FOREX: Asia FX Wrap - Quiet Session Ahead Of US CPI
The BBDXY has had a range of 1209.44 - 1212.04 in the Asia-Pac session, it is currently trading around 1211.”With weaker data eroding the UK’s relative yield advantage and the Federal Reserve clinging to its higher-for-longer script, GBP/USD now faces a more challenging landscape. The pound has rallied nearly 8% year-to-date against the dollar, but the backdrop may be shifting”(BBG). PPG Macro on X: “UK (un)employment. HMRC PAYE employees total for May fell 109k. Even allowing for revisions, payrolled employment has fallen for 7 months in a row. 6-month average fall of 41.7k. The equivalent of nonfarm payrolls falling at over 200k a month.”
- EUR/USD - Asian range 1.1406 - 1.1439, Asia is currently trading 1.1415. EUR has drifted down during the Asian session in response to the move lower in US stocks. Dips should continue to find demand, first support around 1.1350 then the 1.1100/1200 area.
- GBP/USD - Asian range 1.3475 - 1.3510, Asia is currently dealing around 1.3485. The GBP looks to be failing in its attempt to gain any momentum above the pivotal 1.3500 weekly pivot. Poor data yesterday capped the move, support seen back towards 1.3400 and then 1.3200.
- USD/CNH - Asian range 7.1823 - 7.1897, the USD/CNY fix printed 7.1815. Asia is currently dealing around 7.1865. Sellers should be around on bounces while price holds below the 7.2500 area.
- Cross asset : SPX -0.29%, Gold $3340, US 10-Year 4.47%, BBDXY 1211, Crude oil $64.95
Data/Events : US CPI
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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STIR: RBA Dated OIS Dec-25 Pricing 25bps Firmer Than Pre-CPI Level
RBA-dated OIS pricing is 2-24bps firmer across meetings than levels before the release of Q1 CPI data on April 30.
- Q1 headline and underlying inflation printed 0.1pp higher than expected, but the trimmed mean at 2.9% y/y was below the top of the RBA’s 2-3% target band for the first time since Q4 2021.
- The data was close to the RBA’s expectations and at this stage consistent with inflation sustainably remaining within the band. Thus, another 25bp rate cut to 3.85% is likely on May 20, assuming that easing is consistent with the RBA’s updated outlook.
- A 50bp rate cut in May is given a 2% probability (10% before the CPI data), with a cumulative 93bps (117bps before) of easing priced by year-end.
Figure 1: RBA-Dated OIS – Post-CPI Vs. Pre-CPI
Source: MNI - Market News / Bloomberg
GOLD: Gold Falls Again as Optimism Grows
- Gold started the week lower and is trading at US$3,281.41 in afternoon trade, a decline of 1.32%.
- This morning's move sees gold breach the 20-day EMA of $3,284.60 with the 50-day EMA below at $3,162.71.
- Evidence of trade talks and the somewhat easing of tensions has taken some of the safe haven bid out of gold this morning and given the strength of last week's performance, it is likely profit taking is behind this morning's move.
- US and China reported 'substantial' progress after two days of talks in Switzerland with markets looking for a de-escalation of a trade war that could materially lower global growth.
FOREX: Antipodean Wrap - AUD & NZD Outperform
The S&P is up 1.4% this morning after gapping on thin liquidity at the Asian open. It has held these gains remarkably well for now, with these early Monday morning moves having a habit of failing. There seems to be a view that the outcome of these talks could have significant implications going forward as China now sees itself coming to the negotiating table as a peer and not as a subordinate. Hu Xijin, former Editor-in-Chief of the Global Times, remarked in a recent Weibo post: “China has achieved the most equal negotiation with the United States among all nations. The two sides had been at loggerheads, but their first official contact yielded substantial results—an unexpected turn of events. I believe this breakthrough is precisely the result of China’s readiness to stand firm and its unwavering commitment to principle.” See this X link for more details https://x.com/ShanghaiMacro/status/1921759301284376957
- AUD/USD - Asian range 0.6410 - 0.6432, the AUD is currently dealing around 0.6435. AUD has outperformed this morning especially in the crosses. Good demand was seen on Friday sub 0.6400, on the day this could continue to provide support. A break below 0.6300 needed to reverse direction.
- AUD/JPY - Asian range 93.40 - 93.99, price goes into London trading around 93.75. While the support around 92.00 holds, price is likely to continue testing the Weekly resistance seen between 94.00/96.00 where sellers should remerge.
- NZDUSD - Asian range 0.5910 - 0.5931, going into London trading around 0.5935. On the day there is potential for NZD to continue to outperform as the market digests an outcome from the talks that many thought not possible. First support is right here around the 0.5900 area but more importantly the support around 0.5800 needs to hold to keep the bulls in the drivers seat.
- AUD/NZD - Asian range 1.0833 - 1.0859, the Asian session is currently trading 1.0845. Sellers continue to provide headwinds for the cross just above 1.0850, a sustained move back above 1.0900 would negate the bearish trend.
Fig 1 : AUD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg
