EUROPEAN FX UPDATE: Greenback wanes after forging healthy recovery gains

Analysis details (10:33)

DXY

Lots of volatility, but little clear direction or clarity in currency markets, and only partly down to seasonal factors given so many moving parts and uncertainties leading to erratic, abrupt and often unpredictable, random moves. However, the sharp slide and snap back up in Usd/Jpy on Tuesday can be attributed to a combination of hawkish Fed remarks that together with a paring of safety premium resulted in a pronounced rebound and re-flattening along the US Treasury curve. In fact, this boosted the Buck broadly and the Dollar index extended its rebound from just above 105.000 and the 50 DMA a tad below the round number to 106.550 overnight before fading and awaiting Wednesday’s agenda for more impetus. This comprises the final services and composite PMIs, ISM equivalents and factory orders plus speeches from Fed's Barkin, Harker and Kashkari. 

EUR/CAD/AUD/GBP/NZD

All taking advantage of the Greenback’s loss of momentum, and the Euro perhaps mostly encouraging Eurozone PMIs with the glaring exception of Italy as well, while the Loonie is holding in irrespective of renewed weakness in oil prices pre-OPEC+ and post-unexpected API crude inventory build, the Aussie is clawing back deeper post-RBA declines, Sterling retains an underlying bid on the eve of the BoE and the Kiwi regains some poise after somewhat disappointing NZ jobs data. Nevertheless, Eur/Usd is still sub-1.0200 and could be capped by decent option expiry interest between 1.0195 and the figure given 1.84 bn rolling off at the NY cut. Usd/Cad is contained within a 1.2892-50 range, Aud/Usd is back above 0.6900, Cable is hovering beneath 1.2200 after a brief pop above and Nzd/Usd has rebounded from the low 0.6200 area to just over 0.6250.

JPY/CHF

The major laggards, with the Yen trying to recover from the aforementioned recoil, to almost 134.00 from 130.50+ against the Dollar at one stage yesterday and the Franc underperforming across the board in wake of Swiss CPI metrics showing a slightly softer than forecast headline y/y rate. Usd/Chf is eyeing 0.9600 and Eur/Chf is near the upper end of a 0.9783-25 band.

EM

Some relief for the Try as Turkish inflation did not top consensus for a change, but scant consolation in reality as headline CPI still rose at a faster pace and nearly touched 80% y/y, while PPI accelerated further towards 150% y/y. Conversely, the Cnh and Cny continue to draw a degree of comfort from relatively contained retaliatory action from China during US House Speaker Pelosi’s stop-over in Taiwan.

03 Aug 2022 - 10:33- Fixed IncomeData- Source: Newsquawk