EUROPEAN FX UPDATE: risk, rates and Russian rhetoric in focus pre-Fed

Analysis details (09:33)

AUD/EUR/CAD//DXY/NZD

The Aussie has regrouped with assistance from a rebound in iron ore prices, the Yuan and a broad upturn in market mood helped by the latest constructive commentary regarding the Russia-Ukraine conflict. Specifically, Ukrainian President Zelensky stated that the positions of both sides at negotiations sound more realistic, while Russian Foreiegn Minister Lavrov said Ukraine's neutral status is being seriously discussed and some formulations of agreements are close to being finalised. Meanwhile, the Cnh and Cny got a boost from a firm recovery in Chinese and HK equities overnight amidst more speculation about easing, China’s State Council vowing to keep stock markets stable and Vice Premier Liu He pledging to take measures to boost the economy in Q1 and adding that monetary policy should take initiatives to that effect as well. Aud/Usd is back on the 0.7200 handle and probing the 10 DMA before setting sights on 0.7250 that aligns with the 21 DMA. Elsewhere, the Euro is testing 1.1000 again as EGB yields back up abruptly and sharply with curves re-steepening, though Eur/Usd may be hampered by further option expiry at the round number given 1.23 bn rolling off at the NY cut. A partial revival in crude is providing the Loonie with renewed impetus either side of 1.2750 in advance of Canadian CPI that is due alongside US retail sales and piling a bit more pressure on the Greenback via the index that has lost more momentum above 99.000, albeit just holding off Tuesday’s low within a 99.008-98.641 range. Back down under, the Kiwi is tagging along with its Antipodean counterpart, as Aud/Nzd continues to pivot 1.0650 and Nzd/Usd approaches 0.6800 irrespective of worse than expected NZ current account data for Q4.

GBP/CHF

Also firmer vs the Dollar, but the Pound is lagging on the eve of the BoE as a 25 bp hike is all priced in, while the Franc remains wary of SNB intervention and is also acknowledging high yields alongside the encouraging pick-up in risk appetite. Nevertheless, Cable has cleared near term and semi-psychological resistance at 1.3050 and Usd/Chf is off 0.9400+ peaks awaiting the FOMC.

JPY

The major laggard and hardly helped by a wider than forecast Japanese trade balance as exports fell short of consensus in contrast with imports, with Usd/Jpy nudging yesterday’s high circa 118.45 in advance of the BoJ.

SCANDI

It’s pretty much even keel between the Sek and Nok, as Riksbank Governor Ingves finally responds to the prospect of further gains in already high inflation by conceding that it might have to lift the repo before 2024, while the Nok draws traction from Brent’s firmer bounce and more secure grasp of Usd 100+/brl status.

16 Mar 2022 - 09:33- Fixed IncomeData- Source: Newsquawk