JPY: Asia Wrap -USD/JPY Drifts Lower Shrugging Off Wage Data.
The Asia-Pac USD/JPY range has been 147.34 - 147.75, Asia is currently trading around 147.35, -0.20%. USD/JPY initially tried higher after weaker than expected wage data, but good sellers towards 148.00 continue to cap for now. Price has moved very quickly away from the pivotal 151/152 area much to the relief of Institutional Yen longs and the BOJ. CFTC Data shows leveraged accounts had started to aggressively build Yen shorts last week so this quick move lower would be a bitter pill to swallow. Price is holding above the support area around 146.50/147.00 for now, a move sub 145.00 is needed to turn momentum lower once more, until then the 145.00-151-00 range should dominate.
- "HAYASHI: AGREED W/ US THAT JAPAN PHARM WON'T BE AT DISADVANTAGE” - BBG
- "JAPAN'S KONO: NECESSARY TO RAISE RATES TO STRENGTHEN YEN" - BBG
- (MNI) Japan's inflation-adjusted real wage, a key gauge of household purchasing power, remained in negative territory for a sixth consecutive month in June but narrowed to -1.3% from May's 2.6% decline, preliminary data from the Ministry of Health, Labour and Welfare showed Wednesday.
- (Bloomberg) - The Japanese currency’s recent strength can be expected to wane somewhat after wages data came in substantially weaker than had been expected. That’s likely to be seen as reinforcing the BOJ’s instinctive policy caution, pushing traders to pare back already modest bets on a rate hike this year.
- Options : Close significant option expiries for NY cut, based on DTCC data: 147.00($1.5b).Upcoming Close Strikes : 147.65($1.14b Aug 7), 148.50($1.24b Aug 7) - BBG.
- CFTC data shows asset managers surprisingly added slightly to their JPY longs +75119( Last +72326), while leveraged funds aggressively added to their newly built short JPY position -31280(Last -11571).
Fig 1 : USD/JPY Spot Weekly Chart
Source: MNI - Market News/Bloomberg Finance L.P
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STIR: RBNZ-Dated OIS Firmer Than Pre-RBNZ Decision Levels (May)
RBNZ dated OIS pricing is little changed across meetings today. 3bps of easing is priced for this week's meeting, with a cumulative 31bps by November 2025.
- Notably, pricing is 9-15bps firmer across 2025 meetings compared to pre-RBNZ decision levels on May 28.
- (Bloomberg) -- A majority of members in the NZIER Monetary Policy Shadow Board recommend that the Reserve Bank of New Zealand keep the cash rate on hold at 3.25% at the July 9 review. While activity remains soft in the New Zealand economy, there are both upside and downside risks to inflation in the near term, given the recent pick-up in annual CPI inflation and heightened global risks.
Figure 1: RBNZ Dated OIS Today vs. Pre-May RBNZ Decision Levels (%)
Source: MNI - Market News / Bloomberg
CHINA: Bond Futures Drift Lower in the Morning Session
- China's bond futures have drifted marginally lower in a lackluster trading session this morning despite a sizeable liquidity withdrawal from the OMO.
- The 10yr is down -0.01 to 109.10 to maintain its position above all major moving averages. The nearest being the 20-day EMA of 109.02
- The 2yr is down -0.01 at 102.50 and is between the 50-day EMA of 102.50 and the 20-day EMA of 102.49
- The CGB 10yr is at 1.64%.
- Wednesday sees the release of June PPI and CPI, which have both struggled to post positive outcomes in recent months.
RBA: MNI RBA Preview-July 2025: 25bps Cut Likely
- The RBA is widely expected to cut by 25bps at tomorrow’s policy meeting. This is the sell-side consensus, albeit with a small number of economists expecting rates to be left on hold. Financial market pricing is also consistent with a 25bps cut. Our bias is also for a 25bps cut, which would take the RBA cash rate to 3.60% (still above neutral rates). If realized this would be 75bps worth of easing delivered so far in this cycle.
- Data towards the end of June, for May monthly CPI, should give the RBA confidence to cut. Headline inflation was close to the bottom end of the RBA’s 2-3% target band, whilst the trimmed mean eased to 2.4%y/y. Services inflation is still running at a stronger pace, but we continue to move off recent highs for this sub-sector of inflation.
- Some focus will be on the language the RBA uses and whether it considers a 50bps cut or not (assuming a 25bps cut is delivered). We feel the most likely scenario for the RBA board will be to consider holding steady or a 25bps cut. International risks are now arguably lower compared to the first part of Q2. This outlook can change quite quickly, but at the current juncture there are likely to be less fears around the global outlook.
- See this link for the full preview.
