CIBC

FX Flows

New Zealand Q4 2021 terms of trade contracted 1%, lowest since Q3 2020. Annually it was up 2.6% from +5.3% last quarter. Very little participation in terms of FX. Market stabilised, commodity prices up – Wheat up at 1,010.50, market is expecting milk futures up as well. Better risk appetite had the NZ$ trading higher. Expect some resistance 0.6800-15, possibly breakout artists thereafter.

AU$ also higher at end of the Asia morning session. Article by RBA watcher James Glynn on Governor Lowe’s comments on Tuesday that RBA will be patient until the data justify a move higher in interest rates, and not before. That means that at the minimum, another two quarterly inflation reads will be needed to green light the first interest rate rise, which puts the timeline for tightening to around August or perhaps Q4. This is going to disappoint some bulls. Resistant should come in near 0.7300, expect stops through 0.7315.

EUR$ has been steady – offers were mentioned near 1.1140 limited the upside to 1.1133. There should be some more digital options on the downside, 1.1050 and particularly 1.1000. Next big levels are 1.0880 and 1.0640.

Weak sentiment, UST yields had the $YEN moving lower initially but soon turned when the Japanese traders settled down. The pair was bought for the Tokyo fix and activity slowed. Recovery in risk kept the $YEN firm but momentum accounts capped the upside. Think that sellers will line up offers ahead of 115.50. Hearsay bids currently near 114.60, I was told that the Japanese retail have turned long and I am sure they will be there as well. Not large, there are about $1.83bn worth of 115.00 strikes due in coming days.

Credit Agricole

Asia overnight

Oil at USD110/bl is rattling investor sentiment. The Ukraine crisis continues to push commodity prices higher and increase investor concerns that central banks will be forced to slam on the monetary policy brakes in order to control higher levels of cost-push inflation. Most Asian bourses were trading lower, but S&P 500 futures higher at the time of writing. G10 FX followed the latter and the Antipodeans, CAD and NOK were the outperformers during the Asian session. Australia’s GDP release and US President Joe Biden’s State of the Union address were broadly neutral for FX markets. While the JPY and CHF were underperformers during the Asian session, the SEK remains under the most downward pressure.

Citi

European Open

Geopolitics remained top of mind for markets following yesterday’s Russia/Ukraine headlines just ahead of the NY session. DXY held onto the gains it saw in the NY session, while UST dipped. The dominant move, however, was that of oil prices, which surged in the NY session, and continued thereafter into the Asian session. The news of a coordinated release in oil reserves did little to pull oil prices down. Central bank speech also featured heavily. The Fed’s Bostic left the possibility of a 50bps hike on the table. ECB’s Rehn noted that ECB should not exit stimulus before gauging the war impact.

Looking ahead, the OPEC+ is likely to stick to their planned 400k bpd increase. Central bank speech will be watched closely following yesterday’s rates moves. USD looks to Fed Chair Powell’s testimony at 15:00 GMT, with more Fedspeak peppering the day. EUR will see Eurozone CPI, as well as ECB talk from Nagel and Lane. GBP will see speeches from Tenreyro and Cunliffe. CAD will see a rate decision in which Citi Economics expects a 25bps hike.