EUROPEAN FX UPDATE: Kiwi upended by NZ CPI, while expiries underpin Aussie

Analysis details (10:12)

NZD/AUD

Much softer than forecast NZ inflation data undermined the Kiwi even though RBNZ rate expectations hardly budged in response, with Nzd/Usd retreating from just over 0.6200 to test 0.6150 and probe the 200 DMA at 0.6162 in the process, while the Aud/Nzd cross rebounded sharply from circa 1.0822 to the brink of 1.0900 and provided tailwinds for the Aussie vs its US peer in wake of a decline in NAB business sentiment and the RBA review. On that note, the independent body delivered a list of 51 recommendations, including a Fed-style dual mandate to target price stability within an unchanged 2-3% range and full employment, and a new monetary policy board of experts comprising the Governor (Lowe assuming he stays), Deputy Governor, Treasury Secretary and six external members, to name just two. However, Aud/Usd did not really react between 0.6726-0.6698 parameters, and derived underlying support from decent option expiry interest (1.3 bn from 0.6700 to 0.6695) instead.

DXY/CHF/EUR

A retreat in US Treasury yields may have weighed on the Dollar, but the index also narrowly missed closing above the psychological 102.000 level on Wednesday and the descending 21 DMA as a result. Hence, the technical backdrop was less supportive/constructive and the DXY lost momentum after topping out at 102.040 to trade at 101.780 ahead of jobless claims, the Philly Fed, existing home sales and a host of Fed speakers. Conversely, the Franc bounced in wake of another reminder from the SNB that further tightening is not off the table and the Euro regained poise with the backstop of more sub-1.0950 option expiries (1.8 bn at the 1.0925 strike today) plus hawkish-leaning rhetoric from ECB’s Knot (may need to hike in June and July as well as May and not unhappy with the 75 bp more rate rises markets are pricing in at present). Usd/Chf drifted down from around 0.9885 to 0.9850 and Eur/Usd climbed from 1.0948 to 1.0977 in advance of more GC speakers and the March policy meeting minutes.

JPY/GBP/CAD

The Yen, Sterling and Loonie remained relatively contained against their US counterpart, with the former fending off an approach to 135.00 and subsequently trading beyond 134.50 following another BoJ source piece inferring no near term change in YCC, but a livelier debate on the matter in June or July, the Pound consolidating within a 1.2452-17 band and the latter confined to a 1.3452-76 corridor against the backdrop of extended losses in crude.

SCANDI/EM

No respite for the Nok as Brent fell again and the chart landscape continued turn bearish, while the Huf was ruffled by hints that the NBH may narrow its benchmark rate corridor, in contrast to the Cny and Cnh that took unchanged PBoC LPRs in stride on top of an official saying that the impact on the Yuan from volatility in major currencies is limited, and the Bank expects it to be basically stable with two-way swings. 

20 Apr 2023 - 10:12- Fixed IncomeData- Source: Newsquawk