EUROPEAN FX UPDATE: market mood and moves remain very temperamental

Analysis details (10:32)

DXY

Broad risk sentiment is still hanging on almost every headline from Russia and Ukraine or pertaining to the ongoing conflict ahead of a second round of peace talks between the two nations that are scheduled to take place today. In the meantime, levels of anxiety, stress and uncertainty are elevated and only rivalled by volatility or manifesting in knee-jerk, sporadic price action. However, the Dollar remains mixed overall and the index appears to have gravitated around the 97.500 mark as a fulcrum within recent wide ranges to meander from 97.668 to 97.389 in the run up to a busy US agenda on paper. Indeed, Challenger Lay-Offs precede IJC, labour costs, final Markit services and composite PMIs, the non-manufacturing ISM and Fed Chair Powell at the Senate for part two of his semi-annual testimonies.

AUD/CAD    

The Aussie and Loonie continue to ‘outperform’ or find protection from bearish factors via strength in underlying commodities, like copper and crude to name just two, while the latter is also leaning back on Wednesday’s hawkish BoC hike for some fundamental support. Hence, Aud/Usd is holding close to 0.7300 after stalling only 3 pips shy of the 200 DMA (at 0.7326 today) on the back of a wider trade surplus, Aud/Nzd has broken above 1.0750 and Usd/Cad is hovering on the 1.2600 handle after breaching the round number when WTI topped Usd 116.50/brl.    

CHF

Stronger than forecast Swiss CPI data may be behind the Franc’s bounce from sub-0.9200 lows against the Buck, but it continues to outpace the Euro on safe-haven grounds as the Russian invasion rumbles on. Indeed, Eur/Chf is back under 1.0200 and markedly lower than other Eur crosses irrespective of a further retracement in EGBs amidst less dovish sounding ECB rhetoric.

EUR/JPY/GBP/NZD

All trailing in wake of the Greenback and the Euro flagging again as noted above given more adverse knock-on effects from the Russia–Ukraine war. Eur/Usd has retreated through 1.1100 to sustain negative technical momentum towards a key downside chart level (1.1040 Fib retracement), while the Yen is still hampered by the yield backlash after Tuesday’s FTQ that is dampening its own allure as a safe-haven. Usd/Jpy is elevated within a 115.44-81 range pre-Japanese jobs data and the US labour report on Friday. Elsewhere, Sterling has relinquished 1.3400+ status and the Kiwi is capped ahead of 0.6800 following marginal misses in UK final services and composite PMIs and pre-NZ manufacturing sales.

SCANDI/EM

Some rare hawkish sounding noises from the Riksbank in recognition of upside inflation risks is helping the Sek avoid a steeper decline on risk dynamics, while the Nok is getting it’s normal insulation from Brent that almost reached Usd 120/brl at best. Meanwhile, the Huf got a hawkish boost from the NBH that jacked up the 1 week repo rate by 75 bp, the Pln can rely on more direct NBP intervention for traction and the Cny/Cnh were cushioned from fallout after a slowdown in China’s Caixin services PMI as the PBoC set a firm onshore mid point fix. Conversely, the Rub is depreciating appreciably again and the Try seems destined for another swoon on the back of Turkish CPI and PPI metrics that exceeded already hyped up expectations.

03 Mar 2022 - 10:31- Fixed IncomeData- Source: newsquawk