CIBC

FX Flows

Japan’s business sentiment improved in Q3, highest since 2018, large manufacturers’ sentiment rose to 18 from 14. All industry capital expenditure rose to 10.1% from 9.6%. Small USDJPY was bought on the Tankan headline, which saw print of 111.47 at the open. I supposed there were some offers at 111.50, USD backed off. Talk of bids at and below 111.20, said to belong to Japanese retail day traders whom added short above 111.60. Not expecting much, likely to see the USD grind lower towards 111.00. There are some more option downside strikes maturing today.

The AUDUSD started positive, bought at the Tokyo open up to 0.7241 but turned around when US reversed into negative. Small bids surround 0.7220, I suspect, these buying down to 0.7175 linked to several corporate accounts. Furthermore, there are about AUD1.4bn worth of 0.7200 strikes due today.

Weak Aussie put the USDCAD up to 1.27125, there were plenty of buyers atop 1.2700-05 area. Some talk that short-term guys who sold USD last night were stopped out this morning. Could have been those fast money. Fair number of option strikes due today, notable ones are $1.84bn at 1.2600; $900mio at 1.2700; and $1.43bn of 1.2800 calls. Canada will release July’s monthly/yearly GDP today. We think July GDP should do better than the original flash estimate, but might show a small decline despite a good contribution from consumers, while the flash estimate for August should show material gains. Market calls for monthly contraction of 0.2%, we are looking at -0.1%.

Who said what

  • US House: Delays infrastructure vote as Biden agenda bill unsettled; Democrats to continue talks on Biden agenda bill on Friday
  • Manchin: Does not see deal on economic agenda framework tonight
  • US Pelosi: Discussions to continue with House, Senate and White House to reach a bicameral framework agreement to build back better through reconciliation bill
  • Sen Bernie Sanders: Infrastructure bill must be defeated tonight
  • PM Morrison outlined the federal government’s plan to reopen the international border, which will involve seven days home quarantine for fully vaccinated returning Australian citizens and permanent residents.

Credit Agricole

Asia overnight Weak risk sentiment remained the key market driver amid thin liquidity conditions overnight as China began a week-long holiday and the Hong Kong market was closed. While the recent equity market sell-off has lost some of its intensity, Asian stocks remained in the red while US and European stock futures continued to retreat. Global investors remain uneasy despite the fact that a partial government shutdown was averted in the US, after Congress passed a bill to fund the government through 3 December. That said, the Democrats failed to reach a compromise on the Infrastructure fiscal package. The vote on the bill has been delayed and could potentially take place today. The Tankan survey out of Japan released earlier today pointed at slowing corporate activity, especially among automakers, mainly due to supply chain disruptions and growing input costs and factor prices. Concerns about the slowing global economy are made worse by soaring energy costs and global central banks’ policy normalisation plans and could keep risk sentiment on the back foot for now. While the moves in G10 FX remained very contained overall, the JPY has emerged as the biggest outperformer, with the AUD and CAD as the biggest underperformers.