AUD: Asia Wrap - AUD/USD Gets A Boost From Retail and US Tech
The AUD/USD has had a range of 0.6433 - 0.6460 in the Asia- Pac session, it is currently trading around 0.6460, +0.40%. A stellar earning report from Metta and Microsoft saw US stocks surge back into the close. This morning has seen US futures take another leg higher as the market digests the late earnings reports as well a trade deal with South Korea, ESU5 +0.95%, NQU5 +1.35%. Upward momentum now looks to be clearly breaking down and the pivotal support back towards 0.6350 will now be key to hold the bears in check. A better retail print added to the tailwinds, lets see how far the AUD can bounce while stocks keep moving higher.
- AUSTRALIA DATA: Discounting Boosts Q2 Spending But Still Down Per Person. Q2 retail sales volumes were stronger-than-expected, rising 0.3% q/q after 0.1%, the fourth consecutive rise bringing annual growth to 1.5%, the highest in almost three years. RBA Deputy Governor Hauser noted today that consumption growth has not recovered as expected given the pickup in real disposable income growth and low unemployment. The ABS noted that per capita volumes fell again signalling that spending remains soft.
- AUSTRALIA: “Misery Index” Suggest Consumer Confidence Should Have Improved More. RBA Deputy Governor Hauser talked today about how consumer confidence has not improved as much as the “misery index”, combination of inflation and unemployment, implied. He wondered if this was due to a “scarring effect” from high inflation driving real disposable incomes lower in recent years, but noted that the RBA has been unable to model it suggesting that there may be “something special now compared with the past”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD1.38b), 0.6500(AUD710m), 0.6465(AUD1.01b). Upcoming Close Strikes : 0.6600(AUD847m Aug 5), 0.6550(AUD831m Aug 5) - BBG
- AUD/JPY - Asia-Pac range 95.87 - 96.28, Asia is trading around 96.15. The pair could not hold above 97.00 on Monday and drifted lower overnight into the FOMC, but has not really bounced back as would be expected considering the move higher in stocks. The support between 95.00 - 96.00 held very well last week and the pair is looking to regain its momentum for a move higher but this price action does not look great. A close back below 95.00 would be problematic for bulls.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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BONDS: NZGBS: Closed Richer, Bank Economists Shift To No RBNZ Cut In July
NZGBs closed just off session bests, with benchmark yields 4-5bps lower.
- Former RBNZ Acting Governor Grant Spencer has been appointed to the central bank board for a five-year term.
- (Bloomberg) ANZ Bank Chief Economist Zollner no longer sees the RBNZ cutting the cash rate at the July 9 meeting, predicting instead it will keep the rate at 3.25%. “From there, we are now forecasting a cautious pace of cutting with 25bp cuts in August and November, with a third 25bp cut in February to 2.50%”: Zollner.
- (Bloomberg) BNZ no longer expects the RBNZ will cut the OCR next week, Head of Research Toplis says. Says the NZIER survey of business opinion was simply not weak enough to give confidence that the RBNZ will cut the OCR from 3.25%.
- Swap rates closed 4-6bps lower, with a flatter 2s10s curve.
- RBNZ dated OIS pricing closed flat to 3bps softer across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
- Tomorrow, the local calendar will be empty.
- On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 2.75% Apr-37 bond and NZ$50mn of the 2.75% May-51 bond.
FOREX: Asia FX Wrap - USD Makes New Lows, Doesn't Push On
The BBDXY has had a range of 1187.94 - 1190.09 in the Asia-Pac session, it is currently trading around 1189. The USD has traded sideways today after initially trying lower. CHINA CAIXIN PMI Surprises to the Upside: China's CAIXIN PMI Manufacturing in June rose to 50.4, ahead of an expected 49.3. The index was considerably up from the prior month's result of 48.3. This data captures the period post the agreement between the US and China on tariffs and potentially points to an improvement in activity. "US OFFICIALS WERE SEEKING PHASED DEALS WITH THE MOST ENGAGED COUNTRIES AS THEY RACE TO FIND AGREEMENTS BY JULY 9- FT - [RTRS]"
- EUR/USD - Asian range 1.1778 - 1.1807, Asia is currently trading 1.1790. While the USD remains on the back foot the EUR will continue to be supported, first support is back towards 1.1600. This move seems to be accelerating and will now be looking towards 1.2000 and beyond.
- GBP/USD - Asian range 1.3718 - 1.3749, Asia is currently dealing around 1.3740.This move higher now looks to have broken convincingly and with the USD looking like it is set for another leg lower Cable could potentially now target levels back towards 1.4200. Short-term momentum seems to be stalling first support back towards 1.3600.
- USD/CNH - Asian range 7.1501 - 7.1596, the USD/CNY fix printed 7.1534 Asia is currently dealing around 7.1580. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX -0.15%, Gold $3325, US 10-Year 4.208%, BBDXY 1189, Crude oil $64.78
- Data/Events : Italy Man PMI, France Man. PMI, Germany Man. PMI & Unemployment, EZ Man. PMI & CPI,
Fig 1: GBP/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
NZD: Asia Wrap - NZD/USD Dips Well Supported
The NZD/USD had a range of 0.6076 - 0.6097 in the Asia-Pac session, going into the London open trading around 0.6095, -0.03%. A tight range in a relatively quiet Asian session, US Equity futures have also drifted lower in Asia, ESU5 -0.1%, NQU5 -0.1%. The pair is trying to break through its recent highs and build momentum for a potential look back towards the 0.6400/0.6500 area. The relentless pressure on the USD is providing a tailwind and dips towards 0.6000 should continue to see demand.
- (Bloomberg) -- ANZ Bank New Zealand Chief Economist No longer sees RBNZ cutting cash rate at July 9 decision, predicting instead it will keep the rate at 3.25%
- “From there, we are now forecasting a cautious pace of cutting with 25bp cuts in August and November, with a third 25bp cut in February to 2.50% best interpreted as a placeholder for global headwinds, particularly confidence impacts”
- Q2 NZIER Business Confidence Firms, But Lack Of Demand Cited : "A net 27 percent of firms expect an improvement in general economic conditions over the coming months on a seasonally adjusted basis, which was a further lift from the net 23 percent in the March quarter."
- A huge bounce from sub 0.5900 and the NZD has now established a foothold above 0.6000, with the USD breaking lower the NZD/USD looks to be building for a potential break higher of its own. A clear break of 0.6100 could provide the momentum to begin a larger move higher, initially targeting the 0.6400/0.6500 area.
- CFTC Data shows Asset Managers have cut their shorts and are now beginning to build a long in NZD +12195, the Leveraged community maintained their short that had just been added to -11981.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5850(NZD404m July 1), 0.5800(649m July2)
- AUD/NZD range for the session has been 1.0784 - 1.0801, currently trading 1.0790. The cross is struggling to get any momentum for now. It looks to be in a 1.0750 - 1.0850 range for now as it awaits a catalyst to provide some clearer direction.
Fig 1: NZD/USD Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
