NZD: Asia Wrap - NZD/USD Trades Heavy

Despite the announcement of an EU-US trade deal, gold is little changed in today’s APAC session. It seems to have priced in trade optimism on Friday when it fell almost a percent and is currently 0.1% higher at $3340.7/oz. With US-China talks and Wednesday’s Fed decision now in focus as well as significant US data over the week, bullion and other markets are range trading. The USD index and US yields are little changed.

• Equities are generally stronger with Euro stoxx futures +1.0% & S&P +0.4%. In Asia, the Hang Seng is up 0.4% but the Nikkei is down 1.0%. Oil prices are moderately higher with WTI +0.4% to $65.45/bbl. Copper is down 0.1%. Silver is up 0.2% to $38.23 after reaching $38.31 earlier.
• Markets are watching this week’s August 1 tariff deadline closely as negotiations with the US continue. In addition, there are the Fed’s decision on July 30, Q2 GDP & June PCE July 30 & 31, and US July payrolls August 1. A dovish Fed or weak US data would be supportive of gold prices.
• There are few events today with only the July Dallas Fed manufacturing and the ECB survey of monetary analysts released. 

The NZD/USD had a range of 0.6011 - 0.6033 in the Asia-Pac session, going into the London open trading around 0.6011, -0.10%. The pair traded with a heavy tone all through Friday but has attempted to bounce this morning as the market gets news of a US-EU trade deal. Price will need a sustained break back above the 0.6050/0.6100 area to signal a potential base might be in place. There is lots of event risk coming up this week and we are also heading into the corporate month-end so there could be a demand for USD’s starting today but the flow is more likely to be executed tomorrow.

• NEW ZEALAND: Labour Market Remained Weak In Q2. June filled jobs rose a lacklustre 0.1% m/m but down 1.1% y/y following a downwardly-revised -0.1% m/m & -1.7% y/y. This left Q2 down 0.3% q/q and -1.6% y/y after -0.1% & -1.7% in Q1, suggesting that while the pace of deterioration has slowed, the labour market continues to struggle. Q2 labour data is published on August 6 and this data implies (there is a 50% correlation between quarterly rates) that employment may have fallen again after rising 0.1% q/q in Q1, which would increase the chance of an August rate cut.
• (Bloomberg) -- New Zealand farmers are more confident about current economic conditions but less optimistic about the future, according to a survey conducted by Federated Farmers.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6000(NZD395m July 30), 0.5965(NZD424m July 31). - BBG
• CFTC Data shows Asset Managers again reduced their newly built longs in NZD +5034(Last +8192), the Leveraged community added slightly to their shorts last week -7328(Last -6744).
• AUD/NZD range for the session has been 1.0914 - 1.0933, currently trading 1.0925. The cross moved higher in response to the NZ CPI. Dips back to 1.0850/1.0900 should continue to find support as the pair tries to build momentum to move higher. 

Fig 1: NZD CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P

The Asia-Pac USD/JPY range has been 147.52 - 148.02, Asia is currently trading around 147.65, -0.03%. USD/JPY found good demand around 146.00 last week and has bounced nicely off its first support. Some demand for USD’s was finally seen as the market takes some risk off the table heading into this week which is filled with event risk and also month-end. Corporate month-end to start the week with most of the USD demand most likely to be seen tomorrow.

• First Squawk on X: “JAPAN SAYS ONLY 1–2% OF $550B U.S. FUND WILL BE DIRECT INVESTMENT; REST TO BE LOANS. Japan expects that just 1% to 2% of its recently announced $550 billion partnership fund with the U.S. will involve actual capital investment, with the remainder provided through loan-based financing, officials said.”
• (Bloomberg) - "Japan’s pledge for a $550 billion US investment fund may have been key to Tokyo getting a trade deal, but neither side seems to agree on what it looks like, Gearoid Reidy writes. The market’s sigh of relief about this pact might still be premature.”
• “The Bank of Japan is likely to hold at its meeting in the coming week. We’ll watch for its assessment of Japan’s trade deal with the US and view on the impact of tariffs on the economic outlook. Inflation pressures still point to the need to pare stimulus. We expect that in October.” - BBG
• "JAPAN ISHIBA CABINET APPROVAL RATING DROPS TO 34.6% IN FNN POLL" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 148.00($1.02b),148.25($1.04b).Upcoming Close Strikes : 145.00($1.3b July 29), 146.00($971m July 31) - BBG.
• CFTC data shows Asset managers surprisingly added slightly to their JPY longs +72326( Last +71610), while leveraged funds have slightly reduced their newly built short JPY position -11571(Last -12606).

Fig 1 : JPY CFTC Data

Source: MNI - Market News/Bloomberg Finance L.P