EUROPEAN FX UPDATE: Greenback gyrates ahead of major US (and other) events

Analysis details (10:29)

DXY

The Dollar extended post-US PPI and Michigan sentiment survey recovery gains, but only fractionally in index terms before losing momentum and drifting lower within a 105.230-104.750 range. Latest IMM data showed another increase in spec shorts to keep the Buck bunkered or capped, while the proximity of top tier data and the FOMC countered demand for the Greenback as a safe haven amidst broad risk aversion. However, the Dollar retained a bid against petro and commodity counterparts, and the Yen on grounds that Fed-BoJ policy divergence is set to become more pronounced.

CAD/NOK    

Yet another downturn in crude prices undermined the Loonie and Norwegian Crown, as WTI touched Usd 70.25/brl and Brent Usd 75.26/brl to the downside. Usd/Cad straddled 1.3650 in advance of a speech by BoC Governor Macklem and Eur/Nok topped 10.5800 ahead of the Norges Bank on Thursday.

JPY/AUD/NZD

Mixed macro impulses for the Yen to digest as Japan’s Q4 Business Survey Index turned negative to offset firmer than forecast Corporate Goods Prices, but Usd/Jpy was elevated after a bounce from around 136.50 to 137.00+ at one stage. Meanwhile, the Aussie faded from just shy of 0.6800 against the Buck and gave the Kiwi a boost via Aud/Nzd cross flows through 1.0600 to help Nzd/Usd reclaim 0.6400+ status.

EUR/CHF/GBP

The Euro too advantage of another Greenback retreat to build a base on the 1.0500 handle and pull away from decent option expiry interest between the round number and 1.0510 (1.6 bn), while the Franc pivoted 0.9350 either side of a hefty drawdown of Swiss sight deposits at domestic banks and the Pound drew some encouragement from better than expected UK GDP, IP and Trade updates in the face of economic gloom, strike action and travel disruption caused by bleak weather conditions. Cable rebounded from the low 1.2200 area towards 1.2300, while Eur/Gbp rotated around 0.8600 awaiting the BoE and ECB.

EM

Above consensus Czech CPI kept the Czk afloat circa 24.3000 vs the Eur and the Try gleaned enough comfort from the aforementioned decline in oil along with a narrower than anticipated Turkish current account deficit over uptick in jobless rate to hold at circa 18.6500 against the Usd. Conversely, the Cny and Cnh eased after a relatively solid PBoC midpoint fix as China Covid reopening optimism dissipated due to concerns about the strain on hospitals, medical resources and drug supplies.

12 Dec 2022 - 10:29- Fixed IncomeData- Source: Newsquawk