STIR: Expected YE-2025 AU-NZ Policy Rate Differential Widens On The Week

The USD/CNY fix printed at 7.1840, versus a Bloomberg market consensus of 7.1870.

• Today's fixing delivered a fixing error of -30pips. The actual fix was 15pips below yesterday's outcome. We remain just above recent lows in terms of the fixing outcome (7.1833 recorded on May 26). 

• USD/CNH is a little lower in the first part of Tuesday dealings, last near 7.1800. This is close to intra-session lows from Monday. 

   

• CHINA SETS YUAN CENTRAL PARITY AT 7.1840 TUES VS 7.1855

The BBDXY range overnight was 1207.76 - 1211.61, Asia is currently trading around 1209. The USD continues to find support back towards the pivotal 1200 area, though the price action remains heavy and the markets focus will turn to the US CPI tomorrow. 

• Bloomberg - “Asian currencies are poised to benefit even in the absence of clear developments on US-China trade talks, as the dollar failed to find support despite favorable headlines, bond market stability, and expectations of limited Fed rate cuts. The greenback remains under pressure from a confluence of headwinds, including upcoming long-duration Treasury auctions and ongoing concerns over US fiscal sustainability.”
• The BBDXY rejected the 1125 area pretty strongly, the USD should continue to be met with supply while this 1225/30 area caps price. 
• 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.
• Because of this consensus the market will be positioned the same way and USD shorts could be prone to some challenging bounces.
• We are approaching some key Weekly support towards the 1200 area in the BBDXY and this has found some decent demand as we await the US CPI tomorrow. A break below here is needed to signal the move could be about to accelerate.

• Data/Events :  NFIB Small Business Optimism

  Fig 1: BBDXY Hourly Chart

  

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