SCHATZ: Swap related trade

FX Exchange Traded Option, looking for Yen strength:

• JPYUSD (3rd Oct) 70c, bought for 0.23 in ~2.75k.

• A sharp sell-off in USDCAD this week amid the broad greenback weakness has resulted in a break of the 20-and-50-day EMAs. This undermines a recent bullish theme, and spot has significantly narrowed the gap to key short-term support at 1.3727, the Aug 27 low.
• A break of this level would strengthen a bearish threat and targets on the downside would include 1.3637 and 1.3576, lows from late July.
• The Bank of Canada is expected to cut its benchmark overnight rate by 25bp to 2.50% today. Data since the July meeting have been almost unambiguous in tilting the balance toward a further easing, culminating with softer core CPI trends in August’s inflation report released yesterday. Our full preview is here: https://mni.marketnews.com/48mKSq9
• With the statement broadly expected to leave the door open to another rate cut in October, any dovish reaction for Canadian assets would place the focus on EURCAD, which broke to fresh cycle highs on Tuesday, continuing to place the cross at the highest level since 2009. 1.6329 provides the next horizontal resistance point.
• In similar vein, there have been a cluster of daily lows around the 106.00 mark for CADJPY, and a break below this point would highlight a S-T range breakout, initially targeting 104.85, the July 01 low.

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The Swedish 2025 budget bill will be presented in full on Monday (Sep 22), the day before the Riksbank decision. In total, SEK80bln of unfunded reforms are set to be presented, excluding defence spending/military aid to Ukraine. The Government has been announcing details of the budget over the past few weeks – we estimate just over SEK60bln (out of SEK80bln) has been announced so far.

• The most significant unfunded reforms include a temporary reduction in food VAT (SEK15.9bln in 2026), a reduced tax on work and pensions (SEK21.4bln in 2026), a reduced electricity tax (SEK6.5bln in 2026) and a temporary reduction in employer contributions for the hiring of young people (SEK6.1bln in 2026).
• There are broadly two channels for markets the consider with respect to the budget: The impact on Riksbank (i.e. monetary) policy and the impact on National Debt Office/NDO (i.e. issuance) plans.