EUROPEAN FX UPDATE: Sek soars as Riksbank hikes and sets QT start date

Analysis details (09:58)

DXY/SEK

The Buck was already backing off again amidst pressure from high beta and cyclical currencies on risk grounds, but the Dollar index dipped to 103.000 having peaked at 103.560 earlier when the Swedish Krona rallied sharply in response to the Riksbank raising rates by 50 bp to 3%, in line with consensus, lifting the repo path to signal another 25 bp increase in the tightening cycle and accelerating the sale of asset holdings from April. Full details of the latest policy pronouncements, accompanying statement, QT schedule and economic forecast are available on the Headline Feed at 8.30GMT. Eur/Sek dropped from around 11.3200 to circa 11.2450 initially before probing 11.2050 and lowest levels since late January, while the DXY subsequently slipped through the aforementioned round number to expose a gaping hole to its pre-NFP trough (101.546).

NZD/AUD  

As noted above, the Kiwi and Aussie revelled in favourable risk conditions that spread to commodities, so much so that Nzd/Usd overcame stubborn resistance at 0.6350 to reach 0.6369 ahead of the NZ manufacturing PMI and electronic card retail sales, while Aud/Usd set sights on 0.7000 again in the run up to the RBA’s SOMP and Chinese inflation data.

GBP/EUR

The Pound also benefited at the Greenback’s expense, while keeping the Euro at bay awaiting commentary from BoE members in testimony to the TSC on February’s MPR, with Cable reclaiming 1.2100+ status and Eur/Gbp capped below 0.8900, while Eur/Usd bounced from the low 1.0700 area to 1.0768 after even more hawkish ECB rhetoric. Back to Sterling, and Pill got the ball rolling with his annual report that was hawkish leaning vs a more hawkish Haskel, while Governor Bailey began with the observation that the Bank/MPC expects inflation to slow swiftly over the course of 2023 - see rolling posts on the Headline Feed from 9.52GMT for more.   

JPY/CAD/CHF

Further volatility in Usd/Jpy overnight as the headline pair plunged in the region of one full point, but the retested highs above 131.00 as the Buck weakened, while the Loonie clawed back declines just sub-1.3450 having digested the first set of BoC minutes revealing that the council wanted to convey that the bar for additional rate hikes was now higher and it debated whether to leave the policy rate unchanged on the grounds it was starting to work and just needed more time. Elsewhere, the Franc straddled 0.9200 amidst a lack of anything Swiss specific bar poor results from CS.

NOK/EM

Firmer Brent crude and the Sek’s exploits encouraged the Nok to follow suit and scale 11.0000 vs the Eur, while the Huf tripped tech stops on the way to targeting a key Fib retracement level and the Zar held a firm line pre-SA President Ramaphosa’s State of the Nation address.

09 Feb 2023 - 09:57- Fixed IncomeData- Source: Newsquawk