FX Flows

From the FXWW Chatroom: It wasn’t as fierce as the first debate, UsdMxn first traded higher 18.5600 then fell to 18.4950 when the debated ended.

A weak Aussie Sept labour report sent AudUsd down from 0.7730 to 0.7700. I’m told decent buying below 0.7685 away. AudUsd printed 0.7696 and bounced back to 0.77-teens in what we believe was AudJpy buying from Japanese names. AudUsd fell back to 0.7690 post-fixing.

NzdJpy demand into Tokyo fix caused the NzdUsd spike above 0.7250 and triggered round of stop buy orders. Saw one reversionary account selling Kiwi when we backed away from 0.7265.

Japan reported that investors were nett buyers of foreign bonds in the week ending Oct 14 up Jpy317.7bn as supposed to nett sale of Jpy733.8bn on Oct 07. Tokyo names were buyers of UsdJpy and Jpy-crosses related to Gotobi-Day. Dollar advanced above the Ichimoku Cloud 103.51 and registered 103.67. Hearsay buy orders surround 103.00-10; so happens the 100-Day SMA is at 103.07. There is also an option expiry at 103.00 today New York cut for about $1.3bn.

Speaking to the Senate Banking Committee, Poloz said negative rates remain in toolkit but isn’t needed for now. This prompted some buying during the early hours, lifted UsdCad above 1.31-teens. The pair later rose to 1.3146 on weak Aussie. Our strategist Bipan said the risks for UsdCad remain to the upside as we continue to monitor the upcoming data on both sides of the border. At this point, orders are not close – offers close to 1.3200 and bids nearer to 1.3010. 100-Day SMA comes in at 1.3026 while 200-Day SMA is at 1.3166.

Eur and Gbp did little ahead of ECB, not unusual. Usual talk of bids on downside in EurUsd; starting from 1.0950 to 1.0900. Traders ran into challenging offers at 1.0980. EurUsd option expiry today strike 1.0900 worth Eur1.5bn in notional. Also heard, offers in EurGbp from 0.8955.

The Telegraph reported British PM Theresa May heads to Brussels today and is expected to warn that Britain’s vote to leave the EU must be respected and that there will be no second referendum. May will tell leaders over dinner that she is “absolutely clear” that Britain will leave the European Union as she seeks to dispel suggestions in “certain quarters” that the UK could stay in.

One of the key events tomorrow is on Portugal. DBRS is expected to update its opinion on Portugal and there are fears that the Canadian agency would cut the country’s rating to junk. Ricardo Mourinho Felix, Portugal’s Secretary of State for Finance and the Treasury told the press during IMF meeting that he is confident there is no change in rating. If DBRS downgrades Portugal’s credit rating by one notch this would mean Portuguese bonds will no longer be eligible as collateral at ECB refinancing operations nor for QE.

Malaysia will announce Budget 2017 tomorrow – Business Times wrote that with snap polls expected next year, the odds are on a bigger budget – albeit mildly expansionary – to help lower- and middle-income households to cope with the unrelenting rise in the cost of living.

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