CIBC

Key Headlines

  • Very rough morning for Asia. Risk-off the moment Asia kicked off saw US equity futures fall, Treasuries jumped. In terms of FX, speculators gunned for AU$¥, which broke the previous low of 89.75 to print 89.55. Then a massive turnaround into the Tokyo fix, very strong demand for ¥-crosses like EUR¥ and AU$¥ and at the same time, US equity futures turned positive.
  • PBoC Vice Governor Chen caused the offshore $CNH to jump. He said loan rates have been guided to decline which translate as a signal for more Yuan weakness in the near term. $CNH printed 6.7888.

FX Flows

We started the day with weak risk appetite. Market ran the AU$¥ down to 89.55, I suspect there were stop sell orders beneath the previous low 89.75. At the same time $YEN got down to 129.51. No news whatsoever and risk appetite improved. I was told that Japanese investors sold Treasuries and the yields firmed up. Odd demand for ¥-crosses built a base for US$¥ and calm restored. I was also told that the Japanese retail sector have added to their long $YEN position this morning.

Drama in AU$¥ had the AU$ swinging up and down. Initial sales in the cross pushed the US$ leg to 0.69115, then reversed back to 0.6952. Asian equities turned negative and AU$ brought down to 0.69055. I have mentioned that bids occur from 0.6910 to 0.6900, they have held well. The sudden risk-off coincided with PBoC Vice Governor’s comments that loan rates have been guided to decline. According to Bloomberg, traders are taking it as a signal for more Yuan weakness in the near term.

The UK attorney-general has approved the scrapping of large parts of the Northern Ireland Brexit, EU has threatened to retaliate if UK rips up Northern Ireland protocol. These stories propped up the EUR£, GBP$ traded lower and eventually took out option barrier at 1.2220.

EUR$ dominated by cross play. First, we saw buying of EUR£ over the UK news, this was followed by EUR¥ buying. Once over, EUR$ ended just few ticks above New York closing.

Citi

European Open

Markets in Asia started slow, but risk sentiment soured heading into the European Open and a USD bid gained momentum. We saw big moves lower in AUD and NZD, both which plunged alongside CNH. USDCNH had seen a drift higher accelerate as weekly highs that were set were breached. Equities, which had continued their downward trajectory into the NY close tapered lower in Asia after a small bounce. UST saw an early squeeze higher led by 10y notes, although this came off as the day progressed. PHP saw 1Q GDP beat, although the currency tracked CNH lower.

Looking ahead, we will await an expected vote for Fed Chair Powell for USD, alongside secondary data and Fedspeak. EUR will see ECB’s De Cos speak in Madrid, while SEK will see CPI figures watched closely, as markets gauge the Riksbank’s next steps. GBP eyes a set of economic data today. MXN sees IP data prior to a rate decision, in which Citi Economics expects a 50bp hike to 7%. INR will see IP data and CPI, while ARS will also see a CPI print.