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22 Apr 2014
Insightful notes for G10’s – BMO
FXStreet (Guatemala) - Stephen Gallo, European Head of Currency Strategy at BMO Capital Markets rounded up London with insights into JPY, CAD, EUR, AUD and CNY.
Key Quotes
"G10 ranges were tight during the London morning. EURUSD appeared resilient below 1.380, but it’s likely that Russia/Ukraine tensions restrained topside."
"If the Japanese GPIF changes do signal greater demand for foreign assets, the news probably marks a subtle attempt to cap the JPY at the start of the new financial year, leaving 101.5-102.0 in USDJPY as a good base in the pair. The AUD was firm ahead of Q1 CPI data due overnight."
"There is currently no obvious driver for USDCAD, and the pair remains sandwiched between 1.095/1.100 support and good resistance between 1.105/1.109. Sideways movement in the pair is also confirmed by its position within the Ichimoku cloud (daily), as well as the sharp decline in sensitivities to interest rate differentials."
"1.0975 and above should cap CAD strength today on a better wholesale trade report due at 0830. BMO is at 0.8% vs. 0.7% consensus."
"US rates are still poised to rise faster than Canadian ones in our view, so a bigger-than-anticipated rise in durables and (more importantly) another very low print in claims this week will be taken quite positively by USDCAD. That combination will open the door to a weekly settlement in the 1.105-1.110 range (the first since the last week of March), as we begin to gear up for April NFPs."
"The USD/CNY mid-point finally broke above 6.160 overnight (up 19 pips), marking a cyclical high for the fix. USDCNH was also forced to new cyclical highs overnight, but the main difference about this recent bout of CNY/CNH weakness appears to be how it’s being achieved. Specifically: PBoC imposed intervention flows do not appear to be as important as they once were."
"Instead, the upward moves in the fix appear to be forcing the ‘private sector’ to drive most of the flow in spot. In the days surrounding the USDCNY band widening, the cumulative 7-day change in the fix was roughly similar to its current trend, so we don’t take this lesser intervention flow as a sign that PBoC has stepped back much."
"Instead, the lower intervention flow with higher USDCNY fixes may be a ‘tool’ counteract some of the risks in the ‘shadow banking system’, whilst still maintaining low expectations for CNY appreciation. We currently expect to see the upside in the fixes moderate a bit if spot USDCNY edges closer to 6.250."
Key Quotes
"G10 ranges were tight during the London morning. EURUSD appeared resilient below 1.380, but it’s likely that Russia/Ukraine tensions restrained topside."
"If the Japanese GPIF changes do signal greater demand for foreign assets, the news probably marks a subtle attempt to cap the JPY at the start of the new financial year, leaving 101.5-102.0 in USDJPY as a good base in the pair. The AUD was firm ahead of Q1 CPI data due overnight."
"There is currently no obvious driver for USDCAD, and the pair remains sandwiched between 1.095/1.100 support and good resistance between 1.105/1.109. Sideways movement in the pair is also confirmed by its position within the Ichimoku cloud (daily), as well as the sharp decline in sensitivities to interest rate differentials."
"1.0975 and above should cap CAD strength today on a better wholesale trade report due at 0830. BMO is at 0.8% vs. 0.7% consensus."
"US rates are still poised to rise faster than Canadian ones in our view, so a bigger-than-anticipated rise in durables and (more importantly) another very low print in claims this week will be taken quite positively by USDCAD. That combination will open the door to a weekly settlement in the 1.105-1.110 range (the first since the last week of March), as we begin to gear up for April NFPs."
"The USD/CNY mid-point finally broke above 6.160 overnight (up 19 pips), marking a cyclical high for the fix. USDCNH was also forced to new cyclical highs overnight, but the main difference about this recent bout of CNY/CNH weakness appears to be how it’s being achieved. Specifically: PBoC imposed intervention flows do not appear to be as important as they once were."
"Instead, the upward moves in the fix appear to be forcing the ‘private sector’ to drive most of the flow in spot. In the days surrounding the USDCNY band widening, the cumulative 7-day change in the fix was roughly similar to its current trend, so we don’t take this lesser intervention flow as a sign that PBoC has stepped back much."
"Instead, the lower intervention flow with higher USDCNY fixes may be a ‘tool’ counteract some of the risks in the ‘shadow banking system’, whilst still maintaining low expectations for CNY appreciation. We currently expect to see the upside in the fixes moderate a bit if spot USDCNY edges closer to 6.250."