Citi
European Open
Dollar remained king in FX world during Asian trading hours, outperforming G10 peers and most of EM FX. AUD slipped 0.23% as wage rises vindicate the markets rate pricing outlook. This saw OIS rates fall and the curve bull steepen. NOK fell 0.3% on the back of falling oil prices, which saw both Brent and Crude drop by around 1%. USDAsia headed higher in a catch-up move to overnight yield driven gains, while KRW led Asia FX losses amid outflows and KOSPI weakness. JPY continued to struggle against the dollar due to widening interest rate differentials, hitting 114.97 during Asia trade.
Looking ahead, the US will see Building Permits & Housing Starts at 13:30 GMT, followed by a flurry of Fedspeak between 14:10 GMT at 21:10 GMT. Although we do not expect these to be market moving, we keep an eye out for any headlines that may present itself. GBP (07:00 GMT), EUR (11:00 GMT) and CAD (13:30 GMT) will see CPI prints today, while we will see NOK’s Governor Oystein Olsen speaking at 08:00 GMT. On the EM front, we will see ZAR CPI (08:00 GMT) followed by RUB GDP (16:00 GMT).
An eye on the US
Dollar remained king in FX world during Asian trading hours, outperforming G10 peers and most of EM FX. DXY was up 0.3% earlier in the day although it pared some of its gains to trade at +0.14%. We note that the November CPI print, due for release next month, is now trading at over 7% in the market.
CIBC
FX Flows
What a move in the EUR$. Market took out 1.1300, must have been a barrier and triggered decent stops. It was Fast & Furious to 1.12635. There are very few downside option strikes, think there could be another barrier at 1.1250 and then 1.1200.
As predicted, $Yen ran into strong resistance ahead of 115.00. Market printed 114.975 prior to official open, I assume the buyers were either positioning for stop loss orders above the figure or thinking that Japanese investors will buy USD on back of higher UST yields. They got it wrong. $Yen was sold, hearsay from exporters, brought the greenback to first intraday support 114.71, second at 114.50. Activity slowed down towards the end of morning, then move in EUR$ pushed $Yen back to 114.90s.
Australia’s third quarter wage data was in line with expectations, annual gain of 2.2% which backed RBA Governor Lowe’s point that wages need to rise 3.0% or more to return to inflation target. AUD$ traded sub-0.73. Think there was a round of AUD¥ liquidation which added extra pressure. Corporate demand is seen soaking up supply below 0.7280. Aussie dipped to 0.7263 when market triggered Euro stops. Support at 0.7250, nothing much on top, should see some sellers in the 0.7310-20. There is a large strike at 0.7300 maturing today near A$1bn.
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