CIBC

Key Headlines

  • Japanese Fin Min Suzuki spooked traders by telling market government is “watching closely” but he gave no FX levels. $YEN fell to 125.105 from 125.50, then back up to 125.56. Yes, that plus bit of fixing demand helped.
  • Focus will be on US inflation data later today, market is expecting March annual CPI at 40-year high of +8.4% versus +7.9% in February. Latest projection Fed will raise rates 220 bps by year-end against ECB 70 bps.

FX Flows

Japanese investors bought $YEN ahead of the Tokyo open and challenged the offers atop 125.50. US$ was bid until Finance Minister Suzuki spoke. The minister said government will monitor moves in foreign exchange markets including the recent weakening of the YEN and its impact on the economy with a sense of vigilance. Of course, like all other officials, Suzuki used the word “undesirable” and that caused move lower in $YEN to 125.105. Suzuki did not comment on FX levels which then led to the return of buyers, wanting to test their limits. Also, as $YEN climbs, there will be increase demand from importers. Yield of 10-year UST rose above 2.82%, $YEN extended gains to 125.56.

President Zelenskiy voiced concerns that Russia forces could use chemical weapons in Ukraine but he did not confirm whether they had been used in his daily video address. US Pentagon Press Sec Kirby and UK Foreign Sec Truss have both commented and Russian forces may have used chemical agents. EUR$ is weak, slipped below 1.0880 but evidence there are bids hidden, I suspect we will see them all the way to 1.0850. DTCC report showed that there has been good purchase of 1.0800 EUR put strikes, most of them due early May. Strikes at 1.0900 mature today and tomorrow, total €2.2bn.

Citi

European Open

Stocks continued to struggle post the European close, as Fed expectations creeped up and UST yields continued to rise. The Asia session was a continuation of themes, with UST yields higher and tech stocks leading losses. DXY was slightly bid, while G10FX sat in a tight range against the dollar. EM FX saw tech-related FX in KRW and TWD struggle, with little other notable moves. JPY saw stronger verbal intervention early in Asia, although JPY pared gains quickly. Oil prices rebounded higher post European close, and this continued into the Asian session, with Brent breaking above $100 again.

Markets will focus on US CPI today, where the devil will be in the details. Post that, we will expect US President Biden’s announcement on lowering costs at 20:45 BST. We also look forward to Fedspeak post-CPI on their latest thoughts. EUR will closely watch ZEW survey expectations following last week’s plunge in Sentix. GBP awaits a jobs report, while RON and INR will look forward to inflation prints.