LATAM: Brazil Outstanding Loans Report, ECB Reiterate September Decision Hinges On Data
Jun-28 11:21
- The Brazilian central bank will disclose the May Outstanding Loans report with Uruguayan unemployment rate the only other data release on Wednesday. A moderate theme of softening inflation across G10 on Wednesday with lower-than-expected CPI reads in both Australia and Italy, potentially setting the tone for further Eurozone releases tomorrow and Friday.
- ECB Vice President Luis de Guindos said that while another interest-rate increase next month is all but assured, the outcome of the following meeting remains unclear and will be determined by economic data arriving in the interim. Guindos told Bloomberg TV on Wednesday that underlying inflation pressures may prove to be more stubborn than currently expected, with a strong summer tourist season likely to drive services costs higher.
- USD/CNH found a base around the time of the latest USD/CNY mid-point fixing, with a lack of firm steer vs. sell-side estimates allowing the pair to push higher. Ultimately, the market remains comfortable in pushing the envelope re: USD/CNH, even after yesterday’s signs re: policymakers becoming uncomfortable with the velocity of the recent move higher in USD/Yuan (via the mid-point fix and touted state bank sales of USD).
- The MNI policy team noted that “the PBoC is expected to curb any sharp weakness in the yuan should a stronger-than-expected fixing for the onshore CNY fixing fail to slow its depreciation,” based on discussions with traders and policy advisors.
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CANADA: USDCAD Hovering Near 1.36 With Decent Option Expiry Ahead
May-29 11:10
- USDCAD is content near the 1.36 handle as it holds a move off earlier lows of 1.3584.
- Near-term option expiry suggests this could remain the case for today’s holiday-thinned session with further decent grouping around 1.36 with $967m at 1.3590 for today’s cut.
- It doesn’t trouble resistance at the key short-term 1.3668 (Apr 28 high) although came closer on Friday after strong US data, whilst support remains at 1.3485 (May 23 low) prior to more hawkish Fed commentary.
- CAD’s 0.1% gain to the USD puts it towards the higher end of G10 FX on the day despite WTI more than reversing an increase seen at the open, with the loonie lagging an AUD boosted by iron ore prices more clearly exceeding $100/ton.
OPTIONS: Expiries for May29 NY cut 1000ET (Source DTCC)
May-29 10:31
- EUR/USD: $1.0655(E828mln), $1.0870-80(E894mln), $1.1000(E709mln)
- USD/JPY: Y137.92-00($511mln)
- EUR/GBP: Gbp0.8700(E779mln)
- USD/CAD: C$1.3590($968mln)
- USD/CNY: Cny7.0000($739mln)
US: EGB Spillover Continues In Holiday Thinned Trade
May-29 10:15
- The sizeable rally in EGBs continues to spill over into Tsy futures, with TYM3 seeing an 11 tick intraday rally to 112-21 for +8 ticks on the day and clearly reversing any initial cheapening on the open in a cautious take on the debt deal still needing Congress approval. Volumes still unsurprisingly floundering with the US and UK on holiday, cumulative less than 70k vs recent av of 225k.
- Fed Funds implied rates for near-term meetings are unchanged from earlier in the European session but have reversed increases for subsequent meetings for little changed from Friday’s close.
- Cumulative changes from 5.08% effective: +15.5bp Jun (-0.5bp since Fri), +24bp Jul (-1bp), +18bp Sep (-1bp), +6bp Nov (unch), -9bp Dec (-0.5bp) and -24bp Jan (unch).
- Goolsbee (’23 voter) yesterday echoed other Fed speakers that he doesn’t want to prejudge June’s rate move [notable releases between now and then include payrolls on Jun 2 and CPI on Jun 13]. He did however keep to dovish leaning remarks that Fed moves takes months, years to work through the economy.
