Read on the Trading Floor - 22 Mar 2024
Today’s focus… CNH drives USD vs G10
Macro Themes At Play
Theme 1 - USDCNY Dictates
Theme 2 - Ceasefire and Oil
Theme 3 - Week Ahead Previews
Further reading and listening of note
Theme 1 - USDCNY Dictates
After a week of CB moves, which ranged from dull to surprising, the CNY fix has probably caused the biggest uncertainty. After holding USDCNY all year despite diverging growth, rates and CB policy, the market was caught off guard by the weaker than expected fix. Brent Donnelly spoke about this a few weeks ago. Chinese authorities have a need for a weaker ccy (have you seen a CNHJPY chart lately?) as well of course the risk of Trump's autumn re-election (and incoming tariff policy). Now was the time to move, not when he's voted in or on the real campaign trail at the end of the summer vs Biden. With other ACB's set to follow suit with JPY and CNH weakness, ccy wars may well be reignited. As CNY fix goes, so does DXY and one can expect USD to outperform in G10 along with the CNY deprecation trend as there will be limited need to diversify away from the USD.
Bloomberg - Onshore Yuan (CNY USD) Falls to Four-Month Low After Key Level Breached
ZeroHedge - Is China Prepping For Yuan Devaluation: Renminbi Tumbles After PBOC Pushes It Below Key Support Level
Paulo Macro - USDCNH starts to move — initial reactions
Steno Research - China move confirmed!
Theme 2 - Ceasefire and Oil
International pressure is building, momentum is on the side of a short term pause as conditions on the ground tragically worsen. As a result, oil is off its highs of the week, with expectations growing of a potential Easter holiday ceasefire.
FT - US to call for immediate ceasefire in Gaza in UN resolution
Axios - U.S. Gaza ceasefire resolution vetoed by China, Russia at UN Security Council
OilPrice - Hopes of a Gaza Ceasefire Are Putting Oil Prices Under Pressure
Axios - Blinken unloads on Bibi: "You need a coherent plan" or face disaster in Gaza
Politico - EU leaders call for ‘sustainable ceasefire’ in Gaza
Theme 3 - Week Ahead Previews
After the excitement of all the CB's this week, the market is drifting towards spring break and Easter holidays next week.
MacroHive - It's a Dove World
ABN Amro - The week ahead
Nomura - US Consumer Confidence, French, Italian and Spanish Flash Inflation, Tokyo and Australia CPI
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