CIBC

FX Flows

Japanese Finance Minister Suzuki told reporters that he had discussed the recent rapid decline of the YEN with Treasury Sec Yellen. Both agreed to communicate closely on currency moves. He can’t comment on possibility of intervention. $YEN moved little higher but very cautiously. Annual inflation rose 1.2% in March, many economists said CPI likely to reach 2% in April or May.

BOJ in Focus

This puts attention on next week’s BoJ meeting. Most people believe BoJ is not willing to change policy purely in response to exchange rates. A good piece from my Toronto colleague, Sean said he thinks Japan 10-year rates stay at 25 bps and $YEN heads to 130. He sees BoJ sticking to current policy. In context of 30 years of deflation, one or two quarters of inflation which isn't even really domestically driven is no reason to panic and change policy. Sean does not see shift in YCC, that BoJ is laser-focused on domestic consumption and confidence. One suggestion is how to let tourists back in especially when YEN is weak and that would kick-start domestic economy in some ways. However, Sean said, with Kishida focusing on an Upper House election in July, there is no real impetus to reopen quickly.

CAD in Focus

Headlines from Macklem this morning and $CAD had a kneejerk from 1.2581 to 1.25685. Met couple of buyers below 1.2580, we sold some for internal and trader said it was easy to get out. Our trader Jon didn’t think comments by Macklem justified lower $CAD. He said it is all about the US and pointed out that Macklem highlighted that BoC outlook for inflation is that inflation is really slowing down, it may be time to pause so that they don’t over-slow the economy. Well, $CAD came back up. We met Japanese banks buying towards the Tokyo fix; oil futures slipped too but there seemed to be some resistance 1.2600-05. Canada March retail sales out today, month-on-month expected -0.5% and sales ex-auto up 0.4%.

Aussie Data

Australia preliminary April PMIs out today were little better but not a market mover. Plenty of headlines on the election campaign and polls are showing both leaders unpopular. AU$ slipped away from session’s high 0.7377, got beneath the 50-day SMA to print 0.7354. Option strikes at 0.7350 due next week should also lend some support. There was a push in the late morning, took out bids and got to 0.7331. Focus will be on next week’s Q1 inflation report. One RBA watcher said if the numbers come out strong, RBA could hike rates in May, we doubt so. Westpac came out to say they see RBA lifting rates in June by 40 bps.

Looking to Monday

Are you ready for wild Monday open? Post-French President election and win for Le Pen could send market risk off. Furthermore it is ANZAC Day and liquidity will be poor. Macron is seen to garner somewhere between 54-56% of the vote according to polls, while Predictit has odds of his re-election at 94%. EUR$ done little, let’s see what Lagarde says at the Peterson Institute. Trust there will be bids close to 1.0800 and likely a barrier at 1.0750. Today’s expiry, strikes at 1.0850 for €760mio and better at 1.0900 for €1.46bn.