FOREX: Asia FX Wrap - USD Flat In A Quiet Session After Drifting Lower Early
The BBDXY has had a range of 1194.34 - 1196.30 in the Asia-Pac session, it is currently trading around 1195. The USD drifted lower in early trading but has since bounced back in a quiet Asia-Pac session, -0.08%. "China Likely to Ramp Up Fiscal Support for Economy in 2H: Paper. China’s fiscal policy is expected to both “accelerate” and “expand” in the second half of the year, Shanghai Securities News reports, citing industry insiders." BBG
- EUR/USD - Asian range 1.1715 - 1.1750, Asia is currently trading 1.1735. The pair has seen solid demand again just below the 1.1700 area allowing it to bounce in our session. The price is still starting to look a little stretched in the short term and is vulnerable to any correction in the USD, first support is back towards 1.1600 then more importantly the 1.1450 area.
- GBP/USD - Asian range 1.3584 - 1.3613, Asia is currently dealing around 1.3605. Decent support seen around the 1.3580 area in a quiet session. Price has rejected the move higher but the USD would need to gain momentum higher for GBP/USD to extend lower in the short-term. First support around 1.3500 and then more importantly the 1.3350/1.3400 area.
- USD/CNH - Asian range 7.1782 - 7.1834, the USD/CNY fix printed 7.1510, Asia is currently dealing around 7.1820. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX -0.25%, Gold $3317, US 10-Year 4.334%, BBDXY 1195, Crude oil $68.48
- Data/Events : Germany CPI, Italy Industrial Production,
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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BONDS: NZGBS: Closed With A Modest Bull-Flattener, Net Migration Data Tomorrow
NZGBs closed showing a modest bull-flattener. Benchmark yields finished at their lows, 1-2bps lower, on a local data-light session.
- (Bloomberg) -- "Economists at ANZ Bank New Zealand and ASB Bank have raised their 1q economic growth forecasts, adding to signs the RBNZ may be justified in pausing interest rate hikes next month, according to emailed notes. ANZ expects the June 19 report will show GDP grew 0.7% after provisionally projecting 0.6%."
- " NZ Treasury expects growth impulse from net exports will wane” - BBG.
- Cash US tsys are ~1bp cheaper in today's Asia-Pac session after yesterday's modest rally.
- Bloomberg - "Senator Ted Cruz has proposed eliminating the interest paid to banks that deposit cash at the Federal Reserve, which could save the government around $1 trillion over a decade."
- "JPMorgan strategists warn that this move could significantly impact banks' profitability, liquidity management strategies, and short-term interest rates, and risk the Fed losing control of money market rates."
- RBNZ dated OIS pricing closed with 4bps of easing priced for July and a cumulative 29bps by November 2025.
- Tomorrow, the local calendar will see Net Migration data.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 4.25% May-36 bond.
GOLD: Gold Down Today As Risk Sentiment Improves With Ongoing Trade Talks
Gold prices reached $3327.96 early in the session up from Monday’s close of $3326.19, but trended lower thereafter falling to $3302.03. It has stabilised between $3304-3310 and is currently down 0.7% to $3305.0. The stronger US dollar (USD BBDXY +0.2%), little change in US yields and stronger equity markets have weighed on bullion in today’s APAC trading. US-China trade talks are continuing today and hopes of a deal are impacting safe-haven flows.
- Export controls are the focus of the US-China talks in London. There appears a willingness for the US to ease restrictions on tech exports if China eases rules on rare earths. Gold prices stabilised once trade negotiations began and the US delayed duties but official progress is needed for them to moderate again with any set back likely to drive a resumption of flight-to-quality flows.
- Silver is also weaker down 0.7% to $36.50 after falling to $36.31 from a high of $36.83. It broke above initial resistance at $36.71 briefly.
- Equities are generally stronger with the Hang Seng up 0.3%, TAIEX +2.1% and S&P e-mini +0.3%. Oil prices are moderately higher with WTI +0.1% to $65.37/bbl. Copper is down 1.0%, while iron ore is off its lows to be around $94-95/t.
- Later US May NFIB small business optimism and UK April/May labour market data are released. ECB’s Donnery and Buch appear. The focus remains on Wednesday’s May US CPI data but also Thursday’s US long-dated Treasury auction given fiscal concerns.
FOREX: Asia Fx Wrap - The USD Bounces With Stocks
The BBDXY has had a range of 1208.71 - 1212.46 in the Asia-Pac session, it is currently trading around 1211. “Rachel Reeves will announce a “housing bank” as early as Wednesday to deliver cheaper financing to housebuilders, the FT reported”(BBG). “Thames Water’s senior creditors submitted a rescue plan to the UK’s water industry regulator, envisaging £5 billion of fresh funds and hefty losses for the utility’s debt holders.”(BBG)
- EUR/USD - Asian range 1.1386 - 1.1436, Asia is currently trading 1.1395. EUR has drifted lower during the Asian session as the USD bounces in response to the move higher in US stocks. Dips should continue to find demand, first support around 1.1350 then the 1.1100/1200 area.
- GBP/USD - Asian range 1.3520 - 1.3564, Asia is currently dealing around 1.3535. The GBP is attempting another run higher but is struggling to gain any momentum above the pivotal 1.3500 weekly pivot. Support seen back towards 1.3400 and then 1.3200.
- USD/CNH - Asian range 7.1778 - 7.1864, the USD/CNY fix printed 7.1840. Asia is currently dealing around 7.1860. Sellers should be around on bounces while price holds below the 7.2500 area.
- Cross asset : SPX +0.35%, Gold $3303, US 10-Year 4.48%, BBDXY 1211, Crude oil $65.41
Data/Events : Italy Industrial Production
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
