🇨🇭LIVEDESK: FX Flows

• Since the FOMC, we have seen roughly 2x recent volumes. We have bought for macro names in EURUSD, AUDUSD, USDJPY, USDCNH, USDCAD, XAUUSD and a mix of others. This was more than offset by retail and interbank USD selling.

• After a quiet session in Asia, the USDAsia FX market picked up when London opened. High yielding currencies were the main focus and short dollar covering and hedging needs pushed USDINR, USDIDR and USDPHP to new highs. The front end of the curves jumped up, with day-to-day implied yields moving significantly higher on the back of short-end fix coverage. Low yielders reacted much less to the Fed's hawkish surprise after the initial correlation-driven move higher in USDKRW, USDTWD and also USDCNH, which even saw a dip towards 6.42 first thing in Asia. Flows across currencies, mostly right-hand-side on the desk from a mix of names in modest size. The dollar should remain supported on the intraday dips and heading into the weekend.

• USDMXN has suddenly spiked higher in the last two hours towards 20.60. This was met with fading interest from real money accounts, which seems to be a fairly consistent flow theme across higher yielding emerging market currencies.

• After what was a busy overnight session, USD strength continued in London after yesterday's hawkish FOMC. Flows show a continuation of short USD unwinding, whilst vols are bid with realised picking up. Well-owned positions in CNH and EUR are under pressure. Yesterday's meeting suggests the Fed are more concerned around an overheating economy and the move in real rates has seen XAU crash below 1800/oz, driven by macro, retail selling.

• In EUR, there has been downside interest with buyers of 1.17-1.18 outright puts and vols likely to remain supported as the market derives short down here. It is a similar story in CHF where topside demand versus USD in the mid dates has seen skew move further for topside,; flows show a net 150 mn CHF sold today. In general, G10 vols are bid for USD calls as spots continue the move from overnight. Risk reversals are moving better bid and there is unwinding of short USDs alongside interest to hedge for further USD strength.

• Norges were on the hawkish side, bringing the forecast for a hike forward to September from December - gamma is paid up in EURNOK but there was a surprisingly muted reaction in spot with flows actually showing NOK selling on the day. It feels like the market is still digesting the implications of the Fed for risk and hence how this impacts NOK which demonstrates a high positive beta to risk. CBT are also keeping policy unchanged but the market is positively interpreting their pledge to keep policy tight until CPI slows.