EUROPEAN FX UPDATE: Yen pares overnight gains, but Buck still broadly soft

Analysis details (10:17)

DXY

The Dollar and index continue to trade heavy, with the latter dipping below last week’s base within a 104.120-103.790 range T-1 to spot month end that is supposedly supportive for the Greenback on rebalancing grounds. However, a further pick-up in risk appetite is weighing on the Buck ahead of US durable goods data and some of its peers are on the front foot or outperforming on specific factors, like the Yen in wake of strong fix demand, the Pound on another unwind in IMM spec short positioning, the Yuan after a hefty PBoC liquidity injection and even the Lira following another form of capital control.

GBP/EUR

As noted above, Sterling is firmer vs its US counterpart as Cable climbs above 1.2300, and possibly due to some short covering prompted by the fact that it is less oversold rather the anything positive from a UK standpoint. Nevertheless, the Pound also reclaimed 0.8600+ status against the Euro and could be deriving some support from LHS flows linked to the end of June and Q2, even though the single currency is up vs the Dollar in its own right. Indeed, Eur/Usd has tested technical resistance ahead of 1.0600 in the guise of the 21 DMA that stands at 1.0591 today, though also faces another upside chart hurdle before the round number, at 1.0598 (50 DMA).

CAD/JPY    

The Loonie has gleaned some encouragement from a bounce in crude prices on Chinese Covid developments, as Beijing and Shanghai prepare to lift more restrictions, with Usd/Cad back under 1.2900, while the Yen benefited from all round buy orders overnight that might be attributed to repatriation for month and quarter end on Thursday, or some acknowledgment of the latest BoJ Summary of Opinions release that noted damage to the economy and heightened uncertainty from a sharp decline in the Jpy. Usd/Jpy almost hit 134.50 before stalling and retesting 135.00+ levels along with Yen crosses.

NZD/AUD/CHF   

Another improvement in risk sentiment favoured the Kiwi more than Aussie as Aud/Nzd ran into offers around the psychological 1.1000 mark, to keep Nzd/Usd aloft on the 0.6300 handle and Aud/Usd capped above 0.6950 irrespective of recoveries in copper and iron ore. Elsewhere, the Franc held a tight line vs its US and Eurozone rivals between 0.9585-59 and 1.0143-04 with latest Swiss sight deposit balances showing declines at domestic banks.

SCANDI/EM

The Nok did not get any retail therapy as Norwegian consumption fell again in May, albeit not as much as the previous month after revision, but the Cnh/Cny were underpinned by the aforementioned PBoC net cash provision via 7-day reverse repos and the Try received a much needed, though already fading boost from Turkey’s banking watchdog stopping banks from extending Lira loans to companies with more than Try 15 mn worth of FX cash assets or those that exceed 10% of total assets or annual revenues.

27 Jun 2022 - 10:17- Fixed IncomeResearch Sheet- Source: Newsquawk