EUROPEAN FX UPDATE: Greenback caught between safe haven and soft yield stalls

Analysis details (10:21)

DXY/CHF/XAU/JPY

The Dollar index dipped a tad further as the clock ticked down to US jobs data, but held a fraction above 105.000 and around the descending 100 DMA (down to 105.142 today) amidst conflicting impulses given pronounced risk aversion on banking and financial sector concerns that prompted a more concerted scramble back into bonds and other safe-havens. Indeed, the 10 year Treasury yield recoiled towards 3.80% from recent 4%+ peaks, the Franc probed 0.9300 against the Buck and hit 2+ month peaks vs the Euro above 0.9850, while Gold perked up again on the Usd 1800/oz handle to leave just the Yen lagging on BoJ/Fed policy divergence dynamics. Usd/Jpy rebounded from sub-136.00 to almost 137.00 as hawkish hedges and bets were unwound following confirmation of unchanged rates and YCT settings, while outgoing Governor Kuroda signed off his last post-meeting press conference with the same dovish guidance.

GBP/NZD/EUR     

All benefiting from the broadly softer Buck rather than the gloomy market mood, but the Pound also drew impetus from UK GDP topping consensus on a m/m basis in January and the economy flat-lining y/y instead of contracting 0.1% as expected. Cable probed 1.2000 at one stage and the Eur/Gbp cross reversed from the high 0.8800 area to circa 0.8825, as heavy offers at/above 1.0600 kept Eur/Usd capped. Elsewhere, the Kiwi encircled 0.6100 with underlying support from Aud/Nzd tailwinds and a pick-up in the NZ manufacturing PMI to offset a relapse in manufacturing sales.

CAD/AUD  

Aside from the aforementioned risk-off sentiment that spread to crude and other commodities, the Loonie extended post-BoC pause losses through 1.3800 in cautious or defensive trade pre-Canada’s latest LFS, while the Aussie faded just above 0.6600 in the absence of anything specific.

SCANDI/EM

The Sek and Nok were both undermined by aversion, but the latter also weakened in wake of considerably softer than forecast Norwegian headline and core inflation in context of Norges Bank policy implications compared to the Riksbank and ECB. Meanwhile, the Try failed to appreciate a drop in Turkey’s jobless rate or stronger than anticipated ip as it slumped to fresh record lows awaiting an announcement by President Erdogan scheduled for around 11.00GMT and touted to be about the date of the election.

10 Mar 2023 - 10:21- Fixed IncomeEconomic Commentary- Source: Newsquawk