Little Change On Net In G10, USD/CNH Ticks Higher

There hasn’t been much to report when it comes to early G10 FX moves, outside of the earlier flagged weakness in the JPY, which has retraced from extremes, with USD/JPY back below Y130.00 after the early foray above. The remainder of the major USD pairs trade within 10 pips of Friday’s closing levels.

• CNH has traded defensively. USD/CNH is showing ~150 pips higher on the session at typing, albeit operating comfortably within the recently observed range, dealing at CNH6.6550. The redback is pressured by softer than expected Chinese PMI data released over the weekend, with the breakdown of the data including soft demand metrics (plummeting order/inventory ratios), increased delivery times and inflation worry. Elsewhere, Chinese COVID news flow was mixed, with positive developments observed in Shanghai, while deeper restrictions have been imposed in Beijing. Sino-U.S. relations also remain under the microscope, with the FT noting that “Chinese regulators have held an emergency meeting with domestic and foreign banks to discuss how they could protect the country’s overseas assets from U.S.-led sanctions similar to those imposed on Russia for its invasion of Ukraine, according to people familiar with the discussion. Officials are worried the same measures could be taken against Beijing in the event of a regional military conflict or other crisis.” We also saw Axios sources note that “Biden administration officials are debating how — and even whether — to lower some of former President Trump’s tariffs against China to help ease inflation.” Meanwhile, the FT ran another sources story noting that “The US has held top-level talks with the UK on how they can co-operate more closely to reduce the chances of war with China over Taiwan and to explore conflict contingency plans for the first time.” The talks reportedly took place in early March.
• The latest U.S. ISM manufacturing survey headlines the wider docket on Monday, with final Eurozone PMI data also due.
• Holidays in Hong Kong, China & Singapore will thin wider liquidity out in Asia-Pac hours, while a UK holiday will limit liquidity during European dealing.