CNH: USD/CNY Fixing Edges Higher, Error Term Steady

• CHINA PBOC CONDUCTS CNY340.5 BLN VIA 7-DAY REVERSE REPO TUES

• CHINA SETS YUAN CENTRAL PARITY AT 7.2029 TUES VS 7.2043

Shipping rates have been trending lower since mid-2024 as threats to Red Sea shipping dissipated and much of the related jump has now been unwound. They have taken another leg down since January this year though, as threats to global trade volumes from US tariffs weigh on prices charged. Since US reciprocal trade duties were announced on April 2, various shipping rate indices are mixed though.

• The Baltic Dry Index (BDI) is down 11.4% since April 2 and the average is -11.6% m/m & -21.9% y/y in April.
• February global IP rose 0.7% m/m, the 10th non-negative reading in the last year, to be up 2.9% y/y, the fastest since October 2022. Global trade growth has been trending up for the last year and was 3.0% y/y in February. However, both could slow going forward given that the BDI has been trending lower over the last year and can be a leading indicator.

Global trade vs Baltic Freight Index

• The FBX container rate is down 6.5% m/m & 15.9% y/y in April but actually up 0.7% since April 2 driven by an 8.3% increase in the China/East Asia to Mediterranean route, but this reflects some normalisation after the sharp drop on April 1 and it is still down almost 20% m/m on average in April to be 33.1% lower on a year ago.
• Given the tit-for-tat tariff increases between the US and China, it is not surprising that FBX container rate for China/East Asia to the east coast of North America is now 6.2% lower compared to April 2. The April average is little changed on the month but down 18.8% y/y.
• With shipping rates down double digits compared to a year ago and levels subdued, they are likely to provide some disinflationary pressure but container rates are still higher than end-2023 with the FBX up 52.1%, while BDI is now 33% lower.

Global FBX container rates US$/points