RBNZ: RBNZ Cuts Rates 25bp, Decision Not Unanimous

JPY crosses continue to consolidate towards their recent highs as the market attempts to digest the Trump administration's attempts at de-escalation, the market will be eagerly waiting for any positive announcements in Trump’s speech celebrating his first 100 days in office tomorrow. It does feel though that the market will use any decent sell-off to add to JPY longs. “Japanese equities are likely to benefit as the main opposition party puts tax reductions on the agenda leading into July’s upper house elections.”(per BBG)

• EUR/JPY - Friday night range 162.66 - 163.76, Asia is trading around 163.10. EUR/JPY tested back towards the highs of the last couple of months it looks to be consolidating in a 160 - 164 range for now.
• GBP/JPY - Friday night range 190.50 - 191.72, Asia trades around 190.90. Friday saw a good push through the recent highs around 190.00 as shorts were pared back. The market still believes risk will find it tough to sustain any move higher and hence expects demand for JPY on these bounces.
• AUD/JPY - Friday night range 91.34 - 92.14, Asia is currently dealing 91.65. The pair has traded sideways in a 89.50/92.00 range for the last 10 trading days. Sellers seem to have returned back above 92.00, Goldman’s like AUDJPY as the best vehicle to tactically express JPY strength.
• CNH/JPY - Friday night range 19.6522 - 19.7550, Asia is currently trading around 19.6850. CNY/JPY has finally bounced from short-term oversold levels, good resistance back towards 19.85/20.00 should find good supply first up.

Fig 1 : CNH/JPY Daily Chart

Source: MNI - Market News/Bloomberg

Early asset sentiment is risk off in the equity space in terms of US futures, which are down around 0.50-0.55% at this stage. Regional equity markets are mixed. Gold is also down, off nearly 1% though, continuing recent volatility. The USD index is slightly higher, albeit with the safe havens outperforming. US yields are up a touch. 

• The negative US equity market futures backdrop follows four straight sessions of gains to end last week for the SPX. Also over the weekend we didn't see any further positive trade developments, at least at face value. Trump stated:  "Won't Drop China Tariffs Unless They Give Us Something", followed by "People Are Starting To Understand How Good Tariffs Are". Market sensitivity to trade/tariff headlines is likely to remain strong.
• BBG also reported earlier online retailer Shein will raise some prices as much as 377% before tariffs take effect.
• There are hopes of peace progress in Ukraine following weekend meetings, but firm details are yet to emerge following earlier Trump remarks.
• The dip in gold, back sub $3300 is in line with higher USD BBDXY levels, although the move in this index is less than 0.10% at this stage. As we noted earlier lower positioning in gold may indicate some profit taking after the recent surge higher.
• In the FX space, JPY and CHF are little changed versus the dollar, USD/JPY last near 143.60/65. AUD/USD and NZD/USD are down close to 0.20%, but tracking within recent ranges. AUD/USD last close to 0.6380/85, NZD near 0.5950.
• The data calendar is largely empty today, but an upcoming press briefing from the China authorities, including the PBoC and NDRC, on efforts to support growth will be in focus. No big bang stimulus announcements are expected though.
• USD/CNH has been supported on dips sub 7.2900, while HK and China equities are down modestly in early trade. 

The People’s Bank of China is expected to improve its re-lending tools focused on technology innovation and inclusive pension, by extending the loan period, expanding the quota, lowering interest rates, and optimising the issuance conditions, said Securities Times in a commentary. The Politburo meeting last Friday also proposed to create new structural monetary policy tools to support expanding consumption, and stabilising foreign trade, as well as to increase the countercyclical role of policy-based financial instruments to better coordinate fiscal and monetary policies, the newspaper said.