What will Fed do? Well, Asia seems to be taking money off the table and pared long Usd. Our economist Avery Shenfeld said FOMC will drop its pledge to be “patient” about the timing of a rate hike, to leave the door open for a June move; but it will replace that sentence with an emphasis on being “data dependent”, and will mention, alongside solid jobs numbers, the softness in recent growth indicators.
The only interesting price action was in UsdCad – the pair attempted to take on the sellers 1.2790-1.2800; witnessed decent volume as well with a fellow Canadian bank chewing up a lot of offers 1.2795-97, we think he was acting for real money account. Offers are light, nothing really outstanding – unless we see 1.2835-45. Buy orders low side of 1.27’s. Come Friday, large 1.2750 strike rolls off – notional more than $1.2 yards.
Not exciting for UsdJpy – Japanese importers on the bid at 121.00 while “you-know-who” is offering Usd above 121.75. Our trader Jon thinks this UsdJpy is not going anywhere till Japanese local elections in April.
EurUsd stayed above 1.0600 most of the morning; good selling reported above 1.0635 from various names; buy orders mid-1.05’s. There are notable options expiring tomorrow NY cut. 1.0500-strike with notional of more than Eur3bn while 1.0600 has about Eur2bn.
Our rates trader Pawan said it was a strong result in the 10-year Aud700mio government bond auction this morning . 3.86 times bid/cover, 0.2 though the mid. With upside in 3’s limited due to RBA on hold, any further strength in the market should be in 10’s, expecting the flattening to continue.
Saw some short covering of Aud and AudNzd this morning – Aud up to 0.7630 whilst the cross 1.0440. Some guys are not comfortable with Aud given the news that Fortescue Metals has withdrawn the Aud2.5bn bond issuance. AFR reported that the company could be paying up to 8% interest in order to lure investors. I mentioned yesterday that there are a lot of options expiring on Fri Mar 20; 0.7350, 0.7300 and 0.7200