EUROPEAN FX UPDATE: hawkish hike and hot wages help Aussie and Yen

Analysis details (10:04)

DXY/AUD/JPY

The Buck retained a firm underlying bid after extending gains on the back of January’s stellar US jobs report, to 103.790 in index terms, but faced some resistance from G10 counterparts as attention turned to comments from Fed Chair Powell at the Economic Club of Washington to see if the data alters his view on rates regarding the pace of tightening, terminal level and/or how long the peak may last. On that note, the RBA delivered a more hawkish message than many anticipated after its latest 25 bp hike and in response to stronger than expected Q4 inflation metrics that prompted the Bank to predict CPI staying above target until mid-2025 and retain guidance for further increases in interest rates over the coming months to ensure that inflation returns to target and this period of high inflation is only temporary. Meanwhile, the Yen clawed back more losses as much stronger than forecast Japanese average earnings overshadowed hefty misses on the household spending front as the former will give the BoJ more confidence about inflation remaining at 2% after slowing from current levels. Aud/Usd rebounded from sub-0.6900 overnight lows to probe 0.6950 and Usd/Jpy retreated from 132.71 through 131.75 to nudge the DXY back down towards its 103.390 base ahead of US trade data as a precursor to Powell.

NZD/CHF/CAD

Kiwi gains were largely made on the coattails of the Aussie, but Nzd/Usd was capped into 0.6350 as the Aud/Nzd cross bounced from the low 1.0900 area to circa 1.0985 on rekindled RBA rate expectations, while the Franc recovered poise within a 0.9289-43 range with little heed taken of Swiss jobless rate coming in as forecast and the Loonie pared losses between 1.3449-03 parameters in advance of Canadian trade data, with some traction from firmer oil prices.

GBP/EUR  

The Pound and Euro lagged in ongoing fallout and reaction to the aforementioned super-strong NFP release coming hot on the heels of the FOMC, BoE and ECB with somewhat divergent forward guidance. Cable and Eur/Usd struggled to keep afloat of round numbers at 1.2000 and 1.0700 respectively in the absence of anything really new or independent UK or Eurozone-wise, though the latter may have been belatedly hampered by bleak German industrial production given a significantly weaker than expected outcome.

SCANDI/EM

Norwegian manufacturing output fell again, but the Nok gleaned some traction from Brent’s recovery from Usd 81.19/brl to Usd 82.88 at one stage, while the Huf and Inr acknowledged much better than expected industrial production as the latter looked forward to Wednesday's RBI rate verdict and accompanying statement in anticipation (see 8.50GMT post on the Headline Feed for our preview of the event).

07 Feb 2023 - 10:04- Fixed IncomeData- Source: Newsquawk