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Daily Currency Watch
Overnight comment in brief:
13 May | Investors take profits on USD positions
- Chinese data over the weekend were on the soft side with the CPI at -2.5% vs expectations of -2.3%. Money supply measures were also weak, with M2 sliding to a record low. China is set to start selling longer dated bonds this week, while the US is expected to place additional sanctions on China this week. Asian equities were mixed with the HK and Taiwan leading the gains. South Korean tech led the declines. US equity futures were a little higher. UST yields dropped at the open but nudged a little higher through the Asian session. The DXY index was little changed in Asian time.
- As expected in the wake of the developments last week, most notably Governor Ueda’s more hawkish tone following a meeting with the PM, today’s 5~10yr Rinban operation was trimmed by ¥50bn. Volumes in the 1~3yr and 10~25yr buckets were unchanged. USD/JPY immediately dipped towards the 155.0 level but failed to hold the move and traded broadly flat thought the session to end around 155.83. JGB yields came under pressure in the wake of the announcement, with the curve steepening out to the 20yr sector. 30yr yields pushed above the 2.0% level to high their highest level since 2011. Recall that a number of Japan’s major lifers indicated that 30yr yields at these levels would be of interest.
- The minutes of the ECB meeting late last week strongly supported a June cut as expected. They also noted that the natural rate of interest was seen as having limited use for day-to-day policy. EUR/USD sits around 1.0775 as Europe opens. The pair has been becalmed somewhat of late. EUR speculative positioning nudged a little higher last week. Indeed, it looks like there has been quite a lot of profit taking in USD longs over the past week both by asset managers and speculative accounts. GBP/USD sits around 1.2530 as Europe opens.
Read the full report - 13 May 2024
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