Credit Agricole

Asia overnight

The threat of tighter financial conditions continues to weigh on investor sentiment. FOMC Vice Chair, Lael Brainard, and Chicago Fed President, Charles Evans, whom are normally considered doves by the market turned hawkish in suggesting a March rate hike is a possibility. While China’s exports were strong, imports were on the soft side of consensus and weighed on commodity currencies in Asia. At the time of writing, almost all Asian bourses were trading lower and S&P500 futures slightly in the green. In G10 FX, the NOK and JPY were the outperformers; the former being supported by higher oil prices. The USD and the Antipodean currencies were the underperformers during the Asian session.


European Open

An early morning Reuters report that BoJ officials are beginning to debate how they can start telegraphing eventual rate hikes, citing unidentified sources sent JGB futures lower, with Aussie and US treasuries caught in the crossfire. JPY was unsurprisingly the strongest gainer, while DXY ticked lower. BoK hiked its key rate by 25bps to 1.25% as expected, with a notable comment from Governor Lee that that the recent rate hike effects need to be monitored. Chinese trade data came in mixed, while USDCNH was seem slumping slightly ahead of the Europe open. The US will see another flurry of data prints in the form of retail sales (13:30 GMT), IP (14:15 GMT) and most importantly, the University of Michigan Sentiment (15:00 GMT). Fedspeak is also on the horizon.


FX Flows

This Reuters story on BoJ raising rates even before reaching inflation target has put some pressure on $YEN, pair was sold over the Tokyo fix and then triggered string of stops below 114.00. Selling resumed when it bounced back in the 113.90s, macro names were said to have participated. To be honest, it is too early to pre-empt BoJ move and move is just excessive. Two prominent option strikes next week, 114.20 on Monday for about $1bn and 114.00 on Tuesday for $1.35bn.

AUD¥ was sold and has put some pressure on the AUD$ throughout the morning. Some talk going around that one European account unwound short €AUD this morning. AUD$ got down to 0.7266, bids are suspected around 0.7250, probably from corporate accounts.

$CAD rose to 1.2525 over the Aussie move, offers linked to strike stalled the upside, overall trading has been light and I do suspect there was a round of AUDCAD sales from near 0.9110. Decent $CAD option strikes roll off today, at 1.2525 for $1.47bn, at 1.2500 for $1.43bn and $1.28bn at 1.2485.