EUROPEAN FX UPDATE: Euro takes some heed of verbals from Villeroy

Analysis details (10:07)

DXY/EUR/JPY

The Dollar is holding firm against most major and EM counterparts, with the index rangy around 104.500 having retreated from Friday’s fresh 20 year or so high just over 105.00, but the Euro and Yen are showing levels of resistance or resilience for very different reasons. Eur/Usd perked up to around 1.0435 in wake of comments from ECB’s Villeroy underlining that reaching price stability will be harder to achieve if the single currency is too weak and increases inflation via the imported channel, and this also boosted Eur/Jpy within a wide 13.76-134.91 range to the extent that Usd/Jpy rebounded between 128.70-129.64 parameters having been depressed amidst risk-off trade caused by bleak Chinese data overnight.  Ahead, NY Fed manufacturing and Williams the likely pm highlights in terms of Monday’s economic agenda.

AUD/NZD/CHF/GBP/CAD

The aforementioned bad macro releases out of China that is weighing on broad sentiment and the Yuan predictably is hampering the Aussie, Kiwi, Loonie and Pound as high beta, activity and cyclical currencies, while the Franc has extended its decline through parity probably in part on the bid in Eur/Chf and the fact that weekly Swiss sight deposit balances showed a dip in domestic bank accounts that indicates no SNB intervention. Note also, in contrast to the Euro and Greenback, IMM specs raised short positions in the Franc to peaks not seen since November last year. Usd/Chf has been up to circa 1.0059, Eur/Chf to 1.0472, while Aud/Usd and Nzd/Usd are both towards the bottom of bands spanning 0.6960-0.6872 and 0.6293-28 respectively, Cable closer to the lower end of a 1.2297-16 range and Usd/Cad is above 1.2900 within 1.2981-1.2895 confines awaiting Canadian housing starts, manufacturing sales and wholesale trade. Back to Sterling, Eur/Gbp is probing Friday’s apex around 0.8530 ahead of BoE testimony to the Commons’ Treasury Committee and with PM Johnson heading to NI in an effort to resolve the Protocol impasse.

SCANDI/EM

Aversion, relative Eur strength, a pull-back in Brent and narrower trade surplus are all in the mix for the Nok and Sek in terms of factors propping cross above 10.2100 and 10.5000 respectively, while the Zar is weak vs the Usd in tandem with Gold losing Usd 1800+/oz status and the Cnh and Cny rebounded to 6.8200 and 6.8025 following the much weaker than forecast data noted above (ip and retail sales to be precise). Next up for Eur/Sek, Riksbank Governor and ESRB chief Ingves appears at the EU Parliament.

16 May 2022 - 10:07- Fixed IncomeData- Source: newsquawk