HKD: USD/HKD March Towards 7.8500 Continues, Short End Hibor Rates Lower

The BBDXY has had an Asian range of 1219.84 - 1224.72, Asia is currently trading around 1221. Bloomberg - French PM Francois Bayrou plans to unveil a debt reduction and economic boost strategy, potentially seeking public approval through a referendum." The USD has traded very weakly across the board today in Asia driven by the USD/TWD. Asian holidays and thin liquidity have not helped but almost 8% in 2 days is an extreme event and you would expect buyers to reemerge sub 30.00.

• EUR/USD -  Asian range 1.1297 - 1.1347, Asia is currently trading 1.1335. Intra-day support is around the 1.1250 area, should this area not hold demand should remerge on dips back to 1.1100. 
• GBP/USD - Asian range 1.3260 - 1.3301, Asia is currently dealing around 1.3290. Intra-day support  is around the 1.3250 area, then the pivotal 1.30/31 support is next.
• USD/JPY -  Asian range 144.07 - 145.00, has drifted lower for most of the Asia session. Look for some support initially back towards 143.00, but we would probably need another catalyst to test below that again. Which probably makes a range of 143-147 for the week most likely.
• USD/CNH - Asian range 7.1893 - 7.2187, Chinese markets are shut for a holiday. The Longs in Usd/Asia are now capitulating, this was perceived to be the cleanest expression of the tariff trade but this move lower in USD/TWD is causing forced selling as stops are hit.
• Cross asset : SPX -0.75%, Gold $3257, US TYM5 111-08, BBDXY 1221, Crude oil $55.98. 
• Data/Events : US ISM Services PMI

Fig 1: USD/TWD Spot Weekly Chart

Source: MNI - Market News/Bloomberg

EXECUTIVE SUMMARY

• At its May 1 meeting, the Bank of Japan (BoJ) voted unanimously (9-0) to maintain its policy rate at 0.5%, citing increasing risks of a global economic slowdown, particularly in light of escalating US tariffs.
• In its Outlook Report, the BoJ downgraded its forecasts for real GDP growth and core inflation. The central bank also delayed its expected timeline for achieving its 2% inflation target.
• Despite the overall dovish shift, Governor Kazuo Ueda attempted to maintain a degree of flexibility in future policy moves. In his post-meeting press conference, Ueda emphasised that a delay in reaching the inflation target does not necessarily imply a delay in future rate hikes.
• The BoJ now appears to be in a more reactive posture, allowing for flexibility in response to global developments rather than committing to a predetermined tightening path.
• Reflecting the shift in the BoJ’s focus from domestic inflation to external risks, some market analysts have revised their expectations for the timing of the next rate hike. While earlier forecasts anticipated a move in the third quarter of 2025, this has now been postponed to the fourth quarter.
• In summary, the BoJ’s May meeting highlighted a more cautious and data-dependent approach amid mounting global uncertainties.
• Full review here: 

The Asian session started off on the back foot with Trump commenting that he had “no plans to talk to Xi this week.” This weak start then got legs as we saw another huge leg lower in USD/Asia driven by the USD/TWD, which caused the USD to trade lower across the board. Asian holidays and thin liquidity have not helped but almost 8% in 2 days is an extreme event and you would expect buyers to reemerge sub 30.00.

• AUD/USD - Asian range 0.6434 - 0.6481, the AUD is currently dealing around 0.6460. The AUD popped up around 40 points on the USD/TWD open and has since drifted back off its highs as bids below 30.00 finally materialize in USD/TWD . The AUD looks to be building a solid bad base from which to move higher again, first target the 0.6600 area. A break below 0.6350 needed to negate this.
• AUD/JPY - Asian range 93.12 - 93.51, price goes into London trading around 93.25.  AUD/JPY has had a powerful extension as shorts are pared back. Price is now moving towards testing the Weekly resistance seen between 94.00/96.00, sellers should remerge here.
• NZDUSD - Asian range 0.5940 - 0.5985, going into London trading around 0.5970. Like the AUD it benefited from the move lower in USD/TWD upon its open. On the day dips back to 0.5900 should continue to find support.
• AUD/NZD - Asian range 1.0814 - 1.0853, the Asian session currently trading 1.0825. Sellers have returned back towards the 1.0850 area.

Fig 1 : AUD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg