EUROPEAN FX UPDATE: Yen regroups, while Euro awaits ECB in anticipation

Analysis details (10:20)

DXY/JPY/EUR

It’s hard to stray beyond the Yen and Euro in major currency circles given the magnitude of depreciation in the former and proximity of the ECB policy meeting that is widely expected to be pivotal for the latter in terms of near term direction. Moreover, both have been instrumental for the Dollar given their high individual and collective weighting in the index ahead of US CPI data tomorrow that is likely to provide the Greenback with some independent impetus. Indeed, the DXY continues track moves in Usd/Jpy and Eur/Usd amidst the broader risk and rates backdrop, with a fulcrum around 102.500 for the most part, as the Yen claws back some of its huge losses and the Euro treads cautiously into the ECB amidst additional pressure from the Eur/Jpy cross that was offering upside momentum when extending gains through 144.00, but is now sub-143.00. Similarly, Usd/Jpy rallied a bit further to reach 134.56 overnight before reversing below 133.50 on a combination of corrective price action, profit taking and consolidative trade. Back to the ECB, focus is firmly on guidance for July in context of APP and how long after the remaining QE remit ends before rate normalisation begins - full preview of the event available under the Research Suite and to be posted on the Headline Feed pre-12.45BST - as Eur/Usd hovers around 1.0700 and inside decent option expiry interest (1.06 bn between 1.10750-55 and 1.03 bn from 1.0605-00.

SEK

A jolt for the Swedish Krona following mixed data and to offset bearish forces from further risk aversion via Riksbank’s Bremen who backed up concerns about inflation by stating that a 50 bp hike this month is not excluded. Eur/Sek subsequently slipped towards 10.5000 vs 10.5500+ at one stage.

NZD/AUD

The tables turned a tad down under after the RBNZ revealed plans to start running down its LSAP holdings from next month at a Nzd 5 bn/fy pace, while the Aussie was torn between the benefits of upbeat Chinese trade data and news that parts of the country will have Covid restrictions re-imposed due to new cases. In response, Nzd/Usd regained 0.6450+ status, Aud/Usd remained capped into 0.7200 and Aud/Nzd eased back below 1.1150.

CHF/CAD/GBP  

All sitting tight in the absence of anything material on the Swiss, Canadian or UK front, and therefore looking for pointers from elsewhere, but with the Franc poised to breach round numbers against the Buck and Euro, at 0.9800 and 1.0500 respectively, the Loonie losing thrust from oil and other commodities from 1.2550 at best and Sterling unable to scale 1.2550 from a base just shy of 1.2500.

EM

No stopping the Zar in wake of a considerably wider than consensus SA current account surplus, while the Cnh and Cny are both retaining gains on the back of the aforementioned strong Chinese trade data rather than reversing course in disappointment due to latest coronavirus developments. Conversely, the Try recoiled to new troughs beneath 17.2000 vs the Usd and the Huf remained precarious near 400.00 against the Eur even though Hungary  issued FX bonds totalling USD 3bln and EUR 750mln, and Finance Minister Varga said the sales went well.

09 Jun 2022 - 10:20- Fixed IncomeData- Source: Newsquawk