USD/JPY, EUR/CHF flows: Swiss CPI upside stems o/s CHF; strong 30yr JGB auction with grain of yen
Good 30yr auction supports notion of better Japan buying, shifting JPY sentiment
Upside on Swiss CPI stems an oversold CHF, although remains the low CPI, low rates counter
A touch of near-term relief as bond yields come off the highs. Particularly notable is JP30s off almost 10bp on the day and having rejected the 4.2%~ test again coming though the auction. The 30yr sale met with good demand at a 3.79x cover and okay tail even with the rally in.
In tandem with the recent yen price action, it loosely supports the notion that Japan demand is starting to show up at these more attractive yield levels. If bonds can stabilise, removing price loss risks, then domestic bonds start to look more attractive especially at prevailing currency valuations. USD/JPY consolidating on the steep pullback to 157~ with 156.65 area below.
Swiss CPI meanwhile has actually come in firmer than expected at 0.8%y/y from 0.4% vs market of 0.5%. That’s taken a little of the wind out of USD/CHF’s sails, dropping about 20 pips, and it has pulled the pair back from the 0.8150 resistance hold of yesterday 0.8080-8050 is pullback support if the breather extends. EUR/CHF also got overbought on the push to the 0.9455 Fib and also seeing a corrective pullback
While the data is an upside surprise into a recently stretched move and CHF-JPY rotation/divergence, it still doesn’t fundamentally alter CHF’s position as the low-CPI, low-rates currency right now among the majors.