CIBC

Key Headlines

  • $YEN bought for the fix because today is month-end for Japan. Usual comments from Japanese Fin Min but no one paid any attention. Waiting for BoJ, no change expected, ultra-easy monetary policy to continue.
  • BoC Governor Macklem reiterated that Canadian interest rates will go higher, how high they go will depend on how the economy responds and how inflation outlook evolves. Added that BoC to consider another 50 bps hike on June 1 but 75 bps hike would be very unusual. $CAD did not go lower.
  • Comments by Fin Min Hong that South Korea closely monitoring FX market, warned $KW rises too fast and will take measures to stabilise FX if needed. $KRW sold at open but shortlived.

FX Flows

Small selling of $CAD into the North America closing, saw the price action moved from 1.2826 to 1.2817, believe linked to ETFs. Sales resume at the top of the hour 6.00 am Hong Kong, mostly from two US banks. In opening statement to the parliament, BoC Governor Macklem reiterated that Canadian interest rates will go higher, how high they go will depend on how the economy responds and how inflation outlook evolves. Added that BoC to consider another 50 bps hike on June 1 but 75 bps hike would be very unusual. Despite the hawkish remarks, $CAD didn’t react, stayed around the 1.2815. Perhaps hike is already expected. Our economics team published our interest rates outlook on April 22, we are calling for 50 bps hike for both June and September meetings. Intraday resistance comes in at 1.2860.

New Zealand’s trade deficit widened in March, small increase in monthly at -NZ$392mio but 12-month year to date rose to -NZ$9.1bn from revised -NZ$8.676bn. Weak revision for February actually makes the March data look good. NZ$ basically unchanged. April saw the business activity rising to 8.0 from 3.3, however, the survey also showed that New Zealand's business confidence index fell to -42 from -41.9.

Like a broken record, Japanese Fin Min Suzuki again reiterated that sudden moves in forex markets is undesirable. Honestly, I have heard this word “undesirable” like a million times since I don’t know when. I hear that the Japanese retail guys have started to pare their longs, think we will be in range trade for now. It is the month-end for Japanese and they lifted $YEN higher for the fix, high of 128.89.

With market pricing in RBA rate hike next week, traders have been fairly cautious. Meeting on May 3 ahead of Fed’s May 5. Market expecting RBA hike of 40 bps to 0.50% and Fed goes 50 bps. Number of Fed hikes outdo RBA, so I think we will get to see market positioning short on rally. The session has been slow, AU$ drifted lower towards 0.7100.

Very little interest in EUR$, it got down to 1.0530 over the Tokyo fix and then settles in the 1.0540s. Am sure there is a barrier at 1.0500. Story in the FT that some of Europe’s largest energy firms are making arrangements to comply with new payment for Russian gas as sought by Kremlin. FT understands they are making arrangements to open Rouble accounts in Gazprombank in Switzerland. This is a threat to EU unity. EC President von Der Leyen has warned companies paying in Roubles is a breach of sanctions.

Riksbank meets today, it will be a close call whether the Riksbank hikes or not. Recent comments from the central bank have been increasingly hawkish in response to sharp CPI and PPI rises, with total CPI heading above 6% Y/Y in March, while PPI coming in at 24.5%.