¨ AxJ Markets: China’s exports rose in May, climbing by 8.7% y-o-y (consensus: 7.2%; Apr: 8.0%), while imports surged higher by 14.8% y-o-y (consensus: 8.3%; Apr: 11.9%) suggesting resilience in demand for China’s domestic and external markets. Strong momentum seen for China is likely to bolster sentiment within the AxJ region, further cementing the broadly neutral monetary policy stance within the region as FOMC is poised to raise FFR

9 June 2017

Rates & FX Market Update

Exit Polls Indicate High Likelihood for Tories to Lose Majority

Highlights

¨   Global Markets: Large gains were seen on EGBs overnight, with yields on 10y EGBs climbing by 1-13bps across the bloc, contrasting the fairly marginal movements on EURUSD which edged lower by 0.49% to 1.1204. While the reference towards lower ECB rates was removed from the ECB statement, the Central Bank reiterated its focus on subdued inflationary pressures, signalling that low rates and asset purchase program are likely to remain for an extended period of time, beyond its current end date, dampening earlier consensus expectations for ECB to begin taper over the medium term. As such, a mild overweight duration stance on EGBs remain appropriate over the near term, as anaemic inflationary prints continue to fuel ECB’s dovish inclination over the near term.

¨   AxJ Markets: China’s exports rose in May, climbing by 8.7% y-o-y (consensus: 7.2%; Apr: 8.0%), while imports surged higher by 14.8% y-o-y (consensus: 8.3%; Apr: 11.9%) suggesting resilience in demand for China’s domestic and external markets. Strong momentum seen for China is likely to bolster sentiment within the AxJ region, further cementing the broadly neutral monetary policy stance within the region as FOMC is poised to raise FFR by 25bps next week. Post FOMC, investors’ focus are likely to turn towards PBoC for hints of further tightening measures to mitigate pressure on net capital outflows; USDCNY held firm at the 6.80 handle this week following the adjustment made to the PBoC daily Yuan fixing.

¨   GBPUSD fell sharply to 1.2728 (-1.78%) in the early Asian trading session as exit polls indicated a high likelihood for PM May’s party to lose its Parliamentary majority, exerting further strain on the outlook for UK’s Brexit negotiations. With anything less than 330 seats for the Tories likely to reflect poorly on PM May’s decision to hold a snap election, ushering in greater uncertainties towards the Brexit negotiations with the EU. Near term uncertainty however, is likely to weigh heavily on GBP to test its 3-month low of 1.26; keep a cautious stance on GBP.

This message is intended only for the use of the person(s) to whom it is addressed and may contain information that is privileged or otherwise protected from disclosure. If you are not the intended recipient you are hereby notified that any use, review, disclosure or copying of this message and the information it contains is prohibited. If you receive the message in error, please notify the sender by reply e-mail and discard all its contents.   Thank You.