GOLD: Gold Lower Ahead Of Today’s Fed Decision

The NZD/USD had a range of 0.5921 - 0.5938 in the Asia-Pac session, going into the London open trading around 0.5935, +0.22%. US equities' momentum higher seemed to stall and the USD drifted lower again into the weekend. The NZD/USD found some demand back towards 0.5900 and is bouncing off this support in our session. While still firmly in the 0.5850-0.6150 range it's tough to discern any real direction. Risk has opened a little higher this morning, E-minis +0.15%, NQU5 +0.25%.

• NZ MNI: RBNZ Expected To Cut Rates On Wednesday, Governor Speaks. The highlight of the week will be Wednesday’s RBNZ decision where the MPC is likely to cut rates 25bp to 3% after pausing in July. It will also release updated forecasts and Governor Hawkesby will hold a press conference. On Thursday he will appear before a parliamentary committee to talk about the latest Monetary Policy Statement.
• "Reserve Bank of New Zealand publishes Tara-ā-Umanga Business Expectations Survey, for September quarter. Average 1-year ahead inflation expectation rises to 2.53% from 2.44% in 2q. 2-year rises to 2.64% from 2.54%. 5-year rises to 3.16% from 3.06%. 10-year falls to 3.57% from 3.94%.” -BBG
• "RBNZ BUSINESS SURVEY SHOWS TWO-YEAR INFLATION EXPECTATION 2.64%" - BBG
• Options : Closest significant option expiries for NY cut, based on DTCC data:  none. Upcoming Close Strikes :  0.5925(NZD400m Aug 20), 0.5980(NZD660m Aug 21). - BBG
• CFTC Data shows Asset Managers have cut their longs completely and started to rebuild a short adding slightly in the NZD -3679(Last -1811), the Leveraged community though reduced their own shorts slightly -4190(Last -6778).
• AUD/NZD range for the session has been 1.0974 - 1.0993, currently trading 1.0985. The Cross is trying to push higher but will need a sustained break above the 1.1000 area. Until then the range looks to be 1.0850-1.1000.

Fig 1: NZD CFTC Data

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

NZGBs closed slightly off worst levels, 2bps cheaper, after a relatively subdued start to the week.

• NZ-US and NZ-AU 10-year yield differentials closed 1-2bps tighter.
• RBNZ publishes Tara-ā-Umanga Business Expectations Survey, for September quarter. Average 1-year ahead inflation expectation rises to 2.53% from 2.44% in 2q. 2-year rises to 2.64% from 2.54%. 5-year rises to 3.16% from 3.06%. 10-year falls to 3.57% from 3.94%.
• NZGBs held by international investors increased to 62.8% from a month earlier (62.7%) in July.
• The highlight of the week will be Wednesday's RBNZ decision, where the MPC is likely to cut rates 25bp to 3% after pausing in July. It will also release updated forecasts, and Governor Hawkesby will hold a press conference. On Thursday, he will appear before a parliamentary committee to talk about the latest Monetary Policy Statement
• Swap rates closed 2-3bps higher.
• RBNZ dated OIS pricing closed little changed across meetings. 23bps of easing is priced for this week, with a cumulative 41bps by November 2025.
• Tomorrow, the local calendar will see PPI data.
• On Thursday, the NZ Treasury plans to sell NZ$225mn of the 4.50% May-30 bond, NZ$175mn of the 4.50% May-35 bond and NZ$50mn of the 1.75% May-41 bond.

The Asia-Pac USD/JPY range has been 147.08-147.58, Asia is currently trading around 147.40, +0.15%. USD/JPY again found good demand on a 146 handle. Price continues to hold above the support area between 146.00/147.00, a sustained move below this support is needed to turn the momentum potentially lower again. While this plays out it looks to be more range trading within the wider 146.00-151.00 range. CFTC Data shows leveraged funds have bought this dip in USD/JPY betting the support remains intact.

• (Bloomberg) -- “Japan, the European Union, and South Korea are waiting for the US to implement concessions on tariffs, with Japan’s chief trade negotiator Ryosei Akazawa saying “the bleeding hasn’t stopped” for the country’s car industry.”
• "Japan’s CPI may show that inflation eased. But with rice prices still high and wage growth strong, price pressures are building. That puts the Bank of Japan on course to reduce stimulus." - BBG
• "Japan plans to tighten oversight of foreign workers with specialist expertise, after reports some are engaged in work not permitted by their visas, Kyodo said." - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 146.00($385m), 148.40($354m).Upcoming Close Strikes : 146.80($1.19b Aug 21), 150.00($1.06b Aug 21) - BBG.
• CFTC data shows last week asset managers maintained their JPY longs +60866( Last +60532), leveraged funds used the dip to add to their newly built short JPY position -41257(Last -29308).

Fig 1 : JPY CFTC Data

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