FOREX: Asia FX Wrap - USD Drifts Lower
The BBDXY has had a range of 1208.77 - 1210.24 in the Asia-Pac session, it is currently trading around 1208, -0.10%. The USD, with a huge rejection of the 1220/1230 area on Friday, had a knee-jerk reaction lower to the outsized move in US rates as the market's view on growth and interest rate cuts is re-evaluated. The USD is consolidating just above its 1205 support, as the market contemplates the increasing headwinds to risk and what that means for the USD. The market is still very quick to jump onto opportunities to sell the USD, a sustained move back above the 1230 area would be needed to put pressure on the bears.
- EUR/USD - Asian range 1.1564 - 1.1585, Asia is currently trading 1.1585. The pair has bounced nicely off the important 1.1300/1.1400 area. The market is consolidating just ahead of its first resistance towards the 1.1650/1.1700 area.
- GBP/USD - Asian range 1.3292 - 1.3313, Asia is currently dealing around 1.3310. The pair bounced nicely off the 1.3100/1.3200 support area. I would suspect sellers would be around on a bounce back towards 1.3400 initially.
- USD/CNH - Asian range 7.1880 - 7.1955, the USD/CNY fix printed 7.1409, Asia is currently dealing around 7.1920. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
- Cross asset : SPX +0.25%, Gold $3375, US 10-Year 4.222%, BBDXY 1208, Crude Oil $65.58
- Data/Events : France Private Sector Payroll, Italy Industrial Production, Germany Factory Orders/HCOB Construction, EZ Retail sales
Fig 1: GBP/USD Spot 120min Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields Open Lower After Long Weekend
The TYU5 range has been 111-08+ to 111-12+ during the Asia-Pacific session. It last changed hands at 111-10+, up 0-03+ from the previous close.
- The US 2-year yield has moved lower trading around 3.855%, down 0.02 from its close.
- The US 10-year yield has edged lower trading around 4.33%, down 0.02 from its close.
- The 10-year yield saw a strong bounce in reaction to the better NFP print. This 4.35/40% area offers those who would like to express a long the opportunity to fade. A sustained close back above 4.40/4.45% area though would not be great for the bulls and would see more of the longs prepared back.
- US President Trump has posted via Truth Social that the US will start delivering letters outlining tariff levels to various countries starting 12pm Monday, US eastern time. Trade deals will also be announced at the same time.
- (Bloomberg) -- The Treasury’s willingness to fund more at the short-end of the yield curve will further compromise the Federal Reserve’s independence and increasingly leave monetary policy de facto in fiscal hands. The dollar will be a casualty, and the yield curve will steepen.
- Data/Events: Bond investors will be focusing on the Fed Minutes and the demand for 10 & 30-year maturities this week.
Fig 1: 10-Year US Yield Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
STIR: RBNZ-Dated OIS Firmer Than Pre-RBNZ Decision Levels (May)
RBNZ dated OIS pricing is little changed across meetings today. 3bps of easing is priced for this week's meeting, with a cumulative 31bps by November 2025.
- Notably, pricing is 9-15bps firmer across 2025 meetings compared to pre-RBNZ decision levels on May 28.
- (Bloomberg) -- A majority of members in the NZIER Monetary Policy Shadow Board recommend that the Reserve Bank of New Zealand keep the cash rate on hold at 3.25% at the July 9 review. While activity remains soft in the New Zealand economy, there are both upside and downside risks to inflation in the near term, given the recent pick-up in annual CPI inflation and heightened global risks.
Figure 1: RBNZ Dated OIS Today vs. Pre-May RBNZ Decision Levels (%)
Source: MNI - Market News / Bloomberg
CHINA: Bond Futures Drift Lower in the Morning Session
- China's bond futures have drifted marginally lower in a lackluster trading session this morning despite a sizeable liquidity withdrawal from the OMO.
- The 10yr is down -0.01 to 109.10 to maintain its position above all major moving averages. The nearest being the 20-day EMA of 109.02
- The 2yr is down -0.01 at 102.50 and is between the 50-day EMA of 102.50 and the 20-day EMA of 102.49
- The CGB 10yr is at 1.64%.
- Wednesday sees the release of June PPI and CPI, which have both struggled to post positive outcomes in recent months.
