EUROPEAN FX UPDATE: risk-off overtones, but far from overarching

Analysis details (10:24)

DXY/CHF/JPY

The Dollar has eased off after its midweek rebound, irrespective of broad sentiment remaining decidedly bearish, and the pullback appears partly due to the fact that other safe-havens are seeing increased demand, while some riskier assets are managing to resist or evade the latest rout. Bonds are rallying almost across the board as stocks slide and the US Treasury curve is re-flattening regardless of a somewhat tepid 20 year note auction beyond the stop-through, while the Franc has extended its strong and relatively swift rebound against the Greenback and Euro to breach 0.9800 and 1.0300 respectively. Moreover, the Yen retains a firm underlying bid and is retesting Japanese importer buying interest around 128.00 vs the Buck to nudge the index down to 103.430 from 103.880 at best ahead of jobless claims and the Philly Fed. Note, little reaction to mixed data from Japan in the form of trade and machinery orders as the deficit was narrower than forecast, but only thanks to imports missing consensus by a bigger margin than exports and offset the latter exceeding expectations around two-fold on both m/m and y/y counts.

NZD/AUD/GBP/CAD/EUR

As noted above, several high beta, activity, cyclical and commodity currencies are evading the aversion that is weighing heavily on equities and crude oil to an extent, with the Kiwi gleaning traction from NZ’s 2022 budget that was healthy enough to provide funds for cost of living relief measures, while the Aussie peered through a disappointing rise in jobs to a 92.4k jump in full-time employment and dip in the unemployment rate to multi-decade lows. Elsewhere, the deflated Pound took advantage of its US peer’s downturn to probe 1.2400, briefly, the Loonie pared declines from just shy of 1.2900 to have another look at post-Canadian CPI peaks nearer 1.2800 ahead of new house prices and PPI, and the Euro regained 1.0500+ status, albeit just and intermittently in the run up to ECB minutes and more scheduled speakers from GC members.

SCANDI/EM 

The Sek and Nok got some protection from the general risk-off tone in Eur cross terms via corrective trade rather than anything fundamental, but the former may have noted a recovery in Swedish Q1 cap u after downward revision to the prior quarter. Conversely, the Czk was not helped by latest rhetoric from CNB Assistant Governor Nidetsky who seemed to roll back on a likely hike next month by saying rates maybe near the peak, the Huf was left to track external developments as the NBH left its 1 week depo unchanged and the Try remained depressed after Turkish President Erdogan said the country will not support Swedish or Finnish NATO entry and make the same error as it did with Greece. Looking ahead, the Zar awaits the SARB in anticipation of a 50 bp rate increase.

19 May 2022 - 10:24- Fixed IncomeData- Source: Newsquawk