FOREX: Asia FX Wrap - BBDXY Can't Bounce, Eye's 1200 Pivot
The BBDXY has had a range of 1207.21 - 1209.24 in the Asia-Pac session, it is currently trading around 1208. “The EU asked China to address its export restrictions on rare earths and magnets, which are causing disruptions for the European car industry. The Asian nation has introduced a tracking system for the products, Reuters reported”. China Data - CAIXIN PMI Services Rises in May: Following the disappointing May CAIXIN PMI Manufacturing, all eyes were on the CAIXIN PMI Services. May's result of +51.1 will be a welcome relief to market watchers. The USD looking at breaking some crucial levels against a range of currencies, the NFP print tomorrow night will be a key input to determine if these can follow through.
- EUR/USD - Asian range 1.1411 - 1.1435, Asia is currently trading 1.1420. EUR has drifted sideways during the Asian session. Dips should continue to find support while price holds above 1.1100/1200.
- GBP/USD - Asian range 1.3541 - 1.3566, Asia is currently dealing around 1.3560. The GBP is attempting another run higher but is struggling to gain any momentum on a 1.3500 handle. Like USD/JPY its looking to break key weekly levels, NFP will have a say in whether it can be sustained.
- USD/CNH - Asian range 7.1701 - 7.1814, the USD/CNY fix printed 7.1865. Asia is currently dealing around 7.1790. Sellers should be around on bounces while price holds below the 7.2500 area.
- Cross asset : SPX -0.10%, Gold $3375, US 10-Year 4.37%, BBDXY 1208, Crude oil $62.64
Data/Events : Germ Factory Orders, Italy Retail sales, EZ PPI, ECB
Fig 1: GBP/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg
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CHINA: Bond Futures Do Little as OMO Withdraws Liquidity
- Following the long labour day break in China the first trading day back has seen marginally stronger bond markets, despite the Central Bank withdrawing liquidity in the open market operations.
- China’s 10YR bond future is up just +0.05 to 109.10; consolidating its’ position above all major moving averages. The nearest being the 20-day EMA at 108.79
- China’s 2YR bond future has barely moved post the holiday break and remains at 102.35, below the 20-day EMA of 102.42.
- CGB’s are little changed with the CGB 10YR at 1.62% (-0.5bp today).
- Later this week China is expected to issue CNY71bn of 2055 bonds and CNY170bn of 2026 bonds
AUD: A$ Underperforming On Falling US Equity Futures & Soft Data
AUDUSD is off its post-Australian data low of 0.6443 but remains down 0.2% to 0.6454 today as the US dollar rallies (USD BBDXY +0.2%). Aussie is also weaker against other major currencies despite higher commodity prices and HK/China equities, but US futures are lower.
- March household consumption fell 0.3% m/m with Q1 volumes flat, while building approvals were down 8.8% m/m. Both series were impacted by Cyclone Alfred with data for Queensland particularly weak.
- AUDJPY is down 0.2% to 92.79, close to the intraday low, after a high of 93.05. AUDEUR is 0.2% lower at 0.5705, finding support around 0.5700. AUDGBP is -0.2% to 0.4856.
- AUDNZD has been trending down since it reached 1.0849 earlier in the session. It is now 0.2% lower at 1.0820, close to today’s trough.
- Equities are generally stronger with the Hang Seng up 0.6% and TAIEX +0.3% but ASX flat and S&P e-mini down 0.3%. Oil prices are stronger with WTI +1.6% to $58.04/bbl. Copper is 0.8% higher and iron ore is up to around $98-99/t.
- Later US March trade data are released as well as Canadian trade & PMI and European services/composite PMIs for April.
AUSTRALIA DATA: House Approvals Weak In March
Building approvals in March were significantly weaker than expected falling 8.8% m/m with the more stable private houses component down 4.5% m/m. Multi-dwelling approvals fell 15.1% m/m, the second consecutive monthly fall. Housing shortages persist and this is an unfortunate development but appears also to have been impacted by Cyclone Alfred with Queensland recording a drop in house approvals but Victoria was also weak.
- Total building approvals are now up 13.4% y/y after 26.5% y/y in February with private houses down 3.3% y/y, the lowest since November 2023, but apartments still up 47.1% y/y.
- The ABS said that the weakness in house approvals was driven by Queensland and Victoria, while for non-houses there was a sharp drop in Victoria.
- The value of total residential building approved fell 7.6% m/m in March.
- Victoria is making up over half of the value of non-residential building, which may be crowding out the residential sector given skill shortages in construction.
Australia no. of residential building approvals y/y%
