NZD: Asia Wrap - NZD/USD Trying To Bounce Off 0.5800 Support

The AUD/USD has had a range of 0.6471 - 0.6494 in the Asia- Pac session, it is currently trading around 0.6475, -0.10%. US equities took a run lower on the news Trump has fired Fed Governor Cook, down close to 0.50% at one point. Risk stabilised from there and a statement from the Governor saying she would not be stepping down and would fight the allegations has seen some of these losses pared back. The AUD finds itself firmly back in the middle of its recent multi-month range of 0.6350-0.6650 and will need a clearer direction from both the USD and risk to embark on a decent move in either direction

• RBA Minutes: Too Much Uncertainty To Determine Pace Of Future Easing. Given the August decision to cut rates was unanimous, the discussion regarding the outlook was the important part of the RBA meeting minutes. They were clear that further rate cuts were consistent with underlying inflation returning to the 2.5% mid-point of the target band. It was the pace of future easing that “was not yet possible to judge” with the risks around the outlook “in both directions.
• AUSTRALIA: Policy Model Suggests Stable Rates. Our simple RBA policy reaction function is showing that based on the growth and inflation outlook rates should stay around 3.6% through H1 2026 with no further easing as underlying inflation remains above the 2.5% mid-point of the target band. The model includes a one quarter lead of the trimmed mean inflation gap, thus its return to zero in Q4 2027 is not yet factored in the output. As Governor Bullock has said previously, the further out a forecast is the more uncertainty there is around it. It is worth noting that econometric estimates are just a signal and not a prediction.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6400(AUD622m), 0.6455(AUD350m), 0.6475(AUD346m). Upcoming Close Strikes : 0.6525(AUD695m Aug 27), 0.6500(AUD680m Aug 29) - BBG
• AUD/JPY - Asia-Pac range 95.37 - 95.82, Asia is trading around 95.65. The pair has topped out back towards the 96.00 area this morning helped by the sacking news. This pair’s direction will be determined by the market's ability to follow on with this risk-on move or not.

Fig 1: AUD/USD spot 2H Chart

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

• China's bond futures are all lower in morning trade as the OMO withdrew liquidity.  
• The 10-year bond future is lower by +0.06 at 107.86 after yesterday's strong rally where it added +0.27, yet remains below all major moving averages.  The nearest (the 20-day EMA) is above at 108.13.
• The 2-year is lower by -0.01 at 102.37, having trade briefly above the 20-day EMA of 102.38.

• The 10-year CGB is softer today, higher by +1bp at 1.77%

The TYU5 range has been 111-26+ to 112-03+ during the Asia-Pacific session. It last changed hands at 111-27, down 0-04 from the previous close. 

• The US 2-year yield has edged lower trading around 3.713%, down 0.01 from its close.
• The US 10-year yield has moved higher trading around 4.3025%, up 0.03 from its close.
• This has seen the yield curve steepen in Asia - 2s10s +3.57 at 58.514, 5s30s +3.72 at 114.002.
• 10-Year Yields held its 4.35% pivot area when Powell gave the market a reason to add to longs helping yields move lower. While this area continues to hold, bounces should be met with demand. First target the recent lows around 4.18% then the bottom of the range towards 4.10% comes back into focus. Renewed loss of trust in Fed Independence could bring back headwinds to this trade and put pressure back on the long-end though.
• Jens Nordvig on X: “Kugler recently resigned early and Cook has been terminated from the Fed Board of Governors by President Trump this evening. The question is if there will be more premature changes at the Fed board in the period ahead (resignations or early terminations). What is most likely in the coming year?”
• Bloomberg - “Cook is likely to sue to challenge as allegations of fraud are likely insufficient to meet the “for cause” removal standard unless actual wrongdoing is established.”
• "FED'S COOK: SAYS NO CAUSE EXISTS FOR HER TO BE FIRED AND SHE WILL NOT RESIGN, SAYS TRUMP HAS NO AUTHORITY TO FIRE HER, WILL CONTINUE TO CARRY OUT DUTIES - [RTRS]"

• Data/Events:  Philadelphia Fed Non-Man Activity, Durable Goods Orders, FHFA House Price Index, Richmond Fed Man Index/Bus Conditions, Conf. Board Consumer Confidence, Dallas Fed Services Activity

  Fig 1: 10-Year US Yield 2H Chart

  

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