EUROPEAN FX UPDATE: Yen comeback continues, Kiwi recovers and Euro reflates

Analysis details (10:34)

JPY/EUR/NZD

Repatriation flows provided the Yen with additional impetus to claw back losses, irrespective of much more concerted efforts by the BoJ to put a lid on soaraway JGB yields overnight, via scheduled and impromptu buying operations. Moreover, weaker than forecast Japanese retail sales data was largely shrugged off as Usd/Jpy reversed from around 123.21 to circa 121.31 for a cumulative retracement of 379 pips from Monday’s peak. Meanwhile, the Euro reclaimed 1.1100+ status after a brief pull back amidst reservations about Russia’s real intentions following pledges to downscale its military ops and withdraw some troops from certain key areas in Ukraine. Eur/Usd got a fillip from further EGB/UST spread convergence and significantly stronger than expected German state and Spanish inflation outturns that raised the stagflation stakes, but not a specific mention from ECB President Lagarde. The headline pair marginally bettered Tuesday’s peak before fading circa 1.1160 and around a 50% Fib retracement at 1.1151 where decent option expiry interest also sits (1.36 bn up to 1.1155). Elsewhere, the Kiwi regrouped in wake of strength in NZ building consents and improvements in NBNZ own activity and business outlook indices, with Nzd/Usd back over 0.6950 and the Aud/Nzd cross reversing through 1.0800.

CHF/GBP/DXY

The Franc benefited from Dollar depreciation and US Treasury yield erosion to the extent that Usd/Chf tested 0.9250 and Eur/Chf pared more Russia-Ukraine peace talk upside to trade sub-1.0350, regardless of a disappointing Swiss KoF and marked deterioration in investor sentiment. Similarly, Sterling gained at the Greenback’s expense, but could not keep pace with the Euro, as Cable got close to 1.3150 and Eur/Gbp near 0.8500 having breached the 200 DMA at 0.8471. Note, the Pound hardly reacted to remarks from BoE’s Broadbent highlighting the prospect of even higher inflation alongside weaker domestic demand and slower output growth in the near term. Turning to the Buck and using the index as a proxy, another downturn resulted in a breach of 98.000 to expose a cluster of support levels into 97.700 ahead of ADP, final US Q4 GDP and more Fed rhetoric.

CAD/AUD         

Lagging behind other majors, but still bid and rangy against their US counterpart, the Loonie and Aussie remained tethered to 1.2500 and 0.7500 awaiting clearer independent or external direction as crude prices settled down and Aud/Usd braced for hefty option expiries at the strike rolling off on Thursday.

SCANDI/EM 

Mixed Swedish sentiment indicators were offset by a hawkish call from the NIER for a first Riksbank hike in September 2022 to keep the Sek underpinned, while the Cnh and Cny rebounded after a firmer PBoC fix, more net liquidity and pledges to support the economy.

30 Mar 2022 - 10:34- Fixed IncomeEconomic Commentary- Source: newsquawk