CIBC FX Flows: FXWW

From the FXWW Chatroom: We started with UsdJpy but it was Cable that stole the limelight. A tweet from The UK Times that it has an article on front page that senior EU official is saying the Brexit deal is 90% there. This caused GbpUsd buying from 1.3450 up towards 1.35-handle. The Times article cited an unnamed senior EU diplomat said Britain and the European Union were “90%” towards a deal and discussions over role of ECJ were nearly there. Cable printed 1.3514 then drifted back. I believe there is still the sticky Irish border where no firm agreement.

UsdJpy, which ended Friday at 112.17, opened higher at 112.44 following the vote to overhaul US tax code. A Nikkei article on Sunday said Japanese companies are ready to spend money on R&D, building new factories and increase in wages. Also a fresh report this morning said Japanese government is considering rewarding businesses that increase wages and invest in productivity growth by offering tax breaks that could lower their effective tax rates to as low as 20% or so.

UsdJpy offers mentioned in the 112.80’s to 113.00 were slowly chewed away by early speculative names – pre-empting a positive Tokyo open. Bear in mind there are some $2.6bn worth of 113.00 option strike maturing this week. The 61.8% Fibonacci retracement (114.73-110.85) comes in at 113.25. BoJ Governor Haruhiko Kuroda will be speaking at 1.00 pm Tokyo at luncheon with BDF Governor François Villeroy.


EurUsd opened lower at 1.1886 versus last week’s ending at 1.1896 – more or less a Usd sentiment as market ignores Greek news. We have traded down to 1.1852, shy of last Friday’s low 1.1851. Short-term technical trendline comes in at 1.1839. Bids surround 1.1800, profit taking. There are also several options maturing this week – for 1.1800 strike totalling near Eur3.2bn and 1.1825 strike for Eur1.7bn. On the upside, we have Eur2.65bn for 1.1900 strike.

AudUsd traded back onto 0.76-handle after a weak start. We think this is partly profit taking in AudCad and strong rally in iron-ore futures.

CIBC economics team still see the Bank of Canada outlining a wait-and-see approach in this week’s Dec 6 statement, given the risks currently hanging over the domestic economy. In The Week Ahead, our colleagues said there still aren’t enough indicators on fourth quarter growth to justify a tighter policy setting. A stand-pat stance is likely on the menu, particularly with NAFTA risks mounting.

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