NZD: Asia Wrap - NZD/USD Trades Heavy Below 0.5900

The BBDXY has had a range of 1206.79 - 1208.95 in the Asia-Pac session, it is currently trading around 1208, +0.10%. The USD continues to see profit-taking as the market pares back some risk as we head into Jackson Hole at the end of the week. Depending on the contents of Powell's speech this could change very quickly but the BBDXY looks to be putting in a third higher low which would be a worrying sign to the bears that we could be putting in a short-term base. A sustained break below 1197/1195 is needed to regain the momentum lower and retest the year's lows, but risk is more likely skewed to the USD shorts continuing to be reduced into Powell's speech.

• EUR/USD -  Asian range 1.1622 - 1.1651, Asia is currently trading 1.1635. The market is trading sideways in a 1.1600-1.1750 range heading into Jackson Hole. The pair is unlikely to extend too far as the market awaits Powell's speech.
• GBP/USD - Asian range 1.3462 - 1.3493, Asia is currently dealing around 1.3475. Having broken back above its pivot look for dips to again be supported, with risk retracing the pair is probing its first support seen towards 1.3400.
• USD/CNH - Asian range 7.1868-7.1931, the USD/CNY fix printed 7.1384, Asia is currently dealing around 7.1890. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
• Cross asset : SPX -0.30%, Gold $3320, US 10-Year 4.31%, BBDXY 1208, Crude Oil $62.41
• Data/Events : EZ CPI, Germany PPI

Fig 1: BBDXY Spot Daily Chart

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

ACGBs (YM +4.5 & XM +3.5) are richer but off session bests.

• The local market has benefited from positive spillover from a strong post-RBNZ rally in NZGBs.
• The RBNZ cut the OCR by 25bps to 3.0%, as expected (4-2 vote; some favoured a 50bp cut), with forward guidance that saw the OCR averaging 2.71% in 4Q 2025, 2.56% in 2Q 2026, and 2.59% in 3Q 2026 (down from May's trough forecast of 2.9%). It indicated scope for further rate cuts if inflation pressures ease; forecasts imply a good chance of two more 25bp cuts.
• Cash US tsys are little changed in today's Asia-Pac session after modest gains.
• Cash ACGBs are 4bps richer with the AU-US 10-year yield differential at -2bps.
• The bills strip has bull-flattened, with pricing flat to +4.
• RBA-dated OIS pricing is softer across meetings today. A 25bp rate cut in September is given a 30probability, with a cumulative 37bps of easing priced by year-end (based on an effective cash rate of 3.59%).
• Tomorrow, the local calendar will see S&P Global PMIs (P) and Consumer Inflation Expectation data.
• The AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond on Friday.

The NZD/USD had a range of 0.5821-0.5900 in the Asia-Pac session, going into the London open trading around 0.5935, -0.95%. A dovish RBNZ that contemplated a cut of 50bps saw NZD/USD break lower and is now probing some pivotal support around the 0.5800/0.5850 area. Some of the crosses have broken some key levels AUD/NZD above 1.1000 & NZD/JPY below 86.50. Risk has extended its move lower this morning, E-minis -0.30%, NQU5 -0.45% adding to the weight in the NZD.

• RBNZ: OCR Path “Signals” Further Easing. The pace of NZ’s economic recovery appears to have disappointed the MPC with Q2 GDP expected to contract again. The MPC decided to cut rates 25bp to 3% by a vote of 4-2 with two members voting for a 50bp reduction. The MPC said that the OCR path was a “central expectation” “needed to ensure inflation” is sustainably at the band mid-point and it was revised lower which was said to likely provide “sufficient signaling effects”. The revised OCR path now troughs 30bp below the May assumption at 2.55% - the bottom of the RBNZ’s estimated neutral range.
• "RBNZ GOV HAWKESBY: NEXT TWO MEETINGS ARE LIVE, NO DECISIONS HAVE BEEN MADE, OCR PROJECTION TROUGHS AROUND 2.5%, CONSISTENT WITH FURTHER CUTS” - [RTRS]
• "RBNZ GOV HAWKESBY: NEVER HAD A 4 TO 2 VOTE BEFORE, RANGE OF VIEWS AROUND THE RISKS TO OUTLOOK, MPC DEBATED RISKS AROUND MORE AGGRESSIVE CUT - [RTRS]"
• Whole Milk Prices Edge Higher At Latest Auction : Overnight the whole milk powder auction (held around 2 times per month) saw average prices rise 0.3% to $4036. Whole milk powder prices are up from recent lows but still around 7.7% off 2025 highs (albeit presenting a supportive backdrop for NZ's terms of trade).
• Options : Closest significant option expiries for NY cut, based on DTCC data:  0.5925(NZD400m), 0.5950(NZD320m). Upcoming Close Strikes :  0.5980(NZD660m Aug 21). - BBG
• AUD/NZD range for the session has been 1.0939 - 1.1064, currently trading 1.1035. The dovish RBNZ has seen the Cross surge higher breaking back above 1.100 convincingly. This move should now see dips supported as it looks to build momentum to push higher.

Fig 1: NZD/USD Spot Daily Chart

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