EUROPEAN FX UPDATE: Pound precarious and Euro on course for par

Analysis details (10:30)

DXY/GBP/EUR

The Dollar index extended gains beyond 108.500 to 108.550, perhaps with more impetus from latest 75 bp July rate hike calls courtesy of Fed’s Bullard and Bostic, but the Buck also benefited from further safe haven demand and indirectly or at the expense of others. Indeed, Sterling got close to giving up yet another round number at 1.1800 awaiting the official start of the race to be next UK PM and Conservative Party leader, while the Euro flirted with parity amidst the ongoing risk of Russia turning off oil and gas taps as the EU considers imposing additional sanctions. However, Cable and Eur/Usd just held in as the Eur/Gbp cross pivoted 0.8450, and the Euro managed to survive another test on the back of a bleak German ZEW survey.

CAD/NOK

Deeper retracements in crude benchmarks undermined the Loonie and Norwegian Krona, with WTI down towards Usd 101/brl and Brent sub-Usd 104.50 at one stage to push Usd/Cad up within a pip of 1.3050 and keep Eur/Nok elevated between 10.2740-10.2400 parameters, irrespective of a widely anticipated ¾ point rate rise from the BoC tomorrow and Euro weakness elsewhere.  

NZD/AUD/CHF

The Kiwi extended its decline against the Greenback to touch 0.6100, but eked gains vs the Aussie on the even of the RBNZ that is forecast to deliver a 3rd 50 bp OCR hike, as Aud/Nzd probed 1.1000 and Aud/Usd languished below 0.6750 in wake of a downbeat NAB business survey. Elsewhere, the Franc retreated to just under 0.9850 at worst, but remained firm vs the Euro around the same mark.

JPY

Some respite for the Yen, partly on risk and soft Treasury yield dynamics, but maybe also in recognition of a joint statement from Japan’s Finance Minister Sukuki  and US Treasury Secretary Yellen after a meeting in which the former expressed concern about the Jpy’s recent rapid depreciation and said officials are watching currency moves with a sense of urgency. Usd/Jpy reversed further from Monday’s 137.75 apex to almost 137.00 in response.

EM

The Mxn also fell alongside oil prices, while the Cnh and Cny broke below recent ranges on the worsening Chinese Covid situation, but the Sek outperformed with the aid of the aforementioned Eur’s travails and yesterday’s hawkish sounding Riksbank minutes.

12 Jul 2022 - 10:30- Fixed IncomeEconomic Commentary- Source: Newsquawk