Credit Agricole

Asia overnight

Investors have refocused their concerns on US households’ ability to weather rate hikes as well as rising prices. While the US retail sales data earlier in the week offered some relief on this front, weak earnings results from major US retailers reversed this relief. All Asian bourses were trading lower and S&P500 futures in the green at the time of writing. Despite soft labour market data, the AUD was the top performer in G10 FX during the Asian session closely followed by other risk[1]correlated currencies such as the NZD, NOK and SEK. The reversal of S&P500 futures led to a squeeze in short risk positions in G10 FX. The JPY was the underperformer during the Asian session.

CIBC

FX Flows

A comment from Fed Res Harker first echoing the same sentiment as the rest that he expects 50 bps hikes at June, July meetings and sees hikes at measured pace thereafter.

The Financial Times published a report that large while Japanese have enjoyed the YEN weakness, Japan Iron and Steel Federation warned that the YEN’s fall presents a risk for Japan’s manufacturers for the first time. Benefits from weak YEN have diminished because it has caused great difficulties especially for smaller businesses who are dependent on imports of fuel and raw materials. US equity futures and Nikkei opened up weak, flight to safety propped up US Treasuries, $YEN has weakened from early move to 128.465. Macro names would probably to fading any potential rally, maybe to 128.50. Usual buyers, the Mrs. Watanabe have been adding to their long positions. I was told that importers bought this morning, pretty decent too from below 128.15, lifted $YEN into and after the fix. There are two large option strikes due Monday, $1.72bn at 128.00 and $1.3bn at 129.00.

$CAD, which ended Toronto at 1.2890 slipped to 1.28675 after Reuters News flashed a headline that Chinese authorities have lifted a years-long ban on canola seed imports from two of Canada's biggest grain handlers. Confirmed by Canadian Trade Min Mary Ng and Agriculture Min Marie-Claude Bibeau, China has reinstated access to its market for two Canadian companies that China Customs had suspended from exporting canola seed to China since March 2019.

Australia’s April unemployment rate improved to 3.9% as expected, lowest in 48 years but data was mixed. Part timers shifted to full time, total employment gain 4k as supposed to expectations of +30k, participation rate was lowered to 66.3% from 66.4%. Overall, it was not a weak data, AU$ slipped little but not real big deal. Market was positive towards the NZ Budget and lifted AU$ along. Intraday resistance at 0.7050 where average sized option rolls off tomorrow. RBA Kent will be speaking on Monday at the Kanga News DCM Summit; Elis will speak at the UDIA 2022 National Conference. RBA rate decision on June 7.

In the cost-of-living Budget 2022, New Zealand Fin Min Grant Robertson tried to balance the immediate political and pay packet pressures created by rising prices. The government expects to spend NZ$128bn this year and will run a deficit NZ$19bn, slightly lower than forecast in December. Government to spend NZ$1bn to ease impact of faster inflation, gives cash payments to 2.1mio people. Market was optimistic over the budget and NZ$ ticked up and broke above 0.6305. Even the rising UST yields failed to deter buyers. Strong intraday resistance near 0.6380.

What goes down must come up and the EUR$ climbed back on to 1.05-handle. Initial buying was linked to EUR¥ but later was because of weak US$ and higher AU$, NZ$. Nothing much to talk about in terms of option strikes.