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USD Index Moderately Softer, Banxico Hawkish Surprise Boosts MXN

FOREX
  • Weakness across major equity benchmarks throughout Thursday’s US session has underpinned a greenback recovery, however, the USD index is has been unable to reverse the entirety of this morning’s move lower and sits 0.2% lower on the day.
  • Outperformance in G10 is clearly being led by Scandinavian FX following the Riksbank rate decision, which not only saw a 50bps rate hike, but projected further tightening in the Spring and committed to unwinding their balance sheet from April onwards. EURSEK is down over 2% on the day, breaching multiple technical points, including the medium-term support at 11.1411, the 50-dma.
  • Across the major currencies in G10, daily adjustments have been more moderate, however intra-day ranges in the case of the antipodeans and the JPY have been substantial.
  • In the case of AUDUSD, the pair initially was clocking an advance of around 1.25% before the turn in global sentiment sent the pair steadily lower, narrowing the gap with the overnight lows at 0.6921.
    • Price recently tested support at 0.6880, the 50-day EMA. A clear break and close below this average would signal scope for a deeper retracement.
  • In emerging markets, an above consensus Banxico rate hike of 50bps and a hawkish accompanying statement saw the Mexican peso firm around 1%. USDMXN has consolidated around 18.75 ahead of the APAC crossover and will eye key support and the bear trigger at 18.5080, the Feb 02 low.
  • Chinese CPI & PPI data is due overnight before UK growth data for December highlights the European docket. Canadian jobs data and US UMich sentiment data will be in focus to round off the week.
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