EUROPEAN FX UPDATE: Sterling surpasses Anitipodean peers post-stellar labour data

Analysis details (10:21)

GBP/AUD/NZD

The Pound took a while to really appreciate the strength and depth of the latest UK jobs and earnings metrics, even though headline wages soared well beyond expectations to an eye-catching 7% y/y and came with an upward back month revision, while all other components were better than forecast and the ONS noted that jobs vacancies topped the actual number of unemployed for the first time on record. However, Cable gradually built up a head of steam alongside Pound crosses and cleared a Fib retracement level at 1.2390 on the way through 1.2400 plus another recent peak at 1.2406 before breaching the next upside technical target that was also a Fib (1.2424) to reach 1.2488 at best, thus far. Similarly, the Aussie is revisiting psychological resistance, around 0.7000, but the catalysts down under were a hawkish set of RBA minutes allied to a broad improvement in risk sentiment. To recap, the former revealed that the Board was closer to raising rates by 40 bp earlier this month than the 15 bp consensus, but opted for 25 bp on the basis that monthly policy meetings provide the opportunity for review within a relatively short timeframe. Nevertheless, the Kiwi already has April’s half point RBNZ hike under its belt and heightened hype for further 50 bp tightening moves in the cycle, so Nzd/Usd is extending above 0.6350 and away from decent option expiry interest at the 0.6300 strike (1.3 bn).

DXY/CHF/EUR/CAD

It’s abundantly clear that Sterling has piled extra pressure on the Greenback, but the index was losing more momentum anyway on the aforementioned revival in risk appetite and failure to retain 104.000+ status. The DXY continued to fade between 104.230-103.650 parameters as other basket components piggy-backed the Pound or simply benefited from the Buck pullback, with the Franc paring enough declines to trade firmly over par and eye 0.9950, the Euro get close to 1.0500 and Loonie near 1.2800 against the backdrop of gushing oil (WTI and Brent straddling Usd 115/brl at one stage).

JPY

The outright G10 laggard on risk and rate/yield dynamics, irrespective of more jawboning about rapid and excessive currency moves, as the Yen retreated below 129.00 and only managed to find its feet beneath 129.50.

SCANDI/EM  

In stark contrast to the above, the bullish market tone and Brent’s exertions boosted the Sek and Nok, while hammering the Try that also suffered from Turkey’s reservations about Swedish and Finnish NATO membership. Elsewhere, the Inr hit fresh all time lows vs the Usd even before Indian wpi topped forecast, and Pln and Huf gleaned some traction from stronger than anticipated Q1 GDP outturns plus NBP and NBH guidance for further hikes.

17 May 2022 - 10:21- Fixed IncomeData- Source: newsquawk