NZD: Asia Wrap - Trades Softer As NZ Sees Slower Growth
The NZD/USD had a range of 0.5921 - 0.5948 in the Asia-Pac session, going into the London open trading around 0.5925. US stocks stabilised in the Asian session but the NZD has traded softer on the NZ Budget showing a weaker economy with less tax revenue.
- The NZ government continues to expect the budget to be in surplus in FY29, while the timing is unchanged the amount has been revised down and is flat as a share of GDP. From FY26 deficits were revised higher due to weaker revenue as growth was revised down near-term and unemployment higher.
- *NEW ZEALAND BUDGET SHOWS WEAKER ECONOMY, LESS TAX REVENUE
- *NEW ZEALAND SEES BUDGET DEFICIT OF NZ$12.1B IN 2026”
- The NZD/USD has traded softer for most of our session albeit not running away.
- The NZD continues to look comfortable in a 0.5850/0.6050 range and awaits a catalyst to provide the impetus to break-out.
- The support back towards 0.5800 has held very well, and while this continues to hold expect buyers to be around on dips. The first target is the highs just above 0.6000, a break here is needed to regain momentum.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none, Upcoming Strikes : 0.5705(NZD805m May 23), 0.5980(NZD513m May26)
AUD/NZD range for the session has been 1.0822 - 1.0877, currently trading 1.0875. The Cross has bounced in our session as the NZD trades softly after the Budget. A sustained break above 1.0920 is needed to turn the focus higher, until then expect supply on bounces.
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
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US TSYS: Asia Wrap - Yields Largely Unchanged
TYM5 has traded slightly lower with a range of 110-22 to 110-27+ during the Asia-Pacific session. It last changed hands at Heading 110-23, down 0.03 from the previous close.
- The US 10-year yield is unchanged, dealing around 4.41%
- The US 2-year yields is unchanged, dealing around 3.77%
- Risk has turned lower with concerns President Trump will fire Fed Chairman Jerome Powell adding to a market that is already consumed with uncertainty.
- “President Donald Trump warned the US economy may slow if the Federal Reserve doesn’t move to immediately reduce interest rates.”(per BBG)
- Dips back towards 4.25% support in US 10-years have found sellers first up as US yields continue to rise on fears of a rotation out of US assets.
- Data/Events : The IMF releases its World Economic Outlook, Fed Vice Chair Philip Jefferson as well as regional Fed chiefs Tom Barkin (Richmond), Neel Kashkari (Minneapolis) and Patrick Harker (Philadelphia) are scheduled to speak later Tuesday
FOREX: Antipodean Wrap - AUD & NZD Making New Highs
With hopes of any early trade deal fading, the market very quickly returned to what is now becoming a consensus trade, sell the USD. USD/CNH is stable but look at EUR/CNH and CNH/JPY to see how the Yuan is being managed lower. “ (Bloomberg) -- New Zealand exporters had a bumper start to the year, buoyed by a lower currency and higher global prices for key commodities such as milk powder and meat. Exports surged to a record NZ$20.6 billion ($12 billion) in the three months through March, Statistics New Zealand said Tuesday in Wellington. That’s a seasonally adjusted 11% jump from the fourth quarter and 19% more than the year-earlier period.”
- AUD/USD - Asian range 0.6402 - 0.6436, AUD has traded better bid for most of the Asian session. After showing some signs of exhaustion at the end of last week the AUD has broken and held above the pivotal 0.6400 area. Dips back to the 0.6300 area should continue to find demand while the market obsesses about a lower USD.
- AUD/JPY - Asian range 90.12 - 90.57. Price goes into the London open towards the lows trading around 90.20, still firmly within last week’s range of 89.50-91.50. Support towards 90.00 continues to hold for now, a break through here and the downward trend could be reinstated.
- NZDUSD - Asian range 0.5981 - 0.6021, NZ exports hit a record on low currency and high commodities. The market is going into London pressing new highs. Thoughts of a reversion were fleeting as upward momentum is reignited. Expect buyers to return first around 0.5920/50, then around 0.5850/80.
- AUD/NZD - Asian range 1.0682 - 1.0706, the cross has drifted sideways in the Asian session.
Fig 1 : AUD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg
GOLD: Close To $3500, Moving In Line With USD Weakness
Gold is fast approaching the $3500 level. Session highs rest at $3494.8, while we were last near $3486/87, still up 1.8% for the session so far. Monday's gain for bullion was 2.92%.
- Gold is moving in lockstep with USD weakness, the chart below shows bullion plotted against the BBDXY index, which is inverted on the chart.
- The inability of the USD to sustain the earlier modest rebound has likely only added to gold's current bullish momentum. The USD remains firmly under pressure, with continued unwinding of US exceptionalism in focus.
- As we noted earlier, the RSI (14) on gold is comfortably into overbought territory, not at 79.6, but we are still under 2024 extremes for this metric.
Fig 1: Gold Spot Price & USD BBDXY Index (Inverse)
Source: MNI - Market News/Bloomberg
