EUROPEAN FX UPDATE: Swedish Crown slips and Japanese Yen yields

Analysis details (10:30)

SEK/NOK

There were more reservations against keeping the QE quota unchanged and a tweak to the repo rate path from the Riksbank, but no real twist on the assessment of inflation as the Bank stuck to the view that downside risks remain even though the prospect of prices being too low have diminished. Hence, Eur/Sek rallied towards 10.5000 from around 10.4000 and the Krona is underperforming against the grain of cagey and mainly restrained trade elsewhere in the run up to US CPI data. Indeed, even Eur/Nok saw limited upside between 10.0968-0561 approximate bounds in wake of much weaker than expected Norwegian inflation metrics and the headline prints in particular.

JPY/DXY   

The Yen’s resistance to rebounds in US Treasury yields, upturns in broad risk sentiment and bearish technical forces visibly eroded on the back of intervention by the BoJ to stop the rot in JGBs before the 10 year benchmark rate reached what many believe to be a line in the sand at 25 bp. In short, the Bank will buy an unlimited amount of bonds from next Monday and in response Usd/Jpy breached a Fib retracement level at 115.67 more convincingly to clear the path ahead of the round number above. However, the Dollar is still treading cautiously ahead of the aforementioned US inflation release and the index looks rooted to 95.500 amidst ongoing strength in other components following more Fed officials intimating a 25 bp hike in March, like Mester who does not see a compelling argument for the FOMC to lift-off by ½ point.

GBP/EUR/NZD/AUD    

All firmer vs the Greenback, but holding below semi or full psychological levels pending the performance of the Buck post-CPI. Sterling is straddling 1.3550, though poised for another attempt to touch 1.3600 irrespective of the tide turning in the Eur/Gbp cross and the Euro eyeing 1.1450 against its US peer again. Note, Eur/Usd did not really react to hawkish ECB sources or Rehn taking his turn to rein in aggressive tightening expectations, or a sharp upgrade to the EC’s 2022 inflation forecast from 2.2% to 3.5%. Meanwhile, the Kiwi and Aussie continue to build momentum for big figure attempts, at 0.6700 and 0.7200 respectively, while Aud/Nzd hovers under 1.0750 in advance of NZ manufacturing PMI and electronic card sales that are due before a speech by RBA Governor Lowe.

CHF/CAD

The Franc and Loonie are sitting tight just over 0.9250 and 1.2700 vs their US counterpart, with the latter not gleaning a lot from WTI that is pivoting Usd 90/brl or BoC Governor Macklem regardless of the fact that he said rates may be lifted above their natural level.

EM

The Zar extended its rebound pre-SA President Ramaphosa’s SONA as Gold inched closer to Fib resistance and the Mxn remained firm in anticipation of a 50 bp hike from Banxico, but the Idr idled after the BI held rates as widely expected and the Inr declined when the RBI refrained from increasing the Reverse Repo to confound consensus for a 20 bp rise.

10 Feb 2022 - 10:29- Fixed IncomeData- Source: Newsquawk