ASIA STOCKS: Geopolitical Peace / AI Boom Propel Equities to New Highs

The BBDXY has had a range today of 1203.40 - 1205.19 in the Asia-Pac session; it is currently trading around 1204. The USD rebound got back under way as the market very quickly discounted Trump’s attempt to assuage the markets. The market is much more comfortable selling US dollars, but it will need an actual peace deal in the  Middle-East for the Bears to return to the fray en masse. The US 2-Year yield is now challenging some significant resistance, I suspect we do some work around here(4.10%-4.15%) initially but a clear break of this area would have a rippling effect for the USD. On the day, the resistance remains in this 1205-1206 area, a sustained break back above 1205 and the USD bears conviction will be put to the test and we could see the paring back of USD shorts begin to pick up. 

• EUR/USD -  Asian range 1.1594-1.1613, Asia is currently trading 1.1600. The pair’s move lower continues to stall around the 1.1600 support as the USD attempts to regain upward momentum. The EUR moves have been suppressed for the last month oscillating within this tight 1600-1.1850 range, the USD will need a sustained break higher for this support to give way. On the day, the first support is right here around the 1.1600 area, the USD bears will be looking for this support to hold in order to build a base from which to move higher again. A sustained move below this support implies a move back toward the 1.1400-1.1500 area. 
• GBP/USD - Asian range 1.3378-1.3406, Asia is currently dealing around 1.3395. The pair topped out toward 1.3450 as the USD rebound tries to reassert itself. On the day, I would continue to be skewed toward fading rallies. The first resistance is toward 1.3450 and then the 1.3500-1.3550 area. Sterling Bears will be looking for this to top out somewhere up here and have another test of the 1.3300 support at some point.
• Data/Events: UK April CPI,  Eurozone April CPI (F),  US MBA Mortgage Applications,  FOMC April Meeting Minutes

Fig 1: GBP/USD Spot Daily Chart

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

The Nikkei 225 fell heavily today down 1.65% and below the critical 60,000 psychological threshold for the first time this month.  AI are hammered with Softbank down -6.1% and Tokyo Electron down -2.8%.  Ahead of Nvidia's result, the rout started with Fujikura , which is currently down -7.8% as Fujikura’s conservative margin forecasts triggered an immediate, sector-wide exit. Japan's vital semiconductor lithography and testing ecosystem faced liquidations following Kokusai Electric (6525.JP) plunged over 6.3% following the post-market announcement that its major shareholder, KKR & Co., intends to completely block-trade its remaining stake, sparking concerns that professional investors are 'getting out at the top.'

The Jakarta Composite is down again, -1.1% today as the forced liquidation for global managers following the MSCI decision continued.  The CEO of the Danantara Indonesia ‘s sovereign wealth fund, stated that state-owned enterprise (BUMN) stocks on the Indonesia Stock Exchange (IDX) are suitable for long-term investment and have shown good performance of late; in what appears to be an attempt to support stocks in a falling market. Headlines around Prabowo's focus on mining companies isn't helping sentiment either.  

Both onshore and offshore bourses are down in China today by around -0.50% as some parts are disappointed by the no change on the Loan Prime Rates whilst other sectors are derisking ahead of Nvidia results.  Foxconn Industrial Internet (FII)  is the go-to proxy because its revenue is highly tied to Nvidia's global Blackwell and Vera Rubin server architectures. FII fell -2.3% today despite its revenue growth being poised to accelerate in 2026, driven by a new wave of robust capital expenditure from global cloud providers

NZGBs closed showing a bear-steepener, with benchmark yields 4-6bps higher. Yields moved 1bp higher post-data. 

• There was a significant pickup in RBNZ measured household inflation expectations in Q2 across time periods but often not above 2025 highs. The RBNZ will need to judge if the increase is likely to be temporary following recent geopolitical events and their impact on fuel prices. There is evidence that ongoing weak demand is making it difficult for producers to pass higher input costs onto customers, but rising inflation expectations are consistent with higher core inflation.
• The NZ-US and NZ-AU 10-year yield differentials nudged 1bp and 2bps higher, respectively.
• Swap rates closed 3-5bps higher, with a steeper 2s10s curve.
• RBNZ-dated OIS pricing is little changed across meetings. 6bps of tightening is priced for May 27, while February 2027 assigns 101bps.
• Given the near 100% probability assigned to a July hike and market’s stellar track record predicting hikes that cycle, all eyes will be on the updated RBNZ forecasts, especially its OCR profile which has often been used to signal the MPC's thinking on future decisions.
• Tomorrow, the local calendar will see Trade Balance data.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 1.50% May-31 bond and NZ$200mn of the 4.25% May-36 bond.

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