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Pressure On Core Fixed Income Weighs On Japanese Yen

FOREX
  • Pressure on core fixed income on Tuesday mainly reflected a resumption of Monday's retracement from panicked extremes following the weekend's UBS-Credit Suisse tie-up. Higher core yields played into a weaker Japanese Yen, with USDJPY posting a notable bounce from 131.04 overnight lows to 132.60 as we approach Wednesday’s APAC crossover.
  • With the German short end notably underperforming (2Y Schatz yields rising just under 26bp), the Euro has been a relative outperformer across G10, along with the Swiss Franc.
  • EURUSD moved above resistance at 1.0760, the Mar 15 high and a clear break of this level in coming sessions would strengthen the current bull theme. This would signal scope for gains towards 1.0803 next, the Feb 14 high. On the downside, key short-term support has been defined at 1.0516, the Mar 15 low, where a break is required to reinstate a bearish technical threat.
  • AUD and NZD make up the poorest performers in G10 alongside the Yen following the RBA minutes release overnight, which raised the prospect of a pause to the rate hike cycle. The RBA minutes showed the board took uncertainty surrounding the economic outlook into consideration, and could keep rates unchanged at upcoming meetings in order to judge the impact of the tightening cycle so far.
  • In emerging markets, HUF (+1.96%) and MXN (+1.07%) have had the most notable rallies/recoveries against the greenback after their sharp selloffs across both last week and early on Monday’s session.
  • Wednesday’s docket commences with UK CPI, seen as a key data point before the BOE decision on Thursday. ECB president Lagarde is then due to speak at ECB and Its Watchers conference, in Frankfurt. Focus then quickly turns to the March FOMC rate decision/statement.
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