Credit Agricole
Asia overnight
While the news flow remains mostly positive, the risk-on rally faded a little during the Asian session. US President, Joe Biden, continues to say he can get a deal done with Senator Joe Manchin on the Build Back Better bill and the US FDA is set to approve two Covid drug treatments from Pfizer and Merck & Company. Countries in the West also continue to quickly roll out booster jabs. Investors are seeing the climbing infection rates, however, and remain nervous. S&P500 futures were trading slightly in the red and most Asian bourses modestly higher at the time of writing. In G10 FX, the USD was the outperformer and the AUD and NZD the underperformers. The AUD was weighed down by reports of rapidly rising Covid cases in Australia.
CIBC
FX Flows
The session started off good but reversed by midday Tokyo. I believed omicron fears, Bloomberg noted demand for risk remains shaky. Singapore announced freezing new ticket sales for vaccinated travel lanes for entry as the city-state looks to stem import of the omicron variant.
AUD$ traded lower from morning’s high 0.7154. Initial risk-on saw some shorts covered by short term accounts. Expect to see some bids around 0.7100 linked to option strikes, do remember A$720mio of 0.7100 put will roll off tomorrow.
EUR$ rose to 1.1294 where offers were talked about above 1.1300, they could also be linked to 1.1300 strikes due this week worth more than €2.6bn. Sentiment changed and EUR$ moved back to the 1.1270s.
$YEN remained comfortably above 114.00, there was light buying for the Tokyo fix and activity stalled. While I am a bull, will come as no surprise that Japanese will likely cap 114.25-30. Keep in mind large strikes at 115.00 for this week, total more than $2bn. Not much heard about the downside, probably bids 113.50-60.
The Loonie is strong, despite AUD$ weakening in the late morning, $CAD stayed near the lows. I believed there are people getting out of longs as well as A$CAD, ahead of tomorrow’s October GDP release. Our economist wrote heading into the omicron wave, Canada’s economy was speeding ahead. But now, with restrictions being reimposed and mobility likely to fall, that momentum is set to hit a speed bump early in the new year. Our call is in line with general consensus, +0.8% from +0.1% over the month. Seeing strong offers on topside.
Citi
A lens on the US
USD ticked higher during the Asian session, with the remainder of the G10 all in the red against the dollar. UST was flat on the day. Our trader Hideyuki Liu notes the following:
–With each day bringing us ever closer to year-end, treasuries in today's Tokyo session were largely sideways. Long-end has remained their good bid from yesterday's 20y auction, with 5s30s trading around 65bp for much of the day. Flows were seen in buying in 5y to 30y from RM in moderate size
Elsewhere
FX activity slumped, with our etraders noting interbank volumes were at 75% of averages. Leveraged names were seen buying GBP and SGD, while selling JPY, EUR, CAD and CNH. Meanwhile, Real Money was buying HKD, while selling JPY, AUD, and SGD.
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