EUROPEAN FX UPDATE: further Greenback gains forged on multiple factors

Analysis details (09:55)

DXY

The Dollar has drifted down from best levels, but remains dominant and primed to advance further against its rivals on a combination of bullish impulses ranging from rates to risk, Fed policy, positioning and the frailty or underperformance of other currencies. As a result, the index is forming a firmer base around 104.000 within a 104.190-103.780 range and the Buck has breached, prodded and/or probed a series of technical resistance, psychological and key or significant levels ahead of relatively second tier US data in the form of employment trends, wholesale inventories and sales after Fed’s Kaskari and before Fed’s Bostic orates. 

NZD/AUD        

It’s a close call down under in terms of net decline vs their US counterpart, but suffice to say that the Kiwi and Aussie are both getting hit hard as high betas that are also closely correlated to commodities. Nzd/Usd is back below 0.6400 and losing momentum sub-0.6350, while Aud/Usd is struggling to hold 0.7000 in wake of extended Yuan weakness on a mixture of Chinese Covid-related issues that have prompted tighter restrictions and adversely impacted trade data to an extent.

CHF/JPY

No surprise at all to see sight deposits dip at domestic banks in the latest week given Franc depreciation against the Greenback and Euro, with Usd/Chf now eyeing 0.9950 pre-parity and Eur/Chf briefly above 1.0450, while the Yen has succumbed to further UST/JGB divergence and a fresh, albeit relatively minor 2022 low at 131.35.

EUR/GBP/CAD

A weaker than forecast Eurozone Sentix indeed will hardly help the Euro fend off increasing pressure on the 1.0500 handle vs its US peer, while Sterling inched even closer to 1.2250 and another 2020 low having given up 1.2300+ status and the Loonie touched 1.2950 against the backdrop of a downturn in oil prices awaiting some fundamental input via Canadian building permits. However, Cable held around 1.2261 in the run up to a speech from BoE’s Saunders from 2 pm London time and could derive some traction if he expands on the reasons for dissenting in favour of a 50 bp hike instead of +25 bp last Thursday when he appears at the Resolution Foundation.

SCANDI/EM

Not much protection for the Nok from a partial recovery in Norwegian manufacturing output as Eur/Nok blasts through 10.0000 towards 10.0800 and the Sek slides beneath 10.5000 and approaches 10.5500 against the Eur amidst general risk aversion. Similar story on the EM front where the Cny closed below 6.7200 and the Cnh lost chart supports including the 200 WMA (6.7379) and a Fib representing a 50% retracement of its best ever level to y-t-d trough (6.7518). Elsewhere, the Try is nudging 15.0000 vs the Usd, Zar tested 16.2100 and Mxn has been sub-20.3200.

09 May 2022 - 09:55- Fixed IncomeResearch Sheet- Source: Newsquawk