EM ASIA CREDIT: EM Credit Market Update - Asia

The USD is up against most of the majors, albeit away from best levels. USD/JPY is relatively steady, while higher beta plays like AUD and NZD have lost some ground. 

• The session started with the USD on the backfoot and risk appetite supported, as US Commerce Secretary Lutnick stated that there may be tariff relief tomorrow for Canada and Mexico. CAD and MXN firm, although sit away from best levels now. USD/CAD was holding close to 1.4430, USD/MXN near 20.62.
• AUD/USD got to lows of 0.6234, but sits back around 0.6250/55 now. Earlier highs were at 0.6280. We had Trump address Congress earlier, where he confirmed that 25% tariffs on aluminium, copper and steel as well reciprocal tariffs will be implemented. This weighed on the A$ but follow through has been limited. Earlier data showed Australian GDP printing in line with expectations at 0.60%q/q.
• NZD/USD is down by a similar amount, last near 0.5650. We had surprising headlines that, RBNZ Governor was resigning. The Chair of The RBNZ board has since stated that this is for personal reasons. The RBNZ stated that Deputy Governor Christian Hawkesby will be Acting Governor until 31 March. From 1 April the Minister of Finance, on recommendation from the RBNZ Board, will appoint a temporary Governor for a period of up to six months.
• USD/JPY is little changed, last near 149.80, leaving the yen modestly outperforming. Deputy Governor Uchida stated rate hikes will continue, but didn't commit to any timeline.
• In the cross asset space, US equity futures are holding higher. Trump urged Congress to pass tax cuts, but also reiterated tariff plans. In the cash Tsy space, yields are lower at the front, but steady at the back end. The 10yr was last close to 4.24%.
• Looking ahead,  the US February ADP employment, services ISM/PMIs, final January orders and the Fed’s Beige book are released. European February services/composite PMIs and Q4 Italian GDP (2nd estimate) also print.

Oil prices have continued falling with both benchmarks trading below initial support today. WTI is down 1.0% to $67.60/bbl off the $67.50 low, breaching support at $67.75. Brent is down 0.5% to $70.73/bbl after a trough of $70.61, and is trading below support at $70.96 and opening key support at $69.59. The USD index is down slightly. 

• The market remains pressured by concerns of oversupply following reports that OPEC would continue with plans to increase output from April but also by expected weaker global demand due to increased protectionism.
• Crude has been worried about demand strength from China for some time. Today it set its 2025 growth target at 5% which could result in more policy stimulus especially in the face of US tariffs.
• Today in his speech to Congress President Trump confirmed his commitment to increase US oil production. He also stuck with his plans to impose tariffs after Commerce Secretary Lutnick said that there could be a compromise with Canada and Mexico.
• A 10% tax was imposed yesterday on energy imports from Canada. In retaliation Ontario has introduced a 25% export tax on electricity going to Michigan, Minnesota and New York.
• Bloomberg reported that US oil inventories fell 1.455mn barrels last week after 640k the week before, according to people familiar with the API data. Gasoline was down 1.25mm, while distillate rose 1.1mn. The official EIA data is released today.
• Later US February ADP employment, services ISM/PMIs, final January orders and the Fed’s Beige book are released. European February services/composite PMIs and Q4 Italian GDP (2nd estimate) also print. 

• +4,559 UXY at 114-02+, post time 15:03:15 AEST. DV01 $413k. Contract last trades -10+ at 114-03+, vs session lows of 113-28+, the contract hit a high of 115-12 overnight.