EUROPEAN FX UPDATE: Greenback grounded ahead of US CPI, FOMC minutes etc

Analysis details (10:18)

DXY/JPY

The Buck failed to derive any impetus or clear direction from rather mixed Fed commentary in advance of US inflation data, as Goolsbee backed a prudent and patient approach towards setting monetary policy, Harker underlined his long-standing view that rates need reach 5%+ and remain there, while Kashkari said he is not as optimistic as the bond market in terms of the speed that inflation is likely to come down. However, the Dollar did extend gains vs the Yen to probe 134.00 at one stage, and Usd/Jpy retained a firm underlying bid above 133.50 irrespective of mostly above forecast Japanese macro releases, as new BoJ Deputy Governor Uchida repeated that the Bank will continue monetary easing in order to achieve its price stability target sustainably and stably. Note also, the index found support right at Monday’s low within a 101.980-102.160 range awaiting the aforementioned CPI report, FOMC minutes and more remarks from Fed officials, while receiving a fleeting boost when headlines reported that China plans to impose a no-fly zone north of Taiwan from April 16 to 18. Back to Usd/Jpy, decent option expiry interest between 134.10-15 (1.1 bn) may cap the pair and on the flip-side a close above 133.77 (50% Fib retracement aligning with daily and weekly technical levels) would be bullish from a chart standpoint.

EUR/AUD/CHF/NZD

All firmer, but relatively contained vs their US counterpart, with the Euro underpinned by hefty option expiries (circa 3 bn rolling off between 1.0900-10) and hawkish sounding rhetoric from ECB’s Villeroy who stated that we now face the risk of entrenched inflation, price growth has become more widespread, and potentially more persistent, adding that the policy response is now moving from a sprint to a ‘long-distance race’, and the Bank is fully committed to reining in inflation. Elsewhere, the Aussie lost some traction after RBA's Bullock contended that the Board would have paused even without global banking stress, as rates are in restrictive territory and the Bank can afford to wait and watch, but was cushioned by more constructive Chinese chat about resolving disputes with Australia over wine and barley exports. The Franc took some heed of the Swiss Lower House of Parliament retrospectively rejecting the Chf 109 bn CS rescue package and the Kiwi was propped by a pick-up in NZ electronic card retail sales. Eur/Usd, Aud/Usd, Usd/Chf and Nzd/Usd meandered from 1.0937-12, 0.6677-49, 0.9018-37 and 0.6204-0.6183 respectively.

CAD/GBP

The Loonie held a tight line ahead of the BoC and the Pound was contained before the first of two scheduled speeches from BoE Governor Bailey, as Usd/Cad peaked at 1.3470 and troughed at 1.3450, while Cable remained restrained within a 1.2446-09 band.

SCANDI/EM

Hot on the heels of Tuesday’s stronger than expected Norwegian inflation readings, mainland GDP defied consensus for mild growth and contracted instead to leave the Nok in the worst of worlds, but the Huf gleaned some encouragement from Hungarian CPI topping forecasts and the budget deficit narrowing markedly and the Czk was content to see the Czech jobless rate dip even after a downward back month revision.

12 Apr 2023 - 10:18- Fixed IncomeData- Source: Newsquawk