New York Fed President John Williams Signals Rate Hold as Economy Seen Strong in 2026 
RBA Deputy Governor Says November Inflation Slowdown Helpful but Still Above Target 
MAS Holds Monetary Policy Steady as Strong Growth Raises Inflation Risks 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Trump’s "Shock and Awe" Agenda: Executive Orders from Day One 
China's Refining Industry Faces Major Shakeup Amid Challenges 
Fed Confirms Rate Meeting Schedule Despite Severe Winter Storm in Washington D.C. 
Bank of Japan Signals Cautious Path Toward Further Rate Hikes Amid Yen Weakness 
Markets React as Tensions Rise Between White House and Federal Reserve Over Interest Rate Pressure 
Bank of Korea Expected to Hold Interest Rates as Weak Won Limits Policy Easing 
BOJ Rate Decision in Focus as Yen Weakness and Inflation Shape Market Outlook 
U.S. Prosecutors Investigate Fed Chair Jerome Powell Over Headquarters Renovation 
Bank of America Posts Strong Q4 2024 Results, Shares Rise 
Stock Futures Dip as Investors Await Key Payrolls Data 
The Chinese central bank gave a rare comment on a specific level of USDCNY over the past weekend, which seems to suggest that the Chinese authorities intend to stabilize the market sentiment against the backdrop of a global market turbulence. Chen Yulu, deputy governor of the PBoC, said that he expects to see USDCNY to hover around the 7 mark for the time being. CNY opened somewhat stronger versus USD this morning, while overall sentiment remains sluggish across financial assets, sending most Asian EM currencies to new lows.
Elsewhere, the macro standpoint on Aussie dollar (AUD) is still bearish given the global risk environment. The view on EUR meanwhile had been split in what we had expected to be two phases, first, near-term expectations of deleveraging of euro funded carry positions which could be a source of support but second, a bearish medium-term on the view that soft growth dynamics will ultimately dominate. Recent price action in the euro appears to be consistent with the first phase of deleveraging now approaching an end given that the sensitivity of EUR to the recent stock market rout appears to have waned. Subsequent episodes of global de-risking are likely to prove more negative for EUR than the initial unwind of carry trades.
In particular, we have highlighted the vulnerability of EURUSD to:
1) an unwind of sizeable foreign positions in EUR equities and
2) the squeeze on global balance sheets should the world go into recession seeing that these are still predominately funded in USD rather than EUR.
We had previously tentatively expressed our scepticism that EUR would endure as a safe-haven through a 6m put in EURCHF. We book profits on that trade today and scale into a more overt EUR short through a 3m forward in EURCNH. We are minded to extend this to EURUSD should the Fed not signal an immediate resumption of QE alongside what we expect will be a move to zero rates at next week’s FOMC.
Meanwhile, the view on CNH is one of policy-inspired stability and we prefer to be long versus other, untethered high beta FX. AUD has been a short candidate in this regard and we have been recommending this theme via a dual digi.
This week, we add exposure to this general theme of CNY stability against currencies more exposed now to the economic fallout from the virus now exposed though a short EURCNH (via a 3-month forward, entry 7.854 levels).
Trade tips:
Sell EURCNH via a 3-month forward at 7.854. Stop at 8.010.
Long 2M (USDCNH < 7.07, AUDUSD < 0.6425) dual at-expiry digital. Paid 20% at the end of February, marked at 31.15%. Courtesy: JPM & Commerzbank
