AUD: Asia Wrap - Quiet Session
The AUD/USD has had a range of 0.6543 - 0.6561 in the Asia- Pac session, it is currently trading around 0.6545. A tight range in a very quiet Asian session, the announcement that a trade deal has been finalised with China and that the section 899 or so called revenge tax was removed from Trump’s bill has had little impact so far. The USD has broken some key levels and is still looking vulnerable, this could see the AUD/USD continue to probe above 0.6550 looking to gain some momentum to ultimately break higher. CFTC data showed that both Asset managers and Leverage Funds remain short the AUD, this would potentially be pared back should the move higher accelerate.
- Bloomberg - “The US and China finalized a trade understanding reached last month in Geneva, Howard Lutnick said, adding that the White House has imminent plans to reach agreements with a set of 10 major trading partners. The US will ease China trade limits after receiving rare earths.”
- “Republican lawmakers will remove the Section 899 protective measure — or so-called revenge tax — from Trump’s bill after a request from Scott Bessent.”(BBG)
- The AUD/USD is attempting to break through the top of its recent range as the pressure on the USD increases.
- The AUD needs a sustained break above 0.6550/0.6600 to potentially start building momentum for an extended move higher, a close back above 0.6600 and the focus would turn towards the 0.6900/0.7000 area.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD526m), 0.6500(AUD 480m), 0.6570(AUD 350m). Upcoming Close Strikes : 0.67500(AUD1.27b July 2).
- AUD/JPY - Today's range 94.45 - 94.85, it is trading currently around 94.55. Choppy price action as the pair establishes a range between 92.00 - 96.00. Should risk build on this move, focus could turn back to the 96.00 area.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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NEW ZEALAND: VIEW: Westpac Expects Unemployment Rate To Rise In 2025
Filled jobs fell 0.1% m/m in April signalling that employment remains subdued and Westpac notes that the trend is “flat to slightly downward”. It expects the unemployment rate to rise from Q1’s 5.1% this year even as the economy recovers since the labour market lags.
- Westpac observes that “here was a combined 0.3% downward revision to previous months”.
- Also, “the weekly snapshots provided by Stats NZ were notably softer in the second half of April. It’s possible that this was affected by the timing of public holidays – with Easter Monday and Anzac Day falling in the same week, many people will have taken the opportunity for an extended break. The snapshots in the next few weeks should reveal whether this was the case.”
- “Separately, we’ve seen that job advertisements remain at very low levels, indicating that businesses are still not back in hiring mode – some may still be finding themselves overstaffed, having held on to workers during the slowdown period.”
- “Construction and business services continue to see the biggest job losses, while public services (including health and education) are gradually rising. No other sectors are showing a clear trend one way or the other, aside from a lift in jobs in the relatively small mining sector.”
US TSYS: Asia Wrap - 2s10s Steepens
The TYM5 range has been 110-09 to 110-15 during the Asia-Pacific session. It last changed hands at 110-09, down 0-07 from the previous close.
- The US 2-year yield has drifted lower, dealing around 3.965%, down 0.02 from its close.
- The US 10-year yield has edged higher, dealing around 4.467%, up 0.02 from its close.
- This has seen the yield curve steepen in Asia - 2s10s +3.73 at 49.583.
- (Bloomberg) “The JGB 40-year sale has come in weak after all. The bid-to-cover dropped back to 2.21, the weakest since July. And the yield of 3.135% is above the poll estimate of 3.085%. That global bond bounce may fade.”
- “The Fed’s Tom Barkin said elevated uncertainty has led businesses to freeze hiring and hold off on future investment decisions. Neel Kashkari said there’s a “healthy debate” among policymakers about whether to look through the inflation effect of tariffs as a transitory shock, or a lasting issue.”(BBG)
- " FED'S WILLIAMS: WE HAVE TO BE VERY AWARE THAT INFLATION EXPECTATIONS COULD SHIFT IN ANY WAYS THAT COULD BE DETRIMENTAL - [RTRS]
- The 10-year look likely to see supply on any dips in yield in the short-term, should yields hold above 4.35/40% the target looks to be the 4.75% area. Watch for any announcements though relating to the SLR, this could have an impact on a market that is already quite short.
