Reuters story that NAFTA talks have not advanced enough for principle deal to be announced at this month’s Summit in Lima. This story is not new. On late Friday, Canada’s Foreign Affairs Minister Chrystia Freeland made clear there was a lack of consensus on NAFTA. The US wants a tentative agreement before July 1 Mexican election but there are major challenges to overcome, in particular a contentious US demand that the North American content of vehicles made in NAFTA countries be increased to 85% from 62.5%.
Punters paid UsdCad on that Reuters headline but risk-on following the story on North Korea. UsdCad got to 1.2785 after spending several hours 1.2770-75. Believed to be algorithms, UsdCad got slapped to 1.2765. Our macro strategist Bipan Rai published his piece – what to do with UsdCad. Recommending a short UsdCad here 1.2775, stop 1.2885 target 1.2485.
UsdJpy traded up to 107.05 very briefly and backed off after running into offers. Some of the offers are linked to 107.00 option strike maturing this week, total $2.7bn. Talk of bids surrounding 106.40-50.
EurUsd, AudUsd, NzdUsd and GbpUsd have been slow. One fat finger printed 1.4121, actual high is 1.4101.
Usd was broadly weaker across Asian currencies – UsdKrw opened at 1070.5 and slipped towards 1067 in an orderly manner. Traders are fearful of BoK intervention but I suspect the real fear is when we head towards 1060.
So the Malaysian parliament has been dissolved but date of GE14 has not been announced. PM Najib Razak has to hold election within 60 days, which is before June 6 but many are speculating before Ramadan May 15. This will be an interesting election, Dr Mahathir making a comeback to challenge PM Najib. Malaysian Ringgit has been second best performer this year, up 4.7% YTD. Strong UsdMyr support seen at 3.80, this was the previous peg.
Chinese market reopened today and USDCNY fixed 6.3114, in line with expectations. Weaker Usd sentiment and USDCNH backed away to below 6.30-handle. We saw North Asian names selling USDCNH in the 6.3060’s.