Citi
European Open
A week full of events is lined up, with several central bank decisions. However, the Asian session started slowly, with markets quiet. USD ticked higher, while UST yields edged higher as well, in a positive session for equities. The G10 complex traded in line with a stronger dollar, although we noted little significant moves. GBP was the exception, ticking lower –0.3%, after Prime Minister Boris Johnson warned over the weekend about the Covid surge in the UK. On the other hand, Prime Minister Jacinda Ardern announced today that Auckland will ease some Covid restrictions on New Year’s Eve.
Looking forward, we eye a quiet day in terms of data and events. EUR will see quarterly Italy Unemployment rates (09:00 GMT), while TRY will see CA and IP data (07:00 GMT). CPI releases will be sighted in RON (07:00 GMT) and INR (12:00 GMT).
A lens on the US
USD ticked higher in a quiet session, marked with little movements in the G10 space. UST yields edged higher as well, as noted by our trader Hideyuki Liu below:
–Slow trading session in treasuries to begin the week, with yields modestly higher across the curve in a positive day for equities. 10y yields have gravitated back towards 1.50%, and front-end yields have also pared gains after trading well post-CPI on Friday. Desk flows were more limited, but good FM interest was seen in steepeners in structures like 10s30s curve.
Last week’s CPI print keeps the Fed on track to speed taper, as noted by Citi Economics. To recap, US November Core CPI came right in line with expectations at 0.5%MoM (0.5%e, 0.6%p). However, markets saw it as a slight disappointment since many in the markets were bracing for a higher reading. USD sold off against the bulk of G10 FX on Friday NY session, but traded mixed against EM FX. Price action began after strong US CPI and Michigan Sentiment data did little to inspire the greenback. Friday’s flows instead followed rallying commodity prices for the majors and poor liquidity conditions for EM.
CIBC
FX Flows
Cryptocurrencies slipped, Bitcoin down nearly 2%, triggered by announcement from Binance that it has withdrawn its application for a licence to run a cryptocurrency exchange in Singapore. One blogger wrote the move was linked to liquidation of long positions.
$Yen firmed up but the activity has been rather mild, I suspect there are offers lined up at 113.60. Well, exporters are trying to increase hedging hence putting out offers. The retail day traders are looking to add to long USD by putting out bids, I think under 113.30. In excess of $3.6bn worth of 113.00 strikes and about $3bn of 113.75 strikes will roll off this week. Guess you know the range till FOMC?
The Bank of England and European Central Bank have their rate decision this week, none of them will do anything. EUR$ moved, wasn’t a big deal, little lower. There has been some talk that offers scattered above 1.1320, they were leftovers from last Friday. They could be linked to 1.1320 option strike due today for €2bn. Not much talked about on the downside.
GBP$ opened lower on back of report over the weekend that PM Boris Johnson is facing cabinet revolt over Partygate and about 65 Tory MPs have refused to support the PM’s Plan votes on Tuesday. Latest Opinium poll for the Observer showed that UK Labour surged into a commanding nine-point lead over the Tories this weekend as controversies over rule-breaking Christmas parties at Downing Street. The poll puts Labour on 41%, the Tories are now on 32%. It also shows 57% of voters think Johnson should now resign, up nine points from a fortnight ago. Move lower has been shallow, story published in FT said that PM Johnson has offered climbdown in talks with EU. It appeared that the PM was no longer seeking the immediate axing of ECJ from its role in enforcing the NI protocol. Not muchto say in terms of offers, I guess they are distant around 1.3370.
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