EUROPEAN FX UPDATE: somewhat subdued start to super Thursday

Analysis details (10:05)

DXY

The Buck has managed to stop the rot in many respects, but remains cagey and rangy awaiting further/clearer direction that is likely to come from elsewhere today given the overriding focus on policy meetings and guidance from the BoE and ECB. However, the Greenback could glean some independent impetus via US data and surveys, including Challenger Lay-offs, jobless claims and the services ISM. In the meantime, the Dollar index appears to have found some traction around the 96.000 axis with assistance from consolidation and a fade in counterpart currencies within and beyond the basket.

CHF/CAD

The Franc is lagging as Treasury yields tick up rather than anything specific, though a bounce in the Eur/Chf cross back above 1.0400 may be telling in terms of the SNB keeping a close in case the aforementioned ECB event is overly dovish, as Usd/Chf rebounds through 0.9300. Meanwhile, the Loonie continues to track WTI in wake of OPEC+ sticking to its output rollback plan, with Usd/Cad hovering around 1.2700 on the eve of the next Canadian-US employment report showdown.

JPY

Also undermined by the softer/steeper UST curve backdrop to an extent, but the Yen may be paying the price of a technical failure to extend upon gains when bullish momentum was stronger, as Usd/Jpy closed above a Fib retracement level at 114.31 on Wednesday and has not been able to breach since. Moreover, BoJ’s Wakatabe echoed sentiments expressed by sources in context of the Bank not needing to adjust policy in response to the recent spike in JGB yields beyond target overnight. On the flip-side, the Yen might derive underlying support from hefty option expiry interest residing from 114.90-115.00 (1.9 bn).

GBP/EUR

The stage is set for Sterling and the Euro in advance of the aforementioned BoE and ECB policy decisions, accompanying statements, pressers, plus MPC minutes and MPR in the case of the former, with Cable criss-crossing 1.3550 and underpinned by upward revisions to the final UK services and composite PMIs, while Eur/Usd has lost a bit more post-EZ inflation fizz around 1.1300 amidst mixed to weak surveys (Spain and Italy the notable underperformer as both came in sub-50). Nevertheless, Eur/Gbp is sitting tight circa 0.8330 and inside multi tops and bottoms spanning 1.2000 in the reciprocal, and this is where the BoE vs ECB story may well be played out depending on how hawkish or dovish the MPC and GC are - full previews of both available in the Research Suite. Back to Eur/Usd, big option expiries are also in the mix as 2.54 bn rolls off between 1.1290-00 and 1.35 bn at 1.1310-25.

AUD/NZD

It looks like softer trade data and internals are overshadowing an unexpected and significant rise in building approvals as the Aussie pulls back further against its US peer to hover under 0.7150 and just above the round number below where 1.3 bn option expiry interest begin and end. Meanwhile, the latest reversal in Aud/Nzd through 1.0750 may have more to do with NZ PM Adern stating that borders will begin reopening in phases from February 27, albeit not fully until October. Nzd/Usd is towards the upper end of a 0.6609-43 band in response.

SCANDI/EM

Some traction for the Sek against the backdrop of Meta-induced risk aversion via a pick up in Sweden’s services PMI, but little solace in the EM space and especially the Try after yet another acceleration CPI and PPI to just shy of 50% y/y and 100% y/y respectively.

03 Feb 2022 - 10:03- Fixed IncomeData- Source: Newsquawk