CIBC

FX Flows

BoJ Governor Kuroda caused some volatility today. He spoke in parliament and commented about forex, indicated current YEN moves somewhat rapid. Then he reiterated no change in stance that weak YEN is positive for the economy overall. The first statement sent $YEN lower from 122.71 to 122.39. Then it was back up to 122.60. Kuroda also said may not be the last resort but we will offer to buy unlimited amount of 10-year JGBs if rise in long-term interest rates is rapid. Comments from Kuroda continued to roll but this time, market was fatigue and $YEN stalled.

The main event today is RBA meeting at 12.30 pm Hong Kong, no change expected in cash rate target but markets believe the RBA to hike rates in June and cash rate at 1.75% by end of 2022. What’s important today will be the messaging if the RBA pushes away from current expectations. AU$, best performing G10 currency this year, didn’t do much, it was at 0.7543 when I took over and ended Asia morning at 0.7538. Strong AU$ resistance at 0.7555/60, I suspect there will be a push higher ahead of RBA, this could invite breakout artists to jump in. 0.7617 will be the next big target.

Oil futures firmed up as the US and Europe prepare to impose a fresh wave of sanctions on Russia. However, $CAD faced some buyers. Talk of decent option strikes due in coming week, more than $1.9bn worth of $CAD put strikes at 1.2400 and mixture of 1.2600 strikes around $1.6bn. Economists are expecting a strong January merchandise trade out today. Our economics team said trade surplus will have been bolstered by higher energy prices in February, with an even larger boost from that area coming in March.

Bridge closures and protests during the month could have impacted two-way trade, particularly the Ambassador bridge closure and its impact on the auto industry. Advance data from the US suggests that Canadian exports of autos and parts could have seen a greater weakening than imports during the month. That will partly offset the improvement in energy prices within the overall trade surplus, which we estimate will be $3bn in February.

Not much to talk about the EUR$, few ticks lower from where New York closed. Chatter of option bids near 1.0950-60 and offers atop 1.0990, could be linked to 1.1000 strikes maturing this week total €4.5bn.

Citi

European Open

A hawkish shift by the RBA in today’s monetary policy decision (rates left unchanged) sent AUD and Australian bond yields soaring higher as markets repriced rate hike expectations. NZD also rose, following AUD. JPY initially rose early in Asian trading on Governor Kuroda’s comments, although it pared some gains later in the day. DXY and USTs remained flat, while the rest of G10 FX held in a tight range on a quiet day as China, Taiwan and Hong Kong were on holiday. Oil prices continued their march higher following concerns of sanctions yesterday, while equities held onto their gains today. Over in EM, CPIs from KRW, PHP and THB came in above consensus, with all three sitting in the green against the dollar.

Looking ahead, we continue to monitor Russia-Ukraine headlines with The Economic and Financial Affairs Council meeting Tuesday at 09:00 BST. We will continue to monitor movements of assets that are showing geopolitical risk premium given further speculation on action from the EU. USD will observe ISM servives data alongside Fedspeak from Brainard and Williams.