AxJ Markets: In China, Caixin services PMI echoed the moderating trend seen on official PMI data, with tightening credit conditions by regulators curbing optimism for business activity over the medium term. Yields on CGBs continue to creep higher yesterday, with yields on 10y CGB reaching its 22-month high of 3.56%. Coupled with measures to manage the overheating property market, concerns on a moderating growth coul

5 May 2017

Rates & FX Market Update

EURUSD Surged Higher Ahead of French Presidential Elections

Highlights

¨   Global Markets: While US House of Representatives passed the healthcare bill yesterday, the broad USD slid lower to 98.797 (-0.42%) as the healthcare bill is likely to face an uphill battle in the US Senate. Additionally, modest profit taking was also seen on long USD positions ahead of NFP data due later today; keep a neutral view on USD. Meanwhile, yields on USTs climbed higher by 1-4bps yesterday, with 10y UST yields edging back to the 2.40% handle amid easing geopolitical tensions surrounding North Korea along with higher likelihood of a Macron victory in French Presidential Elections.

¨   AxJ Markets: In China, Caixin services PMI echoed the moderating trend seen on official PMI data, with tightening credit conditions by regulators curbing optimism for business activity over the medium term. Yields on CGBs continue to creep higher yesterday, with yields on 10y CGB reaching its 22-month high of 3.56%. Coupled with measures to manage the overheating property market, concerns on a moderating growth could begin to emerge which could exert some pressure on the CNY going forward; maintain mildly bearish CNY.

¨   As we edge closer to the French Presidential Elections on Sunday, EURUSD surged higher by another 0.86% to 1.0981 supported by stronger expectations for Candidate Macron to emerge victorious on Sunday alongside a modest profit taking session on long USD positions ahead of US NFP print due later today. We opine for the EURUSD pair to test the 1.10 resistance over the near term, with stronger economic data likely to fuel further momentum on the pair, should Candidate Macron wins in the Presidential Elections.

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