CNH: USD/CNY Fixing - Another YTD Low, USD/CNH Testing Under 7.1500

• CHINA SETS YUAN CENTRAL PARITY AT 7.1467 MON VS 7.1419

The BoJ offers to buy a total of Y560bn of JGBs from the market:

• Y350bn worth of JGBs with 5-10 Years until maturity
• Y135bn worth of JGBs with 10-25 Years until maturity
• Y75bn worth of JGBs with 25+ Years until maturity

The BBDXY range Friday night was 1195.83 - 1200.60, Asia is currently trading around 1197. The USD’s slide lower finally stalled at the back end of last week and some profit-taking was seen. The market is much more comfortable selling USD’s and while below 1220 rallies should continue to find supply. There is lots of event risk coming up this week and we are heading into month-end so caution is warranted, this could potentially see some more paring back of USD shorts. Worth noting that corporate month-end tomorrow will most likely see some USD demand as well.

• (Bloomberg) - “With Federal Reserve Chair Jerome Powell’s position seemingly secure, the dollar may find near-term support. But the greenback’s downtrend remains firmly in place, with eventual rate cuts poised to supplant the political risk premium as the dominant headwind.”
• Arnaud Bertrand on X: “If Europeans were paying attention (or being told the truth), they should be beyond appalled by this "deal. It's nothing more than one of the most expensive imperial tributes in history. Just a massive one-way transfer of wealth with no reciprocal benefits.”
• Robin Brooks on X: “Euro longs in the CFTC's CoT report are near all-time highs (blue). This build-up in positioning embeds expectations that can't possibly be met. The Euro zone is locked into a stand-off between the high-debt South and low-debt North. It's frozen in place.” See Graph below.
• Nick Timiraos on X: “Import prices have held steady, suggesting foreign suppliers aren't cutting prices to offset tariff costs for US customers. A Goldman Sachs analysis concluded that foreign firms, especially in China, appear to be absorbing around 20% of tariff costs.”
• There is a broad consensus that the USD is set to embark on a decent move lower as the world reduces its exposure to the US and repatriates a lot of these flows. This consensus will also result in some decent short squeezes as a lot of the market is positioned the same way.
• Data/Events :  Dallas Fed Manf. Activity

Fig 1: CFTC Data

Source: MNI/@robin_j_brooks