CIBC FX Flows: FXWW

From the FXWW Chatroom: Despite being Goto-bi Day, we have not been able to tackle the sell orders above 114.00 in UsdJpy. Some chatter that offers are also linked to the 114.00 option strike maturing today New York worth $2.2bn. UsdJpy weakened to 113.77 after the Tokyo fix, bit of AudJpy was sold too following the Aussie Q3 CPI.
Australia’s third quarter inflation better than Q2 but was tad below consensus. AudUsd slipped below the 0.7750 and stayed offered with market scrambling to get exit long AudNzd. AudJpy sale was also reported after Tokyo fix and we soon took out Oct 6 low of 0.7733, also the 50% Fibonacci retracement (0.7329-0.8125) to print 0.7722. Talk of leveraged names offering AudUsd at 0.7740 as well as AudJpy at 88.30.
From our macro strategist Patrick Bennett on Aussie Q3 CPI: So a softer, though not absent inflation. Market taken for risk that in expecting a rise and not getting it, the response is magnified. Expect RBA to ho-hum with this. They are looking for better growth to lift inflation. at present moderate (for it is not low it is around 2%) inflation and decent growth is a good result for assets.
New Zealand PM Jacinda Arden announced key ministerial portfolios this morning, Winston Peters is confirmed as Deputy PM as well as Foreign Affairs. Jacinda also named Grant Robertson as Finance Minister which was largely expected. Our macro strategist Bipan said this is good news as it implies that monetary policy stays away from Peters. The RBNZ mandate could change to include employment but if it includes exchange rate replacing policy rate as benchmark (similar to MAS), that will be bearish for Nzd but Bipan does not think this is likely.
Kiwi felt the heat from the Aussie dollar, lesser in magnitude due to AudNzd liquidation.
Today is D Day for Bank of Canada. Interest rate is expected to stay at 1% and our economics team said the central bank will use today’s policy report to further talk down expectations for additional hikes in the near term, depicting a healthy base case but downside uncertainties. UsdCad advanced to 1.2685 amid softer Aussie. Do note there is a $850mio of 1.2700 option strike rolling off today New York cut.
EurUsd is one boring pair. Common knowledge that big/crucial level is 1.1660, 100-Day SMA at 1.1670. Intraday bids gather near 1.1730-35 and offers atop 1.1800. Think we stay in range until ECB rates decision tomorrow. CIBC Economics Team said ECB is likely to cut bond-buying in half and extend the program another six months following today’s meeting. Our macro strategist Bipan said ECB is almost universally expected to announce some form of tapering into 2018, once the current program ends in December.
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