Yen Finally Finds Poise, Aussie Goes Offered

Risk sentiment soured as Shanghai authorities announced they will lock down the Minhang district on Saturday for mass COVID-19 testing, sending USD/CNH through yesterday's highs. But the rate pulled back into negative territory as the PBOC set the mid-point of permitted USD/CNY trading band 21 pips below the forecast level, while China's May trade surplus printed comfortably above expectations, supported by a solid rebound in shipments.

• Yuan moves were reflected in the Aussie dollar's price action, but broader selling pressure prevailed as AUD remained the worst G10 performer. Bloomberg trader sources pointed to offshore funds shedding local equities and leveraged accounts exiting post-RBA longs.
• AUD/NZD rose to a fresh four-year high in morning trade, but then pulled back as yield differential momentum turned less supportive for the cross. Note that NZGB yields popped higher today as the RBNZ outlined the details of its planned bond holdings reduction.
• The yen turned bid on the back of waning appetite for risk, even as USD/JPY refreshed cycle highs ahead of the Tokyo open. Option traders remain bullish, as 1-month risk reversal operates near its one-month high posted Wednesday, but technical conditions for the spot rate are looking increasingly overbought.
• The Eurozone's single currency garnered some strength before the ECB announces its monetary policy decision later today, with President Lagarde due to hold a press conference shortly after.
• The speaker slate also features BoC's Macklem & Riksbank's Breman, while key incoming data releases are limited to U.S. weekly jobless claims.