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Greenback bid continues

  • With little on the calendar for data releases yesterday, FX markets took their cue from broader market sentiment and global price action in FX was mostly in a tight range. USD ended the overnight trading session bid across the G10 basket. This week, month-end and fiscal year-end dynamics may distort price action. This could be exacerbated by Easter holidays which will also begin across several markets and could likely diminish liquidity conditions.


  • USD: President Biden is set to speak at Pittsburg on March 31 for an unveiling of his “economic vision”. It is unclear how much detail will be given in the speech, but reports suggest around $3 trillion in spending could be proposed. The administration indicated over the weekend that this proposal may not include non-infrastructure items and that a separate proposal (which likely would total more than $1 trillion and include an extension of the enhanced child tax credit) could be released in April. It is also unclear how much, if any, detail may be provided on plans to raise revenue to pay for the new spending. The administration has indicated tax proposals may likely include raising the corporate tax rate (likely from 21% to 28%) and increasing marginal income and capital gains tax rates for high earners. Citi analysts continue to see risks as balanced toward later passage and a smaller size.


  • The key data point this week in the US is the March jobs report with Citi expectations close to consensus at 600K. While inflation data is receiving most of the attention, Citi analysts think the Federal Reserve could be on-track to taper if job growth averages 500K+.


  • JPY: USDJPY climbed 0.15% to close at 109.80 as the uptick in US real yields continues to buoy the greenback. Aggregate JPY positioning is now neutral, from long previously.  This was driven by recent selling from real money investors, who had been large JPY buyers over the past couple of months.  This recent RM selling follows the flow from the leveraged community, who have been short JPY for quite some time. There could be likely scope for further JPY selling ahead, especially into month/quarter-end. 


  • Oil: Brent saw volatile price action, but closed 0.85% higher to $65.10. Early trading found oil prices lower after the cargo ship in the Suez canal was dredged afloat. While prices floated lower on account of previously blocked supply flowing through, the weakness was short-lived. Attention is likely to gravitate to the upcoming OPEC+ meeting on April 1. Expectations are that the committee could maintain the current trend of output, and exert a cautious tone on the back of increased COVID-19 restrictions globally.



  • HKD: February retail sales are expected to boosted by a super low base. As economic activities came to a halt at the outbreak of COVID-19 last year, retail sales could see a large boost on a YoY basis and Citi analysts expecting a 47.0% YoY rise in value and 44.1% YoY rise in volume. Citi analysts also believe retail recovery is on a gradual uptrend but the pace is still dragged by the government-imposed social restrictions for the fourth wave of local infections which remained in place for most of February.


  • MXN: The currency saw a volatile session and ultimately finished -0.2% weaker to 20.62 with initial price action seeing the peso decline nearly 0.8%. Outside broader FX risk aversion, outflows may have been linked to an ongoing hydrocarbon bill. The legislation had been unveiled by President AMLO on Friday and seeks to aid state-run energy firm PEMEX in capturing a broader share of the market. In other news, Banxico kept the overnight rate at 4.0% as anticipated, acknowledging financial market volatility and greater inflationary pressures.

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