EUROPEAN FX UPDATE: Pre-Easter trade sees contained price action across G10s in the absence of catalysts

Analysis details (09:21)

DXY

The index trimmed the gains seen from the risk-off seen in APAC hours as sentiment tilted somewhat more constructive despite a lack of news flow and ahead of the long Easter weekend. The index hit a high of 102.05 overnight before trundling lower to session lows of 101.81 shortly after the European cash open, ahead of yesterday’s 101.40 low. Analysts at ING highlight that “Another big drop in short-dated US yields yesterday did not carry the dollar to a new low”, the desk posits “Either short dollar positioning is too heavy or – as we like to think – investors feel it is too early to default to a 'buy risk, sell dollars' mentality given what could be further skeletons in the banking closet.” Ahead, traders will be eyeing the weekly Initial Jobless Claims – which does not entail the NFP survey period, whilst Fed’s Bullard (non-voter, hawk) is slated to speak at 15:00BST/10:00EDT.

GBP, EUR

The GBP and EUR both initially posted modest gains against the Dollar after the cash open, as the Buck experienced some downticks at the time. GBP/USD is trading around USD 1.2475 within a range of 1.2438-87, but still within the parameters of yesterday's 1.2431-2515 range. EUR/USD is trading on either side of 1.0900 after briefly dipping below yesterday's low of 1.0889, while EUR/GBP is trading within a range of 0.8740-56. Analysts at ING expect EUR/USD to remain around the 1.0900 region today, but acknowledge that a challenging risk environment could cause EUR/USD to fluctuate within a range of 1.05 to 1.10.

AUD, NZD

The Antipodeans fail to benefit from the pullback in the Dollar and reside as the current G10 laggards amid the overnight risk aversion and following this week’s central bank action. The AUD continues to feel headwinds from the RBA’s Cash Rate pause, but losses are somewhat cushioned by a dollar-induced pick-up in some base metals, with AUD/USD oscillating around 0.6700 in a 0.6688-6725 intraday band. The Kiwi sits as the relative underperformer despite the RBNZ’s larger-than-expected hike this week, with NZD/USD back under its 50 DMA (0.6299) but off its session lows of 0.6280.

JPY, CHF

A slight divergence is seen between the traditional FX havens. The USD/JPY is slightly firmer as DXY picks up off lows, and after the pair traded heavily overnight amid the risk aversion at the time. USD/JPY met some resistance near 131.50 in early European trade but remains within yesterday’s 130.62-131.84 range. CHF meanwhile sits as the current outperformer despite a lack of news flow. ING suspects “the SNB will want to keep EUR/CHF quite stable and given the possible de-leveraging of balance sheets following the UBS-Credit Suisse deal, the SNB might end up having to be a buyer of FX reserves to hold EUR/CHF above 0.98.”

INR, CNH

USD/INR experienced a pop higher after RBI kept the Repurchase Rate unchanged at 6.50% (exp. 25bps hike) via unanimous decision, although the pair then faltered after Governor Das suggested the decision to pause is for this meeting only and they will not hesitate to take action if needed in future policy meetings with the MPC ready to act if warranted. Elsewhere, the CNH has remained resilient against the Dollar after the Caixin Services PMI painted a rosier picture ahead of Chinese inflation and trade data next week. Meanwhile, Chinese leaders are set to meet with European leaders during the day, with a trilateral meeting between Presidents Xi, Macro, and von der Leyen slated for later today (time TBC).

06 Apr 2023 - 09:25- ForexData- Source: Newsquawk