The People’s Bank of China announce another step to open China’s financial markets to wider global access. A statement from the People’s Bank of China Friday:China will allow foreign institutional investors to buy bonds traded on its smaller exchange market

Qualified foreign institutional investors ranging from central banks and sovereign funds to commercial banks and pension funds will be allowed to invest in bonds on the exchange marketcan trade bond and invest in derivatives, among other bond-based instruments permitted by the PBOC and China’s securities regulatorfrom June 30via Bloomberg (gated)

Some background reading for the weekend in this report.
Rates may we have peaked for now.
The idea is not fresh, as economic data has come off the boil in the past few weeks yields have fallen, down sharply from the cycle highs reached in the month of May (info via Greg):

2 year 2.484%, +0.2 basis points. The cycle high yield reached 2.857%. The yield has moved down -37 basis points.

5 year 2.724%, +1.2 basis points. The cycle high yield reached 3.107%. The yield has moved down -38 basis points

10 year 2.743%, -0.8 basis points. The cycle high yield reached 3.203%. The yield has moved down -46 basis points..

30 year 2.972%, -1.2 basis points. The cycle high yield reached 3.309%. The yield has moved down -34 basis points

but the report has some comments from various analysts, come noting likely policy divergence between the Fed and the BoE.

Bank of England’s Bailey testifying

Justin had the main point of the defaulted debt juggling posted on Friday:

Evergrande is said to look to repay offshore creditors the principal and interest of the debt by turning them into new bonds.

Reuters have posted more detail, makes for interesting reading on how Evergrande tries to sort out $22.7bn of offshore debt deemed to be in default after missing payment obligations late last year. 

As part of the proposal, Evergrande is looking to repay offshore creditors the principal and interest by turning them into new bonds, which will then be repaid in instalments over a period of seven to 10 years, said one of the sources.

Good luck to the creditors. 

Info comes via Reuters:
Russia’s National Settlement Depository (NSD) on Friday successfully paid coupons in foreign currency on two Eurobonds, an NSD representative told Reuters, a move that could mean Russia may have again averted a default.
There is more USD debt payments due in June. Russia continues to scramble to cover. 

Headlines:Dollar steadies a little, aussie and kiwi lead on the sessionDollar bruised going into the final stretch of the weekEquities look to book end the week with another day of gainsECB’s Nagel: First rate move should come in July, more to follow in 2H 2022Japan PM Kishida: Specific monetary policy tools are up to BOJ to decideEvergrande reportedly mulling repaying offshore bondholders with cash instalmentsMarkets:NZD leads, EUR lags on the dayEuropean equities higher; S&P 500 futures up 0.2%US 10-year yields down 3.3 bps to 2.725%Gold up 0.5% to $1,858.66WTI crude down 0.5% to $113.55Bitcoin down 1.6% to $28,940It was a quiet session for the most part as markets kept rather calm heading into the final stretch of the week.The dollar is trading more mixed, somewhat steadier after a slight decline early on. But as equities look to book end the week with another day of gains, commodity currencies are leading the charge in FX.Both the aussie and kiwi are posting modest gains on the day, with AUD/USD and NZD/USD both racing higher by 0.6% to 0.7145 and 0.6520 respectively; both also testing its 38.2 Fib retracement level of the swing move lower since April as outlined here.The greenback was weaker early on but regained some composure with large option expiries capping EUR/USD price action in a drop from 1.0750 to 1.0700 on the session. USD/JPY tracked around 126.85 to 127.05 throughout, showing little poise as well.Meanwhile, stocks are posting slight gains as US equities look to put an end to seven straight weeks of losses ahead of the weekend.All in all, this points to some breathing room after the moves in April and early May. And with the bond market perhaps hinting at a change in the narrative, we might be looking at a crossroads as to figuring what comes next for markets.

Inflation will not fall overnight, could take some timeHe adds that the ECB „must send a clear signal“ to where it is going in the June meeting. I think it is rather clear already that they will at least be hiking rates in July. Another move in September is likely but beyond that, there might be some challenges as recession risks start to rear its head into the picture.

It will be Memorial Day on Monday, so the US will observe a long weekend in the coming days. With US markets out, that might make for a bit less of an interesting start to the new week come next week. But fret not, volatility should resume quickly with month-end trading in focus on Tuesday.

The greenback is finding some steadier footing on the day but remains pinned lower against commodity currencies as risk sentiment tilts slightly more positively on the session. EUR/USD has fallen off from 1.0750 to 1.0710 in European morning trade, with the high earlier touching 1.0765. Large option expiries may be a factor though, as pointed out earlier with the pair seeing a significant chunk around 1.0760-80 – helping to cap gains.
The same can be said for USD/JPY which is keeping close to 127.00, where there are a host of option expiries layered around the figure level. That said, the US PCE price index will be a key risk event to watch for any potential action in the session ahead.
The dollar is keeping steady and somewhat little changed now against the euro, yen, pound and franc. However, it is trading lower against the commodity currencies. USD/CAD is down 0.2% to 1.2740, its lowest in three weeks.
Meanwhile, AUD/USD is trading up 0.6% to test its 38.2 Fib retracement level of the swing lower since April:

That is a key technical level to watch before the pair looks towards 0.7200 and then the 100-day moving average (red line), now seen at 0.7229.
NZD/USD is in a similar predicament, testing its own 38.2 Fib retracement level at 0.6529 on the day:

Summary: The Dollar
Index (DXY), a popular gauge of the Greenback’s value against a basket of 6
major currencies, dipped for the second day running to 101.77 from 101.92
yesterday. US April Pending Home Sales slumped 3.9% from a month earlier, more
than median expectations for a 1.9% drop. March Home Sales were adjusted
downwards to -1.6% from -1.2%. The minutes from the latest FOMC meeting,
released yesterday, revealed that the Federal Reserve will remain flexible on
rate hikes to address inflation.

 

The Euro
(EUR/USD) rebounded 0.34% to 1.0725 (1.0688) as traders covered their short
positions. A jump in the price of Brent Crude Oil by 3.17% to USD 117.65 (USD
114.50) saw the Canadian Loonie climb 0.38% against its US counterpart. The
USD/CAD pair slid to close at 1.2775 from 1.2817 yesterday. Sterling (GBP/USD)
edged higher to 1.2605 from 1.2587. The Kiwi (NZD/USD) settled at 0.6485
(0.6480) a day after the RBNZ lifted its Official Cash Rate by 50 basis points
to 2.0%. The move by the New Zealand central bank was widely expected.

 

The
Australian Dollar (AUD/USD) finished at 0.7095, little changed from 0.7097
yesterday. Against the Japanese Yen the Greenback (USD/JPY) dipped 0.1% to
127.12 (127.20). US Treasury bond yields settled lower following the release of
Pending Home Sales data. The yield on the benchmark US 10-year note was last at
2.75% (2.76%). Two-year US treasury rates closed at 2.48% from 2.51%.

 

In contrast,
rival global bond rates were mostly higher. Germany’s 10-year Bund yield was up
four basis points to 0.99% (0.95%). The UK 10-year Gilt rate was up 6 basis
points to 1.97% (1.91%). An improvement in risk appetite lifted Wall Street
stocks. The DOW rallied 1.49% to 32,587 from 32,097 yesterday. The S&P 500
jumped 2.04% to 4,057 (3,972).

 

Data
released yesterday saw Australia’s Q1 Private Capital Expenditure slide to
-0.3%, missing median estimates at 1.6% and an upward revised previous Capex of
2.3% (from 1.1%). Japan’s SPPI (Services Producer Price Index) rise to 1.7%,
beating expectations of a 1.5% rise and a previous +1.3%. Canada’s April Core
Retail Sales rose to 2.4%, beating median forecasts at 2.2%. March Core Sales
though were revised lower to 1.8% from 2.1%. Canadian Headline Retail Sales
fell to 0.0% from an upward revised 0.2%, and lower than median estimates at
1.5%.

 

The US Q1
Preliminary GDP fell to -1.5% from a previous -1.4%, and lower than expectations
at -1.3%. US Weekly Unemployment Claims eased to 210,000 an improvement from a
previous 218,000 and median estimates at 217,000. China’s Leading Economic
Indicator declined further in April to -1.0% from March’s -0.4%.

 

·     

EUR/USD – The shared currency rallied
against the overall weaker US Dollar on short-covering to an overnight high at
1.0731 before easing to settle at 1.0725 in late New York. Yesterday, the
EUR/USD pair opened at 1.0688. Overnight low traded was at 1.0663.

·     

USD/JPY – In another choppy,
roller-coaster trading session, the Greenback finished against the Japanese
currency at 127.12 (127.20 open yesterday). Overnight, the USD/JPY pair soared
to a high at 127.58. Earlier in the Asian session, the Greenback tumbled to a
low at 126.55 before soaring back up. Traders braced for further wild moves in
this currency pair.

·     

AUD/USD – The Aussie Battler
settled at 0.7095, little-changed from its opening at 0.7097 yesterday.
Overnight, the AUD/USD pair tumbled to a low at 0.7057 before rebounding in late
New York trade. On the topside, the Aussie Battler saw a high at 0.7110. A
surprise fall in Private Capital Expenditure data weighed on the Aussie.
China’s Premier Le Keqiang warned that the government’s growth target is moving
further out of reach due to the recent Covid outbreaks and lockdowns.

·     

NZD/USD – All eyes were on the
RBNZ yesterday which lifted its Official Cash Rate to 2.0% from a previous
1.5%. Markets fully anticipated the move by the New Zealand Central Bank. From
an opening at 0.6480, the Kiwi (NZD/USD) jumped to a high at 0.6500 which was
seen right after the rate announcement. Overnight low traded was at 0.6447.

 

On the
Lookout: Today’s
economic calendar is light as we come to an end of another choppy week in FX.
Japan kicked off earlier with its May Tokyo Annual Core CPI which came in at
1.9%, matching the previous month’s 1.9% but lower than economist’s
expectations of 2%. Annual Tokyo Headline CPI eased to 2.4% from 2.5%. The
USD/JPY pair dipped modestly to 127.05 from its open at 127.12. Australia
follows with the release of its Preliminary April Retail Sales (m/m f/c 0.9%
from a previous 1.6% – ACY Finlogix). China follows next with its April
Industrial Profits (no f/c, previous was 8.5%).

 

The Eurozone
follows with the release of Eurozone Private Loans (y/y f/c 4.5% from 4.5% –
Forex Factory). There are no other major economic data releases out of Europe
or the UK today. The US rounds up today’s reports with its US April Goods Trade
Balance (f/c – USD 114.8 billion from previous -USD 127.32 billion – Forex
Factory), US April Core PCE Price Index (m/m f/c 0.3% from 0.3% – ACY
Finlogix), US April Personal Spending (m/m f/c 0.7% from previous 1.1% – ACY
Finlogix), US April Personal Income (m//m f/c 0.5% from 0.5% – ACY Finlogix)
and finally, US May Michigan Consumer Sentiment Index (59.1 from previous 59.1
– FX Street).

 

Trading
Perspective: We can expect more choppy action today in FX as markets
continue to switch from risk-off to risk-on and back again. Markets will be
focussing on the release of the US Core PCE (Personal Consumption Expenditure)
report, which is the Federal Reserve’s preferred inflation indicator.
Overnight, the Dollar Index eased further following softer-than-expected US
April Pending Home Sales which was the sixth straight fall in this gauge.

 

Mortgage
rates in the US have been climbing which is a challenge for home affordability.
Which adds more focus on tonight’s US Core PCE report, which is expected to
match its previous at 0.3%. A week ago, the Dollar Index (DXY) settled at
102.95 (101.77 today). Expect consolidation ahead of the US data releases. FX
volatility will stay elevated, so keep those tin helmets on.

 

·     

EUR/USD – The shared currency
rallied against the Greenback overnight to finish up 0.34% at 1.0725 (1.0688).
On the day, immediate resistance lies at 1.0735 (overnight high traded was
1.0731). The next resistance level is found at 1.3760 followed by 1.3800. On
the downside, expect immediate support at 1.0690, 1.0660 and 1.0630. Look for
further choppy trade within a likely range of 1.0650-1.0750. A weaker than
expected US Core PCE will see more Euro short bets head for cover, lifting the
Euro back towards the 1.08 area.

·     

AUD/USD – The Aussie managed to
close little changed at 0.7095 from 0.7097 yesterday. Broad-based US Dollar
weakness was the main support for the Aussie Battler. Despite the sombre news
from China’s Premier and weaker Australian Q1 Private CAPEX, the Aussie Dollar
held its ground. Immediate support lies at 0.7060 followed by 0.7030 and
0.7000. Immediate resistance is found at 0.7120 (overnight high traded was
0.7110). The next resistance level lies at 0.7150, followed by 0.7180. Expect a
volatile one in the Aussie as well, likely range 0.7050-0.7150. Preference is
to sell on Aussie strength towards 0.7150.

·     

USD/JPY – The Dollar settled
against the Japanese Yen to 127.12 at the close of trade in New York (127.20
yesterday). Overnight, the USD/JPY pair traded to a high at 127.58. The dip in
the US 10-year bond yield prevented the USD/JPY pair from moving higher. For
today, immediate resistance lies at 127.40 followed by 127.70 and 128.00.
Immediate support can be found at 126.80, 126.50 and 126.20. Look for another
roller coaster ride in this currency pair, likely range 126.60-127.60. Happy
days!

·     

USD/CAD – Against the Canadian
Loonie, the Greenback dipped 0.38% to 1.2775 from yesterday’s 1.2817. A rise in
Oil prices and the overall softer Greenback buoyed the Canadian currency. On
the domestic front, Canada’s Retail Sales data were mixed. Immediate support today
lies at 1.2750 followed by 1.2720. On the topside, immediate resistance is
found at 1.2810 followed by 1.2840 and 1.2870. The next move in the Greenback
will determine the Canadian Loonie’s destiny. Likely range 1.2740-1.2840.

 

(Source: Finlogix.com)

 

Strap in for
another rollercoaster ride in the world of FX today. Have a good Friday ahead,
happy trading, and a top weekend to all.

 

This article was written by Michael Moran, ACY Senior
Currency Strategist at ACY Securities.

 

This content
may have been written by a third party. ACY makes no representation or warranty
and assumes no liability as to the accuracy or completeness of the information
provided, nor any loss arising from any investment based on a recommendation,
forecast or other information supplied by any third-party. This content is
information only, and does not constitute financial, investment or other advice
on which you can rely.

And back the other way we go. If anything else, this still suggests that the overall mood in equities is rather unsettled – even if US stocks may avoid an eighth straight weekly drop this week. A look across the board:Eurostoxx +0.3%Germany DAX +0.3%UK FTSE flatFrance CAC 40 +0.3%S&P 500 futures -0.1%Nasdaq futures -0.5%Dow futures flatThat compares with the earlier move here.