AUSSIE BONDS: Cheaper & Near Worst Levels But A Subdued Session

Gold is 0.3% higher at a new all-time high of $2631.13 in today’s Asia-Pac session, after closing 1.4% higher on Friday.

• Friday’s move was aided by dovish comments from the Fed’s Waller. Governor Waller expressed concern with inflation undershooting, not overshooting, noting firms' limited pricing power and wage inflation coming down, and that inflation is potentially on a lower path than had previously been expected.
• However, Fed Governor Bowman (voter) issued a statement explaining why she dissented against the FOMC’s decision to cut the Fed Funds target range by 50bps last Wednesday.
• Projected rate cuts into early 2025 bounced off early session lows, latest vs. late Thursday levels (*) as follows: Nov'24 cumulative -37.8bp (-35.9bp), Dec'24 -75.0bp (-72.4bp), Jan'25 -108.5bp (-106.5bp).
• Looking ahead to today’s US calendar we see more Fed speak from Bostic, Goolsbee and Kashkari, alongside data including flash PMI data from S&P Global.
• From a technical perspective, having pierced initial resistance at $2,613.3 on Friday, the next resistance is seen at $2,642.7, the 2.236 projection of the Jul 25 - Aug 2 - Aug 5 price swing.
• Analysts at Quantix Commodities say that although a near-term pull-back in prices is possible, given extreme positioning, the beginning of a Fed easing cycle will undoubtedly be bullish for gold.

•  Asian stocks started the week strongly after the PBOC reduced the interest rate on a lesser used liquidity tool.
• The 14-day repo rate is in place to support the daily used 7-day repo rate in the event of holidays.
• With the upcoming National Day Holidays, the 14-day rate was reduced following July’s cut of the 7-day rate.
• For many regional equity investors this was a sign of things to come that the PBOC is willing to support the ailing Chinese economy and that the potential for further stimulus remains.
• In India, data shows that net foreign purchases this quarter are the strongest they have been since 2023, unsurprisingly given the outlook for GDP growth.
• Last week saw investors in India starting to look forward to interest rate cuts from the RBI, buying interest rate sensitive stocks like banks and real estate.  Whilst it may be some time off before the RBI cuts rates (given the seasonality expected in September data), the October 9 meeting could put rate cuts in play for the following meeting.
• The Nifty 50 firmed 2.03% last week.
• Trade data out this morning in Korea continues to show that the semi-conductor boom is continuing rising by 26.2% in the first part of September.
• The push pull between the Central Bank and Politicians in the desire to cut rates will be a driving factor for Korea in the coming months.
• Having risen 0.70% last week, the KOSPI is up 0.33%.      The relative underperformance of the KOSPI is possibly a reflection of the disparity of views between the BOK and politicians.
• Elsewhere in the region, Malaysia is bucking the trend off -0.25% ahead of its upcoming CPI number and the Jakarta composite is following this trend down 0.36%

CFTC positioning data generally saw shifts towards the USD in the lead up to last week's Fed announcement. The table below outlines the weekly change and outright positions across leveraged investors and asset managers. This data is the for the week ending the 17th of September (so last Tuesday). 

• By currency, in the leveraged space, we saw extension of shorts against the USD, for JPY and AUD, while GBP longs were cut back noticeably. CAD shorts were added to as well.
• For asset managers the modest yen long was added to, but EUR and GBP longs were cut. GBP/USD's position for asset managers is almost back to flat. AUD/USD shorts were added to in a decent size as well. 

Table 1: CFTC FX Positioning Data As At End Sep 17 2024 

Source: CFTC/MNI - Market News/Bloomberg