CIBC

FX Flows

US$ kicked off the final trading day of April softer, we believe it is just pure profit taking into the long weekend.

Its magic. No Japanese rhetoric yet the $YEN weakened for no apparent reason. Started the session at 130.95, the pair slowly declined to 130.365. Call it position adjustment ahead of weekend or month-end clean up. Market participants would still want to buy the dips and likely scatter bids from 130.50 towards 130.00. The biggest question now, one FX reporter wrote that this leaves the authorities to engage in in a degree of damage control via stronger verbal intervention on the weak YEN. A reminder that of illiquid Monday could be their chance to make this happen.

AU$, NZ$ GBP$ and EUR$ have strengthened – one AFR article said Treasurer Frydenberg reminded RBA of its plan to wait for wages data due later next month before increasing interest rates. The newspaper said Frydenberg gave the central bank a gentle nudge, which colleagues interpreted as asking the bank to either wait until it meets in June, or to tread lightly if it moves on Tuesday next week. Of course Frydenberg denied. Short-term resistance at 0.7150 which is the 23.6% and then 0.7209 the 38.2% retracement.

EUR$ climbed back onto 1.05-handle, not a lot to mention. It is month-end, our macro strategist Jeremy Stretch wrote we remain mindful of leveraged players having already materially extended EUR shorts. While investors remain mindful of broad Euro area macro challenges, political risk has obviously eased since the French Presidential election result. As such, we view significant Eurozone macro negativity as already largely priced in. Very little option strikes on the downside, upside maturity today 1.0565 for €1.96bn, 1.0600 for €840mio, 1.0650 for €700mio and 1.0700 for €2.95bn.

Market is expecting s strong Canadian February GDP out tonight. Up 0.7% from 0.2% for the month and up 4.1% from 3.5% for the year. February GDP looks to have been rock solid, part of a Q1 pace that has generally surprised to the upside relative to what was expected when the year began. CAD has outperformed its peers in the G10 space this year. Think we will see position adjustments, sellers lined up above 1.2820, option strike at 1.2850 due today for $740mio.

Citi

European Open

USD rally finally runs out of steam as a mix of month-end selling flows and profit-taking emerge, ahead of a cluster of holidays across the Asia region next week. Despite month-end, activity is below average with Japan on holiday, which saw Treasuries closed overnight. AUD, NOK both staged a strong bounce despite a lack of meaningful flow and platform activity showing no strong biases. CNH saw wild swings in thin liquidity, initially sliding given lack of appetite to sit short USD ahead of the long weekend, before swinging to gains as China tech stocks surged on comments out of Politburo meeting and US regulatory progress.

Choppiness continues on month-end flow dynamics. We wait for rate decisions in RUB and COP, CPI data for PLN, and employment cost indicator for USD. CHF will not move on SNB speeches. We watch for growth figures in EUR, CAD, CZK, and MXN while JPY may take a breather given the local holiday.

USD and Fed officials, while still on blackout ahead of the May FOMC, focus on Q1 Employment Cost Indicator (ECI) data, alongside PCE core deflator figures for March, Friday at 13:30 BST. Citi Economics expects another strong increase in ECI to 1.2%QoQ in Q1, with upside risks from a potentially greater increase in employer provided benefits at the start of the year. Core PCE inflation is likely to rise 0.3%MoM and moderate slightly from 5.4%YoY in February to 5.3%YoY in March, based on already-known elements of CPI and PPI.