CNH: CNH Steady, CNY Basket To Fresh Cycle Highs Amid USD Gains

Spot USD/CNH tracks near 6.6930 in early Wednesday trade, after posting little change for Tuesday's session. This underperformed broader USD softness as the BBDXY index lost nearly 0.20% in Tuesday trade, as back end UST yields edged down (albeit finishing up from earlier lows as crude prices climbed in US trade). Spot USD/CNY finished up at 6.6924, while the CNY CFETS basket index tracker firmed a little further to 103.65. The basket tracker has now risen in the past 8 onshore trading sessions. This may falter if the USD can't sustain higher levels though, we have the US CPI print later on Wednesday. 

• USD/CNH technicals are little changed, with Tuesday lows right on Monday lows at 6.6906. There still appears to be some support ahead of 6.6900, but upticks remain equally modest. The late Sep/early Oct bounce in the pair ran out of steam between the 20 and 50-day EMA resistance points. These levels rest at 6.7035/40 and 6.7190 respectively. EUR/CNH is up from recent lows, last 7.4945/50 but remains entrenched in a downtrend with Oct 2 highs at 7.5643 a potential resistance point.
• Before the US CPI print we have China Sep inflation data, as well as Sep trade figures. The market consensus expects CPI y/y to pick up to 1.0% from 0.8% prior. The PPI is projected at 4.4%y/y (from 3.8% in Aug). Trade figures are seen little changed, exports at 25.7%y/y, while the trade surplus is projected at $117.78bn. Via BBG, Goldman Sachs notes: "China’s currency is undervalued by around 20% to 25%, an estimate the bank’s global head of foreign exchange, rates and emerging markets strategy research calls “conservative.” He added that the nation’s swelling trade surplus strengthens the case for appreciation."
• Implied vols are very benign, tracking sideways to lower for most tenors in Oct to date. The 1 month last 1.70%, suggesting any break sub 6.6900 is unlikely to see a sharp pick up in the pace of CNH gains. 

NZGBs are 1bp cheaper after US tsys finished Tuesday’s session off best levels following a rise in the oil price. US tsys did, however, with yields flat to 4bps lower.

• "Saudi Arabia intercepted more missiles and drones launched by the Houthis, as the conflict showed few signs of subsiding. The Saudi-led coalition later warned people near the Sanaa oil site to leave the area "for their safety." – BBG
• NZ annual net immigration rose to 20,503 in the 12 months ended 31 August, up from a revised 19,927 in the year to July.
• The REINZ House Price Index fell 1.5% y/y in September, though it rose 0.4% m/m.
• (Bloomberg) -- "RBNZ will begin repurchase of April 2027 government bonds from Oct 15, the central bank said in a statement. Repurchase program is for liquidity management purposes and aims to support the efficient functioning of the New Zealand bond market."
• Swap rates are 1bp higher, with the 2-year rate at 4.00%.
• RBNZ-dated OIS pricing is little changed across meetings. 16bps of tightening is priced for October, while February 2027 and August 2027 assign 51bps and 103bps, respectively.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 2.00% May-32 bond, NZ$175mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

Gas rallied on Tuesday showing a clear direction unlike oil. Supply disruptions impacted both US and European prices but the latter is facing a winter with Qatari LNG continuing to be severely impacted by the Middle East conflict and ongoing attacks on vessels in the Persian Gulf. Iran is also securing sensitive sites and preparing for further US attacks following the mid-term elections, including rallies, signalling an agreement to allow free energy flows remains elusive.

• Dutch TTF was up 2.9% to EUR 86.825, close to the intraday high at EUR 87.43, to be up 20% in October. All contract months are above EUR 80 until April 2027 signalling an expensive heating season especially if there is a cold snap. Temperatures are expected to drop next week.
• European storage is only 73.9% full but is still gradually rising given ordered refilling in some countries. Germany remains behind at only 60% and the government obligated the state SEFE Securing Energy for Europe to increase inventories, according to Bloomberg.
• US Henry Hub rose 4.8% to $3.319 reaching $3.33, a new October high, driven by the slow return of Gulf of Mexico operations impacted by Hurricane Isaias on the weekend. While the recovery in output is slow, demand for power generation is improving and for LNG exports is strong with estimated flows up 12.3% w/w on Tuesday (BNEF data). However, forecasts for warmer weather are reducing heating demand expectations.