EUROPEAN FX UPDATE: more manic moves as end to mad month looms

Analysis details (10:27)

DXY

There were some pockets of relative calm, but price action remained pretty frantic as March, Q1 and FY 2021/22 drew to a close amidst a final dash to adjust positions for risk and balance sheet considerations. Moreover, currencies remained fixated on geopolitical headlines as Russia’s invasion of Ukraine rumbled on, while keeping a close eye on commodities, Central Bank policy, guidance and intervention as inflation continued to soar and stoke prospects of stagflation, or even recession in certain cases. However, the Dollar found underlying bids/support a fraction above its midweek trough within a 98.155-97.683 band, albeit in large part thanks to weakness elsewhere, and perhaps an element of short covering ahead of NFP on Friday.

NZD/AUD/CAD

The commodity bloc reversed course along with oil and metals rather than broad risk sentiment, although Russia-Ukraine ceasefire expectations dissipated further from the peak levels reached after the latest round of peace negotiations. The Kiwi also lost momentum after narrowly failing to touch 0.7000 on Wednesday, while the Aussie retreated through 0.7500 again and the Loonie recoiled alongside WTI to sub-1.2500 having only just registered a new 2022 high vs its US rival yesterday circa 1.2429. Note, Aud/Usd failed to derive much lasting impetus from building approvals that gazumped consensus over 4-fold as Chinese PMIs missed and all contracted. 

EUR/CHF/JPY

Technical resistance in the form of the 50 DMA (at 1.1182 today) allied to comments from ECB chief economist Lane stressing the importance of optionality in both directions for policy, appear to have scuppered the Euro’s latest attempt to touch 1.1200 against the Greenback, but hefty 2.69 bn option expiry interest between 1.1195-1.1205 also looks formidable. Elsewhere, the Franc slipped back to probe 0.9250 vs the Buck, but held around 1.0300 against the Euro in wake of a sharp pick-up in Swiss retail sales, and the Yen benefited from residual repatriation demand overnight between 122.45-121.34 parameters before easing on the back of further BoJ intervention in JGBs and a mainly upgraded bond purchase schedule for the April-June quarter.

GBP   

Sterling seemed somewhat out on a limb following mixed UK macro news via upwardly revised final Q4 GDP, a much smaller than feared current account deficit, stronger than forecast Nationwide house prices and marked decline in Lloyds business barometer. Nevertheless, Cable stayed comfortably above 1.3100 and Eur/Gbp revisited the 200 DMA after a 0.8500+ pop.

SCANDI/EM

Brent’s IEA/SPR inspired slide rocked the Nok, understandably, but some additional pressure may be forthcoming as the Norges Bank plans to resume daily currency buying from tomorrow at a 2 bn clip. Conversely, the Czk is on the front foot in anticipation of another CNB rate hike later, and perhaps hedging for a bigger than expected 50 bp tightening move given hawkish rhetoric in the run up, and the Cnh/Cny have taken the aforementioned sub-50 NBP PMis in stride along with angst on US-Chinese delisting due to a stronger PBoC onshore fix and the latest liquidity injection.

31 Mar 2022 - 10:27- Fixed IncomeData- Source: newsquawk