EUROPEAN FX UPDATE: Yen extends slide, while others eye big option expiries

Analysis details (10:13)

DXY/JPY

A new day and month, but the same fate befalls bonds as the rout resumes after little more than fleeting or dead cat bounces. However, the Dollar has lost a bit of its month end mojo as risk sentiment improves, albeit modestly, with the index recoiling into a narrower range around its new 102.000 axis ahead of busy agenda to kick-off June, including weekly MBA mortgage applications, the final manufacturing PMI, ISM, JOLTS, Fed speakers and latest Beige Book publication. Nevertheless, the Yen has not been able to take advantage of any Buck fade amidst more dovish guidance from the BoJ and Deputy Governor Wakatabe also reiterating that it is undesirable to target exchange rates in terms of guiding monetary policy. Hence, a green light for Usd/Jpy bulls to chase upside levels following the clean 21 DMA break on Tuesday and 129.00 was subsequently breached along with a Fib at 129.44 on the way to probing 129.50.

AUD

The Aussie is ‘outperforming’ in wake of stronger than expected Q1 GDP data overnight, but capped into 0.7200 vs its US counterpart and around 1.1050 against its Antipodean peer, partly due to a deeper retreat in the Yuan plus the proximity of decent Aud/Usd option expiry interest (1.29 bn between 0.7175-70 to be precise).

EUR/CAD/GBP/CHF/NZD

All relatively rangy vs their US rival, and interestingly the Euro did not get much purchase from hawkish ECB remarks when Holzmann renewed his 50 bp hike call hot on the heels of yesterday’s record high Eurozone inflation print. Eur/Usd remains toppy on the 1.0700 handle and could also be hampered by hefty option expiries as 1.26 bn rolls off at 1.0740-50 and 1.18 bn at 1.0770-75. Elsewhere, the Loonie awaits the BoC to see if it sticks with consensus for a 50 bp hike or opts for a bigger move and/or delivers a hawkish accompanying statement, with Usd/Cad still straddling 1.2650 irrespective of a bounce in oil post-sharp reversal from lofty EU Russian embargo pinnacle. The Pound is hovering just below 1.2600 having derived little indirect impetus from an unrevised final UK manufacturing PMI, in contrast to mixed Eurozone readings, and perhaps already looking forward to the 4-day Jubilee weekend of celebrations, while the Franc is pivoting 0.9600 and Kiwi is rotating either side of 0.6500 in advance of NZ Q1 terms of trade, import and export prices.

SCANDI/EM

The Nok got a wider Q1 current account surplus to offset a slowdown in Norway’s manufacturing PMI, as it maintained 10.1000+ status vs the Eur, while the Sek seemed more interested in 1.08 bn option expiry interest at the 10.4900 strikes against the Eur than a slender rise in Sweden’s manufacturing PMI. Conversely, the Cnh and Cny did not glean traction from a fractionally firmer than anticipated Chinese Caixin manufacturing PMI as it remained sub-50 and the retracement continued through 6.7100 and towards 6.7000 vs the Usd respectively, and the Huf inched closer to 400 against the Eur as Hungary’s manufacturing PMI pulled up significantly just a day after the NBH undershot expectations for a 60 bp hike by going half point instead.

01 Jun 2022 - 10:13- Fixed IncomeData- Source: Newsquawk