Daily Brief Macro: USD Bears Broke The Bandwagon and more

• Investors ask whether threats to the USD’s reserve currency status are resting or dead, whereas we wonder if it was ever alive. Commentators routinely overextend narratives.
• The USD share of allocated FX reserves is already trending downward. A potential acceleration from smaller deficits and higher tariffs would partly offset the impact.
• Fuller hedging of USD asset holdings abroad may have already reached its limit. We still see more attractive mispricing elsewhere, such as excessively dovish rate curves.

• Bob Gilhooly, a senior emerging markets economist at Aberdeen, joins the podcast to discuss Trump’s first 100 days in office and his key outcomes
• Trump’s focus on trade deficits and tariffs has raised concerns about revenue raising and potential impact on the U.S. deficit
• Uncertainty surrounding trade negotiations and potential outcomes continues to be a key feature of Trump’s presidency

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• Despite the ongoing trade talks and tariff de-escalation between the US and China, there is no denying that US trade barriers have risen substantially.
• The downside risks to growth are high for export-oriented Asia and warrant a stronger policy response from central banks.
• Their cautious approach risks a sharper slowdown and output falling further behind pre-pandemic trend.

• China-U.S. /: Chinese exporters move quickly after tariff rollback, but remain cautious
• Whales /In Depth: The precarious fate of China’s only nearshore whales
• Covid-19 /: New Covid wave in Hong Kong is causing severe infections in children

• Asia’s base oils prices hold firm vs feedstock/gasoil prices, especially for heavy grades.
• Price-strength suggests supply-tightness continues to outweigh weaker-than-expected demand.
• That dynamic could ease as weak demand cushions impact of recent/ongoing plant maintenance, speeds up refiners’ stock-replenishment once plants resume operations.

• A new probe from EU on Chinese tire due to start May 19  
• Lack of clarity on the range of tires under the scope of US auto tariff  
• Lobbying to suspend or delay the implementation of auto tariff 

• US base oils demand likely to stay weaker in face of lower feedstock costs, steady prices and expectations of improvement in supply.
• Supply remains sufficient to cover demand even with heavy round of plant maintenance work in recent weeks.
• Lower crude oil prices and signs of slowdown in industrial activity increase incentive to minimize stocks and procure volumes on a need-to basis.

• Asia’s Group II base oils prices hold in relatively narrow range relative to US export prices, especially for heavy grades.
• Steady price levels leave arbitrage from Asia to Americas hard to work, pointing to limited surplus supply.
• US Group II light-grade export prices hold in narrow range or strengthen relative to CFR India prices since start of Q2 2025.

• Global base oils prices mostly extend rise vs feedstock/competing fuel prices.
• Sustained price-strength for most grades points to tight supply-demand fundamentals.
• Price-strength incentivizes refiners to maintain or raise output.

• US base oils prices hold firm vs feedstock/heating oil prices.
• Rising margins in Q2 2025 point to tighter supply-demand fundamentals.
• Cautious demand suggests supply is the key factor driving higher margins.