Asian trading saw a slight weakening of the U.S. dollar as markets adjusted their risk appetite. The People’s Bank of China (PBoC) set the USD/CNY mid-point at 7.1761, which was lower than expected. Chinese officials highlighted that consumer spending is the main driver of growth in China. In Japan, Prime Minister Ishiba talked about ongoing trade issues with the U.S., proposing cash handouts to help with rising prices. Tensions between the U.S. and Iran continue to affect oil prices and stock markets, though no U.S. military actions have taken place. In May, Japan’s exports fell by 1.7% compared to last year, which was better than expected. Japanese manufacturers reported a dip in sentiment in June, with the index falling from +8 in May to +6. The market reacted to these reports amid international concerns, causing Brent crude oil prices to ease slightly. In the financial sector, the U.S. plans to reduce capital requirements for bank treasury trades. New Zealand’s current account deficit decreased in the first quarter, alongside a small rise in consumer confidence. Additionally, BlackRock suggested that the Federal Open Market Committee should stop Quantitative Tightening. Globally, concerns about military developments lingered, leading to brief changes in investor confidence. We observed a small dip in the U.S. dollar during early Asian trading hours, indicating a minor reduction in defensive strategies. The PBoC set the USD/CNY reference rate lower than market expectations, showing a strong approach to managing currency values. With officials emphasizing domestic consumption as the main growth factor, this signals careful support without broader stimulus for now. In Tokyo, the Prime Minister addressed trade tensions with the U.S. and mentioned cash handouts to tackle inflation. This seems more like a political response to domestic sentiments rather than a structural change. Export numbers were mixed. Although May saw a 1.7% annual decrease, it was not as bad as feared. However, business optimism is slowly declining. Sentiment dipped again in June, suggesting that caution may grow among investors looking ahead. Oil prices decreased slightly. Even with ongoing tensions between the U.S. and Iran, the lack of direct military action helped to ease immediate concerns. The easing of Brent prices likely reflects a fatigue in market positioning rather than new information. The market’s reaction follows a familiar trend—brief changes in appetites followed by stabilization. Meanwhile, the U.S. has moved to relax capital requirements for bank treasury activities, which should improve liquidity, especially in fixed-income markets where treasury holdings play a significant role in balance sheet management. Further south, New Zealand reported a narrowing current account deficit and a small increase in consumer outlook, which offers some relief. While these changes are minor, they support a reduced downside risk in local assets. BlackRock’s suggestion to pause Quantitative Tightening could influence market strategies as the Federal Reserve approaches its next decisions. When large institutions make policy suggestions, it often doesn’t lead to immediate price changes, but it does shape strategic conversations. It wouldn’t be surprising if the yield curve begins to reflect a slower pace of change. Globally, there is a sense of caution. Political tensions haven’t sharply escalated or eased. Traders remained cautious, keeping a careful approach in their strategies, suggesting a focus on instruments that benefit from reduced volatility in the short-term. Where hard data beat expectations, there was a tendency to incorporate those into analyses in a tactical way rather than a structural one. Although Japan’s news and regional export flows were not as bad as expected, enthusiasm remains muted. Given the weak business confidence, this response makes sense. From our perspective, increasing positions in low-volatility and yield-carry assets makes sense, especially in currencies with stable policy outlooks. We recommend avoiding directional bets based on upcoming macroeconomic triggers, as many have already been priced in. As the week progresses, we will monitor participation levels and funding spreads closely, paying more attention than usual to cross-currency basis. Any widening would suggest that larger players are preparing for lower-volume sessions rather than committing to new trends.

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