UBS On-Air: Paul Donovan Daily Audio 'Trade time'

What the desk is arguing

The rise in China's exports, driven by technology demand, signals a potential shift in market dynamics favoring risk assets and EM currencies. According to UBS, the growth in China's high-tech exports, which soared due to global interest in artificial intelligence, paints a positive picture for regional trade recovery. This strong performance could suggest resilience in the face of ongoing geopolitical tensions and potential tariff adjustments by the US.

UBS highlighted that the strength in exports to the US was influenced by comparisons with prior volatility created by tariffs, suggesting a short-term distortion in data trends. The desk sees this as a crucial indicator ahead of US trade figures, which are likely to receive increased scrutiny from both markets and policymakers.

Where it sits in our coverage

The current consensus target for the relevant currency pair sits at 1.075, with a range between 1.04 to 1.12. Notable aligned forecasts include: - jpmorgan (target: 1.10, tenor: Mar26) - bofa (target: 1.04, tenor: Mar26)

This view aligns closely with jpmorgan, which expects an upward trajectory given the implications of the China trade data. The desk's stance is within the upper range of the consensus, emphasizing the potential for further dollar weakening against key currencies.

How other firms see it

Several firms are aligned with this bullish perspective, including jpmorgan, which echoes a similar outlook on risk appetites influenced by global trade trends. Conversely, bofa takes a more cautious stance, predicting a downtrend in the near term based on potential fallout from inflationary pressures and trade disputes.

Key pairs to watch include USD/CNY, as the interactions between these currencies will reflect broader trade sentiment. Additionally, upcoming statements from the Federal Reserve could have spillover effects on USD valuations relative to emerging market currencies.