EUROPEAN FX UPDATE: Kiwi grinds higher as hawkish RBNZ trumps dire trade data

Analysis details (10:16)

NZD/AUD

The Kiwi clawed back some losses against the Buck in wake of the RBNZ matching expectations for a 50 bp hike overnight, but also maintaining guidance for further rate increases to lift the OCR to a likely peak of 5.5% compared to 4.75% at present. Moreover, the Bank contended that the best contribution monetary policy can make in terms of aiding the post-cyclone recovery effort is to free up resources in other areas of the economy by slowing demand via higher interest rates. However, Nzd/Usd stalled ahead of the 0.6250 level amidst another bout of broad risk aversion and may have been hampered by a significantly wider NZ trade deficit on the way back down to test support into 0.6200, whereas the Aud/Nzd cross continued to retreat from around 1.1041 towards 1.0950 as Aud/Usd faded from 0.6864 to around 0.6812 following a surprise decline in construction work done and softer than forecast wages. 

DXY

Aside from its antics down under, the Dollar was underpinned on safe haven grounds and the index drew encouragement from a psychological standpoint after holding bang on 104.000 before bouncing beyond Tuesday’s session best, to 104.320 awaiting further direction or impetus via FOMC minutes and a speech by Fed’s Williams in the absence of anything else in the interim.  

JPY/EUR/CHF/CAD

All rangy and narrowly mixed vs their US rival, as the Yen regrouped between 135.06-134.56 parameters on some convergence in JGB-UST yields, irrespective of emergency BoJ buying to preserve the 10 year YCC cap, while the Euro straddled 1.0650 with little reaction to the latest German Ifo survey revealing marginally divergent metrics relative to consensus and a view from the institute that the nation will not avoid a recession, albeit mild. Similarly, seemingly dovish comments from ECB’s Villeroy were largely overlooked on the basis that they appeared to be a rehash of remarks made last week. Elsewhere, the Franc was contained within a 0.9288-54 range regardless of another improvement in Swiss investor sentiment and the Loonie pivoted 1.3550 post-Tuesday’s below forecast Canadian CPI.

GBP

Payback for the Pound after Tuesday’s marked UK PMI inspired gains rather than any material change or deterioration on the domestic front, as Cable corrected lower between 1.2135-1.2066 extremes and Eur/Gbp rebounded from 0.8785 to 0.8822.

SCANDI/EM

The Sek took another stab at breaching 11.0000 against the Eur on the back of more hawkish Riksbank rhetoric, and this time courtesy of Governor Thedeen (inflation far too high and worrying, Krona appreciation since last tightening move welcome, but need to see how long it lasts), but the Cnh and Cny lost key technical through and approaching 6.9000 vs the Usd, he Zar was on the defensive ahead of the SA budget and the Krw weakened to the point that Korea’s foreign exchange authorities were forced to hold an emergency meeting, according to reports. Conversely, the Try gleaned some traction from a rise in Turkish manufacturing confidence and President Erdogan stating that the election timetable stands even though the country has been hit by multiple earthquakes.

22 Feb 2023 - 10:16- Fixed IncomeData- Source: Newsquawk