EUROPEAN FX UPDATE: Greenback remains mainly elevated, but Kiwi rather deflated

Analysis details (10:15)

DXY

Having overcome negative US macro releases on Thursday, the Buck also took disappointing news on the debt ceiling largely in stride (talks due for today delayed until next week), as the Dollar index formed a double top at 102.150 after holding just below the 102.00 handle. Hawkish and unscheduled rhetoric from Fed’s Bowman may have given the Greenback a fillip given that the current FOMC voter said additional rate hikes are likely to be appropriate if inflation stays high and the labour market stays tight, adding that recent CPI and jobs reports have not provided persistent evidence that inflation is on a downward path. However, the Buck remained underpinned amidst weakness elsewhere on specific and general factors ahead of import and export price data, preliminary UoM sentiment with inflation expectations and more from the Fed via Daly and Bullard.

NZD/AUD

The tables turned down under even though the Aussie continued to wane with base metals and the Yuan, and the catalyst came in the form of considerably cooler NZ inflation projections over 1 and 2 year horizons. Nzd/Usd reversed sharply from just over 0.6300 to 0.6238 and the Aud/Nzd cross rebounded to 1.0715 from 1.0640 to prop Aud/Usd within a 0.6706-0.6684 range near the 21 DMA a fraction below the round number.

JPY/EUR/CAD

A bit of UST/JGB yield divergence kept the Yen depressed between 134.90-41 parameters against its US peer following extra BoJ buying overnight to top up its fixed ops, while the Euro retested psychological support into 1.0900 after its first close beneath a key tech pivot or support level irrespective of ECB’s Nagel reiterating that last Thursday’s rate hike will not be the last, and the Loonie also fended off big figure pressure, at 1.3500, in the face of softer crude prices.

CHF/GBP

The Franc managed to regain some composure after recent heavy losses, with Usd/Chf probing 0.8900 to the downside from circa 0.8947 and Eur/Chf drifting back to 0.9725 from 0.9767, while Sterling defended 1.2500 again vs the Dollar after mixed UK data, including a worrying m/m GDP contraction, and the 200 DMA against the Euro ahead of a speech from BoE’s Pill on the latest MPR.

SCANDI/EM    

Some traction for the Nok via stronger than consensus monthly mainland GDP, but little solace for the Cny or Cnh as the PBoC set a higher onshore midpoint fix to reflect the broadly stronger Usd, and the Try unwound yesterday’s recovery gains and more regardless of another pre-Turkish election effort from CBRT to protect the Lira by raising the remuneration rate on foreign currency free reserve accounts to 4.75% to 4.5%.

12 May 2023 - 10:15- Fixed IncomeData- Source: Newsquawk