Hawkish Fedspeak Bolsters USD, China Real Estate Support Package Aids Risk

Hawkish Fedspeak set the tone of the Asia-Pac session, with U.S. Tsy yields rising 5.6-8.8bp across the curve after Fed Governor Waller played down the significance of the recent below-forecast U.S. CPI reading when interpreted in isolation, casting doubt on expectations of an imminent peak in the rate-hike cycle. The BBDXY index crept higher, adding 0.38% through the session.

• Thin morning liquidity accentuated the upswing in USD/JPY in reaction to Waller's comments, with the yen taking a hit due to its sensitivity to relative U.S./Japan yield dynamics. Spot USD/JPY ran as high as to Y139.94 before trimming gains into the Tokyo fix. Positive risk tone helped keep the yen in check, along its safe-haven peer CHF.
• Sentiment was buoyed by China's announcement of new support measures for the domestic property sector. Spot USD/CNH went offered, lodging fresh multi-week lows in the process, with the rate bottoming out at CNH7.0211. The in-line PBOC fix briefly limited selling pressure, but the pair's weakness resumed promptly thereafter.
• Commodity-tied FX were bolstered by China's real estate rescue package, despite hawkish Fed comments. Antipodean cross AUD/NZD faltered, even as Australia/New Zealand 2-year swap spread reversed initial losses.
• Sterling lagged its G10 peers. Over the weekend, UK C'llr Hunt said his new financial plan will seek to make any recession "as short and shallow as possible."
• EZ industrial output headlines the thin data docket for the remainder of the day. Comments are due from Fed's Brainard & Williams, as well as ECB's de Guindos, Panetta, Centeno & Nagel.