CNH: USD/CNY Fixing To Fresh Multi Month Lows, Error Term Flat

• CHINA SETS YUAN CENTRAL PARITY AT 7.2066 MON VS 7.2095

The ESM5 Friday night range was 5663 - 5715, Asia is currently trading around 5755. US stocks are reacting very well to US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. S&P +1.45%, NQM5 +2%.

• US stocks have gapped higher on the Asian open, it pays to be wary of these Monday morning movies in thin liquidity as they have a habit of being filled back in, is it different this time ?
• Momentum Funds triggers are likely not too far away though and they are reported to be quite underweight, but it may be we would need a move back above 5800 for them to get truly back involved. Can this morning's news start forcing them back in if their triggers are hit ?
• The Stock market has seemed to price in a lot of the recent positive sentiment and you would think it would need some real concrete details of what a US-China trade deal would look like before embarking on another leg higher ?
• “Hong Kong stocks look set for a double boost on Monday with the read across from higher US equity futures and investor relief that CATL’s IPO is gathering solid support, even though some US firms are reportedly being excluded.” “It is likely to be the world’s biggest this year at $5bn or more.”(BBG)
• “Economists and traders expect US tariff policy to result in higher unemployment and a possible recession, as well as a price shock that may well lead to faster inflation in the second half of this year. We’ve not had conditions like those since the early 1970s, and that means US equities are poised to sail off the edge of the map.” - Bloomberg Macro View.
• The SPX has had a big bounce from its lows on 4800 handle, but we are approaching some key resistance around 5800. The longer-term sellers should be active around here, with support seen back towards 5400/5500.

In Tokyo morning trade, JGB futures are weaker, -38 compared to settlement levels, extending overnight weakness on Friday.

• This move aligns with US tsys, which are trading 2-4bps cheaper in today’s Asia-Pac session as risk bounces on US-China officials citing 'substantial progress' made from weekend trade talks held in Switzerland. Traders continue to pare back expectations of the Fed easing this year and the next.
• Japan's March trade balance and current account figures were close to market expectations. The trade balance printing at ¥516.5bn, versus ¥547.7bn forecast. The Feb balance was ¥712.9bn. In seasonally adjusted terms, the current account was ¥2723.1bn, slightly above forecasts, while in unadjusted terms we printed, ¥3678.1bn, slightly below market expectations.
• Cash JGBs are 1-6bps cheaper across benchmarks, with a steepening bias. The benchmark 10-year yield is 2.4bps higher at 1.393% versus the cycle high of 1.596%.
• Swap rates are 1-7bps higher, with swap spreads wider.