European FX Space Back On Its Feet

G10 FX space saw some unwinding of yesterday's price action, with the European FX bloc finding poise. Headline flow was sparse and did not provide anything to diffuse concerns related to Italy's political turmoil and Europe's energy crisis.

• Shipment orders data published by Nord Stream AG showed that gas flows through the pipeline will resume at ~40% of capacity, slightly more than expected, with the planned maintenance due to finish at 06:00 CET. Still, actual volumes remain clouded by uncertainty until realised, while the risk of further weaponisation of gas shipments by Russia remains.
• Yen volatility briefly spiked (USD/JPY seesawed within a 50-pip range) as the BoJ kept its monetary policy settings and forward guidance unchanged, but tweaked economic forecasts to reflect stronger headwinds to growth and upside risks to inflation. The Bank flagged concern with sharp fluctuations in FX and commodity markets. As the dust settles, JPY is roughly where it was before the announcement.
• Traditional safe havens were out of favour despite questionable performance from regional stock markets. The greenback and yen were broadly softer, while the CHF lagged its European peers.
• The kiwi dollar landed at the bottom of the G10 pile, despite the lack of any obvious domestic catalysts. Correction of yesterday's outperformance may have played a role here.
• Central bank activity will remain in high gear, with the ECB preparing to announce its monetary policy decisions & BoE Chief Economist Pill due to speak. In the EM space, rate reviews are due in Indonesia, Turkey and South Africa.
• On the data front, focus turns to U.S. initial jobless claims & Philadelphia Fed Business Outlook.