AUSTRALIA: Little Change To Deficit & Economic Projections Going Into Election

USD/CNH was supported on dips towards 7.2400 post the Asia close on Friday. The pair tracks near 7.2530 in latest dealings, little changed in Monday's session so far. CNH lost 0.27% on Friday as broader USD indices recovered some ground. CNH lagged yen outperformance though, (which rallied amid softer core yields post French and US data misses, along with equity softness). USD/CNY spot finished up at 7.2523, while the CNY CFETS basket tracker fell a further 0.31% to 99.63, per BBG. 

• For USD/CNH technicals, we are wedged between the 100-day EMA (near 7.2600), while downside support has been evident near 7.2430, which is the 200-day EMA support level.
• Late on Friday details of the phone call between US Tsy Secretary Bessent and China Vice Premier He Lifeng were reported, with little signs of positive sentiment to come out of the call, with both sides pushing back on respective issues (China on US tariffs and the US on China's imbalances).
• It was reported over the weekend that the US is pushing Mexico to impose tariffs on China imports (to avoid US tariff action on Mexico), see this BBG link.
• Reports of a new covid like virus that can reportedly transmit from bats to humans also weighed on broader risk appetite on Friday (including US equities). There have been no reported human cases so far though (originally reported by SCMP). The Golden Dragon index rose a further 1.65% in US trade though
• Locally the data calendar is empty today. We still await the 1yr MLF outcome, but no change is expected from the current 2% rate. This coming Saturday we get the Feb PMIs. 

• Tsys futures rallied on Friday following a risk-off move as South China Morning Post reported on a new bat coronavirus study made the rounds with traders, futures were already well supported during the morning session following US data which included soft PMI services and a final University of Michigan sentiment print below estimate. TU closed +04⅜ at 102-28⅜, while TY closed +16+ at 109-22.
• Cash tsys yields closed roughly 7bps richer on Friday, with the belly of the curve out-performing slightly. The 2yr closed -7.1bps at 4.198%, while the 10yr closed -7.4bps at 4.431%. The 2s10s closed -0.5bps at 22.904.
• Hedge funds significantly covered net short positions in 5-and 10yr futures, totaling ~$17.6m/DV01, with overall short covering across the curve reaching ~$22.7m/DV01 for the week ending Feb. 18, per CFTC data. Asset managers, meanwhile, reduced long positions broadly, including $5.1m/DV01 in 5y notes and $3m/DV01 in 10y notes.
• Fed's Goolsbee downplayed the recent rise in consumer inflation expectations, stating that one month of data isn’t sufficient to draw conclusions. The University of Michigan’s survey showed long-term inflation expectations hit 3.5%, the highest since 1995, largely driven by Democratic respondents. He also emphasized the need for multiple months of data before it impacts Fed policy decisions.
• Fed-dated OIS saw a dovish trading following the risk-off move, bringing forward the first full 25bp of easing to the July meeting from the September meeting, while the market is now pricing in 45bp of easing is vs 37bp priced on Thursday.
• There isn't much on the calendar tonight, with just Chicago Fed Nat Activity Index & Dallas Fed Manf. Activity

• Gold finished Friday with a whimper failing to hit new highs.
• Despite Friday’s slow end to the week which saw Gold close at $2,936.05, Gold delivered yet another impressive week with a gain of +1.86%.
• Year to date Gold is up over 10% in 2025, delivering positive returns in every trading week of the year.
• The much-mooted revaluation of US Gold reserves touted by the US President’s team could actually be good for prices, according to BofA Head of Commodities Research (per BBG). 
• In a further bullish sign for gold yet another Central Bank has increased their gold purchases with data from Iran showing imports of 100 tonnes during their financial year, up from 30 tonnes prior (according IRNA).