EUROPEAN FX UPDATE: partial and tentative recovery in risk appetite after the rout

Analysis details (10:21)

AUD/NZD

Sentiment remains very fragile and the overall market mood is tense awaiting further updates from Ukraine where battle is raging around the capital as Russian forces approach in an attempt to seize control. However, an impressive rebound on Wall Street yesterday following steep initial and early losses has provided some respite amidst less hawkish Fed lift-off perceptions and the US holding back from imposing the strongest sanctions it has against Russia. Meanwhile, the Aussie will also be encouraged by the Yuan resuming its bull run and the Kiwi losing traction in wake of mixed NZ data comprising Q4 retail sales that beat consensus, but the more timely January trade balance showing a deficit more than twice as wide as the prior month. Aud/Usd is hovering just under 0.7200 and Aud/Nzd is back above 1.0700, while Nzd/Usd holds around 0.6700.

DXY/JPY/XAU

The Greenback is mixed beyond the aforementioned Aussie outperformance, and the index is grinding higher between 96.770-97.196 parameters after Thursday’s sharp reversal from fresh 97.740 y-t-d peak with residual month end demand for rebalancing perhaps keeping the Buck underpinned along with an element of safe haven premium. Indeed, the Yen is also off worst levels within a 115.62-16 range vs the Dollar and Gold is treading water on the Usd 1900/oz handle to indicate that risk-off hedging may have faded, but is far from disappearing. 

GBP/CAD/CHF/EUR

All narrowly divergent against their US peer, as Sterling straddles 1.3400 having slumped to a new 2022 low sub-1.3300 yesterday, the Loonie pivots 1.2800 with ongoing support from WTI irrespective of crude prices unwinding a chunk of their geopolitical supply premium, the Franc oscillated either side of 0.9250 and Euro rotates around 1.1200 with little independent direction via contrasting German data or Eurozone sentiment indices.

SCANDI/EM     

A similar pattern panning out for the Sek and Nok, as Brent hanging around Usd 100/brl continues to support the latter on top of a decline in Norway’s registered nsa jobless rate, but the former gleans little traction a raft of Swedish sentiment readings after latest dovish vibes from the Riksbank on Thursday. Similarly, no real respite for the Try as Turkish economic confidence falls below 100 and the CBRT sticks to unconventional measures in an effort to combat inflation. Elsewhere, the Rub maintains recovery momentum as the CBR ups the ceiling for its repo auction to Rouble 3 tn from 2 tn and claims that banks have ample liquidity, while the Cnh and Cny are back to winning ways after a hefty cash injection from the PBoC via its 7-day op.

25 Feb 2022 - 10:19- Fixed IncomeData- Source: newsquawk