EUROPEAN FX UPDATE: Greenback gleans some traction after adverse Fed reaction

Analysis details (10:30)

DXY/CHF/EUR  

The Dollar was roundly sold following the latest FOMC policy meeting as bears pounced on a tweak to guidance in the accompanying statement that Fed Chair Powell described as meaningful in his press conference. In short, the line reading that ‘it anticipates more policy firming may be appropriate to attain a sufficiently restrictive stance’ was removed and replaced with ‘in determining the extent to which additional policy firming may be appropriate, it will take into account tightening to date, policy lags and other developments’. However, the index defended 101.000, albeit narrowly, before clawing back losses to trade at 101.430 vs 101.020, with assistance from a pronounced pullback in the Franc and a fading Euro. Usd/Chf bounced from around 0.8821 to 0.8869 and Eur/Usd stalled ahead of 1.1100 again amidst contrasting Eurozone services and composite PMIs, some pre-ECB caution and an array of hefty option expiries (see 8.08BST post on the Headline Feed for details of sizes and strikes plus other major pairs with expiry interest rolling off at the NY cut). Back to the Buck, Challenger layoffs loom as another NFP proxy and jobless claims are due alongside trade and unit labour costs, while the Euro will likely be focusing on the ECB fallout in advance of President Lagarde - full preview available on the Headline Feed at 9.13BST and in the Research Suite.

NZD/JPY/GBP/CAD/AUD

All off peaks vs their US peer, but the Kiwi retaining enough elevation to hold above 0.6200 in wake of a solid rebound in NZ building permits, and Sterling sustaining sufficient momentum to stay close to its new 2023 peak just shy of 1.2600 after upwardly revised UK services and composite PMIs, mixed BoE consumer credit, mortgage lending and approvals data, dips in DMP inflation expectations and a more hawkish Cable call from UBS (bank now sees 1.2900 by end H2 from 1.2400 previously, 1.3100 by end September and 1.3300 over 2023/2024 turn vs prior 1.3000). Elsewhere, the Yen probed the 21 DMA at 134.17 before stalling within a 134.16-81 range, the Loonie derived some underlying support from a recovery in oil either side of 1.3600 in the run up to Canadian trade and a speech from BoC Governor Macklem, and the Aussie was underpinned between 0.6641-99 bounds following a wider than consensus trade surplus boosted by a bigger improvement in exports relative to imports. Note also, 1.39 bn option expiries in Usd/Cad at 1.3625-35 may cap the pair.

SCANDI/EM

The beleaguered Nok finally received some respite via a bounce in Brent crude and hawkish vibes from the Norges Bank to supplement its widely flagged 25 bp hike, as another increase likely increase in June was reaffirmed and the Bank gave currency depreciation a firmer nod by saying if it remains weaker than projected or pressures in the economy persist, a higher policy rate than envisaged earlier may be needed. Meanwhile, the Sek drew encouragement from Sweden’s services PMI returning to growth from contraction, in contrast to the Cny back from China’s Golden Week and Cnh given the sub-50.0 Caixin PMI, the Brl was hampered by the BCB stating that further tightening is less likely and the HKMA kept the Hkd pegged with a 25 bp hike to match the Fed.

04 May 2023 - 10:30- Fixed IncomeData- Source: Newsquawk