CIBC

FX Flows

Bank of Canada rate decision today, traders pricing near 70% chance of rate hike, read from one report that economist’s predictions for the decision placed after the Business Outlook survey see an 80% chance of hike, while those placed prior to the data to Bloomberg, assigned just a 25% chance of a hike. $CAD slightly softer while WTI has been steady. Price action suggesting some prop accounts positioning for tonight’s big day. Downside support at 1.2550, several strikes 1.2550-60 roll-off in coming sessions.

Saw Tokyo names sold $YEN around the opening and we stayed in the 113.80s most of the time. Light on option strikes maturing today, leveraged names said to offer near 114.00 while corporate buying close to 113.60.

Yesterday’s surprise in inflation has economists lifting RBA interest rate hike forecasts. One called for RBA move in March. AUD$ little firm this morning, struggled to test 0.7190.

A lot to read about on partygate, birthday party and Sue Gray inquiry but nothing earth shattering. FX has been dull.

There are about €1.4bn worth of EUR put strikes maturing today, 1.1225-35.

PBoC sold CNY200bn of 14-day reverse repos, this is a net injection of CNY100bn. CNH points moved to the right, TN which was around +4 jumped to +5. Spot $CNH did little, ended the morning close to 6.33.

Citi

European Open

A typical pre-FOMC session in Asia gave markets a respite from volatility in equities during the NY session on Tuesday. Major equity indices, which were down over 3% rallied post the London close, although they dipped once again towards the NY close. DXY lost ground during the NY session as well. The muted Asia session saw G10 currencies little changed, although CAD was outperforming a tad ahead of the BoC rate decision as well. NZD 10y bonds gained as much as 5bps, although our trader notes that liquidity is low due to an Australian holiday.

Looking ahead, the FOMC will be the highlight of the day at 19:00 GMT, with Chair Powell’s presser at 19:30 GMT. We remind that the focus point will be on asset purchases, balance sheet, and hints on the rate hike schedule. The US will also see data in the form of an inventories print at 08:30 GMT and New Home sales at 15:00 GMT, although we do not expect markets to react just ahead of the Fed.

Elsewhere, the Bank of Canada Rate Decision will be at 15:00 GMT, and Citi Economists expect a 25bps increase to 0.50%. CLP will see an overnight rate decision at 21:00 GMT where Citi Economists expect a 125bps hike to 5.25%. BRL will see an inflation print at 12:00 GMT followed by CA data at 12:30 GMT. Lastly we flag that AUD and INR will be on holiday today.