JGBS: Subdued Session, PPI Broadly In-Line

• CHINA Q1 EXPORTS +6.9% IN YUAN TERM: CUSTOMS
• CHINA Q1 IMPORTS -6.0% IN YUAN TERM: CUSTOMS

The BBDXY range on Friday night was 1229.76 - 1243.64. We got to fresh lows of 1229.31 in recent dealings, but sit slightly higher now, last near 1231.0 (still off 0.25% for the session so far). Momentum looks firmly against the USD, as focus remains on rotation out of US assets, although US equity futures are higher in the first part Monday trade.

• EUR/USD had been trading very closely with the EU-US 10 year rate differential, but this relationship broke down completely last week.
• Traders are looking to increase their exposure to assets outside the US with nearly two-thirds of respondents to the latest MLIV Pulse survey (per BBG) saying they would seek investments in Europe. With nearly a third looking towards Asia.
• These long USD positions built up over the last 10/15 years due to US exceptionalism are only just starting to be pared back. Institutions who are now reacting to this paradigm potentially ending could take months to reduce these positions/exposure. USD sellers on bounces may be expected if this view becomes more entrenched.
• The FT also noted the number of people travelling from Europe to the US in recent weeks has plummeted by as much as 35% as travelers have cancelled plans in response to Trump's policies. This adds near term downside risks to US GDP growth.
• A weaker USD may also part of the policy playbook.  Per our policy team: The United States will be looking to see if other countries will be willing to include commitments not to lower the value of their currency relative to the dollar as part of various trade negotiations, U.S. Trade Representative Jamieson Greer said Sunday. (see this link).
• Technical wise for the BBDXY index, we aren't too far away from late Sep lows sub 1220. A break below this level could see support near 1200 targetd, see the chart below. 

Fig 1: BBDXY Index: 

Source: MNI - Market News/Bloomberg 

• The PBOC issued CNY43bn of 7-day reverse repo at 1.5% during this morning’s OMO.
• Maturities today CNY93.5bn
• Net liquidity withdrawal CNY50.5bn.
• The PBOC monitors and maintains liquidity in the interbank market through the issuance of reverse repo.
• The CFETS Pledged Repo Deposit Institutions 7 Day Weighted Average is at 1.54%,from 1.65% Friday.
• The China overnight interbank repo rate is 1.65%, from 1.58% Friday.
• The China 7-day interbank repo rate is 1.72%, from 1.65% Friday.