CIBC

FX Flows

New Zealand’s first quarter inflation rate climbed to 6.9% over the year and up 1.8% over the quarter. Bloomberg Squawk said the annual rate is the highest in 32 years however, both rates were lower than estimates and traders rushed in to sell NZ$ and bought AU$NZ$. Earlier this week RBNZ Governor Orr said the balance of risks for New Zealand policymakers is very much weighted to constraining medium-term inflation expectations. Good resistance at 0.6815, support at Monday’s low 0.6715. AU$NZ$ rose but just shy of 1.1000. There have been calls from one or two RBA watchers that RBA will hike in May due to higher inflation data out next week. We do not agree with that because RBA meets on May 3, we doubt they will hike ahead of Australian election is on May 21.

New York ended with $YEN at 127.86, there was a flurry of buying when US equity futures reopened, US$ climbed to 128.21 then settled down around 128.00. There was a report by Associated Press of a probable threat to the Capitol Complex, this got the $YEN down to 127.83. Apparently, it was a false alarm and $YEN climbed. Reflecting yesterday’s move, a lot of people are saying this is a hiccup and historically YEN is not that weak. $YEN went bid amid higher UST yields, however, met with selling for the Tokyo fix. The pair slipped into narrow range, with bids below 128.00.

Japanese were seen bidding up the US$, ran into offers near 128.50. There was a quick squeeze up to 128.64 when Suzuki and Kuroda spoke.

AU$ was little lower, nothing compared to the NZ$. It is dividend day for one large Australian corporate, so the buying is finished. Market talk that RBA will hike in May due to higher inflation data out next week. We do not agree with that because RBA meets on May 3, we doubt they will hike ahead of Australian election is on May 21. Watch0.7415, we should see some kind of support. Very little seen on top, probable sellers 0.7475-80.

EUR$ ended the session lower with very little to tell really, I’d say higher UST yields contributed. Large option strike at 1.0900 due today worth €2.6bn, shouldn’t be a threat. France’s BFM TV said 59% found Macron more convincing in TV debate ahead of French Presidential election. Will be an exciting Monday if things turn ugly.

Citi

European Open

The overnight Treasury rally is faded in Asia, with selling seen across the curve. USD gains as yields tick higher, providing a lift for USDJPY despite a lack of clear flow biases in spot desk flows. EUR shrugged off a balanced French presidential debate which failed to shift the needle for the final vote, before edging higher after another round of hawkish comments from a central bank official pushed bund futures lower and sets up cash EGBs for a weak open. NZD lags after below consensus inflation print, while still a 30y peak, which nails on more RBNZ tightening next month. CNH is back under pressure after another high-volume session, with softening economic outlook now drawing the attention of other trade-dependent currencies in the region.

EUR braces for another drop in Eurozone consumer confidence, after we look to comments from ECB President Lagarde’s who appears alongside Fed Chair Powell, at the IMF. GBP’s rally Wednesday will likewise be tested by comments from BoE’s Catherine Mann ahead of a likely dovish rendition from Governor Bailey. US claims should support aggressive Fed tightening for USD, while data and price action in PLN and HUF, respectively, may give more reasons for Ceemea central banks to reconsider aggressive hikes.