EUROPEAN FX UPDATE: Greenback retreats as US Treasury yields pause for breath

Analysis details (10:25)

DXY

Although Fed’s Waller maintained a hawkish line in latest remarks, comments from Bostic may have resonated more as he firmly favoured sticking to 25 bp hike increments and said the FOMC could be in a position to take a break from tightening by the middle or towards the end of summer. Moreover, USTs could have been reprieved on technical grounds as the 10 year T-note arrested its slide a fraction above chart support seen at 110-12 and the long bond was leggy on the 4% handle, while the Dollar index lost momentum after scaling 105.000, but fading ahead of a virtual double top forged in late February and came under a bit more pressure as sentiment in stock markets improved. The DXY subsequently drifted within a 104.980-640 range in advance of final services and composite PMIs plus the non-manufacturing ISM and Friday’s batch of Fed speakers that could revive Buck fortunes again.

CHF/AUD/NZD   

The Franc had more than most to make up for given its recent heavy losses amidst rising rate and heightened hawkish Central Bank policy expectations, so it was unsurprising to see Usd/Chf reverse through 0.9400 and Eur/Chf pull back from parity to probe 0.9950. Meanwhile, the Aussie seized a firmer grip of the 0.6700 handle vs its US peer and 1.0800 against the Kiwi, irrespective of weaker than forecast house lending data overnight with an eye to next week’s RBA meeting and another ¼ point rate rise. Nevertheless, Nzd/Usd tagged along between 0.6239-08 parameters.

JPY/GBP/CAD/EUR

All taking advantage of the Greenback’s retracement as the Yen rebounded further from Thursday’s new y-t-d low circa 137.10 towards 136.00 following slightly firmer than forecast Tokyo CPI data and an unexpected dip in Japan’s jobless rate, while the Pound bounced from sub-1.1950 to within touching distance of 1.2000 with some impetus from upward tweaks in the final UK services and composite PMIs and the Loonie clawed back from just beneath 1.3600 to test bids into 1.3500 pre-Canadian building permits and labour productivity. However, the Euro lost traction ahead of 1.0650 and a Fib just a pip beyond against the backdrop of very conflicting Eurozone PMIs, softer than anticipated PPI metrics, upbeat German trade data, a hefty French IP miss and mainly hawkish ECB rhetoric.

SCANDI/EM  

More worrying news for the Sek as Sweden’s services PMI slid into contractionary territory, but renewed risk appetite kept it afloat vs the Eur, like the Nok that saw Norway’s registered unemployment rate tick up against consensus for no change. Elsewhere, the Try did not get any lasting benefit from softer than anticipated Turkish CPI or another slowdown in PPI, but the Cny and Cnh straddled 6.9000 against the Usd after Caixin services and composite PMI completed a full set of Chinese beats on the eve of the next Two Sessions event where the official GDP target range for 2023 is widely tipped to be upgraded considerably. Conversely, the Huf was derailed by a wider Hungarian trade deficit and hardly helped by the NBH noting that monetary transmission must be strengthened until the inflation objective is achieved.

03 Mar 2023 - 10:25- Fixed IncomeData- Source: Newsquawk