ForexLive Asia-Pacific FX news wrap: Oil up despite OPEC+ output hike. USD lower,

• ICYMI – JP Morgan CEO Dimon said China not going to come bow down to the US on trade
• Recap – Japan Q1 capex jumps 6.4%, offering domestic support despite GDP dip
• BoJ confirms loss provision on bonds transactions was 100% for fiscal 2024
• Heads up for (b/s) ‘rumours’ doing the rounds of Powell to resign Monday
• Melbourne Institute Australian headline monthly inflation gauge biggest drop in 33 months
• Japan tariff negotiator Akazawa to visit US for tariff talks for 4 days from Thursday
• Morgan Stanley forecasts 9% dollar drop by mid-2026 on 175bp Fed cuts, and slower growth
• Chinese officials issue harsh words against the US on trade
• More from Fed’s Waller, says doesn’t see how tariffs would create persistent inflation
• Japan Jibun bank PMI manufacturing, final for May 2025 49.4 (prior 48.7)
• Goldman Sachs sees final OPEC+ hike in August, cuts 2026 Brent forecast to $56
• Fed’s Waller says rate cuts remain possible later in 2025
• Japan Capital Spending (Q1 2025) +6.4% y/y (vs. expected +3.8%, prior -0.2%)
• ICYMI: Bank of Japan has boosted its provisions for JGB losses, braced for higher rates
• Australian S&P Global Manufacturing PMI (Final, May 2025) 51.0 (Prev. 51.7)
• Bessent repeats that he thinks Xi will speak to Trump ‘very soon’
• Bloomberg report: Graham Aims for Tough New Russia Sanctions Ahead of G-7 Summit
• Past-Fed Vice Chair Stanley Fischer has died
• Weekend – OPEC+ hikes oil output supply for third straight month by 4,11,000 bpd
• NVIDIA is reportedly working on a new AI chip designed for sale in mainland China
• Reports of a targeted terror attack in Boulder, Colorado (US)
• ICYMI: Ukraine used to drones to attack around 40 Russian war planes at 4 military bases
• Chinese and New Zealand markets are closed today, Monday, June 2, 2025, for holidays
• The Bank of Japan has boosted its provisions for JGB losses – braced for higher rates
• Trade ideas thread – Monday, 2 June, insightful charts, technical analysis, ideas
• Monday open levels, indicative FX prices, 02 June 2025
• Hard Drug Allegations Against Musk and What Does Price Action Hints
• China May Manufacturing PMI rose to 49.5 (prior 49.0), Non-manufacturing 50.3 (prior 50.4)
• Forexlive Americas FX news wrap 30 May: PCE dips but may be the low for the cycle.

Oil rises despite OPEC+ output hike

Oil prices opened higher on Monday, even after OPEC+ confirmed it would raise production by 411,000 barrels per day in July — matching increases from May and June. This marks the third consecutive monthly output hike as the cartel continues its push to regain market share and exert discipline on over-producing members.

The stronger open was attributed to mounting geopolitical risks. Ukraine launched a large-scale drone offensive against Russian targets over the weekend, heightening concerns about supply disruption. Additionally, U.S. Senators Lindsey Graham and Richard Blumenthal are pressing for new sanctions ahead of the G7 summit, including a proposed 500% tariff on imports from nations buying Russian oil or uranium — a move that could further tighten energy markets.

Yen strengthens as Bank of Japan boosts JGB loss provisions

The U.S. dollar softened broadly on Monday, with notable gains for the yen following reports that the Bank of Japan had sharply raised its provisions for potential losses on Japanese Government Bonds (JGBs). Japan’s Nikkei first reported that the BoJ had increased its provisioning ratio to 100% for fiscal 2024 — a move later confirmed officially.

The decision marks a significant step by the central bank, widely interpreted as preparation for a future of higher interest rates. With markets still debating the pace and scale of BoJ policy normalisation, this concrete adjustment bolstered confidence in yen assets and drove demand for the currency throughout the session.

Waller leans toward rate cuts, says to ‘look through’ tariff-linked inflation

Federal Reserve Governor Christopher Waller signalled openness to rate cuts later this year, speaking at an event in South Korea. Waller said that recent tariff-driven inflation pressures linked to President Trump’s trade policies are unlikely to be lasting, and therefore should not overly influence monetary policy decisions in the near term.

He emphasised that if tariffs remain at the lower end of potential outcomes, and if core inflation continues to fall toward the Fed’s 2% goal while the labour market remains resilient, then “good news” rate cuts would be appropriate. Waller noted the Fed has time to assess how trade developments and the broader economy evolve before making any move.

Asian factories feel the pinch as tariffs, Chinese oversupply weigh

Factory activity across Asia remained under pressure in May, as escalating trade tensions and excess supply from China sapped demand. Manufacturing PMIs from Japan, South Korea, and China all remained in contraction territory, underlining the region’s struggle to regain momentum amid an uncertain global trade backdrop.

Japan’s final manufacturing PMI for May edged up slightly to 49.4, the softest contraction of the year. While declines in new orders and output moderated, firms remained cautious — trimming purchases and inventory levels. Encouragingly, business confidence improved from April’s lows, leading to the fastest rise in employment in over a year as firms tentatively looked ahead to a demand recovery.

China hits back at US claims over trade deal breaches

China’s Ministry of Commerce on Monday rejected U.S. President Trump’s accusations that Beijing had violated the Geneva trade consensus, calling the claims “groundless” and promising to defend its interests with “forceful measures.” The response followed Trump’s Friday remarks that China had failed to honour commitments to roll back tariffs.

Beijing countered that it had implemented the Geneva agreement in good faith, while the U.S. had since imposed several discriminatory restrictions. These included new export controls on AI chips, a ban on chip design software sales, and visa revocations for Chinese students. The ministry accused Washington of repeatedly escalating tensions and destabilising bilateral trade relations, but stopped short of detailing its planned response.

Polish election

In news as I post, Polish nationalist Nawrocki wins presidential election. This sets up a right-wing presidency again in Poland, in contrast to Musk’s recent win as PM on a more moderate, pro-Europe, pro-EU platform. Its not a positive, at the margin, for the euro.