EUROPEAN FX UPDATE: Franc firm following Swiss CPI, but other majors firmer

Analysis details (10:11)

CHF/EUR/DXY/GBP

It remains to be seen whether the SNB responds to the latest headline inflation data showing a further acceleration beyond target in the y/y rate, but the Franc acknowledged the fact by rising across the board to touch 1.0220 vs the Euro and 0.9575 against the Dollar before stalling amidst more hawkish commentary from the ECB (Villeroy repeating that policy normalisation is needed because inflation is too high and broad-based). However, the retreat in Usd/Chf from circa 0.9637 at one stage was still enough to apply additional pressure on the Greenback generally and the index reversed to 102.200 from 102.620 at best to the benefit of all basket components alongside other Buck peers. Indeed, Eur/Usd bounced towards 1.0700 from a low just shy of 1.0650, but faced a series of hefty option expiries starting at the round number (1 bn) through 1.0725-30 (2.26 bn) to 1.0735.40 (1.78 bn) ahead of Eurozone PPI and a raft of US macro releases, including Challenger lay-offs, ADP, jobless claims, labour costs and factory orders. Meanwhile, a somewhat jaded Pound jumped on the Dollar downturn to reclaim 1.2500+ status in time to enjoy the Jubilee festivities that will keep UK markets closed until next Monday, albeit not quite perky enough to bounce above the 10 DMA (1.2568 today) having closed below yesterday.

NZD/AUD/JPY  

Also gaining at the expense of their US counterpart to large extent, the Kiwi got close to 0.6500 from worst levels around 0.6460, the Aussie bounced from sub-0.7150 to the high 0.7100 area and the Yen pared declines from 130.24 or so to trade near 129.75 irrespective of resistance from the BoJ regarding physical intervention to curb Jpy weakness (Adachi said attempting to stem a weak currency by tightening monetary policy would squeeze corporate funding). Note, Nzd/Usd and Aud/Usd took overnight trade data in stride, but the former will have heeded stronger than expected NZ import and export prices, while the latter had more angst with China to contend with after the Chinese Ambassador to Australia said  Beijing is prepared to talk without preconditions, but trade sanctions on Australia will not be removed until there is an improvement in the political relationship.

CAD/NOK

Not quite hero to zero, but the Loonie lost some of its post-BoC hawkish hike impetus due to a pretty pronounced downturn in crude prices in wake of reports that Saudi Arabia is prepared to plug the gap if Russian oil output falls on the back of sanctions. Usd/Cad bounced strongly to circa 1.2686 from 1.2654 and 1.2605 on Wednesday, while Eur/Nok reversed course sharply around 10.1000 as the Norwegian Krona felt brunt of Brent’s recoil alongside WTI (from Usd 115.04/brl to Usd 112.80 and from Usd 114.98/brl to Usd 111.64 for the respective benchmarks).

SEK/EM

A steady recovery in risk sentiment propped the Sek and several EM currencies, while the Cnh and Cny also took advantage of the aforementioned Usd retracement to claw back declines from under 6.7150 and 6.7050 and the Huf derived some traction from the NBH lifting the 1 week depo rate by 30 bp. Conversely, the Try continued to weaken on the eve of Turkish CPI and amidst the ongoing opposition to Swedish and Finnish NATO membership.

02 Jun 2022 - 10:10- Fixed IncomeData- Source: Newsquawk