FX Flows

On today’s release of Japanese data, our Strategist Patrick Bennett said the standout is Jobs-to-Applicants at 1.23, this is the highest since 1992, another is the household spending rising 2.9% annually from -0.3%. Japanese data rarely a market mover; BOJ Tankan published yesterday was okay, capex numbers were encouraging. Check all this against a still weak inflation and it is a tough call for further BOJ action. 

In G-10 space, Asian has a lacklustre session. Pre-empting a weak Nikkei open, fast money accounts said to be responsible for 119.78 print. Demand for AudJpy helped reverse UsdJpy back up. Nikkei started to pare losses and this gave UsdJpy a further boost to 120.00. I am told there are bids in the 119.70’s and stops from intraday guys developing above 120.20. 

We enjoyed a brief moment of fun in AudUsd during the release of Australian August retail sales. Improved to +0.4% from -0.1%, but this was in line with expectations. AudUsd jumped 10 points or so; then settled back to square one. Then in the late morning, AudUsd turned lower for no reason. Went from 0.7037 to 0.7012. We think the move was linked to weak Asian currencies. 

One real money PM pointed out the AudCad hourly chart and that it has broken the support line. Technically we agree but another reason to back this is the rates. Our rates trader Pawan said the rate differentials have been narrowing on the divergent monetary policy paths. This has been exerting downward pressure on AudCad and today is seeing some correction of the rate spread, but the medium term trend is still lower.