AUD: A$ Lags USD Index Slump, AUD/JPY Near 92.00, Close To YTD Lows

USD/CNH tracks near 7.2535 in early Wednesday dealings. CNH gained nearly 0.70% for Tuesday's session, as broader USD sentiment faltered. Concerns over the US economic outlook weighed on dollar sentiment, although US Tsy yields recovered from earlier lows (the 10yr yield rebounding around 15bps as Tuesday's session unfolded). USD/CNY spot finished up at 7.2639, while the CNY CFETS basket tracker slipped 0.16% to 100.016. 

• For USD/CNH, we are back sub the 100-day EMA (near 7.2615). Tuesday lows were at 7.2487. On the downside we have the 200-day EMA (7.2384). The 20 and 50-day EMAs sit back in between 7.2765-7.2800.
• China's response to the recent US tariff increased was described as measured. Effective from March 10, China will impose a 15% tariff on chicken, wheat, corn, and cotton imported from the U.S, and a 10% duty on sorghum, soybeans, pork, beef, aquatic products, fruits, vegetables, and dairy products, the Ministry of Finance said in a statement.
• This may have helped CNH at the margin in the sense it is designed not to escalate tensions with the US. Remarks from Trump on Monday around devaluing of the yuan and JPY may also be in play (as the market speculates the authorities will keep the yuan stable to slightly firmer to avoid trade conflict escalation).
• Comments from US Commerce Secretary Lutnick around potential tariff compromise with Mexico and Canada aided the CAD and MXN, but China wasn't mentioned in great detail in the remarks.
• In US trade, the Golden Dragon index rose 1.95%, its first gain in 4 sessions. Yesterday the headline CSI 300 index was close to unchanged.
• On the data front today we have the Caixin PMI services (and composite read) for Feb. The market forecast is a 50.7 read for services (prior was 51.0).  

ACGBs (YM -8.0 & XM -10.5) are weaker after US tsys finished with a bear-steepener, yields 4-9bps higher. This came after US tsys reversed off Tuesday morning's yield lows as stocks rebounded.

• RBA Deputy Governor Hauser emphasised that the central bank will continue making decisions on a meeting-by-meeting basis. While progress toward the CPI target is encouraging, it is too early to declare victory. Hauser noted that the RBA does not align with market expectations on the timing and sequence of rate cuts. He highlighted productivity as a key factor for inflation and the broader economy, adding that the RBA will closely monitor the impact of trade tensions on CPI and respond if inflation rises as a result.
• S&P Global PMIs for February have printed: Composite Index fell to 50.6 from 51.1 in January and the Services Index fell to 50.8 from 51.2 in January.
• Cash ACGBs are XX with the AU-US 10-year yield differential
• Swap rates are 7-9bps higher, with the 3s10s curve steeper.
• The bills strip has bear-steepened, with pricing -1 to -7.
• Today, the local calendar will also see Q4 GDP data.
• The AOFM plans to sell A$800mn of the 4.25% 21 March 2036 bond today. 

• Gold had a strong session overnight in the US finishing at US2,917.89, a gain of +0.87%
• As tariff headlines dominated markets, safe haven assets like gold performed well.
• The trade war is now fully underway with over US$100bn of retaliatory tariffs from Canada, China imposing tariffs on agricultural products and Mexico set to announce their reply this weekend.
• Markets are now fearful of stagflation, pushing bond yields higher and gold higher.
• What now looks like profit taking last week, the last two days of gains are pairing back the losses from last week.
• Having broken back through the 20-day EMA of $2,887.68, gold’s next key technical will be the 24 February high of $2,951.73.