JPY: Asia Wrap - USD/JPY Tops Out Toward 148.00, Trades Offered In Asia
The Asia-Pac USD/JPY range has been 147.20-147.87, Asia is currently trading around 147.25, -0.35%. USD/JPY found good demand towards 146.00 and then reacted higher to the move in US yields by reversing the whole move lower. Price continues to hold above the support area between 146.00/147.00, a sustained move below this support is needed to turn the momentum potentially lower again. While this plays out it looks to be more range trading within the wider 146.00-151.00 range. The pair has traded heavily all throughout the Asian session after stalling towards 148.00.
- Japan Q2 GDP Beats, Aided By Strong Capex, Consumption Slightly Firmer: Japan Q2 GDP was better than market expectations. Q/Q growth rose 0.3%, against a 0.1% forecast, while the Q1 outcome was revised up a touch to 0.1% from the original flat estimate. In terms of the detail, private consumption rose 0.2% q/q, versus 0.1% forecast, while Q1 was revised up to 0.2% (originally reported as 0.1%). Capex was up 1.3%, versus 0.7% expected (Q1 was revised down 0.1% to a 1.0% gain). Net exports contributed 0.3% to growth (0.1% was forecast), while inventories took 0.3% off growth, in line with forecasts. Nominal GDP rose 1.3%q/q, a touch below market forecasts of 1.4%.
- "JAPAN FINMIN KATO: MUST CLOSELY WATCH ECONOMIC, PRICE BACKDROP BEHIND RECENT COMMENTS BY BUSINESS SECTOR CALLING ON BOJ TO RAISE RATES, THOUGH SPECIFIC MONETARY POLICY DECISION UP TO BOJ - [RTRS]"
- "JAPAN ECONOMY MINISTER AKAZAWA: U.S. TARIFF LIKELY TO PUSH DOWN JAPAN'S REAL GDP BY 0.3-0.4%, WON'T URGE BOJ TO SET RATES AT PARTICULAR LEVEL - [RTRS]"
- Options : Close significant option expiries for NY cut, based on DTCC data: 145.00($977m), 150.00($685m).Upcoming Close Strikes : 150.00($846m Aug 19), 148.00($809m Aug 20) - BBG.
Fig 1 : USD/JPY Spot 2H Chart
Source: MNI - Market News/Bloomberg Finance L.P
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CHINA: Bond Futures Mixed in Morning Session
- China's key bond futures are moving in opposite directions in a quiet morning session.
- Having finished yesterday higher by +0.19, the 10yr future is lower by just -0.02 today at 108.865.
- The 10yr remains between the 50-day EMA of 108.90 and the 100-day EMA of 108.80
source: Bloomberg Finance LP / MNI
- The 2yr future is lower by -0.01 today at 102.42, having finished yesterday higher by +0.03.
- The 2yr future remains below all major moving averages with the 20-day above at 102.45.
- The CGB 10yr is at 1.66%
STIR: RBA Dated OIS Remains Sharply Firmer Than Pre-RBA Levels
RBA-dated OIS pricing is modestly firmer across meetings today and remains 17–21bps above levels seen prior to 8 July RBA decision.
- The RBA held the cash rate steady at 3.85%, defying market expectations that had assigned a 92% probability to a 25bp rate cut.
- Markets now assign an 87% probability to a 25bp cut in August, with a total of 54bps of easing priced in by year-end—down from 75bps ahead of the RBA decision.
Figure 1: RBA-Dated OIS – Current Vs. Pre-RBA
Source: Bloomberg Finance LP / MNI
US: Is The Fed Chair Being Sacked Underpriced ?
A post on X from Congresswoman Anna Paulina Luna alluding to the imminent firing of Jerome Powell is adding fire to the situation. For the moment the market seems to be brushing this off and should it materialise is massively underpriced. What if the only way Trump can actually get yields lower is to replace the Fed Chair with someone who is willing to cut, and cut a lot. Should this happen it would further erode trust in US Assets and the USD would freefall once more. You would think the knee-jerk reaction would be higher in the Long-End but should an Uber Dove be appointed this could drive yields lower albeit with the front-end leading the charge and the curve steepening further.
- Rep. Anna Paulina Luna on X: “Jerome Powell is going to be fired. Firing is imminent.”
- (Bloomberg) -- “I think it sort of is,” President Donald Trump says when asked whether the renovations at the central bank were a fireable offense for Federal Reserve Chair Jerome Powell.
- Jim Bianco - “The betting market of “Will Trump fire Powell in 2025” has responded and the uptrend continues. See Graph Below.
Fig 1: Polymarket Betting - Will Trump Fire Powell In 2025
Source - @biancoresearch/Polymarket/Bloomberg
