GOLD: Gold & Silver Higher Ahead Of Expected Fed Rate Cut

The AUD/USD has had a range of 0.6547 - 0.6567 in the Asia- Pac session, it is currently trading around 0.6565, +0.35%. US stocks found some support and the USD’s bout of strength stalled as the data on Friday came in as expected. The AUD found some demand back towards the 0.6500 area and is trying to bounce, getting an added nudge this morning as the risk of a US government shutdown increases. Price is back in the range and the market will be turning its attention towards the Fridays Payroll number. RBA is tomorrow.

• MNI AU - RBA Widely Expected To Hold On 30 September. The focus of the week will be Tuesday’s RBA decision followed by Governor Bullock’s press conference. As it is widely expected to keep rates at 3.6% and there won’t be an updated set of forecasts, the tone of the statement and Bullock’s comments will be scrutinised after disinflation appears to have stalled in Q3 and the Governor said to a parliamentary committee last week that "domestic data have been broadly in line with our expectations or if anything slightly stronger". The Board is likely to remain highly data dependent.
• “Australia’s fiscal 2025 budget deficit is set to be just under A$10 billion ($6.56 billion) compared with the government’s forecast of A$27.9 billion.” - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD405m), 0.6625(AUD1.29b), 0.6725(AUD1.19b). Upcoming Close Strikes : 0.6600(AUD943m Oct 1), 0.6600(AUD1.57b Oct 2), 0.6700(AUD1.64b Oct 1) - BBG
• CFTC Data last week shows Asset managers added back to their recently reduced shorts, -48580(Last -41095). The Leveraged community did likewise, -6358(Last -1519).
• AUD/JPY - Asia-Pac range 97.67 - 97.99, Asia is trading around 97.70. The pair found solid demand back towards 97.00 and bounced last week with the help of the AU CPI print. While above 97.00 the focus will remain on September’s highs toward 98.50.

Fig 1: AUD CFTC Data

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

The TYZ5 range has been 112-08+ to 112-14 during the Asia-Pacific session. It last changed hands at 112-13+, up 0-05 from the previous close. 

• The US 2-year yield has edged lower trading 3.631%, down 0.01 from its close.
• The US 10-year yield has moved lower and is trading around 4.158%, down 0.02 from its close.
• 10-Year yields persisted with its probe of the 4.20% area on Friday night, I suspect buyers continue to be around 4.20% initially and look to fade the move higher. The jobs data if released will be key this week. The threat of a US shutdown has seen yields edge lower putting a top in place for now. 
• Sean D.Emory on X: “Government shutdown headlines always spark fear. But history tells a calmer story. Looking back at every shutdown since 1976: The S&P 500 has been flat on average during shutdowns (0.0%) and actually up +0.6% the week after. The 10-year Treasury barely moves, average change of +0.03% during, then reversing after. In other words, the market tends to look through shutdown noise quickly.”
• "TRUMP TELLS CBS GOVT SHUTDOWN LIKELY UNLESS DEMOCRATS BACK DOWN, TRUMP CONFIDENT VOTERS TO SIDE WITH HIM IF FUNDING LAPSES: CBS"
• “Guy LeBas, chief fixed-income strategist for Janney Montgomery Scott. “The next thing to get priced in is probably a government shutdown, which has historically been a bad thing for short-term economic growth and pulled US Treasury yields down,” LeBas said.” - BBG
• Data/Events:  Pending Home Sales, Dallas Fed Manf. Activity

Fig 1: 10-Year US Yield Daily Chart

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

• China's bond futures made some modest gains Monday in a slow start to the week.  
• The 10-Yr is up +0.03 at 107.70 with the 20-day EMA above at 107.82.
• The 2-Yr is flat at 102.34 and is also below all major moving averages.  
• The CGB 10-Yr is at 1.88%