AUD: Asia Wrap - AUD/USD Gets A Boost From A Positive Asian Session For Risk
Aug-06 04:14
The AUD/USD has had a range of 0.6465 - 0.6492 in the Asia- Pac session, it is currently trading around 0.6490, +0.25%. The AUD has bounced in our session as Asian equities trade positively ignoring the wobble seen in the US in response to the ISM Services data. The AUD bounced nicely off the 0.6400 area but I suspect sellers might return back towards 0.6500/50 initially. I feel the performance of US equities over August/September will be crucial as seasonality points to some strong headwinds approaching.
- MNI Exclusive - The Reserve Bank of Australia looks set to cut the cash rate by 25 basis points to 3.6% on Aug 12, but further easing could prove a policy mistake and force the Bank to reverse course within six months unless a major global shock intervenes, former RBA board member Warwick McKibbin told MNI.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6575(AUD701m). Upcoming Close Strikes : 0.6500(AUD4.27b Aug 8), 0.6600(AUD1.97b Aug 7), 0.6800(AUD1.72b Aug 7) - BBG
- CFTC Data shows Asset managers reduced their shorts slightly -49183(Last -53959), the Leveraged community added to their own shorts -13997(Last -12010).
- AUD/JPY - Asia-Pac range 95.40 - 95.76, Asia is trading around 95.70. The pair failed on multiple attempts above 97.00 and has moved swiftly back to test its first support toward the 95.00 area. There should be sellers around the 96.00/96.50 area initially, a sustained break below 94.50/95.00 could signal a deeper move lower.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA: Bond Futures Drift Lower in the Morning Session
Jul-07 04:06
- 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.
RBA: MNI RBA Preview-July 2025: 25bps Cut Likely
Jul-07 03:44
- The RBA is widely expected to cut by 25bps at tomorrow’s policy meeting. This is the sell-side consensus, albeit with a small number of economists expecting rates to be left on hold. Financial market pricing is also consistent with a 25bps cut. Our bias is also for a 25bps cut, which would take the RBA cash rate to 3.60% (still above neutral rates). If realized this would be 75bps worth of easing delivered so far in this cycle.
- Data towards the end of June, for May monthly CPI, should give the RBA confidence to cut. Headline inflation was close to the bottom end of the RBA’s 2-3% target band, whilst the trimmed mean eased to 2.4%y/y. Services inflation is still running at a stronger pace, but we continue to move off recent highs for this sub-sector of inflation.
- Some focus will be on the language the RBA uses and whether it considers a 50bps cut or not (assuming a 25bps cut is delivered). We feel the most likely scenario for the RBA board will be to consider holding steady or a 25bps cut. International risks are now arguably lower compared to the first part of Q2. This outlook can change quite quickly, but at the current juncture there are likely to be less fears around the global outlook.
- See this link for the full preview.
JGBS: Bear-Steeper Holds At Lunch, US Tariff Letters To Go Out Today
Jul-07 03:17
At the Tokyo lunch break, JGB futures are slightly weaker, -6 compared to the settlement levels.
- Japan's weak wage data released Monday shows that it is becoming more difficult for the Bank of Japan to pursue interest-rate increases. Inflation-adjusted wages fell 2.9% on the year in May, compared with a 2.0% drop in April. With trade negotiations between the U.S. and Japan seemingly stuck and Washington threatening to impose even higher tariffs on Japanese goods, the economic outlook is "incredibly challenging," says Moody's Analytics economist Stefan Angrick. (DJ via BBG)
- Cash US tsys are flat to 3bps richer in today's Asia-Pac session after resuming trading following the long weekend.
- 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. Focus will be on tariff levels, particularly after Trump remarks late last week, where he stated tariff levels could be as high as 60-70% (although further details weren't provided).
- Cash JGBs are flat to 6bps cheaper across benchmarks, with a steeper curve. The benchmark 5-year yield is 0.7bp higher at 0.978% ahead of tomorrow’s supply.
- The swaps curve has bear-steepened, with rates 1-3bps higher. Swap spreads are generally tighter.
