NZD: Asia Wrap NZD/USD - Challenging Support Just Below 0.6000
The NZD/USD had a range of 0.5981 - 0.6015 in the Asia-Pac session, going into the London open trading around 0.5985, -0.40%. Risk is opening on the backfoot this morning as the world has to again digest Trump's next round of tariffs this time on Europe and Mexico, E-Mini -0.40%, NQ -0.40%. NZD/USD needs to hold this support just below 0.6000 to build for another test higher, the risk is the USD taking a leg higher. A break below this support and the market would look back towards the 0.5850/0.5900 area.
- NZ Data - Services PMI Firmer In June, But Still Comfortably Sub 50.0 : The New Zealand performance of services index rebounded somewhat in June, rising to 47.3 from 44.1 (per BNZ and Business NZ). We are still sub the early 2025 highs for the index, which was just above the 50 expansion/contraction point.
- NZ Data - Mixed June Card Spending Trends, Down For Q2: June card spending figures were mixed, with total spending down 0.2% m/m, after a 0.3% May gain. Card spending for retail rose 0.5%m/m, after a revised 0.1% fall in May.
- (Bloomberg) -- RBNZ balance sheet has shrunk further in June, according to data posted on the central bank website Monday in Wellington. Total assets declined to NZ$72.4b from NZ$77.3b at May 31, and from NZ$84.4b at June 20, 2024, smallest since November 2020.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : none.
- CFTC Data shows Asset Managers added slightly to their newly built longs in NZD +9229, the Leveraged community added slightly to their shorts last week -8654.
- AUD/NZD range for the session has been 1.0927 - 1.0972, currently trading 1.0970. TThe cross has broken out of its recent range and is now trying to push through the more pivotal 1.0950 area. Dips back to 1.0850/1.0900 should now be supported as the pair tries to build momentum to move higher.
Fig 1: NZD CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
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US FISCAL: Available Extraordinary Measures Pick Up Ahead Of Tax Date
Treasury had $144B in "extraordinary measures" available to keep the government financed as of June 11 per a release Friday. That is up from $84B a week earlier and the highest since April 28.
- However, TGA cash continues to fall, to $309B latest (lowest since early April) Combined with a pullback in Treasury cash ($376B), keeping the total resources available to avert an "x-date" in the summer at around $450B .
- There will be another uptick in Treasury cash in the coming days, and it's likely Treasury allowed some of the extraordinary measures to be rebuilt (ie not exercised) in anticipation of more cash coming in.
- This is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
FED: Two Cuts Priced This Year Headed Into FOMC Week
As we head into the June Fed meeting week, market pricing is reflective of the FOMC’s messaging (that we describe in our preview):
- The next cut is only fully priced by the October FOMC meeting, with September seeing a roughly 80% implied probability of bringing the next 25bp reduction.
- Exactly 50bp of cuts are priced through end-2025, implying two Q4 cuts.
- That’s a shift from just after the May meeting, after which the next cut was fully priced by September, and there were closer to three cuts priced for the rest of the year.
- Overall cuts are seen backloaded this year (after 15bp in September, 29bp of cuts priced in Q4 - Oct/Dec combined), but falls off in Q1 (just 21bp cuts priced, 9bp of cuts priced for January and 12bp for March)
FED: Summary Of Economic Projections: Higher 2025 Inflation, Weaker Growth
The MNI Markets Team’s expectations for the updated Economic Projections are below.
- As of the May meeting, the Federal Reserve staff – whose outlook tends to be broadly shared by the median Committee member – revised their forecasts for growth weaker in 2025 and 2026, “as announced trade policies implied a larger drag on real activity relative to the policies that the staff had assumed in their previous forecast. Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years. With the drag on demand expected to start earlier and to be larger than the supply response, the output gap was projected to widen significantly over the forecast period. The labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027."
- On inflation, "The staff's inflation projection was higher than the one prepared for the March meeting. Tariffs were expected to boost inflation markedly this year and to provide a smaller boost in 2026; after that, inflation was projected to decline to 2 percent by 2027."
- Our expectations for these changes fall somewhere in between those projections and the March SEP – a slightly higher unemployment rate, substantially higher inflation in 2025 but to a lesser extent in 2026, and weaker GDP growth this year. Longer-run variables should be unchanged.
MNI Markets Team Expectations For June 2025 Summary Of Economic Projections Medians
