Written by Steven Dooley, Head of Market Insights, and Shier Lee Lim, Lead FX and Macro Strategist
Trade tensions ease as Trump delays tariff threat
Trump agreed to delay his 50% tariff threat to July 9 from June 1 after a call with EC President von der Leyen. A European Commission spokesperson said they both agreed to “fast track the trade negotiations”.
US/Japan talks appear to be progressing, with Tokyo saying they will “accelerate efforts” towards an agreement with the G7 meeting in mid-June a likely target.
EUR/USD failed to break 1.14 as markets await inflation data. The French inflation print due Tuesday 16:45 AEDT will be an important gauge of the strength of the reversal of the April “late Easter effect” in May.
The PBoC has asked major banks to increase the floor ratio for RMB-denominated trade transactions to 40% from 25% as part of the Macro Prudential Assessment. This suggests more Yuan will move from onshore to offshore. USDCNH trades at 7.1784 as of this writing.
In Asia, USD/SGD and USD/CNH were both flat on the day.
The Aussie was also flat while Kiwi eke out 0.2% gains.
RBNZ Preview: Another 25bps cut
On May 28, the RBNZ is anticipated to make another 25 basis point cut, bringing its cash rate down to 3.25%.
When the RBNZ last met on April 9, it had already adopted a highly cautious global outlook amid significant tariff uncertainty and related market volatility, and recent local activity and inflation statistics had typically been a little stronger than it had predicted.
We believe that this should reduce the possibility of any additional downgrades to its forecast, in contrast to the RBA. However, given significant spare capacity, broadly targeted inflation, and a restrained fiscal policy, we see room for more mild easing.
NZD/USD looks for RBNZ for guidance as it trades at key psychological level of 0.6000 at the time of writing.
Next key support lies at 21-day EMA of 0.5930.
SoftBank’s founder talks about the potential for a US-Japan Sovereign Wealth Fund
Masayoshi Son, the founder of SoftBank, has suggested creating a US-Japan sovereign wealth fund to finance significant investments in infrastructure and technology.
Although the concept hasn’t been properly proposed yet, Son spoke with US Treasury Secretary Scott Bessent about it.
According to media sources, the US Treasury and Japan’s finance ministry would jointly own and manage the fund, with both retaining a significant stake.
Retail investors in the US and Japan might be able to participate if the fund were made available to limited partner investors.
From the technical lens, USD/JPY is now trading at the low end of 30-day trading range.
The next short term key resistance levels for the pair are at the 21-day EMA of 144.35 and 50-day EMA of 145.62.
Antipodeans scale back from top end of the range
Table: seven-day rolling currency trends and trading ranges
Key global risk events
Calendar: 26 – 30 May
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*The FX rates published are provided by Convera’s Market Insights team for research purposes only. The rates have a unique source and may not align to any live exchange rates quoted on other sites. They are not an indication of actual buy/sell rates, or a financial offer.
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