ASIA FX: USD/CNH Drifts Higher, KRW & TWD Modestly Outperform
In North East Asia FX, aggregate FX moves have been very modest in Wednesday trade to date. USD/CNH is a little higher, and supported on dips so far, while KRW and TWD are little changed, outperforming firmer USD trends elsewhere but only at the margin.
- USD/CNH was last near 7.1950, unable to test above 7.2000 but supported under 7.1900. The pair continues the recent pattern since Monday of higher highs and lows. We remain well within recent ranges, and appear to mostly be following broader USD trends, albeit with a low beta. A move above 7.2000 may bring more selling interest into play.
- Spot USD/KRW was last near 1376, little changed for the session. At the start of the session we did dip briefly under 1370, before buying interest emerged. Local equities were up +2% at one stage, we now sit at +1.5%. Optimism around potential corporate value up from a new South Korean President (elections are held June 3), along with a strong offshore tech lead have been clear positives. Earlier data showed an improvement in manufacturing sentiment, albeit from a low base.
- Spot USD/TWD is holding under 30.00 at this stage, little changed for the session. The Taiex is around flat, while alter on Q1 Taiwan GDP prints. The market expects a 5.4%y/y outcome, versus 5.37% prior.
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FOREX: G10 Wrap - USD Has A Quiet session
The BBDXY has had an Asian range of 1225.84 - 1227.93, Asia is currently trading around 1226. The headlines from the PBOC press conference aimed at stabilizing the economy and supporting the jobs market didn’t shift market sentiment greatly. It still appears more monetary stimulus is on the way, but the authorities will enact such moves in a timely manner. Bloomberg - “ECB: Klaas Knot told FD the June meeting will be “really complicated” due to uncertainty over US tariff policy and European fiscal plans."
- EUR/USD - Asian range 1.1340 - 1.1367, Asia is currently trading 1.1363. 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 1.3280 - 1.3312,the market seems happy to accumulate GBP on dips but the risk of a short-term retracement remains. Buyers should reemerge back towards the 1.3000/3100 area.
- USD/JPY - Asian range 143.35 - 143.88, has traded sideways for most of the Asia session. On the day the 143 handle should still see some supply, then more importantly the 145/146 area should once more offer good levels for sellers to reengage.
- USD/CNH - Asian range 7.2878 - 7.2986, the USD/CNY fix printed at 7.2043. USD/CNH continues to trade sideways and find support towards 7.2800, as it weakens in the crosses.
- Cross asset : SPX -0.52%, Gold $3293, US 10yr 4.23%, BBDXY 1226, Crude oil $63.31.
Data/Events : Spain Unemployment, Retail sales, ECB’s Guindos and Rehn Speak, US April Dallas Fed Manufacturing Activity.
Fig 1: EUR/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
GOLD: Gold Softer Again as Profit Takers Move In.
- Gold has kicked off the week with a fall in Asian trading, down -0.80% today.
- Up over 25% year to date on trade war concerns, gold is one of the best performing assets in what is proving to be a volatile start to the year.
- Reaching a new all-time high of US$3,423.98 this month, gold has surged through most predictions at the beginning of the year.
- Gold started the trading week this week in Asia at $3,325.21 and fell to $3,292.74
- Key central banks globally have reported increases to their gold reserves, boosting demand for the precious commodity whilst China’s Gold Association reported a 6% decline in gold consumption in Q1.
- Data out from the CFTC last Friday showed that Hedge Funds have reduced the number of their gold longs to the lowest level in one year indicating that the rally for now may be stalled.
- For now, all major moving averages are pointing upwards: a sign that the bullish momentum remains in place but with the CFTC positioning data, it is possible we could see a modest week for gold should trade war headlines not dominate.
OIL: Geopolitical Uncertainty Clouding Oil Outlook
Oil prices are moderately higher during today’s APAC session as markets watch and wait for progress on US trade negotiations. WTI is up 0.5% to $63.34/bbl off the intraday low of $62.88/bbl and Brent is +0.3% to $67.10/bbl after falling to $66.70 earlier. The USD index is off its high to be little changed on the day.
- The oil markets looked through today’s China economic press conference which included a statement that rates and the RRR would be reduced and that the 5% 2025 growth target is expected to be met.
- Geopolitical uncertainty is at the fore with significant uncertainty around US tariffs, threats to increase sanctions on Russia if it doesn’t reach a deal on Ukraine and ongoing US-Iran talks on Iran’s nuclear programme. In addition, with a meeting on May 5 the outlook for OPEC production is also unclear after the larger-than-expected increase in April.
- Later US April Dallas Fed manufacturing and UK April Nationwide house prices are released. ECB’s de Guindos presents ECB’s 2024 Annual Report. Oil markets will be monitoring Friday’s US payrolls.
