AUD: Asia Wrap - AUD/USD Bounces As Market Prices Out US Entering Conflict
The AUD/USD has had a range of 0.6463 - 0.6495 in the Asia- Pac session, it is currently trading around 0.6495. The AUD has edged higher in our session +0.2% as the market prices out the chances of the US joining in the conflict. Recent history reminds us that there is still every chance we see some sort of US strike this weekend, and the article printed by Seymour Hersh points to that very fact.
- Seymour Hersh: "This is a report on what is most likely to happen in Iran, as early as this weekend, according to Israeli insiders and American officials I’ve relied upon for decades. It will entail heavy American bombing. I have vetted this report with a longtime US official in Washington, who told me that all will be “under control” if Iran’s Supreme Leader Ali Khamenei “departs.” Just how that might happen, short of his assassination, is not known.”
- (AFR) "Interest rates in Australia and the United States may be on hold for longer than the market and borrowers are hoping, thanks to resilient jobs numbers that suggest there is no pressing need to cut rates aggressively."
- The AUD looked as if it might trade back down to its 0.6350/0.6400 support before that statement, but has bounced overnight off the 0.6450 area.
- Price remains in the wider 0.6350 - 0.6550 range for now, a sustained break above 0.6550/0.6600 is needed for the move higher to accelerate.
- Technically buyers should continue to be around on dips while the support in the AUD/USD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6650(AUD708m). Upcoming Close Strikes : none
AUD/JPY - Today's range 93.97 - 94.35, it is trading currently around 94.30.Choppy price action as the pair establishes a range between 92.00 - 96.00. A break back below 91.50/92.00 is needed to see the move lower regain momentum and the focus turn back to the year's lows again.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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US TSYS: Asia Wrap - Yields Extend Higher
TYM5 has traded higher within a range of 110-00 to 110-10+ during the Asia-Pacific session. It last changed hands at 110-0, down 0-06 from the previous close.
- The US 2-year yield has edged higher, dealing around 3.977%, up 0.01 from its close.
- The US 10-year yield has extended higher, dealing around 4.507%, up 0.02 from its close.
- “Donald Trump is losing patience with demands to raise a draft SALT cap past $30,000, a person familiar said. But some House Republicans still plan to oppose the bill unless their changes are made.”(BBG)
- “There is a clear narrative building on Wednesday in Asia as long-end bond futures extend losses, which is helping to undermine US equity contracts. While it isn’t yet a full repeat of the “Sell America” theme, there is broad weakness developing for the greenback.”(BBG)
- The 10-year found sellers again back towards 4.40% overnight. Asia is having another look back above 4.50% in our session, a sustained break above 4.55/60% needed to see another round of selling targeting the 4.75% area. Support seen back towards 4.35/40%, dips back towards here should see supply emerge once more.
- Data/Events : MBA Mortgage applications, Richmond Fed President Tom Barkin , Fed Governor Michelle Bowman to participate in a “Fed Listens” event
NEW ZEALAND: Business Inflation Expectations Broadly Higher
The RBNZ has released its first official business expectations survey for Q2 2025 after trialling it over H2 2024. It found that inflation expectations rose across time horizons from 1-year to 10-years. Data released last week also showed an increase for Q2. The RBNZ decision is announced on May 28 and it is likely to cut rates 25bp but rising inflation expectations may make its tone more cautious.
- 1-year ahead expected CPI rose to 2.44% from 2.25% in Q1 with the pickup broad-based across business size and sector, while 2-years ahead increased to 2.54% from 2.47% but was less uniform. Both 5-year and 10-year ahead are above the top of the RBNZ’s 1-3% band with the latter now close to 4%.
- The increase in expected inflation was not driven by wages, as 1-year moderated to 2.6% from 2.8% while 2-year was stable at 3.2%.
- 1-year ahead unemployment expectations fell slightly to 5.1% from 5.2% but 2-years rose 0.1pp to 4.9%. The struggling construction sector showed a larger decline than the total over both periods signalling greater optimism re the outlook.
- The survey was taken from April 22 to 30 and was likely impacted by increased global trade uncertainty.
CHINA: January April Deficit Record
- Ministry of Finance data shows the Chinese government deficit tipped CNY2.6tn in the year to April.
- This deficit is one of the largest on record and represented a 50% increase year on year.
- The government is looking to cushion the economy as it is buffeted by the impacts of the trade war.
- Total expenditure rose 7.2 per cent to CNY12 trillion yuan, the data showed.
- In signs the economy may be stabilizing, tax revenue rose 1.9% from a year earlier after a 2.2% decline in March.
- Signs that the wave of government bond issuance are impacting the fiscal position were evident as interest payments rose 11%.
- With signs that the US China relationship is thawing and this release could represent the low point in the deficit as signs that economic activity is stabilizing.
