EM ASIA CREDIT: Biocon: Q1 results out

• CHINA JUN CPI +0.1% Y/Y VS MEDIAN -0.1%; MAY -0.1%: NBS
• CHINA JUN CPI -0.1% M/M VS -0.2% M/M MAY
• CHINA JUN FOOD PRICES -0.3% Y/Y VS -0.4% Y/Y MAY
• CHINA JUN NON-FOOD PRICES +0.1% Y/Y VS +0.0% Y/Y MAY
• CHINA JUN PPI -3.6% Y/Y VS MEDIAN -3.2%; MAY -3.3%: NBS
• CHINA JUN PPI -0.4% M/M VS -0.4% M/M MAY

The WSJ is reporting that Kevin Hassett met with US President Trump twice during June to discuss the Fed Chair role. This comes as Trump continues to criticize current Fed Chair Powell for not cutting interest rates.

• The WSJ notes: " Kevin Hassett, one of Trump's closest economic advisers, is emerging as a serious contender to be the next Fed chair, according to people familiar with the matter. Hassett's rise threatens the other Kevin -- former Fed governor Kevin Warsh -- an early favorite for the job who has angled for the position ever since Trump passed him over for it eight years ago. Some people close to the president worry that Warsh, who isn't in Trump's inner circle, won't be a champion of lower rates."
• It adds: "Trump's ire with Fed Chair Jerome Powell is animating the contest. The Fed has said it wants to make sure tariffs don't rekindle inflation. Trump is demanding bigger, faster reductions and has toyed with announcing Powell's replacement much earlier than normal."
• See this link for the full article. 

The BBDXY range overnight was 1193.28 - 1199.72, Asia is currently trading around 1197. The BBDXY had another decent bounce higher yesterday and unlike the price action over the NFP it continues to hold onto most of its gains. We have danced this dance before and the USD has most recently failed to follow through on these corrections. The market is short and vulnerable but is still quite away from pressure points. The larger picture remains one of USD weakness and in the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area, a sustained break above 1220 would be needed to begin challenging the shorts conviction, that does look a long way off for now.

• (Bloomberg) - “The consensus view isn’t always wrong. Even though the prevailing view is for further dollar downside, that doesn’t mean it won’t happen. The structural backdrop for the US currency remains poor, pointing to further declines.”
• “It remains overvalued on a purchasing power parity basis and a real effective exchange-rate basis. Further, hedging flows and selling of dollar assets by foreigners has the capacity to take the dollar even lower in the coming months and years.”
• “Some FX strategists are pushing back, calling for a tactical bounce in the greenback. Spectra Market’s Brent Donnelly says dollar bears have been waiting for fresh cyclical evidence — softer US data, a clearer rate-cut timeline from the Fed or a decisive AI-trade unwind. Instead, they face a still-resilient labor market, sticky inflation and a central bank that’s in no hurry to ease.’
• “With positioning so one-sided, Donnelly says that even a modest pause in foreign hedging or a string of good US headlines could unleash a classic squeeze, dragging EURUSD back toward the 1.14–1.15 “pain zone” and lifting the DXY to its 50- and 100-day moving averages.”
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
• Data/Events : MBA Mortgage Applications, Wholesale Inventories, FOMC Minutes

Fig 1: BBDXY Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P