Asia Summary and Highlights 23 May

Asia Session

The Chinese military has begun its military drills around Taiwan. Apart from the regular rhetoric, Ministry of National Defense of the People's Republic of China says the drills also serve as a strong punishment for the separatist acts, pointing to Lai Ching-Te's May 20 speech. So far it has only affect the sentiment in regional equities in China and Hong Kong but one must beware of the underlying risk of further escalation of such tension AUD/USD is trading 0.18% higher at 0.6630 with USD broadly soft on strong U.S. equity performance, NZD/USD is trading 0.35% stronger at 0.6118 while USD/CAD is trading 0.09% lower at 1.3681. 

The USD is trading broadly softer as U.S. equities are cheering Nvidia's earnings beat. U.S. Treasury yields are little changed while 10yr JGB yields retreated from one percent as BoJ did not further reduce the amount of JGB purchase in their operation. USD/JPY is trading lower by 0.03% at 156.74. Else, EUR/USD is up 0.04% and GBP/USD is up 0.07%.

North American session

The USD ended firmer after an afternoon acceleration that was underway before the release of the FOMC minutes. These produced only a modest reaction but front end UST yields did advance as the minutes stated various participants were willing to tighten more if needed.  EUR/USD slipped 20 pips to 1.0820 and USD/JPY rose 25 pips to 156.70. AUD/USD was particularly soft, slipping to .6610. USD/CAD tested 1.37.  

GBP/USD found support at 1.27 but slipped back again as the USD picked up after recovering to 1.2750. There was little reaction to the announcement that a UK election would take place on July 4.