USDJPY TECHS: Bull Cycle Remains In Play

After posting a deficit in April, a strong rise in May exports returned the customs trade balance to a surplus of $1116mn. Export growth jumped to 18.4% y/y from 10.2% in April, while imports rose 18% y/y from 16.1%, likely boosted by imports from China rerouted on their way to the US. The export outlook remains unclear.

• Customs export growth was its fastest since March 2022 due to continued frontloading of shipments ahead of the end of the delay to the implementation of US reciprocal tariffs on July 8. The surplus with the US was $4.1bn in May.
• Thailand faces a 36% duty and has said it will present its trade proposals to the US on June 20 and is hoping to only face the minimum universal 10%. Thailand had one of the Asia’s largest export shares to the US in 2024 at 20% worth around 11% of GDP, while it was 12.7% to China (7.2% of GDP).
• The rush to get goods to the US may drive a slowdown in Thai exports in H2 which would be exacerbated by the imposition of an outsized tariff.
• The deficit with China was $4.1bn in May as China diverts shipments to other countries to avoid US tariffs as it continues to negotiate. Thailand will have to prove to the US that it has practices in place to stop China using it to reroute goods.

Thailand customs exports vs imports y/y% 3-mth ma

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•  Ahead of the publication of the MPC policy decision tomorrow, May CPI data will be published at 7:00BST (although the MPC will already have advance access to the data as of Monday morning).
• The ONS' VED (road tax) component error in the April dataset which boosted headline CPI by around 0.13ppt (on our calculations core by 0.16ppt and services CPI by 0.25ppt) will be reversed in the May data.
• Headline CPI was also boosted in April by Easter effects: air fares contributed 0.11ppt to the increase, package holidays 0.07ppt and sea transport 0.04ppt. These combined are therefore over 0.2ppt and along with the VED a fully reversal would see headline CPI drop by almost 0.4ppt and services CPI by almost 0.8ppt.
• The MNI median looks for a smaller fall to 3.3%Y/Y for headline (from 3.53%, 3.40% adjusted for VED) and for services to 4.8%Y/Y (from 5.42%, 5.17% adjusted). The BOE forecasts are 3.36% and 4.73% respectively. We see risks skewed more to the downside for services.
• However, there are upside risks to core goods (albeit resulting in a smaller downside surprise to the BOE) and food prices.

Germany, Spain and France will look to hold auctions during the remainder of this week. The EU held a syndication, while Germany and Slovakia already held an auction. We pencil in estimated gross issuance for the week of E29.1bln, up from E21.7bln last week.

For the full document with a recap of issuance so far this week, a look ahead to the rest of this week's and next week's issuance and a roundup of Q3 funding updates, click here.

• Germany will return to the market to hold a 30-year Bund auction today. On offer will be E1.0bln of the 2.50% Aug-46 Bund (ISIN: DE0001102341) alongside E1.5bln of the 2.50% Aug-54 Bund (ISIN: DE000BU2D004).
• Cancelled auction: The Greek PDMA has announced that it will not hold its auction which had been scheduled for today.