EUROPEAN FX UPDATE: Greenback regains attraction in the face of risk aversion

Analysis details (10:37)

DXY

It’s highly debatable whether the Dollar and index garnered more momentum on reflection of the FOMC’s hawkish midweek hike given the lack of positive net reaction to higher dot plots leading to a loftier terminal rate in the first place. However, the Buck bounced firmly across the board and the DXY further from its post-Fed low (103.440) set on a dovish line in the Q&A from Chair Powell that policy is getting to a pretty good place and close to sufficiently restrictive, due to renewed safe haven demand as sentiment soured significantly. The index climbed from 103.600 to 104.410 ahead of a raft of US data and survey-based indicators, including jobless claims, retail sales, ip, NY and Philly Fed releases, and the Greenback recouped even more losses against high beta rivals.

AUD/NZD

The Aussie and Kiwi reversed sharply from recent peaks irrespective of upbeat macro news in the form of a big payroll beat and markedly stronger than forecast GDP respectively. Aud/Usd slumped from circa 0.6870 to 0.6766 and may well have been rattled by disappointing Chinese ip and retail sales updates overnight, while Nzd/Usd plunged from around 0.6465 to 0.6371, awaiting NZ manufacturing PMI ahead of the full set from Australia.

JPY/GBP/EUR/CHF

All down vs the Dollar, with the Yen subject to Tokyo fix offers and subsequently sliding under 136.60 compared to 135.24 at one stage, Sterling losing 1.2400+ status and briefly beneath the round number below, the Euro testing support into 1.0600 after respecting resistance at the big figure above and the Franc encountering sales in wake of an as widely expected 50 bp SNB hike with largely unchanged accompanying statements to probe 0.9300 from 0.9235 or so at the opposite end of the spectrum. Back to Eur/Usd, 1.15 bn option expiry interest at the 1.0700 strike may also be impacting before the spotlight turns to the ECB another anticipated slow down in tightening pace to half point in tune with the BoE at noon.

CAD  

In contrast to recent trends, the Loonie held up better than others within a 1.3540-90 against its US peer and perhaps on a combination of technical impulses and relative stability in crude prices.

SCANDI/EM

The Nok and Sek were undermined by the gloomy market mood, but the former also had marginal dovish tweaks to contend with in the latest Norges Bank rate path that came with the previously telegraphed ¼ point increase. Elsewhere, risk-off positioning also took its toll, but the HKMA kept the Hkd pegged to the Usd via a like-for-like 50 bp hike, the Php was propped by the same from the Central Bank and the Mxn may derive some support if Banxico follows in kind. Conversely, the Cnh and Cny were not helped by the aforementioned worrying Chinese data and the Zar was hampered by softer than consensus SA PPI along with Gold’s reversal through Usd 1800/oz.

15 Dec 2022 - 10:37- Fixed IncomeData- Source: Newsquawk