EUROPEAN FX UPDATE: Greenback grinds higher as curves bear-flatten

Analysis details (09:39)

DXY/JPY

Some consolidation and corrective price action in yields after Monday’s extreme moves and even more pronounced outperformance at the front end on radical repricing of Fed and other global Central Bank rate expectations. However, more banks joined the list of those anticipating no change at next week’s FOMC policy meeting and Nomura went even further in calling for a 25 bp ease plus the suspension of quantitative tightening in response to the financial sector turmoil caused by the banking collapse. Hence, the market mood remained very fragile amidst highly volatile trading conditions awaiting further developments and as attention turned to US CPI data that could pose a real dilemma for the Fed if considerably stronger than forecast.  The Dollar regrouped as 2 year cash rebounded firmly above 4% and 10s topped 3.5% again, with the index probing 104.000 to the upside between 104.050-103.670 parameters and the Yen a notable loser in part due to a loss of safe haven premium. Indeed, Usd/Jpy spiked towards 134.50 from just over 133.00 and yesterday’s sub-132.50 low.

EUR/GBP/AUD/CHF

All making way for their US rival’s revival as the Euro relinquished 1.0700+ status and was hardly helped by downward tweaks to final Spanish inflation metrics, while the Pound was capped ahead of 1.2200 and a Fib just beyond the round number with little traction or reaction to a mixed UK labour report. Elsewhere, the Aussie pivoted 0.6650 following no change in Westpac consumer sentiment, but a deterioration in NAB business confidence and dip in conditions, and the Franc hovered beneath 0.9100 in wake of a slowdown in Swiss producer and import prices.

NZD/CAD  

The Kiwi kept afloat of 0.6200 against its US peer ahead of NZ current account balances with mild tailwinds via the Aud/Nzd cross and the Loonie meandered within a 1.3704-50 range against the backdrop of renewed weakness in WTI before Canadian manufacturing sales.

SCANDI/EM

Another expression of concern about the level of underlying inflation in Sweden from Riksbank Governor Thedeen may have underpinned the Sek in contrast to the Nok’s fall in tandem with Brent, while the Zar was undermined by Gold losing some of its lustre rather SA mining production declining less than anticipated, the Cnh and Cny shed some of their recent gains in advance of Chinese industrial output and retail sales, and the Inr slipped in line with softer than expected Indian wholesale prices.

14 Mar 2023 - 09:39- Fixed IncomeData- Source: Newsquawk