EUROPEAN FX UPDATE: Rouble reels regardless of radical rate rise

Analysis details (10:31)

RUB

The CBR resorted to conventional monetary policy methods in an attempt to curb further Rouble depreciation via a huge 10.5% ratchet up in the benchmark interest rate to 20% having hiked by 100 bp at its last scheduled meeting, but Usd/Rub continues to whipsaw either side of the century mark following further sanctions against Russia, including the partial exemption from SWIFT for some entities. Meanwhile, the Ukrainian invasion continues and President Putin upped the ante by putting the country’s nuclear deterrent forces on high alert over the weekend to spark another wave of risk aversion in the financial markets pending talks between delegations from the two nations to try and resolve the situation, or at least agree to a ceasefire.

DXY/CHF/JPY/XAU   

All off best levels, but retaining a firm underlying bid on safe-haven grounds with the Dollar index holding above 97.000 between 97.428-018 parameters and perhaps also benefiting from residual rebalancing demand for month end in the run up to Chicago PMI and comments from Fed’s Bostic. Elsewhere, the Franc is pivoting half round number levels vs the Buck and Euro at 0.9250 and 1.0350 respectively in wake of mixed Swiss Q4 GDP data, a weaker than expected KOF index and pick-up in retail sales plus sight deposits suggesting no official intervention last week. The Yen is back below 115.50 vs the Greenback after testing 115.00 offers and resistance post-Japanese ip and retail sales coming under and a tad above consensus, and Gold is keeping a tight rein around Usd 1900/oz. Note, decent option expiry interest in Usd/Jpy at the 115.40 strike (1 bn) may be influential ahead of the NY cut.

EUR

At the other end of the major spectrum, Euro declines are only exceeded by the Swedish Krona that remains hampered by the Riksbank’s relatively dovish stance, as Eur/Usd lags below 1.1200 and Eur/Jpy drifts within a 129.40-128.34 range.

GBP/AUD/NZD/CAD

The Pound is meandering between 1.3400-1.3300 against its US peer for the most part and did not glean too much traction from a rise in Lloyds UK business barometer, like the Aussie that could have been given a pre-RBA boost given much stronger than forecast retail sales overnight. However, Aud/Usd is hovering around 0.7200 and the Aud/Nzd cross is nearer 1.0700 than 1.0750 as the Kiwi manages to tread water on the 0.6700 handle vs its US counterpart irrespective of declines in NBNZ’s business outlook and own activity readings. Conversely, the Loonie has retreated alongside WTI pre-Canadian ppi and current account data, albeit off sub-1.2800 lows and closer to its 1.2750+ high.

SCANDI/EM

As noted above, the Sek continues to underperform, while the Nok derives underlying support from Brent sticking close to Usd 100/brl to the extent that another month of no Norges Bank foreign currency sales or softer than anticipated Norwegian retail sales have not really adversely impacted. On the EM front, risk-off positioning on the final day of February is weighing on most currencies with the exception of the Cnh and Cny that got close to all time highs before reports about major state-owned Chinese banks buying Usd at 6.3100 to prevent further appreciation.

28 Feb 2022 - 10:30- Fixed IncomeData- Source: newsquawk