CIBC
FX Flows
Bit of action before the official start, $YEN jumped to 135.60, was there a barrier at 135.50? We don’t think so but believe stops were located above which caused the abrupt move. UST yields tad lower and $YEN was dragged along, this coincided with Tokyo fixing supply. We printed 134.88 before small bounce back however market keeping close watch on yields. The usual from Japan Cabinet Sec Matsuno, reiterated BoJ has jurisdiction over monetary policy and if needed, Japan will take appropriate action on forex. He made not comment on FX intervention.
Australia June Westpac consumer sentiment fell to its lowest since August 2020, down 4.5% to 86.4. According to Westpac, over the 46-year history of the survey, they have only seen the index reads or at below this level during major economic dislocations and the last three episodes were associated with high inflation, rising interest rates and a contracting economy – a mix that may be threatening to repeat. The data did not have any effect on currency, AU$ strengthened during the early part of Asia as the $YEN retreated.
New Zealand Q1 current account deficit narrowed a little to NZ$6.143bn from -NZ$7.34bn. This was higher than estimates of -NZ$5.96bn. Like above, NZ$ didn’t do much on that data. The pair slipped to 0.62165 before coming back to 0.6230s. Put strike maturing tomorrow at 0.6200 for NZ$727mio could be aiding the NZ$.
Both EUR and GBP climbed on back of weak US$. Several reports have confirmed there are bids hidden in EUR$ below 1.0400 and I do not think they are linked to any nearby option strikes. Likely some people are taking chips off the table. GBP$ is back onto 1.20-handle, think we will see sellers above at 1.2107, the 23.6% retracement.
The PBoC left the 1-year MLF unchanged at 2.85% as expected. It also rolled over CNY200bn of MLF loans maturing which was also in line. Industrial production improved in May but retail sales still weak. National Bureau of Statistics said though that was an improvement from April's 11.1% drop. Onshore $CNY opened lower at 6.7279 versus yesterday’s close 6.7425. Some banks started to echo that Chinese data does show that worst economic impact is over.
$CNH moved lower from the moment Tokyo opened and fell from 6.7470 when onshore opened, got down to 6.7277.
Citi
European Open
Markets were seen paring dollar longs in Asia, taking profit ahead of the FOMC decision later today. This resulted in high beta currencies generally faring better, although JPY led the charts on the back of flows. The JGB market however, was tumultuous, with JGB futures in freefall after BoJ reinforces YCC. This triggered a volatility interruption on the exchange. US yields were down lower in a slight bull steepening move. Meanwhile, US equity futures were modestly positive, while Chinese stocks were noticeably in the green. Oil prices plunged late in the NY session, and has thereafter remained stable in Asia.
Ahead, the FOMC will be closely eyed with debates on the outcomes, although markets have priced in around 70bps of hikes. As usual, the rate decision will be followed by Fed Chair Powell’s Presser. EUR sees several ECB speakers today, with Lagarde likely to be closely watched. EUR will also receive Eurozone IP data. HUF will see central bank minutes, while BRL sees a selic rate decision in which Citi Economics expects a 50bps hike to 13.25%
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With 10 years of experience as a private trader and professional market analyst under his belt, James has carved out an impressive industry reputation. Able to both dissect and explain the key fundamental developments in the market, he communicates their importance and relevance in a succinct and straight forward manner.