FOREX: G10 Wrap - USD Trying To Bounce, Market Remains Bearish
The BBDXY has had an Asian range of 1220.99 - 1223.27, Asia is currently trading around 1222. Bloomberg - “ The European union has made tangible offers to Donald Trump's administration in an effort to return stability to the global economy, according to the bloc’s commissioner for international partnerships”. “The ECB’s Yannis Stournaras urged caution with any additional rate cuts due to global uncertainty, but said the deposit is expected to be trimmed to 2%”. US President Trump has spoken at a rally in Michigan, which marks his first 100 days in office. The speech was big on rhetoric, but policy related areas of interest for the market remained light.
- EUR/USD - Asian range 1.1355 - 1.1396, Asia is currently trading 1.1370. Intra-day support is around 1.1300, should this area not hold demand should remerge on dips back to 1.1100.
- GBP/USD - Asian range 1.3382 - 1.3415, the GBP momentum seems to be stalling towards the decent Weekly resistance around 1.3500. Intra-day support 1.3280 area.
- USD/JPY - Asian range 142.17 - 142.55, has drifted higher for most of the Asia session. On the day the 143 handle should once again offer supply, then more importantly the 145/146 area should once more offer good levels for sellers to reengage. A break back below 142.00 and the market will once again turn its focus on the pivotal 140.00 area.
- USD/CNH - Asian range 7.2619 - 7.2761, the USD/CNY fix printed lower again at 7.2014. Will need to get back above 7.3000 again to start thinking about moving higher again. The longer it stays below there the higher the chance of weaker longs being forced to pare back exposure.
- Cross asset : SPX -0.44%, Gold $3303, US 10-Year yield 4.16%, BBDXY 1222, Crude oil $59.68.
- Data/Events : French & Italian GDP, US ADP private jobs data, GDP, Chicago PMI, PCE and Home Sales.
Fig 1: USD/JPY Spot Hourly Chart
Source: MNI - Market News/Bloomberg
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AUSSIE BONDS: Richer Of Tomorrow’s RBA Policy Decision, No Change Expected
ACGBs (YM +8.0 & XM +9.5) are stronger but off session bests, aligning with a slight paring of early gains for US tsys in today’s Asia-Pac session. Currently, cash US tsys are 4-6bps richer after Friday’s strong risk-off-induced rally.
- Outside of the previously outlined private sector credit and MI inflation gauge, there hasn't been much by way of domestic drivers to flag ahead of tomorrow’s RBA Policy Decision.
- While a 25bp rate cut in April is given only a 5% probability, a cumulative 71bps of easing is priced by year-end. The market’s reluctance to price in a cut for tomorrow reflects the RBA’s cautiousness surrounding February's easing.
- Cash ACGBs are 7-9bps richer with the AU-US 10-year yield differential at +17bps.
- Swap rates are 6-7bps lower, after being 10-11bps lower early.
- The bills strip has bull-flattened, with pricing +4 to +8.
- Tomorrow, the local calendar will see Retail Sales ahead of the RBA Decision, with the market expecting a rise of 0.3% m/m in February after 0.3%.
- After today’s May-28 supply, the AOFM plans to sell A$800mn of the 3.75% 21 May 2034 bond on Wednesday and A$600mn of the 1.00% 21 November 2031 bond on Friday.
FOREX: Safe Havens Outperform Amid Weaker Equities & Lower Yields
Yen gains have dominated the first part of Monday trade, up 0.50% versus the USD. CHF has also risen against the USD, ensuring lower USD index levels. The BBDXY was last near 12740.4, off a little over 0.1%. Higher beta plays have struggled although losses haven't been large.
- The risk off tone in FX markets has been reflected in cross asset trends as well. Weekend news of Trump threatening Russia with tariffs (over the Ukraine peace deal), a potential strike on Iran and ahead of liberation day on Wednesday when reciprocal tariffs will be announced, is all contributing to the risk off move.
- US equity futures are down sharply, following Friday cash losses. Eminis were last off 0.60%, Nasdaq futures were off 1.15% (up from session lows). US Tsy futures have risen, while cash Tsy yields are off more than 5bps for some part of the curve. Gold has hit fresh record highs above $3110.
- Regional equities are down sharply, led by Japan and tech sensitive plays.
- USD/JPY got to lows of 148.73, but sits slightly higher now (last near 149.10/15). USD/CHF was tracking close to 0.8790. We had Japan data earlier on IP and retail sales, but sentiment wasn't shifted.
- AUD and NZD are ticking lower. NZD/USD was last near 0.5705/10, with dips under 0.5700 supported. AUD/USD was close to 0.6280, also near session lows. AUD/JPY was last near 93.60/65, just up from March 20 lows (near 93.15). NZD/JPY is back to 85.10/15, fresh lows since the middle of the month.
- Looking ahead, German February retail sales and German/Italian March preliminary CPI are released. ECB’s Panetta and Villeroy speak. In the US the March MNI Chicago PMI and Dallas Fed manufacturing print.
OIL: Crude Monitoring Tariff Landscape Carefully
Oil prices are moderately lower during APAC trading after a very short-lived jump at the start of the session in response to US President Trump’s threat to impose primary and secondary tariffs on Russian and Iranian oil. Crude has trended down since then in line with the deterioration in risk sentiment. WTI is 0.4% lower at $69.10/bbl after a low of $68.81 and Brent -0.4% to $72.46/bbl following a drop to $72.28.
- Oil is likely to see a volatile week as it worries about the global demand impact of reciprocal tariffs to be announced April 2 but also the effect on supply if the US follows through on threats to Russia and Iran. Trump is proposing “secondary” tariffs on those who buy oil from Russia and Iran, which would have a significant effect on China. This warning has already been made on those who buy from Venezuela.
- Trump sounded more conciliatory earlier today though implying that measures against Russia weren’t imminent and that he trusted President Putin would not “go back on his word”, which brought oil prices off their intraday high. Trump and Putin are due to speak later this week.
- India and China have been buying discounted Russian crude since it invaded Ukraine in 2022. It is the world’s third largest producer and so further restrictions on its exports would push prices higher. According to Bloomberg, they reached a 5-month high in March.
- Later US March MNI Chicago PMI and Dallas Fed manufacturing print, as well as German February retail sales and German/Italian March preliminary CPI are released. ECB’s Panetta and Villeroy speak.
