• Positive momentum continues in Asia amid the French election relief rally, alongside optimism over tax cuts.
• Major pairs relatively rangebound, however CAD slips on news that US is to levy 20% import tax on Canadian lumber.
• Looking ahead, highlights include Richmond Fed, API Crude report and US New Home Sales.

ASIA

Asia equity markets maintained the positive momentum from Wall St. where the French election relief rally spilled over and tax cut hopes also buoyed sentiment. Nikkei 225 (+0.8%) was underpinned as USD/JPY reclaimed the 110.00 handle, while the KOSPI (+0.6%) also sspanugged off geopolitical concerns amid no further signs of provocation from North Korea which conducted a firing drill to commemorate its 85th military anniversary. Elsewhere, Shanghai Comp. (+0.4%) and Hang Seng (+0.9%) were higher following an increased liquidity injection by the PBoC, although mainland bourses were somewhat restrained on trade concerns and the ASX 200 was shut for ANZAC day. Finally, 10yr JGBs continued to reclaim the losses seen from the French election with prices back above the 151.00 level, while today’s enhanced liquidity auction for 10yr, 20yr and 30yr maturities also drew greater interest.

PBoC injected CNY 40bln in 7-day reverse repos, CNY 20bln in 14-day reverse repos and CNY 20bln in 28-day reverse repos.

PBoC set CNY mid-point at 6.8833 (Prev. 6.8673). (Newswires)

EUROPE

N/A

UK

UK PM May is tipped to win House of Commons majority of 150, according to an article in the Daily Telegraph. (Newswires)

FX

FX markets were mostly uneventful overnight and consolidated from the post-French election moves, amid holiday thinned trade and a lack of key data releases. However, CAD underperformed amongst the major currencies after the US imposed 20% duties on softwood lumber imports from Canada and could also place import taxes on Canadian dairy products. This subsequently pressured MXN to a further extent on NAFTA concerns considering US’s larger trade deficit with Mexico, while NZD was also pressured as prices took out stops tspanough 0.7000 to the downside.

US imposed a 20% tariff on Canadian softwood lumber imports and may place import tax on Canadian dairy products. (Newswires)

COMMODITIES

Copper prices scaled up overnight amid the risk on sentiment in markets while there were also reports regarding a 7.1 magnitude earthquake that hit near the coast of Central Chile, although no damage was reported. Meanwhile, gold (-0.2%) unsurprisingly softened as participants shifted assets into more risky positions and WTI crude futures traded quiet and only nursed partial losses after its recent retreat below the USD 50/bbl level.

Goldman Sachs expects pressure in gold prices with its 3-month price target at USD 1200/oz and 12-month target at USD 1250/oz. (Newswires)

US

Although US Treasuries continued to trade in the red (in a bear flattening pattern), they did pare some of the overnight losses tspanough the day, with month end flows also touted as supportive, alongside the continuing geopolitical worries (ex-France). Jun’17 10y T-note futures settled at 125.25+, down 8+ ticks.

US President Trump instructed White House aides to draft a tax plan to reduce the corporate rate to 15%. (WSJ)

US White House said that President Trump is flexible on funding for the border wall and that he could wait until Autumn. (Newswires)