CIBC

Key Headlines

  • Market started with risk-on, lots of happy faces until mid-morning. US$ goes bid,, risk appetite turned negative… why? I think this is relief rally. Risk on at the start but there was no impetus. Australia Q1 capex was very weak. US equity futures are now in red so is Shanghai. My colleague Jacky pointed out that Nasdaq futures lowered after report that Apple will boost pay for workers, which is wage inflation.

FX Flows

Speaking at the parliament committee earlier, RBNZ Governor Orr said monetary conditions need to act to restrain, Kiwi economy is resilient but facing inflation challenge. Government spending puts short-term pressure on inflation, continue to project employment growth. Orr said can’t rule out recession but does not predict one. Orr later spoke on Bloomberg TV, reiterated about inflation expectations and will be watching it closely. All these from RBNZ hardly moved the market. Japanese bought YEN crosses over the Tokyo fix and sent NZ$ towards 0.64995.

Decent buying of $YEN and the YEN crosses for the Tokyo fix and it didn’t stop there. $YEN continued to print higher towards 127.58. Risk is being put back on, 10-year UST yields rose, US equity futures gained so did the Japanese equity indices. UST yields led the way, moved lower and so did the $YEN. Strong $YEN bought during the Tokyo noon, no news whatsoever, spot returned to peep at 127.50.

AU$¥ was bought for the Tokyo fix, as soon as that was over, the cross reversed back towards 90.20. AU$ also peaked at 0.7110 then backed off onto 0.70-handle. First quarter’s private capex fell 0.3% versus estimates to +1.5%, however firms plan to spend A$130.5bn in 2022/2023 against estimates of A$122.5bn while buildings and structures investments fell 1.7%. Intraday resistance comes in at 0.7147 which is the 38.2% retracement. AU$ call strikes 0.7120-25 for AU$650mio matures today.

EUR$ slightly higher from where we took over, initial buying of EUR¥ reversed after the fix, price action was similar in EUR$. We are likely to be stuck in range of 1.0650-1.0750 from here. I read one report from a bank highlighting bear trend started again. The bank recommended going short EUR$ with target below 1.0250. Weak stops from short-term names under the yesterday’s session low. Near €1bn of 1.0600 puts transacted for Tuesday’s expiry. Nothing much maturing today, fair bit of strikes due tomorrow particularly 1.0650 and 1.0635. No ECB speakers today, de Cos will be presenting Bank of Spain annual report to parliament economic affairs commission.

$CAD tracked closely to the commodity futures, most metals are weak especially after Chinese Premier Li’s gloomy rhetorical assessment of the lockdown-hit economy and the weakness seen in early indicators for May. In big picture, traders think the $CAD is sitting in range of 1.2650-1.2950. In March retail sales to be published today, consumer spending on services continuing to recover from the pandemic, a flattish trend in retail sales volumes should not be unexpected or a concern for the macro outlook. However, the continued squeeze on household incomes from high inflation could bring weaker goods spending in the second half of the year, particularly as the savings cushion becomes less plump.