GOLD: Gold Higher On Increased Fed Cut Expectations & Elevated Uncertainty

The headlines overnight focused on the imposition of tariffs on Japan and Korea and the sending of letters to other countries.  However markets today focused on President Trump's suggestions that he remains open to further negotiations, further delaying tariffs until August.  These comments eased earlier concerns .  

• China's major bourses were strong with the Hang Seng leading the way with gains of +0.79%, CSI 300 up +0.74%, Shanghai Comp up +0.58% and Shenzhen rising +1.07%
• In Taiwan, the TAIEX was one of the few fallers, down -0.61% today.
• The KOSPI had a slow start to the day but things improved on Trumps comments and it has gained +1.40% to be one of the best performers of the major bourses.  
• The FTSE Malay KLCI is down -0.54% and the Jakarta Comp down just -0.05%.
• The FTSE Straits Times in Singapore is up +0.45% and the PSEi in the Philippines down -0.17%
• The NIFTY 50 is doing very little following yesterday finishing flat.  

The NZD/USD had a range of 0.5995 - 0.6021 in the Asia-Pac session, going into the London open trading around 0.6015, +0.32%. The pair has drifted higher for most of our session as the market tries to view the Europe trade deal as a potential playbook and hopes that the Aug.1 deadline has not been set in stone. US Equity futures turned positive after opening lower in Asia, ESU5 +0.04%, NQU5 +0.20%. We have seen this ‘movie’ before and it normally ends with the USD faltering and moving lower again, is this time different ? The NZD found support again around the 0.6000 area as it tries to build a base from which to move higher, a sustained break below here though would risk a deeper correction back to 0.5850/0.5900.

• MNI RBNZ Preview-July 2025: Likely On Hold. The sell-side consensus is for the RBNZ to remain on hold tomorrow, which is also consistent with market pricing. There are some sell-side forecasters looking for a rate cut tomorrow, whilst most of those who see the RBNZ on hold, see risks of further cuts as we progress through 2025. For this meeting, our own bias is for the central bank to hold policy rates steady.
• RBNZ dated OIS pricing is little changed across meetings today, ahead of tomorrow's RBNZ Policy Decision. 3bps of easing is priced for this week's meeting, with a cumulative 32bps by November 2025.
• The NZD/USD has lost all its upward momentum and is back testing its support around the 0.6000 area. If risk has a deeper correction and the USD can find some upward momentum the risk is a move back towards the 0.5850/0.5900 area.
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.6075(NZD519m July 9), 0.6000(NZD407m July 10), 0.6025(NZD373m July10).
• CFTC Data shows Asset Managers have reduced their newly built longs in NZD +8515, the Leveraged community reduced their short last week -8424.
• AUD/NZD range for the session has been 1.0820 - 1.0839, currently trading 1.0830. The cross is struggling to get any momentum for now. It looks to be in a 1.0750 - 1.0850 range for now as it awaits a catalyst to provide some direction. Can the RBA today and RBNZ tomorrow give this pair the energy it needs to move higher again ?

Fig 1: NZD/USD Spot Hourly Chart

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

The TYU5 range has been 110-29+ to 111-01+ during the Asia-Pacific session. It last changed hands at 111-00, up 0-02 from the previous close. 

• The US 2-year yield has moved lower trading around 3.884%, down 0.01 from its close.
• The US 10-year yield is relatively unchanged trading around 4.38%.
• The 10-year yield has seen a  strong bounce in reaction to the better NFP print. This 4.35/40% area offers those who would like to express a long the opportunity to fade. A sustained close back above 4.45% area though would not be great for the bulls and would see more of the longs prepared back.
• Per Politico: "The United States has offered an agreement to the European Union that would keep a 10 percent baseline tariff on all EU goods, with some exceptions for sensitive sectors such as aircraft and spirits, an EU diplomat and a national official told POLITICO."
• (Bloomberg) -- “Scott Bessent told CNBC that he’ll meet with his Chinese counterpart within the next couple of weeks.”
• Data/Events: Bond investors will be focusing on the Fed Minutes and the demand for 10 & 30-year maturities this week. NFIB Small Business Optimism tonight