Credit Agricole

Asia overnight

UST yields holding onto yesterday’s gains kept downward pressure on sentiment in Asia. Most Asian bourses and S&P 500 futures were trading lower at the time of writing. The JPY was the outperformer in G10 FX on the back of weaker risk sentiment. The NZD was supported by the NZ rates market pricing in a more aggressive RBNZ. Oil prices have been given a boost by an explosion at a pipeline running from Iraq to Turkey. Higher oil prices supported the CAD and the NOK in the Asian session. The USD and SEK were the underperformers during the Asian session.

CIBC

Key Headlines

  • The pattern continues in Asia, most equity indices are in negative, sell-off in the US fixed income futures.
  • Taken from WSJ Pro, Bill Nelson, a former top Fed staffer said Fed needs to prepare the public for the possibility that they will tighten by 50 basis points in March. He added that such a big increase may be necessary because the Fed is behind the curve in getting inflation under control, and it could have some value in reshaping market expectations toward a monetary policy stance that is serious about lowering inflation.

FX Flows

$YEN moved up towards 114.79 as UST yields advanced. As mentioned yesterday, any move towards 115.00 will bring about profit taking from leveraged funds and the Japanese day traders. I also do not think this is going down as long as UST yields continue to climb, likely base 114.10-20.

EUR$ stuck in tight range in Asia, Japanese names were seen bidding in the low 1.1320s, apparently for the Tokyo fix. Some said bids under 1.1320 are linked to option strikes due on Thursday, between 1.1315 and 1.1300. 50-day SMA seen at 1.1322 and short-term support 1.1282. Likely to run into buyers near 1.1280 to 1.1270. The increasing divergence between Fed and ECB policies will continue to put pressure on EUR$.

Citi

European Open

FX was quiet during the Asian session, with rates and equities taking center stage. USD was a tad weaker against the G10, with the only notable move coming from a strengthening JPY. In the rates space OIS markets started to open the door for a fifth hike by the fed, while the short end of the treasury curve was under pressure. Over in China, 10y bond yields dropped as markets continued to digest dovish comments from Deputy PBOC Governor Liu Guoqiang yesterday.

Looking ahead, USD will see housing starts at 13:30 GMT. GBP will look for CPI at 07:00 GMT, followed by BOE officials’ testimony on financial stability at 14:15 GMT. CAD and ZAR will also look towards CPI at 13:30 GMT and 08:00 GMT respectively.