USD: BBDXY Consolidates Below 1200, Awaits NFP For The Greenlight Lower

• China's May CAIXIN PMI contracted in May, surprising forecasters.
• May's result of +48.3 was materially down from +50.4 in March and a surprise to market survey's predicting a rise to +50.7
• May's result was the worst since Q3 2022.  
• Output fell sharply to +47.5 vis +51.6 in April for the lowest reading since late 2022 and new orders fell from the month prior.
• The outcome reverses seven consecutive months of expansion and speaks to the uncertainty created from the US-China trade war.  

BoJ Governor Ueda is in parliament, with headlines crossing currently. The governor is reiterating the trade uncertainties are extremely high and will remain so, even once tariff rates are settled. 

• A few key headlines are outlined below via Rtrs: "BOJ GOV UEDA: HAVE SAID IN OUTLOOK REPORT THAT OUR BASELINE SCENARIO COULD CHANGE SIGNIFICANTLY - [RTRS]" "BOJ GOV UEDA: NO PRESET PLAN FOR RATE HIKES, WILL RAISE INTEREST RATES ONLY IF ECONOMY, PRICES TURN UP AGAIN, OUTLOOKS LIKELY TO BE REALISED - [RTRS]"
• So the likely bias remains to raise rates further, but as Ueda notes the baseline scenario (particularly based off where tariff/external conditions end up) could change significantly.
• On the bond buying program: "BOJ UEDA: WILL REVIEW BOND TAPER PLANS AT NEXT POLICY MEETING TAKING INTO ACCOUNT OPINIONS OF BOND MARKET PARTICIPANTS - [RTRS]"
• Note that the next BoJ board meeting outcome due on June 17. Ueda reiterated that sharp moves in super long end yields could also influence the short end.  
• Note as well Governor Ueda will speak later today at 4:50pm local time. 

Interbank market liquidity will remain loose in June following the PBOC’s reserve requirement ratio cut and increased medium-term lending facility rollover in May, Economic Information Daily reported, citing analysts’ expectations. However, liquidity could fluctuate given increased fiscal spending at the end of the month, said Ming Ming, chief economist at CITIC Securities. Analysts should track the intensity of central bank’s liquidity support closely as recent deposit rate cuts may further exacerbate the migration towards wealth management products, Ming added.