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JPY Bounces Off Lows as US Yields Wane

FOREX
  • Global equity markets plumbed new lows on Monday, with the e-mini S&P extending the year-to-date pullback to over 15%. Concerns continue to swirl surrounding the direction of global monetary policy and the implications of a wave of stagflation across developed markets in H2 this year.
  • Yields in the US initially rallied Monday, with the 5yr yield trading north of 2018 highs and briefly clearing 3.10%. This faded as US equities extended the pullback, prompting US 10y yields to shed over 10bps off the session highs.
  • As a result, early greenback strength faded, putting USD/JPY back below the Y131.00 level, prompting the pair to close lower despite topping key resistance at the 131.25 April 28 highs at one point of the trading day.
  • There have been further notable moves in Chinese currency markets, with USD/CNH surging to new cycle highs following downbeat comments from Chinese Premier Li on the domestic labour market. The uncharacteristically candid speech reverberated across Asia, with the offshore yuan offered, even as the PBOC continued to lean against its depreciation via the daily fixing of USD/CNY mid-point.
  • Focus turns to Italian industrial production, Australian NAB Business Conditions data and Germany's ZEW Survey. There's a bevy of central bank speakers due Tuesday, with Williams, Barkin, Waller, Kashkari and Mester all on the docket as well as ECB's de Guindos, Nagel and Villeroy.
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