EUROPEAN FX UPDATE: Greenback caught in Aussie and Euro crossfire

Analysis details (10:18)

DXY

The Dollar eased further and almost across the board as one of the last remaining Fed hawks, Waller, added his name to the list of those officials backing a smaller 25 bp hike at the upcoming FOMC policy meeting, and left Bullard isolated in terms of wanting another half point increase in February. However, the index held just off a recent low that coincided with a key Fib retracement level within a 101.570-910 range, courtesy of Yen underperformance to counter downside pressure from the Euro as the largest component of the basket.

AUD/NZD 

Aussie and Kiwi inflation data looms and will likely highlight in terms of macro impulses, but in the run up to the respective releases the former outperformed, perhaps on the back of political and positional factors. On the one hand, Aud/Usd may have gleaned impetus or tailwinds from the Aud/Nzd cross via a bullish recommendation from Deutsche Bank that sees the pair rallying to 1.1000 from circa 1.0800 currently due to deteriorating NZ fundamentals, as it probed 0.7000, while Nzd/Usd stalled bang on 0.6500 in wake of the vote to find a new leader of the ruling Labour Party and PM. In the event, Hipkins was chosen to replace Ardern, with Sepuloni named as his Deputy.

EUR/JPY     

As noted above, the Euro and Yen diverged markedly and mainly on hawkish ECB guidance rather than dovish undertones that emerged from December’s BoJ minutes overnight in context of most members of the Bank being cautious about the decision to widen the 10 year JGB yield target band. Eur/Usd breached 1.0900 on the way to circa 1.0926/27 and Eur/Jpy popped over 142.00 as Usd/Jpy rebound in excess of 100 pips from 129.05 to 130.31 at one stage.

CAD/CHF/GBP   

All firmer against the Buck, with the Loonie comfortable on the 1.3300 handle ahead of Canadian new house prices and budget balances before the BoC on Wednesday, the Franc paring losses from just below 0.9200 and taking note of CS raising its SNB hike forecast for March to 50 bp from 25 bp instead of virtually static weekly sight deposits at domestic banks, and Sterling piercing pivotal resistance, but not quite touching 1.2450.

SCANDI/EM

The Nok derived momentum from Brent topping Usd 88.00/brl, but the Try failed to take advantage of an improvement in Turkish consumer confidence, the Zar was weaker amidst consolidation in Gold off multi-month peaks and the Inr retreated in response to reports of more RBI intervention to curb its strength vs the Usd. Elsewhere, the Pln did not get a boost from stronger than expected Polish PPI as IP and Retail Sales both missed consensus, and the Huf was far from impressed with Fitch downgrading Hungary’s ratings outlook to negative from stable.

23 Jan 2023 - 10:18- Fixed IncomeData- Source: Newsquawk