CNH: USD/CNH Back Sub 100-day EMA Amid Broad USD Dip, Caixin Services PMI Today

USD/CNH sits off earlier highs. The pair got to 7.3734 in early Monday dealings (post weekend tariff news) but sits back near 7.3600 in latest trade. This is still around 0.50% weaker in CNH terms versus end Friday levels. Record intra-session highs in USD/CNH rest at 7.3749 (from 2022) per BBG, so we stopped just short of a test of this level. 

• A reminder that onshore markets remain closed until Wednesday, when they return from the LNY break. Hong Kong markets return today so we should see some improvement in liquidity from that standpoint.
• Focus today will be on any China retaliation measures to Trump's 10% tariff announcement from the weekend. China officials vowed action, with the Commerce Ministry stating a lawsuit would be filed with the WTO. Broader measures though weren't specified.
• Higher USD/CNY levels would expected to counteract the tariff response, when onshore markets return on Wednesday. The close before the LNY break was 7.2446, but recent highs rest close to 7.3330
• Today we do have the January Caixin manufacturing PMI out. The market consensus is for a 50.6 print, versus 50.5 prior. 

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In local morning trade, NZGBs are 1bp cheaper after US tsys finished Friday with modest losses. 

• US tsys were little changed after the economic data but edged higher in yield later in the session. 10-year notes closed 2bp higher at 4.54%.
• Financial markets were volatile into the global close amid conflicting news on the timing for implementing tariffs on US imports. Confirmation that tariffs would be set for Canada and Mexico at 25%, and China at 10%, and begin this week, saw equities retrace earlier gains.
• Over the weekend, Canada and Mexico have announced retaliatory tariffs on the US. In addition, China has said it will take counteractive measures and file a lawsuit with the World Trade Organisation. Trade tensions will remain in focus as markets open for the week.
• China is much more diversified than Canada and Mexico with only 13.3% of its 2024 goods exports going to the US down from 14.8% in 2023. They were worth 2.8% of GDP in 2023. 6.9% of US exports went to China in 2024.
• Swap rates are 1-2bps higher.
• RBNZ dated OIS pricing is little changed. 48bps of easing is priced for February, with a cumulative 123bps by November.