Citi: G10 FX flows

From the FXWW Chatroom: Citi: G10 FX flows not at the centre stage this morning as we just struggle along waiting for Jackson Hole and the r* debates..
{US} Jackson Hole is all clients and colleagues are discussing this AM in G10. We are trying to pin down what the market expects and how they would react to various outcomes. Please TAKE THE SURVEY below – we will publish the results later today.
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{SA} ZAR has continues its move as London walks in..  our onshore desk notes, after the headlines yesterday evening, our trading had warned that 13.55 break would target the 13.90 area but we got to the 14.00/20 good resistance much faster than anticipated. To put things into context on yesterday’s headlines market volumes were approximately 1000% above average.  Market liquidity in USDZAR deteriorated significantly following the headlines, with density of liquidity around 25% thinner than normal and average market top of book spreads around 50% wider.

{MX} MXN:S&P downgraded Mexico’s outlook from stable to negative but affirmed its BBB+ rating. Our Strategists note  “Always inclined to think that unless the investment grade status is at risk (and we are far away here), these rating things blow over pretty fast. So short term negative, but probably not a major change to the story.”
Positioning is another story.. Given the heavy EM inflows seen in recent weeks although our Strategists do NOT expect any hawkish surprised out of JH event into the weekend they warn that USD could squeeze given the nervousness and said positioning. This should be temporary in nature but they are sitting on the sidelines.

Equally in {GB} GBP : Levels remain 1.3180, 1.3275 1.3360-80 BUT we have seen a close below the support of 0.8585-90 in EURGBP. Would expect GBP to remain relatively bid as positions are reduced ahead of the Jackson Hole summit.

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