NZD: Asia Wrap - NZD/USD Consolidates Towards 0.5900
The NZD/USD had a range of 0.5908 - 0.5925 in the Asia-Pac session, going into the London open trading around 0.5920, +0.10%. US yields bounced hard in reaction to the PPI print, reigning in its expectations for larger rate cuts. This saw the USD get a reprieve and bounce off its support area. The NZD/USD has moved lower overnight in reaction to this but while still firmly in the 0.5850-0.6150 range it's tough to discern any real direction. Risk has traded a little stronger this morning, E-minis +0.20%, NQU5 +0.05%. NZD has had a quiet session treading water above 0.5900 in our session.
- NZ PMI Bounces Strongly In July, Back In Expansion Territory : The July BNZ manufacturing PMI rose to 52.8, from a revised 49.2 outcome in June (originally reported as 48.8). This puts the index back to March levels, with Feb's read of 54.0 the recent cycle high for the index. We did get as low as 47.4 in May, so at face value this is a decent recovery in the index.
- NZ Food Prices Up 5%y/y In July, Fuel, Travel & Accommodation Up M/M : For July, New Zealand food prices rose 0.7%m/m, after June's +1.2% gain. Food prices are now up 5.0% y/y. Stats NZ noted: "Higher prices for the grocery food group, up 5.1 percent, contributed the most to the annual increase in food prices. The price increase for the grocery food group was due to higher prices for milk, butter, and cheese."
- “NEW ZEALAND ANNUAL NET IMMIGRATION SLOWED TO 13,701 IN JUNE" - BBG
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5925(NZD400m Aug 20). - BBG
- AUD/NZD range for the session has been 1.0969 - 1.0983, currently trading 1.0975. The Cross continues to trade sideways after stalling towards the 1.1000 area once more. The range looks to be 1.0850-1.1000 for now.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA: Bond Futures Mixed in Morning Session
- China's key bond futures are moving in opposite directions in a quiet morning session.
- Having finished yesterday higher by +0.19, the 10yr future is lower by just -0.02 today at 108.865.
- The 10yr remains between the 50-day EMA of 108.90 and the 100-day EMA of 108.80
source: Bloomberg Finance LP / MNI
- The 2yr future is lower by -0.01 today at 102.42, having finished yesterday higher by +0.03.
- The 2yr future remains below all major moving averages with the 20-day above at 102.45.
- The CGB 10yr is at 1.66%
STIR: RBA Dated OIS Remains Sharply Firmer Than Pre-RBA Levels
RBA-dated OIS pricing is modestly firmer across meetings today and remains 17–21bps above levels seen prior to 8 July RBA decision.
- The RBA held the cash rate steady at 3.85%, defying market expectations that had assigned a 92% probability to a 25bp rate cut.
- Markets now assign an 87% probability to a 25bp cut in August, with a total of 54bps of easing priced in by year-end—down from 75bps ahead of the RBA decision.
Figure 1: RBA-Dated OIS – Current Vs. Pre-RBA
Source: Bloomberg Finance LP / MNI
US: Is The Fed Chair Being Sacked Underpriced ?
A post on X from Congresswoman Anna Paulina Luna alluding to the imminent firing of Jerome Powell is adding fire to the situation. For the moment the market seems to be brushing this off and should it materialise is massively underpriced. What if the only way Trump can actually get yields lower is to replace the Fed Chair with someone who is willing to cut, and cut a lot. Should this happen it would further erode trust in US Assets and the USD would freefall once more. You would think the knee-jerk reaction would be higher in the Long-End but should an Uber Dove be appointed this could drive yields lower albeit with the front-end leading the charge and the curve steepening further.
- Rep. Anna Paulina Luna on X: “Jerome Powell is going to be fired. Firing is imminent.”
- (Bloomberg) -- “I think it sort of is,” President Donald Trump says when asked whether the renovations at the central bank were a fireable offense for Federal Reserve Chair Jerome Powell.
- Jim Bianco - “The betting market of “Will Trump fire Powell in 2025” has responded and the uptrend continues. See Graph Below.
Fig 1: Polymarket Betting - Will Trump Fire Powell In 2025
Source - @biancoresearch/Polymarket/Bloomberg
