EUROPEAN FX UPDATE: Pound plunges post-poor UK retail sales data

Analysis details (10:21)

GBP/DXY/EUR

It took a while in wake of a bleak set of UK consumption figures, but Sterling lost grip of the 1.3000 handle vs the Greenback and then declined through recent lows before stops were tripped on a breach of the prior y-t-d base from April 13 (1.2972) and Cable subsequently tumbled all the way down to 1.2880 or so before the selling abated. Meanwhile, Eur/Gbp resumed its rally to reach 0.8379 and only pulled up a few pips shy of almost aligning technical resistance in the form of a Fib retracment level at 0.8381 and the 100 DMA at 0.8383 before broader Buck strength and perhaps some semi-psychological offers capped Eur/Usd around 1.0850, irrespective of better than expected preliminary Eurozone PMIs in contrast to somewhat mixed UK outturns. In fact, Eur/Usd retreated further to probe 1.0800 and along with weakness in other Dollar index components, pushed the DXY up over 101.000 again, and a fraction beyond its 101.030 twin peaks from April 19 and 20 to 101.050.

AUD/NZD/CAD

All unable to avoid the adverse effects of risk aversion and their US rivals revival, with the Aussie also down in sympathy or tandem with the Yuan, the Kiwi extending post-NZ CPI losses and the Loonie undermined by a retreat in crude prices. Aud/Usd teetered above 0.7300, Nzd/Usd gave up 0.6700+ status and Usd/Cad scaled 1.2650 in advance of Canadian Retail Sales and PPI data.

JPY/CHF

The Yen may have regianed some safe haven premium given the aforementioned downturn in sentiment, or finally paid attention to verbal intervention from Japanese Finance Minister Suzuki who added a bit more weight behind efforts to curb excessive moves (weakness) by confirming that he is in close contact with US Treasury Secretary Yellen about Usd/Jpy. Indeed, although UST yields rebounded firmly and the BoJ continued to cap JGBs in accordance with its YCT, the headline pair straddled 128.00 within a wide 128.69-127.74 range, unlike Usd/Chf that was mainly elevated within a 0.9529-59 band.

SCANDI/EM  

Brent’s retracement ruffled the Nok and the Mxn fell alongside WTI, while the Cnh weakened further even though the PBoC set a slightly firmer than forecast Cny midpoint rate as Governor Li cited COVID related issues putting more pressure on China's economy and said the Bank will provide policy support for the real economy. Moreover, China’s FX regulator said recent Yuan volatility is mostly due to global market fluctuations and demand/supply changes, while it expects the currency to be basically stable at reasonably balanced levels, indicating little concern about its depreciation that is on track to culminate in the steepest weekly decline since its devaluation in 2015.

22 Apr 2022 - 10:20- Fixed IncomeData- Source: Newsquawk