Traders in “ deft “ mode
A relatively quiet APAC morning session tracking towards “ Super Thursday” as traders remain in deft mode ahead of the main risk events.
Reports that China is ready to buy more US Treasuries has driven US Treasury yields lower providing additional fodder to the sagging US dollar narrative.
Given the enormity of the risk events ahead, currency prognostication is more or less a carnival sideshow at this stage. Certainly, traders will reduce exposures on both sides of the coin as risk reward ratio becomes little more than a coin flip across the board.
The stage is set, but trade remains uninspiring.Market positioned for a shift in ECB forward guidance, so the tail risk if for a steady as you go from Draghi.
GBP ignores data but continues to trade constructively heading into the election. Price action would suggest the market lean if for a Tory majority
AUD momentum continues to build from last week’s spell of bearishness.Given market positioning skewed short, I suspect the clean break of .7500 had near term short running for cover.GDP came out on the consensus button.But despite the happy mood on the Aussie desk this morning, lingering concerns about inflation and wage growth will likely temper the mood.Sellers are likely looking to re-enter shorts against the technical backdrop, however, price action suggests that dealers are content to let the event risk dust settle before re-engaging any dollar longs.
Offers dominated directional flow overnight, but volumes remain tepid. Certainly, the greenback is getting little support from US yield which plays into the risk aversion play on USDJPY. Exporter flow continues to weigh on the back of dealers minds as a break below the 109.00 level could see a rush to hedge dollar risk and could potentially drive the USDJPY to the low 108.00 level.
Local Asia FX
Ahead today we have the RBI – only 1 of 39 BBG economists predicting a rate cut this time around – though the market is pricing in a cut in upcoming month so market focus is on a shift to dovish guidance