CIBC – FX Flows: FXWW

From the FXWW Chatroom: EUR first moved lower, pre-open traded down to 1.1639, where we saw one Italian bank bidding decent size down there. But this uncertainty in Italy took a turn. Der Spiegel wrote Italy’s new government is bad news for Eurozone. Roger Bootle in The Telegraph said an Italian exit from Euro might be the end of the single currency. So, when Premier-Designate Giuseppe Conte failed to form a new government, market bought EURUSD and EURJPY. EURUSD came back fiercely and traded up to 1.1692. Risk on continued, EUR crosses firmed up and EURUSD revisited 1.17-handle.
Move into EURJPY saw USDJPY printing 109.83. There was a report on Nikkei that PM Shinzo Abe’s disapproval rating hit record 53% in the latest Nikkei/TV Tokyo survey. Abe spoke in parliament, apologized as administration head over school deals. Apparently, Abe was asked if he will call for snap elections if no-confidence motion is submitted. USDJPY slipped past 109.50 to print 109.42.
Unwinding of long oil futures continued into Asia and USDCAD ticked up. We saw platform names hitting our offers in the 1.2980’s, suspect algorithm names behind.
Our rates team produced the monthly CAD rates – since the start of the year was the market was looking for too many hikes to be delivered by the Bank of Canada in 2018. Our view has not changed, despite the fact the market continues to price just over two additional hikes for the balance of the year. Real headwinds remain, in particular trade uncertainty stemming from NAFTA and a lower macro sensitivity than in prior years to rising energy prices. Additionally, the BoC is likely to want to see more evidence of sustained growth amidst higher administered rates given the increased sensitivity of household and rate sensitive sectors.
Asians

Onshore USDKRW opened at 1074.5 – WSJ confirmed the news that US officials are visiting North Korea. US delegation met with North Korean officials, hoping to hammer out agreements on a possible summit between Trump and Kim. Korea Kospi Index is up, KRW strengthened to 1072.5.
Market is touch excited about Bank Indonesia ad hoc meeting this week. Most people see the central bank hiking rates by 25bp to 4.75%.
Watch that HKD, market is going to get very ugly if 7.8300 gives way.

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