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(M2) Correction Extends


Late Session Rebound


(M2) Corrective Cycle Remains In Play


(M2) Gains Still Considered Corrective

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  • China FX had another solid session, with CNY and CNH both creeping higher against the greenback to hit new cycle highs. This price action stalled and partially reversed, however, as the PBoC acted to raise the FX reserve requirement ratio for financial institutions to 7% from 5%, effective in two weeks.
  • The policy switch may prompt institutions to further diversify out of CNH & CNY and into the likes of USD and EUR, thereby arresting some of the recent currency strength. USD/CNH bounced to trade back above 6.37 on the news.
  • Across G10 FX, GBP and CHF traded lower while AUD and NZD printed furtive gains. Liquidity, headlines and price action remained muted throughout due to the US and UK bank holidays.
  • Tuesday marks the beginning of June, with focus turning to global final PMI revisions from a number of different developed markets, prelim Eurozone inflation, Canadian GDP and the ISM Manufacturing report for May.
  • The RBA rate decision is also due, with policy expected broadly unchanged. Fed's Quarles, Bailey and Brainard are all due to speak.
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