EUROPEAN FX UPDATE: Euro hampered by sharp EZ inflation slowdown, to an extent

Analysis details (10:07)

EUR/DXY

Eur/Usd remained ‘comfortably’ above the 1.0800 level in wake of soft CPI metrics from the German states and Spain, but partly if not primarily due to a broader Buck retreat on a mixture of month end related factors and Fed chair Powell referencing the FOMC’s March dot plots showing one more 25 bp hike when asked about the extent of further tightening in a closed door meeting. Moreover, the Dollar and index were undermined by another upturn in risk sentiment as the DXY drifted within a 102.780-340 range ahead of final US Q4 GDP, jobless claims and several Fed speakers, including Collins, Barkin and Kashkari.

AUD/JPY/NZD/GBP

The Aussie regained 0.6700+ status vs the Greenback amidst the generally upbeat market mood rather than specifics, as NAB joined the list of those looking for a lower RBA peak rate, at 3.85% from 4.1% previously, while the Yen drew solace from relatively steady Treasury yields and took respite after its midweek slide. However, Usd/Jpy remained elevated between 132.22-84 parameters on the penultimate session of March, Q1 and Japan’s FY. with potential for plenty more volatility before the turn and pivotal data on Friday via Tokyo inflation and core US PCE. Elsewhere, the Kiwi largely shrugged off a narrowly mixed ANZ business survey and a steeper slump in NZ building consents as Nzd/Usd continued to consolidate above 0.6200 against its US peer, and Sterling rebounded from just below 1.2300 to top 1.2360 with support from a reversal in UK STIR contracts and Gilts that also weighed on the Eur/Gbp cross around 0.8800.

CHF/CAD

Hardly a shock to see the latest Swiss KoF indicator miss consensus given Credit Suisse’s recent demise, and the Franc did not dwell too long as it bounced from circa 0.9201 towards 0.9150 vs the Buck awaiting comments from SNB’s Maechler and Moser. Meanwhile, the Loonie pivoted 1.3550 post-BoC’s Gravelle who focused on what the Bank is ready to do in the event of severe market-wide stress, though added that the QT program will likely end sometime around the end of 2024 or H1 2025.   

SCANDI/EM

The Sek and Nok depreciated further ahead of remarks from the Norges Bank and Riksbank, but the Cnh and Cny pared some declines following another hefty PBoC liquidity injection and the Zar and Mxn traded on a firmer footing before the SARB and Banxico that are both forecast to hike rates by 25 bp. The Pln was propped by NBP’s Kotecki suggesting that there is a real risk of returning to tightening monetary policy, but the Try was undermined by a dip in Turkish economic confidence.

30 Mar 2023 - 10:07- Fixed IncomeData- Source: Newsquawk