1) Overnight Wrap
Another wild session, liquidity non existent at times as we gap around in remarkable fashion. New York had closed on its lows after the bloodbath in equity markets overnight. Asia immediately pushes risk higher as stale shorts are squeezed, further propelled by a very low CNY fixing. AUD trades to 1.0220 before the employment numbers and goes into the data 1.0200/10. Poor numbers see AUD hit hard, down to a low of 1.0110 but as fast as the move lower was the bounce was even more nasty. No liquidity on the way back up AUD gapping from its lows back onto a 1.0200 handle and then up to 1.0280. Regional Central banks getting some of the blame. Talk of a widening in the Yuan trading band also helping drive the move with the risk spiking and the USD sinking across the board as stocks rally hard. The correlation with equities remains high and the ability of Asian bourse’s to shrug off their early losses (Kospi -3.5 to +.05, ASX -1.8 to flat, S&P -0.8 to +1.5) has led to the dramatic turn in the USD.
There seems to be no official commentary on the Yuan band and in the end the comments were attributed to an unnamed Chinese scholar. That said we did see plenty of interest to sell long dated USDCNY as well as good buyers of gamma in the street. A US investment bank joins the growing list of banks calling for 50bp of cuts from the RBA before year end and AUD is whacked off its highs back towards 1.0200. It then gyrates 10/40 for a few hours with very little trading hands and price action still shocking. From here is anyone’s guess, watch stocks and keep you position size appropriately flexible.
*CHINA SETS YUAN REFERENCE RATE AT 6.3991 AGAINST U.S. DOLLAR
2) Orderbook & Flows
EURUSD is now looking skewed towards the downside with offers above and little support below. Downside stops 1.4050.
EURGBP System base turned strong GBP SELLERS late in the day..GBP$ and EURGBP
USDCHF and EURCHF continues to be sparse of orders below.
Sold MULTIPLE HUNDREDS of USDCNY for various names overnight.
3) USD/Asia Run
USDKRW 1086.0 (Wednesday morning mids 1082.0)
USDINR 45.46 (45.14)
USDPHP 42.46 (42.58)
USDCNY1y 6.3020 (6.3665)
USDIDR 8575 (8560)
USDMYR 3.0145 (3.0145)
USDTWD 28.88 (28.91)
USDSGD 1.2140 (1.2085)
4) A Few Key Opening Levels
EUR 1.4226
GBP 1.6181
JPY 76.58
CHF 0.7296
WTI 82.6
Brent 106.4
XAU 1790.2
Silver 38.91
X-Over 617
Greece 1778
Porutgal 893
Ireland 790
Spain 370
Italy 385
UK 10y 2.48
Ger 10y 2.19
US 10y 2.19
Bund 134.10
Spain over bunds 279
Italy over bunds 288
BeBanks Index 76.12
3m Eur Xccy -84.0
HSBC Global Research