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Late Equity Surge Underpins Cross/JPY Recovery

FOREX
  • Optimism across global markets rose in the latter half of Thursday trade on diminished banking sector panic with major US institutions reportedly propping up troubled First Republic Bank. The news supported a punchy recovery for Cross/JPY which had come under extended pressure in earlier trade.
  • For USDJPY, fresh lows for the week were printed at 131.72, largely in the lead up to and the immediate aftermath of the ECB decision. EURJPY also tracked through Wednesday’s worst levels to trade as low as 139.13. However, as the dust settled on the ECB’s 50bp hike and fresh news underpinned a significant recovery for First Republic shares and major indices alike, the Japanese yen came under consistent pressure with USDJPY rising back to unchanged on the session around 133.50 as we approach the APAC crossover.
  • With the focus on the volatile yen, EURUSD traded in a fairly narrow range despite the ECB decision and press conference outcomes being blurred in recent sessions by the Credit Suisse situation. Some early selling pressure on the lack of forward guidance for May was swiftly absorbed and the pair returned back north of the 1.06 handle for much of the session.
  • In emerging markets, the sensitive Mexican peso reacted very favourably to the latest developments. USDMXN, after briefly trading to fresh weekly highs at 19.1792 has slipped all the way back to 18.77 as of writing with the peso partially clawing back the steep losses incurred since late last week. 18.4707, the 20-day EMA, is the first support to watch.
  • On Friday, Final Eurozone CPI readings will cross before US industrial production and Uni Mich consumer sentiment and inflation expectations cap off the week. Focus then turns to the March FOMC meeting next Wednesday.
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