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USD and JPY Bolstered By Equities Rout, Notable CHF Weakness

FOREX
  • FX markets were active on Monday despite the lack of significant data/event risk, however, G10 currencies largely played second fiddle to the large selloff seen across US equity indices.
  • Despite the relatively contained price changes, both the US dollar and the Japanese Yen were beneficiaries as investors sought a flight to quality throughout the US session where e-mini S&P futures sunk roughly 2.3% from their intra-day highs at their worst point.
  • The USD index gained 0.5% at its best levels, erasing the negative greenback sentiment in the aftermath of the US employment data on Friday. In general, the index continues to trade blows either side of the 96.00 level, a similar theme witnessed through much of December.
  • USDJPY was understandably heavy and once breaking back below the old highs of 115.52, the Yen squeeze extended. Cross/JPY bore the brunt of the negative tone for risk with both CADJPY and NZDJPY losing over 0.6%.
  • The most notable divergence was probably witnessed in the Swiss Franc, with USDCHF remaining very well supported throughout the entirety of the session. After a quiet Q4 last year, total sight deposits are pointing north again, potentially suggesting the SNB are uncomfortable with the pace of the recent CHF acceleration. Additionally, USDCHF breaking back above multiple recent highs around 0.9250 could be considered a bullish development.
  • Aussie retail sales overnight before a very light European data calendar. Focus will be on potential comments from Fed’s Powell and other Fed speakers before the major data point of US inflation on Wednesday.
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