EUROPEAN FX UPDATE: risk, retail, repatriation and repos all in the mix

Analysis details (10:21)

DXY

Plenty of price action on spot month end, but mainly downside for the Dollar and index amidst improving risk sentiment, partly on more signs of a possible compromise between Russia and Ukraine as talks to try and strike a peace deal resume. However, the Greenback is also making way for recoveries in rival currencies on specific factors and the DXY could be paying the price for not sustaining bullish momentum when in the ascendency yesterday, as it faded just shy of the y-t-d high, at 99.377 vs 99.415 and has subsequently drifted into a slightly lower 99.300-98.844 range. Ahead, US consumer confidence, a trio of Fed speakers and the last of this week’s note auctions in the form of Usd 47 bn 7 year issuance.

JPY/EUR/AUD      

The Yen continues to lick wounds and consolidate after extending its bear run on Monday through 125.00 vs the Greenback and equally eye-catching levels against other peers in cross terms. Short covering and profit taking have aided the mini-revival, but aside from two-way interest from Japanese importers and exporters for hedging purposes, repatriation flows are probably approaching their peak as settlement for transactions falls on March 31 today. Hence, Usd/Jpy is finding bids into 123.00 and meeting offers ahead of 124.50, with similar interests keeping Eur/Jpy and Aud/Jpy inside recent extremes, irrespective of moves in individual Usd/major pairs. Moreover, the Euro is in the thick of some hefty option expiry interest that might stifle Eur/Usd or cap the upside amidst another ratchet higher in EGB yields along with hefty option expiry interest spanning 1.0950-1.1000 (1.3 bn from 1.0950-60, 1.33 bn between 1.0975-80 and 2.78 bn at the round number strike to be precise). Meanwhile, mixed impulses for the Aussie around 0.7500 vs its US counterpart after final retail sales came in almost double consensus overnight, but the budget underwhelmed irrespective of a narrower deficit forecast compared to December and various measures aimed at easing the strain for households facing higher fuel and other living costs - see 9.30BST post on the Headline Feed for details.

CHF

Having stepped back from direct intervention of late, the SNB is said to be mulling changes to its repo operations by indexing transactions to the benchmark policy rate and thereby enhancing flexibility for steering money market rates. In response, a bit more Franc weakness and underperformance as Usd/Chf approaches 0.9975 and Eur/Chf hovers towards the upper end of a 1.0300-1.0252 band.

CAD/NZD/GBP  

The Loonie is drawing comfort from comparative stability in crude prices following a further retracement, but the Kiwi and Sterling are both slipping having lost grip of psychological markers vs the Greenback. Usd/Cad is clinging on to the 1.2500 handle, Nzd/Usd is sub-0.6900 and Cable is midway between 1.3116-1.3051 bounds in wake of conflicting BoE data (consumer credit stronger than anticipated, but mortgage lending and approvals missed consensus).

SCANDI/EM

A broad upturn in risk appetite pending an official statement about Russia-Ukraine ceasefire negotiations has underpinned the Sek and Nok, while keeping the Rub supported alongside fellow EM currencies, bar the Try.

29 Mar 2022 - 10:20- Fixed IncomeData- Source: newsquawk