GOLD: Gold Benefits From Geopolitical & US Jitters

In local morning trade, NZGBs have bear-steepened, with benchmark yields 1-4bps higher, as trading resumed after the Easter weekend. 

• Overnight, US markets were impacted by ongoing uncertainty over tariffs and rising concerns over Fed independence. President Trump's further verbal attacks on Fed Chair Powell appeared to heighten concerns over the soundness of US assets and unnerved investors.
• US equities were hammered, though the major indexes managed to inch off the lows. European bourses were spared since they were still closed for Easter Monday. The S&P 500, NASDAQ and Dow tumbled ~2.5%.
• US tsys finished mixed with the front end garnering a safety bid. The 2-year yield was down 4bps to 3.76%. The long end was underwater, with the 10-year rate cheapening 8bps to 4.41% while the 30-year raterose 10bps to 4.90% amid inflation angst, along with fiscal worries.
• NZ’s trade surplus widened to NZ$970m in March from a revised +NZ$392m in February. The 12 months YTD trade deficit narrowed to NZ$6.133b from a revised -NZ$6.634b in February.
• Swaps have twist-steepened, with rates 2bps lower to 4bps higher.
• RBNZ dated OIS pricing is 1-2bps softer across meetings. 27bps of easing is priced for May, with a cumulative 81bps by November 2025.

The NZD had a range on Monday of 0.5927 - 0.6019, Asia is dealing near the highs around 0.6000 as both US stocks and the USD came off.

• Concerns President Trump will fire Fed Chairman Jerome Powell added to a market that is already consumed with uncertainty.
• The market pared back positioning going into the long weekend hoping for some good news particularly around a trade deal with Japan, this was not forthcoming and there seemed little to indicate this would be changing in the short-term. If the US cannot negotiate a deal with its closest ally, the market will be concerned about scope for deals with other nations.
• This saw the “buy the rumour sell the fact” unfold yesterday as the market rushed to reinstate USD shorts on a day when liquidity was low.
• The NZD rose almost 100 points yesterday and is breaking above 0.6000 for the first time since November 2024.
• The price action continues to suggest that dips will probably find demand, first support on the day is 0.5930/50 then 0.5850/80.
• CFTC data show Asset managers have been aggressively paring back their shorts last week, Leveraged funds not so much. Should the NZD hold above 0.6000 and begin to accelerate we could see the “fast money” start to be squeezed.
• Data : NZ Trade Balance 

Fig 1: NZD/USD CFTC Holdings

Source: MNI - Market News/Bloomberg

AUDUSD’s break above 64c yesterday was maintained with the pair rising 0.6% to 0.6415 after a high of 0.6438 earlier, but it still underperformed the rest of the G10, except CAD, pressured by weaker risk appetite. There was broad-based weakness in the US dollar with the BBDXY index down 0.7% as White House attacks on the Fed continued with President Trump saying that “preemptive” rate cuts are being “called for by many”. Worries over Fed independence have weighed on the greenback, long-dated Treasuries and US equities.

• AUDUSD has broken above resistance at 0.6409. This has opened up 0.6428, which was exceeded a number of times on Monday but not held. A clear break would open up 0.6471.
• Kiwi outperformed the G10 leaving AUDNZD down 0.4% to 1.0694 following a trough of 1.0678, the lowest since March 2024. It has started today slightly higher at 1.0697.
• The euro was an outperformer again and so AUDEUR fell 0.4% to 0.5574 off the intraday low of 0.5555 during Monday’s APAC session. This was the weakest level since March 2020. AUDGBP was only slightly lower at 0.4796.
• The yen did not perform as well as some of the European currencies but AUDJPY was still down 0.3% to 90.38 after falling to 89.97 early in the day. It is currently slightly lower at 90.32.
• Equities were closed in Europe but the S&P fell 2.4% and its e-mini is down 0.1% so far today. Oil prices fell with Brent -2.2% to $66.47/bbl. Copper is down 0.4% while iron ore remains around $99/t.
• Today preliminary April Australian S&P Global PMIs are released.