🇨🇭LIVEDESK: FX Flows

• Asian equities traded higher today, following the new high set in the US yesterday. Australia lagged a bit with the covid situation in Sydney a challenge, while the NAB business confidence index nearly halved in June. However, AUDUSD managed to push to a fresh high of 0.7503 following strong Chinese trade data for June. There is more China data to come this week, but so far the numbers are not consistent with a sharp slowdown, and makes last week's RRR cut look like a move just to smooth an expected H2 slowdown, rather than a sharp dovish shift from policymakers. Selling of USDCNH for macro names after the China data, and we've been a better seller of USD in general, though volumes are rather tepid.

• FX trading volumes are down 20% from Monday, as investors await the US CPI print at 08:30 New York. The USD has retraced some of its losses and flows show a small bias to buy USD from macro and real money names. Buyers of the USD are mostly via EUR and CAD in G10, with both CAD and NOK underperforming despite the rally in oil from Monday's close. Encouraging trade data out of China overnight gave some support to NZD and AUD. USDZAR is making two-month highs as rioting continues in South Africa although flows have been mixed -- although real money names have bought USD against ZAR, PLN and RUB. CZK continues to rally as inflation at 2.8% y/y slightly beat forecasts, further validating the central bank's view that rate hikes will be necessary. In TRY, the lira continues to strengthen after strong industrial production data - flows continue to remain light.

• The dollar is higher across the board in the first reaction to the US CPI data. There's no follow-through for the moment and USDCNH is returning to pre-release levels. The dollar should remain supported after the decent print but keep an eye on rates to see if there is any reversal of the stop-driven rally.