CIBC

FX Flows

New Zealand 4Q annual CPI rose to 5.9%, highest in more than 30 years. According to Bloomberg, price increases were widespread and were particularly acute for home rentals and construction of new dwellings. Shipping disruptions that stem from closed borders and congestion at ports during the pandemic have added fuel to the inflation bonfire. The data is likely to encourage economists to increase calls for RBNZ to continue lifting rates in 2022. NZD$ did little after that number, risk-off had the pair trading down to 0.6620. Option strike at 0.6670 matures today for N$550mio. Strong resistance around 0.6700-10. Keep an eye out for NZD¥, break of 75.75 could attract selling interests.

$YEN sold into and post-Tokyo fix. Some month-end selling as well. Weak risk sentiment continued to pile pressure on $YEN and YEN crosses. Japanese retail day traders have taken profit on their longs, rumoured that they are looking to position short close to 115.00 and re-enter long below 114.10.

It took a bit of effort for AUD$ to break 0.7100. I guess traders are not particularly keen to go short ahead of RBA meeting next week February 1. General feel that corporate accounts are scooping this Aussie dollar on dips, probably explains the price action. Not much to speak about for option strikes, next support at 0.7040.

Yield spreads of AU-NZ bonds narrowed, 2-year spread now at 115 bps, probably explained the price action of AUDNZD, traded up to 1.0710.

On the BoC, both our economics and strategy teams said BoC accompanying press-conference were authoritatively hawkish. The Bank explicitly noted that they would begin a “decisive series of steps” to abandon emergency policies implemented at the start of the pandemic. It was a hawkish hold. $CAD moved higher to 1.2706, buyers we met were mostly platform names. WTI March contract has fallen beneath $87.00. Tonight we will have the January CFIB Business Barometer and November Payroll Employment Change.

Death cross developed in the spot gold day charts, move under 1800 could entice sellers.

Citi

European Open

Asia took the theme from the New York session and ran with it. Fed’s hawkish lean continued to reverberate with short-end US rates pushing higher, USD climbing and most of all, stocks plunging. US equity futures fell over 1%, upsetting the risk tone and dragging high-beta FX lower. Asia bourses were similarly battered with Nikkei sliding, which propped up JPY, while Kospi dropped 3% weighed by flighty foreign selling flows which pressured KRW.

Looking ahead, we see an influx of data. The US will see Core PCE and Initial Jobless & Continuing Claims at 13:30 GMT. EUR will watch EB speak from Scicluna at 13:30 GMT as well, which will be closely watched following dovish comments from ECB officials. TRY will see a central bank inflation report, while TWD sees GDP at 08:00 GMT, and HKR trade data at 08:30 GMT. MXN will see trade balance data at 12:00 GMT. HUF sees a one week deposit rate decision at 08:30 GMT, where our economists forecast a 30bps hike to 4.30%. ZAR will see an interest rate decision, where Citi Economists expect a 25bps hike to 4.00%.