EUROPEAN FX UPDATE: Greenback continues to wane awaiting Fed guidance

Analysis details (10:23)

DXY

Slightly softer US Treasury yields in comparison to their global bond peers and a relatively settled risk backdrop leaned on the Buck to the benefit of others, while recovery momentum faded further following Tuesday’s topsy-turvy session when the Dollar index rebounded firmly to test/probe key resistance before retreating around London fixes amidst selling for month end rebalancing. However, the DXY remained tethered to 102.000 within a narrow 102.180-101.900 band ahead of several macro releases that could provide interim impetus before the FOMC and Chair Powell’s post-meeting presser (full preview of both available via the Headline Feed at 7.05GMT).

AUD/NZD

The Aussie took most advantage of its US peer’s relapse, but also Kiwi shortcomings in wake of mostly sub-consensus NZ labour data that prompted some banks to pare back RBNZ rate expectations, like BNZ and ASB. Aud/Usd topped 0.7080 to mark a near 100 pip turnaround from the low seen post-poor retail sales and the Aud/Nzd cross rebounded to 1.0985 to leave Nzd/Usd trailing behind after topping out at 0.6451.

EUR/JPY    

Also firmer vs the Greenback, albeit rangy with Eur/Usd restrained between 1.0888-53 parameters and Usd/Jpy rotating around 130.00 within 130.42-129.81 bounds, and the Euro not really getting clear direction from a mixed bag of Eurozone PMIs or preliminary CPI as a softer than anticipated headline print came with firmer than envisaged core inflation readings.

CAD/GBP

The Loonie straddled 1.3300 against its US rival pre-Canadian manufacturing PMI and Sterling managed to stay just above 1.2300 irrespective of Eur/Gbp headwinds amidst EU denials of a compromise deal with the UK over the ECJ’s involvement in NI protocols, and the Pound may have been encouraged by a marginal upward revision to the final manufacturing PMI.

CHF

In contrast to the above, Switzerland’s manufacturing PMI came in much weaker than forecast and just under 50.0 vs expectations for a pick-up in activity, though the Franc’s lag mostly beneath 0.9150 and 0.9950 against the Buck and Euro respectively looked more corrective after its stellar performance on the final day of January.

SCANDI/EM

Some relief for the Sek and Nok as Sweden’s manufacturing PMI was less contractionary and Norway’s maintained equilibrium, while the Cny and Cnh took heed of comments from Chinese President Xi on the need to coordinate the expansion of domestic demand with deepening supply-side structural reforms, amongst other things (see 7.24GMT post on the Headline Feed for more bullets), but the Inr was largely unimpressed with the latest Indian budget.

01 Feb 2023 - 10:23- Fixed IncomeData- Source: Newsquawk