EUR: Viewpoint - Performance Closely Tied to Dollar Pegs

• CHINA MAY EXPORTS +4.8% Y/Y VS MEDIAN +6.0% Y/Y: CUSTOMS
• CHINA MAY IMPORTS -3.4% Y/Y VS MEDIAN -1.0% Y/Y: CUSTOMS
• CHINA MAY TRADE SURPLUS +$103.2 BLN VS MEDIAN +$101.1 BLN

AUDUSD has trended higher so far through today’s APAC session to be up 0.3% to 0.6510 supported by better risk appetite which is driving equities higher following the US’ post-payroll rally, and US yields and the dollar are lower (USD BBDXY -0.2% after Friday’s +0.3%). The pair is approaching resistance at 0.6538. 

• AUDJPY has range traded and is currently around 94.06 after a low of 93.97 and a high of 94.24. AUDNZD is flat at 1.0790 off the intraday peak of 1.0803.
• AUDEUR is 0.1% higher at 0.5702 holding a break above 0.5700. AUDGBP is off its high of 0.4807 but is still up 0.1% to 0.4802.
• Equities are rallying with the Nikkei up 1.0% and Hang Seng +1.5% but the S&P e-mini is down 0.2%. The ASX is closed for a holiday. Oil prices are slower lower with WTI around $64.55/bbl. Copper is 0.3% higher and iron ore is off its intraday low to be just over $95/t.
• Later US April wholesale data and May NY Fed 1-yr inflation expectations print. The ECB’s Elderson speaks. 

China asset markets aren't showing a strong reaction to the May inflation data. To recap, the CPI remain in deflation, albeit slightly above market expectations (-0.1%y/y, versus 0.2% forecast). The PPI continued to show worsening deflation at -3.3%y/y (-3.2% was forecast and prior was -2.7%). USD/CNH is down slightly, last near 7.1845/50. Broader USD sentiment is struggling to hold Friday's gains, the BBDXY last down 0.20%, which is likely aiding CNH, albeit with the usual lower beta. 

• Local equities are up +0.30% for the CSI 300, last above 3880, so within recent ranges. Hong Kong markets are +1.35%. We have US-China trade talks resuming in London later, while some softening in China's rare export stance (for both the US and EU) may be helping aid sentiment ahead of the talks.
• Bond yields onshore are not showing a strong direction trend, the 10yr last 1.68%, while the 2yr was near 1.4%, still close to recent lows.
• Inflation data underscore the need for on-going policy support to maintain domestic momentum to avoid further deflationary pressures. Onshore media suggests infrastructure spending will spending will pick up while incremental policy shifts are also likely (see this link).
• Very large scale stimulus seems unlikely unless US-China trade talks break down and high tariffs by the US are reinstated.