GOLD: As Trade Tensions Ease, Gold Softens

TYM5 is 111-18, +0-11+ from closing levels in today's Asia-Pac session.

• According to MNI's technicals team, Jun'25 10Y futures have breached initial technical resistance at 110-26 (Mar 25 high). The medium-term trend condition is bullish, the first key resistance is located at 111-17+, the Mar 20 high.
• Last week's strong risk-off tone has extended into today’s Asia-Pac session ahead of this week's Trump Tariff "Liberation Day" rollout on April 2 and Friday's employment data for March.
• Stocks have dropped from Sydney to Hong Kong, with the Nikkei-225 sinking to the lowest level in over six months. Equity index futures for the US and Europe also weakened. Gold touched a fresh record high and US tsy yields declined.
• Cash US tsys are 4-6bps richer across benchmarks, with a slight steepening bias, as concern over the health of the US economy fuels demand for haven assets.

NZGBs closed richer, but well off session bests, with yields 4-7bps lower and the 2/10 curve flatter. Early in the session, NZGBs were richer by 9-12bps lower. 

• ANZ business confidence eased slightly in March to 57.5 from 58.4, while the activity outlook rose to 48.6, the highest since December. The series is off their Q4 highs but continues to signal that a gradual economic recovery continued in Q1. The price/cost components are trending higher, which will be monitored, but while inflation expectations ticked up they remain in the range seen since November.
• On a relative basis, NZBGs underperformed, with the NZ-US and NZ-AU 10-year yield differentials 7bps and 2bps wider respectively.
• Swap rates closed 5-7bps lower, with implied swap spreads slightly tighter.
• RBNZ dated OIS pricing closed flat to 5bps softer across meetings, with late 2025 leading / early 2026. 24bps of easing is priced for April, with a cumulative 70bps by November 2025.
• Tomorrow, the local calendar will be empty, ahead of Building Permits on Wednesday.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 0.25% May-28 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 5.00% May-54 bond.

The move lower in US yields has seen the EUR bounce off the 1.0750 area and the news that the European Union would be willing to compromise with the US to secure better trade terms (see this link) has helped keep dips supported. 

•  A tight range so far in Asia considering the moves elsewhere initially opening 1.0821 and grinding to a high of 1.0845, for the moment the EUR is paying closer attention to the moves lower in US yields as the market continues to favour this cross together with USD/JPY as the preferred expression of USD weakness.
• Macro traders continue to see shorting the USD as one of the cleanest ways to position for an end to US exceptionalism but there are some clear risks to this if the move lower in growth and risk gains momentum.
• If the market starts to price a US recession the other side of the USD smile starts to dominate and so will the demand for USD’s (see the chart below). Pay attention to EM for such risks, as these markets are normally the canary in the coal mine.
• Should these moves not see some of the usual Monday morning reversions then crosses like EUR/JPY could see greater downside pressure, which in turn could provide EUR/USD with some headwinds. EUR/JPY was last near 161.35, with recent lows around 160.75.
• Later today we have German and Italian CPI, the market will be paying close attention to these  to see if they follow the suit of France and Spain on Friday and print lower than expectations.
• CFTC Weekly data shows leveraged funds just starting to turn long after aggressively cutting their shorts, Asset managers continue to add to longs that had been pared back in the beginning of the year.

Fig 1: USD Smile