GOLD: Bullion Trending Higher This Week On Fed & Trade Uncertainty

In a data light week, the focus will be on Wednesday’s CPI for May which consensus expects to ease to 2.3% from 2.4%. Trimmed mean ticked up to 2.8% in April and has been around 2.7-2.8% since December suggesting a stalling in disinflation. The next RBA meeting is July 7-8.

• The S&P Global preliminary June PMIs are released today. They are holding just above the breakeven 50-mark signalling moderate growth in activity.
• Q2 job vacancies are out on Thursday. They fell 4.5% q/q in Q1 and monthly measures have been trending lower. 

The NZD had a range Friday night of 0.5964 - 0.6009, Asia is trading around 0.5955. The NZD/USD has gapped lower this morning in reaction to the US bombing Iran Nuclear sites over the weekend. The market is short USD’s and will now be focusing on how long the US plans to be involved and if the conflict will become extended.

• (Bloomberg) - “New Zealand’s dollar is particularly vulnerable in the event of a haven rally in the US currency should the conflict between Iran and Israel pose constraints on oil supply, according to Bank of America Corp.”
• “Among Group-of-10 commodity currencies, the Kiwi “is the only energy importer and most vulnerable if Middle East oil supply is impacted more severely,” wrote Bank of America. “Being a large oil importer, the Asia region remains most vulnerable to such a shock,” the BofA team notes.”
• The NZD could not get back above 0.6000 on Friday and this morning has seen another wave of selling as the market digests the weekend's news and the implications of what further US involvement might imply.
• Technically while the support around 0.5850 holds in NZD/USD it is still in an uptrend but should risk start to come under more significant pressure the market is likely to test this.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5830(NZD300m June 23). Upcoming Close Strikes : 0.5690(NZD621m June 25)
• CFTC Data showed Asset managers paring back their shorts slightly once more over the week, the leverage community did likewise.
• Data/Event : GDP

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P

Oil prices have begun today’s trading sharply higher following US strikes on Iranian nuclear sites yesterday. Following this development, concerns have escalated that oil supplies from the region will be impacted by the conflict. WTI is up 2.5% to $75.70/bbl after the initial high of $78.40, above $75.74 initial resistance.

• WTI rose 0.7% on Friday to $74.04 to be up 11.1% since Israel first struck Iran. It fell to $72.32 before recovering. It is now around 27.0% higher in June.
• Brent diverged falling 1.9% to $77.32 after $75.51. It is up around 28% this month reinforcing the bull cycle. Technicals suggest that it is extremely overbought. It reached $81.40 in early trading today above psychological round number $80 but it hasn’t lasted and the benchmark is currently around $79.00 up 2.6%, above initial resistance at $79.04.
• The US said that it destroyed the Fordow, Natanz and Isfahan nuclear sites. US President Trump said that Iran must now agree to peace but Iran’s President Pezeshkian threatened the US and said it “must receive a response for their aggression” while others officials said that there had not been “any irreversible damage” and that knowledge “can’t be destroyed by bombing”. Meanwhile, the US has warned against retaliation and Israel and Iran continue to attack each other.
• With the risks around oil supply rising and prices already significantly higher in June, inflation pressures will be watched closely. Fed Chair Powell said that he wasn’t concerned as he expects the impact on prices to be temporary. While headline inflation is likely to be impacted, it will be second round effects showing in core that will be important.