ASIA FX: USD/CNH Edges Down, Lujiazui Forum In Focus, USD/KRW Upticks Faded
Jun-18 05:18
In North East Asia FX, USD/CNH sits down a touch, amid a flurry of headlines from the Lujiazui Forum. Spot USD/KRW upticks have been faded, while USD/TWD is holding above 29.50. USD/HKD spot remains very close to the top end of the peg band.
- USD/CNH is holding under 7.1900, marginally down on end Tuesday levels. The USD/CNY fix was set higher, but only marginally, lending some support to CNH. Most focus has been on headlines from the Lujiazui forum, where various officials have spoken.
- The PBoC Governor sees a multipolar system, where several sovereign currencies will coexist (see this link from our policy team).
- Elsewhere it was noted - China’s foreign exchange market will remain stable, with the yuan operating at a “reasonably balanced level,” said Zhu Hexin, head of the State Administration of Foreign Exchange, adding that a new round of investment quotas under the Qualified Domestic Institutional Investor (QDII) scheme will be granted to meet demand for overseas investment. (see this link from our policy team).
- For spot USD/KRW, we opened close to 1382 before finding firm selling interest. The pair was last near 1370, slightly up in won terms for the session. The 1 month NDF is back under 1370, up 0.80% in won terms versus end NY levels on Tuesday. Local equities are higher, but sub early Tuesday highs in index terms.
- USD/TWD has been very steady, last holding above 29.50, which still looks to be a support point in the near term.
- USD/HKD is unchanged, and just under 7.8500.
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LOOK AHEAD: Eurozone Timeline of Key Events (Times BST)
May-19 05:18
| Date | Time | Country | Event |
| 19-May | 1000 | EU | HICP (f) |
| 20-May | 0700 | DE | PPI |
| 20-May | 0900 | EU | EZ Current Account |
| 20-May | 1000 | EU | Construction Production |
| 20-May | 1100 | EU | ECB's Cipollone pre-rec video On Sustainability |
| 20-May | --- | EU | ECB's Lagarde and Cipollone at G7 Meeting |
| 20-May | 1500 | EU | Consumer Confidence Indicator (p) |
| 21-May | 1700 | EU | ECB's Lane at Monpol Panel Discussion |
| 22-May | 0745 | FR | Manufacturing Sentiment |
| 22-May | 0815 | FR | S&P Global Flash PMI (p) |
| 22-May | 0830 | DE | S&P Global Flash PMI (p) |
| 22-May | 0900 | DE | IFO Business Climate Index |
| 22-May | 0900 | EU | S&P Global Flash PMI (p) |
| 22-May | 1230 | EU | ECB April Minutes Released |
| 22-May | 1400 | BE | BNB Business Confidence |
| 22-May | 1600 | EU | ECB's Elderson Dinner Speech at Biodiversity Day |
| 22-May | 1635 | EU | ECB's de Guindos Speech in Madrid |
JGBS: Belly Leads Curve Cheaper, Tariff Discussions In Focus
May-19 05:15
JGB futures are weaker and near Tokyo session lows, -27 compared to settlement levels.
- March Tertiary Industry Index fell 0.3% m/m versus -0.2% estimate.
- “Japan's Prime Minister Shigeru Ishiba says the country won't compromise its national interests in trade talks with the US by fixating on time limits. Japan will continue to seek exemptions for all additional tariffs imposed by the US and won't accept a deal that doesn't address the 25% tariff on cars.” (per BBG)
- Cash US tsys have twist-steepened in today's Asia-Pac session, with yields 1bp lower to 4bps higher, as the market continued to digest late Friday news that Moody's Ratings downgraded the US credit score.
- "US House panel approves Trump tax cut bill, setting up a possible vote on passage this week" - [RTRS]
- Cash JGBs are flat to 2bps cheaper across benchmarks, with the belly leading. The benchmark 10-year yield is 1.5bps higher at 1.478% versus the cycle high of 1.596%.
- Swap rates are flat to 1bp lower, with swap spreads tighter.
- Tomorrow, the local calendar will see Tokyo Condominiums for Sale data alongside 20-year supply.
- The G7 will hold a meeting from the 20th to the 22nd, with attention focused on whether foreign exchange rates will be discussed in relation to tariffs.
GBPUSD TECHS: Trend Outlook Remains Bullish
May-19 05:11
- RES 4: 1.3550 High Feb 24 ‘22
- RES 3: 1.3510 1.236 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 2: 1.3402/3444 High May 6 / High Apr 28 / 29 and the bull trigger
- RES 1: 1.3360 High May 14
- PRICE: 1.3305 @ 06:11 BST May 19
- SUP 1: 1.3140 Low May 12
- SUP 2: 1.3110 50-day EMA
- SUP 3: 1.3041 Low Apr 14
- SUP 4: 1.2968 Low Apr 11
Recent weakness in GBPUSD appears corrective. The May 13 bounce highlights a possible reversal pattern - a bullish engulfing candle. The pattern remains valid and if correct, signals the end of the recent corrective cycle and a resumption of the uptrend. Key support to watch is 1.3117, the 50-day EMA. A continuation higher would refocus attention on the key resistance and a bull trigger, at 1.3444, the Apr 28 / 29 high.
