CHINA: CNH Rally Fits APAC Theme, But PBOC Liquidity Preference Stabilises Fwds
May-23 11:01
USD/CNH spot has shown through the May lows on the latest phase of dollar weakness, meaning a close at current levels would be the lowest since November and the lowest of Trump's term so far. As was the case in early May, much of the intraday CNH gains being led by the run of stronger-leaning CNY fixes: this week's fix at 7.1903 USD/CNY midpoint was the lowest since early April and goes further in reversing the tariff-tripped CNY depreciation seen in early April.
- Trade optimism is partly responsible here, and fits theme of stronger APAC currencies (seen across KRW, TWD, HKD, IDR and others since April). While expectations for a wide-ranging settlement before the August 12th deadline (when the 90-day tariff delay expires) are scant, orderly markets suggest an underlying expectation we won't see a return of 145% (or higher) tariffs once that period expires.
- The scale of official intervention remains a key focus for the near-term trajectory. Notably, China's 50-year bond sale today saw yields rise for the first time in three years - mimicking the eventful US and Japanese 20y bond sales this week, however this lower demand at auction is more likely a preference for riskier assets given the far-ranging policy package last month, rather than the buyer's strikes evident elsewhere.
- This is also reflected in the PBOC's strong preference for liquidity support in the last few weeks - with heightened reverse repo activity pressuring local CNY rates and likely containing the extent of the break lower in USD/CNH Friday, and stabilising the front-end of the forward curve.
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MNI: US MBA: MARKET COMPOSITE -12.7% SA THRU APR 18 WK
Apr-23 11:00
- MNI: US MBA: MARKET COMPOSITE -12.7% SA THRU APR 18 WK
US TSYS: TYA Probes Resistance In Extension Of Trump Softening Powell Stance
Apr-23 10:54
- Treasuries are firmly twist flatter, with the majority of moves coming at the open after President Trump said he had no intention of firing Fed Chair Powell.
- It helps build on the broader improvement in risk seen with a softened stance around China trade.
- Long-end gains have extended over the past hour as US desks filter in, with Treasuries continuing their recent relationship of firming amidst risk-on as deleveraging pressures dissipate.
- Cash yields are 2.5bp higher (2s) to 11bp lower (30s).
- 2s10s at 50bp (-8.5bp) for lows since Apr 17 vs a high of over 66bp on Monday.
- 5s30s at 80.6bp (-8.2bp) for lows since Apr 16 vs a high of 97bp on Monday.
- TYM5 has recently touched session highs of 111-04 (+10+) on decent cumulative volumes of 415k.
- It has cleared resistance at 111-00+ (20-day EMA) after which lies 111-17+ (Apr 16 high). Gains are still deemed corrective from a technical angle, with a firmer resistance level at 111-25 (50% retrace of Apr 7-11 bear leg) watched.
- Data: MBA mortgages (0700ET), S&P Global US mfg & serv PMI Apr flash (0945ET), New home sales Mar (1000ET)
- Fedspeak: Goolsbee (0900ET), Musalem (0930ET), Waller (0935ET), Musalem (1435ET), Hammack (1830ET) – see STIR bullet
- Coupon issuance: US Tsy $30B 2Y FRN (1130ET), $70B 5Y Note auction - 91282CMZ1 (1300ET)
- Bill issuance: US Tsy $60B 17W bill auctions (1130ET)
OUTLOOK: Price Signal Summary - Pullback In Gold Appears Corrective
Apr-23 10:48
- On the commodity front, the trend needle in Gold continues to point north and this week’s fresh cycle high reinforces bullish conditions. The latest move down is allowing an overbought trend condition to unwind. Moving average studies are unchanged, they remain in a bull-mode position highlighting a dominant uptrend. The next objective is $3547.9, the 1.764 projection of the Feb 28 - Apr 3 - Apr 7 price swing. Initial firm support to watch lies at 3184.2, the 20-day EMA.
- In the oil space, a bearish theme in WTI futures remains intact and the recovery since Apr 9 is - for now - considered corrective. The move higher is allowing an oversold trend condition to unwind. Recent weakness has resulted in the breach of a number of important support levels, reinforcing a bearish threat. A resumption of the bear cycle would open $53.72, a Fibonacci projection. Resistance is seen at $64.49 (pierced), the Mar 5 low. The 50- day EMA is at $66.12. A clear breach of the 50-day average is required to undermine the bearish theme.
