It was a volatile morning in Asia trade. BTC/USD led the way, dropping under US$30K. Equity index futures and risk FX were hit lower in the wake of the crypto drop. There is an argument that those caught holding declining crypto who are unable, or unwilling, to hit bids and get out are selling more liquid assets (i.e. the contagion argument) and driving these down. I am not sure that holdings of crypto are that widespread, or widely held by those with the volume to shift more established markets, but I thought I’d float this as the correlation of the moves were evident today (of course this is not necessarily causation I should add in).

On the data front we had Japan’s household spending climbing for the first time in three months in March (data for this month were released today). The lift in spending followed the relaxation of virus restrictions across the nation. Also from Japan were remarks from a senior official of the Bank of Japan, Shinichi Uchida is Executive Director/Head of Monetary Policy at the Bank of Japan, reaffirming monetary policy from the Bank will stay very accommodative indeed (see bullets above). Uchida specifically said there is no plan to tweak the 50bps band set around the Bank’s 10yr JGB yield target, adding that widening the band is undesirable as it would effectively be a rate hike (or at least acquiescing to tighter policy).

Back to data, Australia’s business conditions strengthened further in April. The survey (National Australia Bank Business Survey for April) showed that labour, input costs and output prices remained elevated. The RBA will take note and will continue with further rate hikes.

As mentioned, equity index trade and 'risk' FX tagged along behind the crypto moves for direction. AUD/USD, for example dropped under 0.6920 before bouncing back above 0.6960. NZD followed a similar pattern. EUR and GBP were more subdued against the dollar. Both have gained during the session. USD/JPY fell toward 129.80 and has since recovered to be circa 130.5 and little net changeed on the session.

The PBOC set the reference rate weaker again for the onshore yuan (CNY lower against USD).

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US equity futures, 10 minute candles ES:

spx 10 May 2022 22