EUROPEAN FX UPDATE: risk aversion boosts Buck, but repatriation adds to yearn for Yen

Analysis details (10:32)

DXY/JPY

More distress in financials and another broad deterioration in risk sentiment in consequence gave the Dollar a firm fillip on safe haven grounds following its fallout from Wednesday’s dovish FOMC hike. The index also found some semi-psychological support bang on the 102.500 level and would have reclaimed the round number above earlier without fierce competition from the Yen that outperformed in a favourable low yield environment, and with added demand from Japan inc approaching the end of March, Q1 and the fiscal year for many. Indeed, Usd/Jpy reversed sharply from just shy of 131.00 through 130.00, a recent low just below and a Fib (129.80 from February 10 and a 76.4% retracement at 129.74 to be precise) to cap the DXY for a while before it broke higher to 103.260.

XAU/CHF   

No shock to see Gold continue its revival given the extent of pre-weekend risk off positioning and hedging, but the fact that the Franc held up much better than most was both telling and worrying in context of the weakness in bank stocks, bonds and CDS. Xau/Usd got to within five Bucks or the Usd 2k/oz mark and Usd/Chf was contained within a range inside 0.9200-0.9150.

CAD/GBP/AUD/NZD/EUR

All unable to evade the Greenback’s clutches or revival, as the Loonie lurched towards 1.3800 from close to 1.3700 amidst renewed weakness in oil prices and the Pound failed to derive any real upside impetus via upbeat UK retail sales data or a warning from BoE Governor Bailey about further tightening if firms continue to jack up prices before a set of disappointing preliminary PMIs. Cable retreated from almost 1.2300 to the low 1.2200 area, while the Aussie waned from nearly 0.6700 to sub-0.6650, the Kiwi faded from just over 0.6250, though managed to keep afloat of 0.6200 narrowly and the Euro was only briefly supported by strong Eurozone services and composite PMIs vs bleak manufacturing prints on the way down to 1.0722 from 1.0838 at best.

SCANDI/EM  

The Sek reclaimed some of its losses vs the Nok post-Norges Bank irrespective of a slowdown in y/y Swedish PPI and an uptick on Norway’s credit indicator as the latter felt the Brunt of Brent’s hefty retracement, while EM currencies backed off across the board against the Usd for obvious bearish risk reasons.

24 Mar 2023 - 10:32- Fixed IncomeData- Source: Newsquawk