EUROPEAN FX UPDATE: market mood improves on peak prospects

Analysis details (10:10)

DXY

The Dollar and index regained some composure with assistance from hawkish Fed vibes, as Bullard warned that markets are underpricing the risk that the FOMC may be more aggressive and another current voter, Williams said he sees a somewhat higher rate path in 2023 than the September SEP dot plots portrayed. However, the Buck was capped by a pick-up in risk appetite, partly due to a dip in Chinese Covid infections following a run of daily all time highs rather than speculation that some virus protocols could be relaxed in the face of demonstrations against the strict zero-tolerance measures. Hence, the Greenback faded almost across the board and DXY retreated from 106.750 to 106.050 in advance of US consumer confidence.

AUD/NZD

No surprise to see Monday’s underperformers breath a sigh of relief with the Yuan, commodities and sentiment generally, as the Aussie reclaimed 0.6700+ status and Kiwi recaptured the 0.6200 handle ahead of NZ building consents.

GBP/JPY/CAD/EUR

All clawing back lost ground against their US rival, with Sterling firmly back above 1.2000, the Yen probing 138.00 irrespective of somewhat disappointing Japanese data in the form of retail sales and unemployment, the Loonie nearer 1.3400 than 1.3500 against the backdrop of recovering oil prices pre-Canadian GDP metrics and the Euro rebounding from sub-1.0350 towards 1.0400 in wake of preliminary German state and Spanish national inflation readings revealing a welcome slowdown in price pressures. Back to the Pound, hardly any adverse reaction to weaker than expected BoE credit and mortgage data, but upcoming comments from MPC member Mann and Governor Bailey might well stir things up, while the Euro largely took mixed Eurozone sentiment indicators in stride. 

CHF

The Franc flagged within a 0.9460-0.9508 range following Swiss GDP data showing a marginal rise in Q3 q/q growth after revision to the previous quarter, but sub-forecast and big miss against consensus y/y.

SCANDI/EM

Similar plight for the Sek in terms of macro disappointment, as Swedish GDP, retail sales and trade were all worse than anticipated, but the Nok drew support from Brent’s revival, the Cny and Cnh from the aforementioned latest pandemic updates from China that also included less cases in Beijing and an initiative to vaccinate more people aged 80 and over, and the Zar got a boost via a decline in Q3’s SA jobless rate. Conversely, the Try was hindered by softer Turkish economic confidence and the Huf as the wait to find out the fate of EU funding continued.

29 Nov 2022 - 10:10- Fixed IncomeData- Source: Newsquawk