JAPAN: "JAPAN JULY HOUSEHOLD SPENDING -3.6% YEAR/YEAR - GOVT (REUTERS [...]

Spot USD/CNH tracks near 6.7470/75 in early Wednesday dealings. CNH rose 0.15% for Tuesday's session, as broader USD sentiment slipped on the oil price slump and surging equities. US officials raised hopes of a Iran deal around re-opening Hormuz, although the BBDXY index was only 0.06% lower for the session despite the sharp energy/equity swings. For USD/CNH Tuesday highs were at 6.7599, while remaining sub all key EMAs, with the 50-day resistance point at 6.7815. Recent lows rest at 6.7423 from the end of July. Spot USD/CNY finished up Tuesday trade at 6.7492, while the CNY basket index was little changed, last 101.97, but this follows falls in the previous four sessions (as the yuan lagged USD softness to a degree, particularly versus the yen).

• Yesterday's USD/CNY fix edged a little higher, but has been relatively stable near 6.7900 for the past week, despite the yen induced slump in the BBDXY index. Still, this follows a strong period of CNY fixing outperformance relative to BBDXY index trends. The steadier fixing trend of late may leave USD/CNH downside as a low beta one. Implied vols suggest markets aren't expecting any dramatic shifts with the 1mth now under 2%.
• Locally today we have the RatingDog July PMI for services, which is projected at 53.7, versus 54.1 prior. The July round of PMIs, both official and private sector, have softened relative to June reads. The Citi China surprise index is back trending lower, last -35.00. Weaker growth momentum for China since Q2 hasn't impacted yuan sentiment. The fixing trend will be eyed for any meaningful push back, particularly if we see further broad USD downside.
• We get more updates on the growth picture on Friday with July trade data, with exports having been a source of strength so far in 2026. The strength of the trade surplus has also featured in strong valuation arguments for the yuan. 

In post-Tokyo trade, JGB futures closed stronger, +20 compared to settlement levels, after US tsys finished 5-6bps richer on Tuesday on US/Iran deal optimism that permeated the session with brief pullbacks on reality checks and policy.

• US tsys rallied after Bloomberg reported earlier that Qatar says language has been drafted on a possible US-Iran deal, while weaker crude prices provided ongoing support for US tsys throughout the session. Brief pause after Qatar admitted nothing was in the books when it comes to US-Iran direct talks.
• "U.S. Treasury Secretary Scott Bessent said he was sure Bank of Japan Governor Kazuo Ueda will "do what is best" for the country's economy, public broadcaster NHK reported on Wednesday. "I do believe that part of the inflation uptick in Japan was a result of the weak yen and also the energy prices," Bessent told NHK in an interview.” - RTRS
• "Bessent had said he would meet Ueda at a U.S.-hosted G20 finance leaders' meeting at the end of August, which would precede the BOJ's September policy meeting."
• Today, the local calendar will see Labor Cash Earnings and S&P Global PMI Composite & Services (F), alongside BOJ Minutes of June Meeting.

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ACGBs (YM +5.0 & XM +5.0) are stronger after cash US tsys finished 5-6bps richer on Tuesday on US/Iran deal optimism that permeated the session with brief pullbacks on reality checks and policy.

• Waves of support followed after Tsy Sec Bessent commented on purported US/Iran talks, says may have deal today, followed by Sec of State Rubio commenting there's been progress made in those talks, but not finality yet. We're hoping that will happen very shortly."
• Market sentiment looked past Philly Fed Paulson hawkish comment on potential tightening if inflation persists that policy is not sufficiently restrictive to get inflation down to the 2% target and that "more restrictive policy may be needed".
• S&P Global PMI(F) printed: Services index rises to 53.6 from 50.5 in June; and Composite index rises to 53.2 from 50.4 in June.
• Cash ACGBs are 5bps richer with the AU-US 10-year yield differential at +31bps.
• The bills strip has bull-flattened, with pricing flat to +4 across contracts.
• RBA-dated OIS pricing shows modest tightening across all meetings, with the probability of a 25bp hike rising from 6% for August to 59% by December 2026.  
• This week, the AOFM plans to sell A$1000mn of the 3.75% 21 April 2037 bond today and A$1000mn of the 1.50% 21 June 2031 bond on Friday.