Asia Wrap: Gold glitters while the bulk of Asia FX flows post-FOMC continues to be unwinding risk-off positions

Gold

Comex gold flow has turned balanced after the fear of missing out on $1400 triggered a massive wave of buying earlier in Asia. Now the futures market is balancing out with a subtle axe towards profit taking.

So, after a pause to better quantify the current rate curve pricing and to fully digest the headline that Iran Revolutionary Guard shot down a US drone amid building middle east tension.

The markets still think the odds of a US military escalation is unlikely although the longer this war mongering continues that probably will shift.

So, the debate moves on to the likely hood of a FED  50 bp cut in July, which means the markets will move into in data-dependent mode readying to pounce on the next dovish economic signal.

Currency Markets

The bulk of the flow post-FOMC continues to be unwinding risk-off positions.

Yuan

I always remind myself these days to never to look a gift horse in the mouth. Thanks to even more dovish repricing along US yield curve that's blending sweetly with the lingering risk euphoria from the rescheduled d Trump -Xi meeting, the USDCNH hit 6.85 much quicker than even our most optimistic expectations were.

Philippines Peso

BSP left its overnight rate at 4.50%, as they think inflation risk look balanced, so we had a quick diver lower to USDPHP 51 55 where the Peso continues trading favourably while now catching a ride on the coattails of improving Yuan sentiment.

The Rest of the bunch

Also trade risk-correlated currencies like the SGD, TWD, MYR, KRW and of course the AUD. in the G-10 space rode on the coattails of the stronger Yuan as the market continues to dump the buck in Asia.

G-10 

The Euro 

After today's USD sell off the Euro positioning should be a bit cleaner, and the market could start to test the Euro downside gingerly as growth outside the US markets will still hold the key for the USD's short to medium term outlook.