CNH: USD/CNH Steady, Implied Vol Close To Multi Month Lows, CNH/JPY Recovers
USD/CNH tracks near 7.2045 in early Friday dealings, the pair largely tracking sideways post Thursday's Asia Pac close. We were unchanged for Thursday's session, outperforming modest USD index upticks, as US related asset sentiment stabilized, particularly in the Tsy bond space. Spot USD/CNY finished up at 7.2056, while the CNY CFETS basket tracker fell a further 0.21% to 96.12 (per BBG). The index is tracking back towards recent lows (around 95.70 on Apr 22).
- CNH once again displayed a very low beta with respect to broader USD moves, with USD/CNH not shifting too far away from the 7.2000 region.
- USD/CNH implied 1 month vols sit at 4.11% in latest dealings, just above lows which stretch back to August last year. In terms of risk reversals, the 1 month is relatively steady, last around -0.40, up from early May lows near around -0.63.
- Until we get some sense of how US-China trade talks are progressing, we remain in this low vol environment where CNH tracks broader USD shifts with a low beta
- The CNH/JPY cross remains in focus, albeit with USD/JPY volatility driving most of the moves. CNH/JPY was last back near 20.00, against recent lows of 19.8284.
- The data calendar remains light in the near term, with end May PMIs (due on the 31st) the likely next major focus point.
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AUSSIE 3-YEAR TECHS: (M5) Within Range of Highs
- RES 3: 97.190 - High May 5 2023
- RES 2: 96.932 - 76.4% of Mar-Nov ‘23 bear leg
- RES 1: 96.860 - High Apr 07
- PRICE: 96.760 @ 16:06 GMT Apr 22
- SUP 1: 95.900 - Low Jan 14
- SUP 2: 95.760 - Low 14 Nov ‘24
- SUP 3: 95.480 - Low Jan 11 2023 and a major support
Aussie 3-yr futures continue to circle just below recent contract highs, having cleared resistance on the continuation contract. The rally has taken out resistance at 96.730, the Sep 17 ‘24 high. On the downside, any reversal lower from current levels would signal a resumption of a downtrend. A deeper sell-off would refocus attention on 95.760, the 14 Nov ‘24 low.
US: Trump States - Has No Intention Of Firing Fed Chair Powell
A press conference has just concluded at the White House where US President Trump spoke on a number of issues. Most prominent were comments Trump made on Fed Chair Powell and the tariff/trade outlook.
- On the Fed outlook Trump stated that now was the perfect time to lower rates, as Trump spoke about the lower food and energy price backdrop since he took office.
- Trump added that he wants Fed Chair Powell not to be too late in terms of lower rates, but that if he doesn't it isn't the end. Trump added he no intention of firing Fed Chair Powell. This has been speculated recently given Trump remarks around Powell's performance.
- On tariffs Trump stated he won't play hard ball with China and that while tariffs on China are currently 145%, the final number won't be near that number (per BBG).
- If countries invest in the US they won't pay tariffs Trump added and that China and other countries will make a deal with the US, or the US will set the deal.
- When asked about the economic impact of tariffs said the whole economy will benefit given surging investment into the US.
ASIA: Coming Up In Asian Markets On Wednesday
| 0500BST | 1200HKT | 1400AEST | Malaysia Mar CPI |
| 0600BST | 1300HKT | 1500AEST | India HSBC Apr P PMIs |
| 0600BST | 1300HKT | 1500AEST | Singapore Mar CPI |
| 0820BST | 1520HKT | 1720AEST | Indonesia BI Decision |
| 0900BST | 1600HKT | 1800AEST | Taiwan Mar IP |
| 0920BST | 1620HKT | 1820AEST | Taiwan Mar Money Supply |
| 0930BST | 1630HKT | 1830AEST | Hong Kong Mar CPI |
