EUROPEAN FX UPDATE: Yen revival and Euro rebound keep Buck at bay

Analysis details (10:34)

DXY/JPY/EUR

Semi-psychological resistance at 102.500 may have capped the Dollar index amidst another downturn in overall risk sentiment anyway, but the Greenback also faced external pressure from the Yen and Euro as the former continued its recovery/reversal from post-BoJ lows and the latter regained 1.0800+ status in wake of another pushback against dovish ECB source speculation, this time via Knot by the slopes at Davos. Usd/Jpy retreated between 128.91-127.76 parameters with perhaps some impetus from Japanese trade data showing a narrower than forecast deficit as exports beat consensus in contrast to imports, while Eur/Usd bounced within a 1.0782-1.0828 range after the GC member chimed with guidance from President Lagarde at December’s policy meeting that signalled multiple 50 bp tightening moves rather than a slowdown following another half point hike in February.  As such, the DXY slipped back from 102.480 before finding underlying bids ahead of 102.000, at 102.110 in advance of US housing data, jobless claims, the Philly Fed survey and further remarks from Fed officials.

NZD/AUD   

Risk aversion, a largely disappointing labour market report and unexpected political news all contributed to the Kiwi and Aussie’s downfall, albeit to varying degrees. To recap, NZ PM Adern gave notice of her intention to resign with effect from February 7 and the ruling Labour Party will now vote for a replacement on Sunday, while Aussie payrolls fell against consensus for a rise and the unemployment rate ticked as participation slipped, with the only bright spot coming from the fact that full time jobs rose. Nevertheless, Aud/Usd recoiled from just under 0.6950 to 0.6878 and Nzd/Usd from almost 0.6450 to 0.6381 pre-NZ manufacturing PMI.

CHF/GBP/CAD   

All more restrained than other majors in relation to the Buck, as the Franc flitted between 0.9149 to 0.9177, the Pound sat tight within 1.2351-13 bounds and the Loonie straddled 1.3500 in a +21/-15 pip range. Usd/Chf hardly reacted to softer Swiss producer/import prices, Cable largely shrugged off a mixed BoE credit conditions survey (details on the Headline Feed at 9.31GMT) and Usd/Cad was elevated amidst retracement in oil awaiting Canadian wholesale trade for some potential independent impetus.

SCANDI/EM

The Nok did not get much time to appreciate an improvement in Norwegian industrial confidence before attention turned to the Norges Bank and an unchanged rate decision that prompted a blip in Eur/Nok as a significant minority were looking for a 25 bp hike. However, this is now likely to be forthcoming in March per the accompanying statement that was very similar to the one delivered last time in all other aspects (see 9.00GMT post on the Headline Feed for more and 9.37GMT for post-meeting comments from Governor Bache). Elsewhere, the Idr got the ¼ point BI rate rise that was widely anticipated, the Try expects the CBRT to continue its pause and the Czk took the latest CNB survey in stride.

19 Jan 2023 - 10:34- Fixed IncomeData- Source: Newsquawk