US FX WRAP: Dollar bid on further Yen weakness post-BoJ as focus continues to reside on intervention talk

Analysis details (21:09)

The Dollar Index was firmer despite Core PCE printing in-line with expectations and therefore avoiding a hawkish surprise (in the context of Thursday’s hot quarterly PCE metrics). Support for the Greenback has primarily been as a result of significant JPY softness given the extent of the moves and the weighting of JPY in the Dollar index. 106.18 was the high print for the session. Next week there is a slew of risk events, namely QRA, FOMC, NFP, and continued mega-cap earnings from the likes of AMZN, AAPL, and chip-bellwether SMCI, with lots of risk from the Euro cross with German inflation figures on Monday.

JPY was the clear laggard and saw notable losses against the Buck and was once again the talk of the town, as it appears it will be for some time. The BoJ kept rates steady, amid a lack of hawkish surprises within the release and lack of forceful commentary on the JPY by the BoJ. Subsequently, USD/JPY ascended to an interim high of 156.82 in the European morning before being slapped down in a sharp move to trade at sub-155 levels in absence of any news. That proved a dip to buy and thereafter, the pair continued its move higher through the rest of the session peaking at the close here at 157.92 (and counting). Some may view the earlier sharp move lower as an intervention, but we have not seen any official confirmation of this, and there are many analysts that argue that it appears unlikely. Some suspect these mini flash crashes may be opportunistic participants attempting to create situations that appear to others like intervention. Note, Japan is on market holiday on Monday, so be aware for any further opportunistic dips, whether it's the BoJ or not. 

AUD was the G10 outperformer and eked out slight gains vs. the Greenback as it benefited from broad-based commodity strength. As such, AUD/USD hit a high of 0.6554 and broke through its 200d and 50d MAs of 0.6526 and 0.6532, respectively. NZD was flat, with NZD/USD in a contained range between 0.5930-69.

CAD was flat, while GBP, CHF, and EUR all saw losses to varying degrees against the Dollar, albeit with none too steep. The currencies were weighed on by the Dollar bid (amid the Yen weakness) as opposed to any currency-specific newsflow. Cable hit a low of 1.2450 against an earlier high of 1.2540 and currently sits close to the round 1.2500. EUR/USD reversed from a peak of 1.0752 in the EZ session to a trough of 1.0675. Nonetheless, ECB Consumer Inflation Expectations survey for March saw the 12-months ahead gauge fall to 3.0% from 3.1%) and the 3-year ahead gauge left unchanged at 2.5%. Looking to next week, EZ flash CPI and GDP metrics are the highlights at the beginning of the week.

EMFX, in the main, noticed gains vs. the Greenback as it tracked the risk sentiment on Wall St. Elsewhere, the ZAR firmed as analysts stated a recent poll suggested there was no alternative to the governing African National Congress (ANC), despite a fall in its support. For the BRL, IPCA-15 Mid-Month CPI was cooler than expected for both April and Y/Y, which allowed CapEco to note that “this inflation release probably just keeps the door open to a 50bps move, rather than a smaller 25bps cut”. Lastly, Mexican unemployment rate in March fell to 2.3% from 2.5%, marginally more than the forecasted 2.4%.

26 Apr 2024 - 21:09- ForexData- Source: Newsquawk