CHINA PRESS: China Halts Unreliable Entity List, Export Control Measures On U.S.

The BBDXY range overnight was 1227.25 - 1235.95, Asia is dealing around 1232 currently, very similar levels to yesterday as the market tries to consolidate. 

• Earlier, US Tsy Secretary Bessent said there is no evidence of sovereign sales of US government debt and the USD is still a global reserve currency. He also said there will be first-mover advantage in trade talks.(per BBG TV)
• Still, focus will remain on the USD's and US Tsys potential erosion of safe haven status. Our US based policy team noted this in an interview overnight with a former Fed and US Tsy Department official, see this link for more details.
• EUR/USD will remain in focus, with traders targeting a move back to 1.2000 in the Euro as the USD’s safe haven role is reassessed. There are structural forces underpinning these gains: Firstly Germany loosening its fiscal rules will provide a buttressing in the euro-area should there be a global downturn and secondly tariffs will eventually reduce Europe's trade surplus with the US, meaning less revenue gets invested back into USD assets.(per BBG)
• Technically, the backdrop for the BBDXY index remains quite poor.  A move back below 1200 in the BBDXY would likely see the move lower gather momentum.
• After such a quick move lower though it is normal to have some positions pared back as we head towards a long weekend. Expect sellers to reengage on bounces back towards the 1250/60 area.
• Data: Upcoming US data: Empire Man 15/04, Retail Sales 16/04

Fig 1: Break down in EUR/USD and Yield Differentials 

Source: MNI - Market News/Bloomberg

ACGBs (YM +2.0 & XM +7.0) are little changed after the release of the RBA Minutes for the April Meeting. In summary:

• The Board judged that economic conditions were broadly in line with forecasts, with inflation gradually declining and the labour market still tight. Risks to the outlook were seen as balanced, including global trade uncertainty and domestic factors like wages and productivity.
• Given this, the Board decided to keep the cash rate unchanged, emphasising the need for caution. Future decisions will depend on incoming data, especially on inflation, employment, and global developments.
• The Board reiterated its commitment to bringing inflation back to target without sacrificing gains in employment and stressed the importance of flexibility in policy
• Members discussed the staff’s latest assessment of the pace at which the RBA’s holdings of government bonds were running down. The current approach is to hold these bonds until maturity.
• Cash US tsys are 1-3bps richer, with a flattening bias, in today’s Asia-Pac session.
• Cash ACGBs are 2-7bps richer with the AU-US 10-year yield differential at -2bps.
• The bills strip has bull-flattened, with pricing +1 to +4.
• RBA-dated OIS pricing is flat to 4bps softer across meetings today. A 50bp rate cut in May is given a 39% probability.

NZD and AUD both outperforming in the G10 space, led by the Kiwi. Both currencies are through their respective highs from Monday, albeit the NZD more convincingly. NZD/USD was last near 0.5900, above its simple 200-day MA, see the chart below. AUD/USD was above 0.6340, with headlines from the RBA Minutes crossing. The RBA is maintaining a cautious tone around the timing further rate cuts. 

• Generally green Asia Pac equity trends are helping the Kiwi and AUD, with the MSCI Asia Pac index up 1%, while US equity futures are back close to flat. We were down close to 0.50% at one stage in the first part of trade.

Fig 1: NZD/USD Testing Above Simple 200-day MA 

Source: MNI - Market News/Bloomberg