INDONESIA: Country Wrap: Copper to Avoid Tariffs
- Indonesia garnered strong demand for its first Australian dollar-denominated Kangaroo bond as the country sought to diversify funding sources. The Southeast Asian nation attracted almost A$8 billion ($5.2 billion) for its five-year and 10-year notes, which are expected to be priced later Thursday. The deal size is expected to be capped at A$800 million and marks a rare offering by a foreign government in Australia’s local-currency debt market. (source BBG)
- The United States will grant zero tariffs on Indonesian copper amidst Jakarta’s pursuit of duty-free treatment on certain commodities that Washington can't produce, according to the Investment Minister. The announcement came hours before Washington’s 19 percent reciprocal tariffs would enter into force. Speaking in a Japanese business forum, he said that Indonesian copper -- the red mineral key for electric vehicles and advanced electronics production -- would enjoy a 0 percent tariff. “It’s true that the US will reduce the tariffs on certain goods and commodities that it can’t produce on its own. And now they have approved a 0 percent tariff on copper. We have asked for a similar treatment on nickel and other commodities,” he told the conference in Jakarta on Wednesday evening. (source Jakarta Globe)
- The Jakarta Composite continues to deliver strong gains, up +0.50% today.
- The Rupiah has had strong day in line with regional trends, up +0.33% at 16,307
- Bonds are strong with intermediate maturities outperforming. 5-year 6.01% (-4bp) 10-year 6.46% (-1bp)
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STIR: RBA Dated OIS Shunts Firmer After Surprise RBA Decision
RBA-dated OIS pricing is 11-23bps firmer across meetings after the RBA surprised the market by leaving the cash rate at 3.85%. A 25bp rate cut today was given a 92% probability by the market ahead of the decision.
- A cumulative 62bps of easing is priced by year-end (based on an effective cash rate of 3.84%) versus 75bps pre-RBA.
Figure 1: RBA-Dated OIS – Post-RBA Vs. Pre-RBA
Source: Bloomberg Finance LP / MNI
FOREX: Asia FX Wrap - The USD Drifting Lower
The BBDXY has had a range of 1193.81 - 1196.62 in the Asia-Pac session, it is currently trading around 1194. The USD has drifted lower in a quiet Asia-Pac session, -0.18%, giving back a little of its overnight gains. “Asian equities are holding up in the face of tariff angst as markets appear to be leaning into a familiar playbook: President Trump blusters, then backpedals. Many of the early jitters have faded, replaced by hopes of flexibility. Traders are latching onto signs that the Aug. 1 deadline may not be set in stone and that the White House remains open to negotiation. A proposed 10% tariff deal with the EU is also feeding that optimism." BBG
- EUR/USD - Asian range 1.1709 - 1.1749, Asia is currently trading 1.1745. The pair got a nice bounce on the news of a proposed deal with the US. The price is starting to look a little stretched in the short term and is vulnerable to any correction in the USD, first support is back towards 1.1600.
- GBP/USD - Asian range 1.3599 - 1.3639, Asia is currently dealing around 1.3635. Strong demand was again seen below 1.3600 helping the support to hold. A sustained move sub 1.3550 needed to signal a deeper correction.
- USD/CNH - Asian range 7.1706 - 7.1796, the USD/CNY fix printed 7.1534, Asia is currently dealing around 7.1720. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX +0.01%, Gold $3331, US 10-Year 4.39%, BBDXY 1194, Crude oil $67.52
Data/Events : France Trade Balance, Germany Trade Balance
Fig 1: GBP/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
EURUSD TECHS: Trend Signals Remain Bullish
- RES 4: 1.1967 2.0% 10-dma envelope
- RES 3: 1.1923 2.000 proj of the Feb 28 - Mar 18 - 27 price swing
- RES 2: 1.1851 High Sep 10 2021
- RES 1: 1.1829 High Jul 01
- PRICE: 1.1745 @ 06:04 BST Jul 8
- SUP 1: 1.1687 Low Jul7
- SUP 2: 1.1637 20-day EMA
- SUP 3: 1.1590 Low Jun 25
- SUP 4: 1.1458 50-day EMA
The trend condition in EURUSD is unchanged, signals remain bullish and the latest pullback appears corrective. MA studies are in a bull-mode position, this continues to highlight a dominant medium-term uptrend. Note that corrections have been shallow. This also reinforces the trend condition. A resumption of gains would signal scope for a climb to 1.1851, the Sep 10 2021 high. Key short-term support to watch lies at 1.1637, the 20-day EMA.
