EUROPEAN FX UPDATE: Franc outperforms, Euro and Kiwi in slipstream

Analysis details (10:26)

DXY

Having bounced off worst levels on Friday when US preliminary PMIs beat consensus convincingly, the Buck lost momentum with the index drifting further below 102.000, to 101.510 from a 101.910 high and perhaps taking heed of comments from Fed’s Cook as the last official speaker before blackout period for May’s FOMC policy meeting. However, the 2023 voter did not really say anything new as she noted that monetary policy is moving into a more uncertain phase and banking sector headwinds could weigh on the rate rise outlook, while adding that March PCE inflation is likely to moderate to 4% and inflation pressures have been abating, but core prices remain sticky. Moreover, Monday’s US agenda offered little scope for fresh direction or in way of an incentive to break out of recent ranges given rather secondary releases, including the National Activity index and Dallas Fed manufacturing business survey. 

AUD/JPY//GBP/CAD

All off worst levels against their US rival, though the Aussie was capped around 0.6700 amidst ongoing weakness in iron ore prices and the Yuan losing pivotal technical support via the 100 DMA. Elsewhere, the Yen acknowledged latest remarks from new BoJ Governor Ueda ahead of his first meeting at the helm, as he reiterated that the Bank must maintain monetary easing as trend inflation is still below 2%, but added that if it can be foreseen it will reach 2%, the BoJ must head towards policy normalisation. Ueda also said that how to revise YCC will depend on various factors, such as economic conditions and the pace of inflation at the time and noted that he cannot say now how it could be tweaked specifically. Note also, a Sankei report citing no sources suggested that the BoJ is considering conducting a comprehensive review of the longer term impact monetary easing has had, with the central bank planning to examine a quarter century of deflation and could start discussions as early as this week’s policy meeting. Usd/Jpy flitted either side of 134.00 between 133.90-134.47 parameters. Meanwhile, the Pound remained restrained within 1.2459-11 bounds weighing up weak Rightmove UK house prices and hawkish guidance from BoE’s Ramsden and the Loonie straddled 1.3550 in advance of Canada’s new housing price index and with latest IMM data showing a 10k+ paring of short spec positions.

CHF/NZD/EUR

The Franc was underpinned near 0.8900 against its US counterpart and bid vs the Euro on suspicions of safe haven demand, while the Kiwi benefited from Aud/Nzd cross tailwinds under 1.0900 rather than the RBNZ lowering the risk weighting for investment in the Business Growth Fund as Nzd/Usd held comfortably above 0.6100, and the Euro drew some encouragement from the latest German Ifo metrics showing improvements in the business climate and expectations to probe 1.1000 against its against its US peer even though current conditions missed consensus and accompanying statements were mixed.

EM

As noted above, the Cnh and Cny breached chart props, and irrespective of the PBoC injecting short term liquidity or an official claiming that the Yuan has a solid foundation to remain stable and the Bank will improve the floating exchange rate system based on market demand and supply, as China’s Vice Commerce Minister Wang said uncertainty in external demand remains the biggest restraint for trade. Similarly, the Try failed to derive support from an improvement in Turkish manufacturing sentiment, but the Pln shrugged off weaker than forecast Polish retail sales, industrial production and producer prices, and the Czk climbed regardless of CNB's Zamrazilova contending that a key rate of 7% is sufficient for taming inflation in the Czech economy’s current state.

24 Apr 2023 - 10:26- Fixed IncomeData- Source: Newsquawk