EUROPEAN FX UPDATE: Greenback wanes after racking up hefty gains

Analysis details (10:05)

DXY

Some signs of fatigue and a loss of bullish momentum rather than any real change in sentiment or direction following the Buck’s exertions on Tuesday, but bulls may also be biding time to see if the forthcoming FOMC minutes provide more rationale to buy Dollars from a pure policy outlook perspective. The index held within a 106.700-340 range in the interim having set a new high bar at 106.790 yesterday when it tallied sharply from a 105.040 low on return from the long US Independence Day holiday weekend, awaiting comments from Fed’s Willaims and the services ISM that could offer some impetus before the aforementioned accounts of June’s meeting.

JPY

The Yen took advantage of the Greenback’s fade to claw back more losses, from circa 135.89, with added impetus from Jpy crosses remaining on a downward trajectory irrespective of the latest pick-up in risk appetite. However, the headline pair faced strong technical resistance aside from the obvious psychological and importer buying interest at 135.00 given recent lows not far below the round number.

GBP/NZD/AUD  

Also trying to rebound against their US counterpart, and Sterling shrugging off more UK political turmoil in the process along with BoE commentary underlining a determination to combat inflation while attempting to avoid adding further downside pressure on growth at the same time. Cable formed a firmer base on the 1.1900 handle and reclaimed 1.1950+ status, while the Kiwi recovered from just below 0.6150 to just shy of 0.6200 with light tailwinds via the Aud/Nzd cross holding sub-1.1050 as the Aussie faded above 0.6800 vs the Buck amidst more pronounced weakness in base metals.

CAD/CHF/EUR

The G10 laggards, with the Loonie still reeling from yesterday’s drilling in oil, the Franc striving to regain poise after depreciation and the Euro likewise with no assistance whatsoever from mostly bleak Eurozone construction PMIs (French especially). Usd/Cad pivoted 1.3050, Usd/Chf was elevated near 0.9700 and Eur/Usd retreated through 1.0250 to a marginal new two decade low circa 1.0226.

SCANDI/EM

A mild reprieve for the Sek and Nok on broad risk grounds as the mood improved and the latter also welcomed news that the Norwegian oil and gas workers strike ended after Government intervention. Elsewhere, the Cnh and Cny coped well with reports of more Covid cluster outbreaks in China, but the Huf was slammed yet again regardless of significantly stronger than forecast Hungarian industrial production data.

06 Jul 2022 - 10:05- Fixed IncomeResearch Sheet- Source: Newsquawk