EUROPEAN FX UPDATE: Greenback grinds higher again, amidst risk aversion

Analysis details (10:20)

DXY

The Dollar and index look set for another leg higher after another pullback in wake of Friday’s broadly better than expected US jobs data that is likely to tip the Fed towards delivering back-to-back 75 bp rate hikes, barring any big downside miss on the inflation front this Wednesday when June CPI figures are due for release. However, the DXY is holding just shy of its 2022 and multi-year peak set prior to NFP, at 107.790, within a 107.640-070 range, as the Yen regains some composure and the 137.00 handle against the backdrop of souring risk sentiment, partly on a further flare up in Chinese Covid cases, but also general fears about global growth and the threat of recession.

AUD/EUR/JPY

It’s a close call between the Aussie, Euro and Yen in terms of weakest G10 link, as Aud/Usd struggles to hold above 0.6800, Eur/Usd eyes bids/support into 1.0100 on contagion from China and concerns that Russia may cut all oil and gas supply to Europe, and Usd/Jpy hovers near 137.00+ overnight highs after downbeat/dovish comments from BoJ Governor Kuroda. In short, he noted signs that Japan’s economy is slowing and warned that uncertainty is very high, adding that ultra-easy policy will be maintained, the Bank stands ready to ease further without hesitation as needed and he expects short- and long-term rate targets to remain at current or lower levels.

GBP/CAD/NZD/CHF 

All down against their US counterpart, and the Pound back below 1.2000 awaiting the Tory leadership contest and testimony from BoE Governor Bailey in Parliament, while the Loonie is trying to contain losses beneath 1.3000, the Kiwi is striving to keep its head above 0.6150 before the RNBZ hikes rates by another 50 bp this week, per consensus and the verdict delivered by NZIER’s shadow board, and the Franc defends 0.9800 again with latest weekly Swiss sight deposits showing a hefty from in domestic bank balances.

SCANDI/EM

Hawkish Riksbank minutes and remarks from Floden especially (see 8.30BST post on the Headline Feed for bullets and a link to the full report) are providing the Sek with traction and in contrast to the Nok that is not gleaning any real support from much hotter than forecast Norwegian headline inflation, while the Cnh and Cny are softer in wake of mixed Chinese CPI and PPI data, but the Czk is not really reeling even though Czech retail sales came in considerably weaker than expected.

11 Jul 2022 - 10:20- Fixed IncomeData- Source: Newsquawk