Major FX gained pretty much across the board against the US dollar in Asia here to kick off the new week. US equity index futures performed well also, continuing their Friday rally. The bid for US equities translated into a tailwind for regional equities, but there were a few concerns. China, specifically, with reports over the weekend from Shanghai with a district placed under renewed lockdown for mass testing. Beijing, too, was a worry – the capital reported a record number of cases. So far restrictions introduced in Beijing have not been quite so draconian as those in Shanghai. HK and China stocks took note and did not run ahead. Also in the mix was a dramatic revaluation for the onshore yuan at the daily People’s Bank of China mid-rate setting. The reference rate on Friday was set at 6.7487, while Monday's was 6.6756. This is the biggest one-day strengthening for the onshore yuan, CNY, at the mid-rate, since July of 2005. Just as a weaker yuan acts to attract offshore money into Chinese stocks, at least for a short-term play, a dramatically stronger yuan like this does not.

In Australia we had a federal election over the weekend. This resulted in a huge landslide loss for the incumbent government. The dominant Liberal party of the previously governing Liberal/Country parties coalition recorded its worst performance (in seats in parliament) since the 1940s. Curiously, the landslide loss did not translate into a landslide win for the opposition. Sure, the previously opposition Labor Party will form government, but it too lost safe seats. Independents were big gainers in the election. Its unclear yet (counting continues) if Labor will form a majority government (its leader and Australia’s new PM Albanese thinks it will) or will govern in minority with independent/Green support. Regardless, AUD was up alongside other FX against the USD today.

AUD was outdone by the NZD though. As a reminder, the Reserve Bank of New Zealand meet this week (Wednesday NZ time) with a 50bp cash rate hike almost unanimously the expected outcome.

On the central bank front, we had a speech, and Q and A, from the Reserve Bank of Australia’s Christopher Kent, Assistant Governor (Financial Markets). Kent’s main message was the bank's emphasis on the cash rate as the main tool for tightening monetary policy. He said the upcoming quantitative tightening (QT) and dialling down of the Term Funding Facility (TFF) will play a predictable & modest background" role.

BTC popped back above USD30K over the weekend:

btc wrap 23 May 2022 30k