5G Too big to ignore?
|Aisa equities are rallying into the P1 trade deal although much of the optimism is in the price. But with an abundance of liquidity in the system over LNY, investors are zeroing in on the positive outlook for 5G which is supporting technology stocks. All of which is getting framed by a better than expected regional macroeconomic outlook.
The G5 story is just too big to ignore as it's estimated by 2025 some 600 mn Chinese will be 5G enabled, which will not only transform the domestic scene but will revolutionize the global telecommunication industry. Indeed, investors could ride this wave for a while.
The Yuan
The Yuan is surging this morning on a combination of trade optimism and substantial equity inflows as the market sliced through the key for risk 6.90 USDCNH level. Not only will the stronger Yuan leave a sizable footprint across Asia FX, but it will likely have a knock-on effect in G-10, although negative carry and low volatility are holding a lot of G-10 traders back from selling the buck, the rallying Yuan is to ignore hard.
Taiwan Dollar
USDTWD is extremely well offered, following the rest of USD/Asia as well as strong local equity performance following Taiwan's election on Saturday.
G-10
Trading G-10 FX in my trading life has never been a precise science, but it's even more difficult these days by the lack of interest rate differentials.
As for NFP generally, it's some combination of headline NFP jobs and wages that matters for risk-sensitive FX. 145k (with negative revisions), not enough to trigger doom and gloom US recession fears, while wage growth moderated to 2.9% y/y, the slowest pace since mid-2018. This should fall somewhere in the mild risk on zone and the high-beta AUDUSD should benefit, but there isn't a considerable story evolving here yet, but its evolving none the less.
The short dollar story will come down to whether or not global growth picks up, triggering a rotation out of the USD into the EUR. In the meantime, the negative carry is a problem for the Euro given low volatility hence the reason why the dollar bears are currently looking to express their short dollar pref
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