CIBC – FX Flows: FXWW

From the FXWW Chatroom: USD is generally firmer across G10 and EM ahead of FOMC; one Japanese megabank chewed away offers from low 110.40s into the 50s. Move up has been slow; next challenge should be 111.00.
EURUSD has traded in tight range ahead of FOMC. Rate rise in US but market is focussing on ECB instead. Our macro strategist Bipan Rai notes ECB’s policy unwind is a bigger a deal considering that the Eurozone is the largest capital provider globally. Our trader Jon said market positioning is now skewed towards long EUR so downside will be supported. Option strikes maturing today from 1.1725 to 1.1700 total EUR4.7bn. There are more than EUR7bn at 1.1700 alone for this week.
They said it was a win for PM Theresa May with MPs voted 324 to 298 to back government. But MPs will be given a say on what the government should do if May fails to strike a Brexit deal. So, did she win? Cable is caught in range for now; keep an eye out for UK inflation data later today.
Dull for Aussie and the Kiwi. RBA Governor Philip Lowe reiterated the view on interest rates, its going up but not now. AUDUSD unchanged.

Asians

While South Korea is closed today for local election, USDKRW NDF is slowing creeping higher on interest rates divergence. Fed Res is expected to hike by 25bp to 1.75% overtaking South Korea who’s at 1.5%. Many see BoK to hike rates only H2 of this year. US President Trump told Fox News that US will not hold war games with South Korea while North Korea negotiates in good faith on denuclearisation. Probably upset the Japanese; moments ago, Defence Minister Onodera said joint military exercises must go on. In the 1s NDF, technical resistance noted at 1084.00; some speculation authority is likely to step in nearer to 1087.

While most USD/Asia pairs are higher, USDCNH has been edging lower. Some said the move is linked to the PBoC easing restrictions for foreign institutional investors. The central bank said it will scrap the 20% monthly repatriation limit and will remove the 3-month lockup periods. USDCNH has moved lower but support seen around this 6.3980-6.4000.

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