EUROPEAN FX UPDATE: Pound perky and Euro elevated on the eve of BoE and ECB

Analysis details (10:20)

EUR/GBP/CHF/JPY/DXY

Ranges in major pairings are relatively confined in the run up to what could be a lively end to the week given an array of Central Bank events and US jobs data that always holds potential for market movement and volatility. However, the Buck continues to slip to the benefit of most peers, or vice-versa, amidst buoyant if not quite bullish risk sentiment and a softer yield backdrop. Perhaps latest comments from Fed hawk Bullard are also undermining the Dollar as he joined the camp playing down prospects of a 50 bp lift-off by the FOMC, albeit adding that market pricing for five hikes in total this year is not overly aggressive. The index is clinging to the 96.000 handle within a 96.031-303 band ahead of a light US agenda highlighted by ADP and the Quarterly Refunding details for next week that could have an indirect bearing via any reaction in Treasuries. Meanwhile, DXY components and other currencies are effectively taking turns to take advantage of the Greenback’s vulnerability regardless of other factors, almost, with the Euro, Sterling, Yen and Franc currently vying for position. Eur/Usd probed 1.1300 having scaled resistance in the form of a cloud base with the aid of much stronger than expected Eurozone headline inflation and core measures, while Cable has been close to 1.3550, a Fib at 1.3555 and the 21 DMA that stands at 1.3559 today, awaiting the ECB and BoE on Thursday respectively. Elsewhere, Usd/Chf is straddling 0.9200 and Usd/Jpy is probing 114.50 having breached recent lows including a support zone covering daily and weekly levels plus a Fib at 114.58 to expose another retracement point at 114.31, irrespective of BoJ Governor Kuroda refuting criticism of its ultra-easy policy stance overnight.

AUD/NZD/CAD

Narrowly divergent vs their US counterpart, as the Aussie extends beyond 0.7100 towards 0.7150 in wake of remarks from RBA Governor Lowe overnight essentially underscoring guidance that the economic outlook is brighter and inflation is projected to be higher, but the Board will not raise rates until confident that the latter is sustainably at target. Nevertheless, the Aud/Nzd cross has bounced back over 1.0750 following NZ jobs data missing consensus on all counts, bar the unemployment rate that declined to a record low, and leaves that Kiwi flat under 0.6650 against its US rival. Conversely, the Loonie is holding above 1.2700 before Canadian building permits and a couple of BoC speakers, Gravelle ahead of Governor Mackleml, though perhaps more importantly Friday’s face-off with the US on the labour front.

EM

More traction for the Pln on top of mainly hawkish rate guidance as NBP’s Glapinski states that the Bank welcomes a strong Zloty, while the Czk is likely to derive more upward momentum via the CNB tomorrow when it is tipped to lift benchmark rates by another 75 bp. Meanwhile, the Rub remains on course to extend its recovery even though Russia says there are no immediate plans to hold more talks with the US, as President Putin expressed very cautious optimism after Wednesday’s security discussions.

02 Feb 2022 - 10:18- Fixed IncomeData- Source: Newsquawk