EUROPEAN FX UPDATE: Riksbank doves roil the Swedish Crown

Analysis details (10:04)

SEK/DXY/EUR

The Riksbank stuck to its script in terms of delivering a 50 bp hike, but not every Board member was on the same page as Bremen and Floden dissented in preference of ¼ point instead. Moreover, the two doves were not in favour of forward guidance flagging a 25 bp hike in either June or September and the revised repo rate path shows a peak by the end of Q2 next year through the same quarter in 2025 before a cut by Q2 the following year. In sum, a ‘dovish’ half point, and the Swedish Krona slumped in response to the relative benefit of the Dollar and Euro via the index and Eur/Sek cross respectively. Indeed, the DXY rebounded through 101.500 having reversed from 101.890 to 101.460 and Eur/Usd held above 1.1000 as Eur/Sek breached a couple of Fib retracement levels on the way to probing 11.4000 and opening scope for a complete rebound to early April peaks near 11.4500. Back to Eur/Usd, and the headline pair was also in the thick of hefty option expiry interest spanning 1.0900-1.1045 (see 7.29BST post on the Headline Feed for specific sizes and strikes) in the run up to and beyond US durable goods, wholesale and retail inventories, but edging higher towards the top of that band to apply a bit more pressure on the index that retreated further to 101.370.

GBP

Sterling regained poise after Tuesday's tumble, though largely due to the Buck losing momentum and the Euro fading following its spike to 0.8875 before closing on the cusp of a chart pivot. Cable rebounded from circa 1.2403 to top 1.2475 at one stage and Eur/Gbp held around 0.8850 ahead of CBI UK distributive trades.

AUD/NZD

No such luck for the ailing Aussie as fractionally firmer than forecast headline CPI was overshadowed by softer than expected monthly and RBA trimmed or weighted measures in the context of policy perceptions. Indeed, markets assigned and even lower probability of a 25 bp hike next week and nearer certainty that the RBA will stand pat again, with Aud/Usd teetering over 0.6600 in response and Aud/Nzd hovering under 1.0800 even though the Kiwi was undermined by a wider NZ trade deficit and Nzd/Usd slipped within a 0.6149-28 range.

CHF/JPY/CAD

The Franc clawed back some losses vs its US peer from 0.8926, and perhaps paying some attention to an improvement in Swiss investor sentiment, while the Yen continued its recovery between 133.86-40 parameters on a mixture of month-end factors, pre-BoJ positioning and an element of safe haven demand. Elsewhere, the Loonie lagged sub-1.3600, though kept afloat of 1.3650 against its US rival awaiting BoC minutes from this month’s policy meeting.

NOK/EM

No respite for the Nok irrespective of some stability in Brent as it fell partly in sympathy with the Sek and on risk-off grounds, but the Cny and Cnh arrested their slide on approach to 200 DMAs.

26 Apr 2023 - 10:04- Fixed IncomeData- Source: Newsquawk