Investment Bank Outlook 18-05-2022


CIBCKey Headlines US$ kicked off the session bit weak, speculators probably sold $YEN reacted to weak UST yields. EUR$ also traded lower but was linked to EUR¥ cross. One information service provider reported there was decent block buying in the 2-year US note.FX FlowsFirst quarter flash GDP shrank 0.2% and annualised fell 1%. Nikkei Asian Review said accelerating inflation and Covid cases in Q1 contributed to the GDP. US$ kicked off the session bit weak, speculators probably sold $YEN reacted to weak UST yields. One FX reporters noted offers surrounding 129.80 said to be from Tokyo names, these could be the retail accounts taking profit. Also, there should be some 130.00 strikes coming up. We don’t see much on the downside, anything below 129 will attract buying from Japanese retail guys.Australia’s first quarter wage price index disappointed the bulls. Annual wage increased 2.4% underscored RBA’s cautious policy tightening cycle. AU$ fell instantly from 0.7036 to 0.70125. Seemed that OIS pricing for next RBA meeting slipped 4 bps to 0.65%. AU$ struggled to recover but same time, bids were felt below 0.7010. An Aussie bank put out a piece and said the pair should remain capped within 0.7075-0.7140 area.CAD started off strong, it was in line with performance of oil futures. Option gamma came into play below 1.2805, buy orders were filled and frustrated $CAD bears. Oil futures then moved lower, weak Aussie data and $CAD bounced back into the hands of the gamma players. We see corporate bids lower down, note there are about $2.65bn worth of 1.2730 strikes rolling off on Friday May 20. Canada will release the April inflation numbers today, our forecast for monthly up 0.3% and annual 6.5%, we are below consensus.Pretty dull day for the EUR$, it was mostly dominated by the EUR¥ cross. Some bids in the cross mentioned near 136.00, this stalled the downward momentum for the EUR$. It took a while before we cleared the bids and the cross slipped to 135.95. Think we should see eager buyers below 1.0510. Recent remarks from ECB members have been hawkish and we should expect them to be so. ECB Muller will be speaking today at 11.00 am CET.$CNH ended the session higher, there was no news or headlines whatsoever apart from weak Chinese and Hong Kong tech stocks. On the other hand, Jacky noted that overseas listed Chinese firms’ dividend season coming soon in June-Aug, total dividend payable $70bn hence we may see more real $CNY buying demands.Who Said What? Japan Matsuno: Hope economy recovers as activity returns to normal; North Korea may make more provocations including nuclear test; giving positive consideration to joining IPEF Eco Min Yamagiwa: Ukraine impact will show up more in April-June quarter; China’s zero-Covid policy is having a big impact on supply chains; will put economy back on autonomous growth path by achieving virtuous cycle of growth and distribution; imports rose on easing supply-side restrictions and imports of vaccines and drugs; need to pay attention to rising raw material prices, swings in financial markets and supply-side restrictions; Japanese economy expected to pickup but uncertainty remains due to Ukraine situation Fed Evans: Favours front-loading rate hikes towards neutral; hope can shift to more measured pace after front-loading; could see the need to take policy somewhat above neutral; inflation is clearly to high, policy must reposition; sees good foundation for further solid growth; policy needs to moderate strong demand pressures; underlying inflation arguably about 4%, 4.5% right now; optimistic inflation going to be under 3% in 2023; if inflation is not responding to tighter policy to the degree needed, we are going to continue working on it; Fed’s dot plot playing useful role in providing guidance; sees Fed slowing pace of hikes to 25 bps steps before December; it is like the Fed will raise rates to above neutral.

Source: Tickmill

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