EUROPEAN FX UPDATE: Loonie betting on BoC preempting the Fed

Analysis details (10:05)

CAD/DXY

Another broad improvement in risk sentiment that is spilling over to crude benchmarks may be the obvious factors behind the Loonie’s latest foray above 1.2600 against its US rival, but it appears that Usd/Cad is also hedging for the BoC to confirm market expectations by delivering a 25 bp hike ahead of official guidance and in doing so front-run the FOMC. However, the Fed could follow hot on the heels with one or two hawkish surprises and boost the Buck that remains relatively bid overall as the index pivots 96.000, just a fraction shy of Tuesday’s 96.273 high. Note, full previews of both NA Central Bank policy meetings and press conferences are available via the Research Suite and will be re-posted on the Headline Feed in advance. 

AUD/NZD    

The Antipodean Dollars have regained a bit more poise after Monday’s meltdown and yesterday’s calmer session, with the Aussie forming a firmer base around 0.7150 against the Greenback and 1.0700 vs the Kiwi in holiday-thinned trade, while Nzd/Usd is still encountering resistance into 0.6700 awaiting Q4 CPI that may have the same bullish impact as Australian inflation data, if considerably stronger than expected.

JPY/CHF/EUR/GBP

In contrast to all the above, the Yen and Franc are bearing the brunt of renewed risk appetite plus firmer US Treasury yields awaiting JGBs and Swiss Conf bonds to catch up. As such, Usd/Jpy is back above 114.00 after little reaction to the BoJ’s SOO that merely underscored the latest policy convene statement, and Usd/Chf has rebounded through 0.9200 irrespective of an encouraging recovery in investor sentiment. Elsewhere, the Euro is still trying to stay within reach of 1.1300 having hit fresh y-t-d lows circa 1.1263 on Tuesday, but managing to close above a key Fib at 1.1299 for the second day in a row, and Sterling is also striving to shrug aside potentially negative and damaging UK political vibes with the aid of hawkish BoE dynamics and the aforementioned brighter market mood. Cable is hovering close to 1.3500 and Eur/Gbp not far from 0.8350.

SCANDI/EM       

The Nok has clawed back more of its heavy recent declines to trade near 10.0000 vs the Eur again, but the Sek is stalling in wake of mixed Swedish macro releases showing an acceleration in producer prices and sharp swing in the trade balance to deficit from surplus. Conversely, the Cnh and Cny are going from strength to strength following another net PBoC liquidity injection and the firmest onshore fix for years, while the Zar is on a solid chart footing ahead of the SARB tomorrow, with Gold providing underlying impetus as it holds close to Usd 1850/oz. On the flipside, Brent’s revival is not helping the Rub resist selling pressure on geopolitical grounds as Russia reportedly begins large scale drills in the Black Sea.

26 Jan 2022 - 10:04- Fixed IncomeData- Source: newsquawk