Investment Rating - The report indicates a medium-term bearish outlook for USD/Asia currencies, suggesting a downward trajectory for the USD against Asian currencies [3][18]. Core Insights - The US-China trade talks resulted in a larger-than-expected reduction in tariffs, leading to a decrease in USD/CNY and an initial increase in other USD/Asia pairs [3][5]. - The US economics team revised their 2025 GDP growth forecast to 1.0% from 0.5% and reduced recession odds from 45% to 35%, which may limit the downside for the USD compared to a recession scenario [5][6]. - Key themes include ongoing diversification away from US assets, continued conversion of USD by Asian exporters into local currencies, and potential strength in Asian currencies if trade deals are reached [3][11][15]. Summary by Sections Changes Observed - The reduction in tariffs has led to a revision of USD/Asia forecasts, with expectations for USD/CNY to drift towards 7.0 [4][15]. - The US left-tail risk has decreased, improving the outlook for US assets and potentially reducing broad USD bearishness [5][18]. Unchanged Factors - The USD remains overvalued by approximately 17% according to the GS DEER model, indicating that the diversification theme away from US assets is still relevant [6][10]. - Asian exporters are expected to continue selling USD, with significant increases in foreign currency deposits in several Asian countries [11][9]. Implications for Asian FX - The report anticipates that if trade deals are finalized, Asian currencies will likely strengthen against the USD, with favored currencies being KRW, TWD, MYR, and SGD [3][18]. - The path of least resistance for USD/Asia is expected to be downward, especially if trade negotiations lead to a narrower trade deficit with the US [15][18].