EUROPEAN FX UPDATE: Yen and Gold the standout performers as bank strains persist

Analysis details (09:57)

JPY/XAU/DXY  

In similar vein to this time last week, risk aversion was rife regardless of more concerted efforts to stem the slide in bank stocks, including a hastily arranged deal to buy Credit Suisse that saw UBS make a U-turn having distanced itself from a takeover previously, while a host of major global Central Banks agreed to enhance liquidity provisions with the Fed via 7-day swaps on a daily basis. However, CS shares tanked all over again and UBS also fell amidst reports that at least two major banks in Europe are examining scenarios of contagion potentially spreading across Europe’s banking sector and looking to the Fed and ECB to step in with stronger signals of support. Usd/Jpy reversed sharply from around 132.64 towards 130.50 at one stage and capped the Dollar index ahead of 104.000 within a 103.960-680 range as Gold topped Usd 2000/oz at best.

CHF/AUD/NZD

The Franc underperformed between 0.9312-0.9246 parameters against the Greenback as relief over the aforementioned Swiss bank deal quickly faded and a senior lawmaker noted that the merger creates enormous risk, saying the new entity is too big for Switzerland. Elsewhere, the broad downturn in sentiment weighed on the Aussie and Kiwi, with the former losing 0.6700+ status vs the Buck and the latter topping out just above 0.6300 before retreating through 0.6250 ahead of RBA minutes and NZ trade data respectively.

GBP/CAD/EUR

Sterling held up better than other G10 currencies, perhaps on the premise that the Fed may be more inclined to hold fire on a 25 bp hike than the BoE this week, or in advance of UK macro releases comprising public sector finances, inflation and retail sales. Cable hovered near 1.2200 and the Eur/Gbp cross pivoted 0.8750, while the Loonie was undermined by another drop in crude prices and the Euro suffered more EU bank contagion. Indeed, Usd/Cad rebounded from sub-1.3700 to almost 1.3750 and Eur/Usd recoiled from just over 1.0700 to under 1.0650 at worst.

SCANDI/EM    

The bearish market mood took its toll on the Sek and Nok, albeit latter more so due to the decline in Brent oil, while the Pln derived some traction via firmer than forecast Polish PPI and Corporate Sector Wages to offset weaker than expected Employment and Industrial Output. Elsewhere, the Cnh and Cny only gleaned brief impetus from a marginally stronger than anticipated PBoC midpoint fix as LPRs were maintained and adviser Cai said China needs household stimulus to boost the recovery and noted that residents' incomes have not grown well in the past few years, so the recovery in consumption is not enough to support economic growth, according to Caijing.

20 Mar 2023 - 09:57- Fixed IncomeData- Source: Newsquawk