MNI EUROPEAN OPEN: Dollar, Yields Steady Ahead Of NFP
EXECUTIVE SUMMARY
- FED MUST WAIT AND SEE ON POLICY AMID UNCERTAINTY - HARKER - MNI
- US TREASURY ADDS IRELAND, SWITZERLAND TO FX WATCH LIST - MNI
- TRUMP-MUSK ROW SLAMS TELSA SHARES, $150 BILLION IN MARKET VALUE WIPED OUT - RTRS
- LOCAL ANALYSTS SHARE INSIGHT INTO CHINA COPPER DEMAND - MNI
- MNI DISCUSSES PBOC'S EASING STRATEGY - MNI
- US FIRMS IN CHINA NOT PLANNING HOME PRODUCTION - MNI BRIEF
Fig 1: USD BBDXY Index & US Tsy 10yr Yield
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
POLICTICS (BBC): "Labour confounds expectations with Hamilton by-election victory"
EU
ECB (MNI ECB WATCH): The European Central Bank as expected cut its benchmark deposit rate by 25 basis points on Thursday for a seventh consecutive meeting, bringing it to 2%, with President Christine Lagarde indicating that the ECB is nearing the end of its easing cycle with policy settings in a good position to navigate uncertain conditions.
ECB (BBG): "Christine Lagarde pledged to see out her presidency at the European Central Bank following speculation over an early departure to lead the World Economic Forum in Switzerland."
GERMANY (BBG): “ German Chancellor Friedrich Merz successfully navigated a 40-minute meeting with Donald Trump in the Oval Office without falling victim to the public humiliation the American president has doled out to other leaders — even though both Germany and Europe are two of Trump’s perpetual irritants. “
US
FOREX (MNI): The U.S. Treasury on Thursday added Ireland and Switzerland to its currency manipulator watch list, and officials warned continued strengthening of global currencies relative to the dollar could see more foreign exchange market interventions and rising current account surpluses that would land more countries on the list.
US/JAPAN (BBG): "The US Treasury called on the Bank of Japan to raise interest rates to strengthen the yen, stepping much deeper into policy recommendations for Tokyo than before in its semiannual currency report."
MARKETS (RTRS): “Tesla shares went into free-fall on Thursday as President Donald Trump publicly feuded with the electric vehicle maker's billionaire CEO Elon Musk, his self-proclaimed "First Buddy." Investors watched the unfolding drama with growing worry about what the fracas could mean for Musk's business empire. The carmaker's shares ended the day down 14%, wiping off $150 billion in market value on a day absent other news about the company.
FISCAL (BBG): “President Donald Trump told Senate Republicans he is open to a state and local tax deduction cap lower than the $40,000 in the House-passed version of his giant tax bill, a person familiar with the matter said.”
FED (MNI): The Federal Reserve must maintain credibility on its inflation mandate as prices rise under President Trump's tariffs, even as trade policy will likely also hurt economic activity and jobs, Kansas City Fed President Jeff Schmid said Thursday.
FED (MNI): Federal Reserve officials must wait for more clarity on the effect of tariff policies before making any decisions on interest rates, Philadelphia Fed President Patrick Harker said Thursday in his last public speech as an FOMC member.
FED (MNI): Federal Reserve Governor Adriana Kugler said Thursday she is worried about the risk that tariff policies will generate higher inflation, and supports keeping interest rates on hold for now while the FOMC assesses the full impact of fluid trade and immigration policies.
OTHER
CANADA (MNI): Firms have been telling Bank of Canada officials the U.S. trade war isn't turning into a worst-case scenario, Deputy Sharon Kozicki said Thursday, part of the reason policymakers held interest rates Wednesday even with a large minority of economists calling for stimulus now to fend off a recession.
JAPAN (BBG): “Japan’s exports fell in the first 20 days of May as the Trump administration’s sweeping tariffs continued to disrupt trade. Exports measured by value dropped 3% from the same period a year earlier, the Finance Ministry reported Friday.”
JAPAN (BBG): “Japan’s household spending unexpectedly declined in April as elevated inflation deterred discretionary spending, in a worrisome sign for policymakers after the economy began contracting even before US tariff measures fully kicked in."
US/JAPAN (BBG): "Japan and the US have begun the latest round of trade negotiations, with media reports suggesting Tokyo’s delegation is trying to win a reprieve from the tariffs by pledging to make more cars in the US and enhancing cooperation on rare earths."
THAILAND (BBG): " Thailand should be more aggressive in cutting borrowing costs given its bleak growth outlook and subdued inflation, according to Somprawin Manprasert, one of the candidates seeking to become the Bank of Thailand’s new governor. "
CHINA
US/CHINA (BBG): “US President Donald Trump and Chinese President Xi Jinping on Thursday agreed to further trade talks aimed at resolving disputes over tariffs and supplies of rare earth minerals at the heart of tensions between the world’s two largest economies.”
US/CHINA (MNI BRIEF): The majority of U.S. firms operating in China are focused on localising operations or shifting some production to third countries rather than exiting the country, a recent flash survey of 112 firms by the American Chamber of Commerce in China published on Friday showed, with zero respondents reporting plans to shift output back to the US.
PBOC (MNI): MNI discusses the PBOC's easing strategy. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
US/CHINA (XINHUA): “China-US relations stand at a critical historical node and are amongst the most important in the world, Vice President Han Zheng told a U.S. delegation at the China-US High-Level Track 2 Dialogue held in Beijing.”
COPPER (MNI): Local analysts share insight into Chinese copper demand this year. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.
LIQUIDITY (ECONOMIC INFORMATION DAILY): “The People's Bank of China will conduct a CNY1 trillion outright reverse repurchase operation on Friday to maintain ample liquidity in the banking system, according to a statement issued on Thursday.”
BONDS (YICAI): China issued CNY1.6 trillion in local government special bonds during the first five months of the year, up 41% on last year, data from the Ministry of Finance and China Bond Information Network showed.
CHINA MARKETS
MNI: PBOC Net Drains CNY156.1 Bln via OMO Friday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY135 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY156.1 billion after offsetting the maturities of CNY291.1 billion today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4500% at 09:25 am local time from the close of 1.5509% on Thursday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 47 on Thursday, compared with the close of 46 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1845 Fri; +0.97% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1845 on Friday, compared with 7.1865 set on Thursday. The fixing was estimated at 7.1755 by Bloomberg survey today.
MARKET DATA
JAPAN APR HOUSEHOLD SPENDING Y/Y -0.1%; MEDIAN 1.5%; PRIOR 2.1%
JAPAN APR P LEADING INDEX 103.4; MEDIAN 103.9; PRIOR 107.6
JAPAN APR P COINCIDENT INDEX 115.5; MEDIAN 115.4; PRIOR 115.8
MARKETS
US TSYS: Little Changed Going Into Today's US Payrolls Release
TYU5 is trading at 110-26, +0-00+ from closing levels in today's Asia-Pac session.
- Cash bonds are slightly mixed, with a steepening bias, after yesterday’s heavy session.
- The focus is on today's Non-Farm Payrolls release. US Non-Farm Payrolls are seen increasing a seasonally adjusted 126k in May in the Bloomberg survey after a stronger-than-expected 177k in April (albeit one that was more than offset by negative revisions).
- The unemployment rate is widely expected to round to 4.2% again.
- Average hourly earnings are expected to rise 0.3% M/M after a softer than expected 0.17% M/M in April, with the workweek watched after a recent recovery from January’s adverse weather lows.
- We expect greater sensitivity to a soft print in the event of a large surprise, although longer-term reaction would likely be capped by the FOMC not wanting a repeat of September’s (with hindsight) overreaction to a sharp but short-lived uplift in the unemeployment rate (See MNI US Payrolls Preview here)
JGBS: Cash Bond Bull-Flattener Pared Ahead Of US Payrolls
JGB futures modestly weaker, -7 compared to the settlement levels, but well off session cheaps.
- (Bloomberg) -- The US Treasury called on the Bank of Japan to raise interest rates to strengthen the yen, stepping much deeper into policy recommendations for Tokyo than before in its semi-annual currency report.
- “BOJ policy tightening should continue to proceed in response to domestic economic fundamentals, including growth and inflation, supporting a normalisation of the yen’s weakness against the dollar and a much-needed structural rebalancing of bilateral trade,” the Treasury Department said in a report released Thursday in Washington.
- Headlines crossed earlier from US President Trump when asked about the feud, stating it is fine. A call will reportedly take place between Trump and Musk on Friday US time.
- Cash US tsys are slightly mixed, with a steepening bias, ahead of Non-Farm Payrolls data.
- Cash JGBs are dealing mixed, with benchmark yields 1bp higher to 1bp lower. The benchmark 30-year yield is 0.4bps higher at 2.897% after being as low as 2.857% earlier.
- The swaps curve has bull-flattened, with rates 1-3bps lower.
- Tomorrow, BOJ Deputy Governor Uchida will give a speech at Japan Society of Monetary Economics. On Monday, the local calendar will see Q1 GDP (F), May Bank Lending and April Trade Balance data.
AUSSIE BONDS: Cheaper But Narrow Ranges Ahead Of US Payrolls
ACGBs (YM -2.0 & XM -1.5) are modestly weaker, with narrow ranges, on a typical local data-light pre-US payrolls Friday.
- Cash US tsys are slightly mixed, with a steepening bias, after yesterday's heavy session. US Non-Farm Payrolls, due later today, are seen increasing a seasonally adjusted 126k in May in the Bloomberg survey after a stronger-than-expected 177k in April. The unemployment rate is widely expected to round to 4.2% again. (See MNI US Payrolls Preview here)
- Cash ACGBs are 1-3bps cheaper with the AU-US 10-year yield differential -13bps.
- The bills strip has bear-steepened, with pricing -1 to -4.
- “CBA views the RBA's 0.7% second quarter GDP forecast as overly optimistic given global uncertainty, with household consumption seen as key to recovery. A 25 basis point rate cut is likely in August, but July remains a possibility due to weak growth data, the report added.” (MTN via BBG)
- RBA-dated OIS pricing is firmer across meetings today. A 25bp rate cut in July is given an 84% probability, with a cumulative 78bps of easing priced by year-end.
- Monday will see the King's Birthday Holiday except for WA & QLD.
- Next week, AOFM plans to sell A$1000mn of the 1.75% 21 November 2032 bond on Wednesday.
BONDS: NZGBS: Closed Cheaper & At Worst Levels Ahead Of US Payrolls
NZGBs closed 7-9bps cheaper and at/near the session’s worst levels on a local data-light day.
- On a relative basis as well, NZGBs delivered a poor performance. With the NZ-US & NZ-AU 10-year yield differentials closing 4bps and 8bps wider, respectively.
- Cash US tsys are slightly mixed, with a steepening bias, after yesterday's heavy session.
- The focus is on today's Non-Farm Payrolls release. US Non-Farm Payrolls are seen increasing a seasonally adjusted 126k in May in the Bloomberg survey after a stronger-than-expected 177k in April (albeit one that was more than offset by negative revisions). The unemployment rate is widely expected to round to 4.2% again. Average hourly earnings are expected to rise 0.3% M/M after a softer than expected 0.17% M/M in April, with the workweek watched after a recent recovery from January's adverse weather lows. (See MNI US Payrolls Preview here)
- Swap rates closed 5-7bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed 1-2bps firmer across meetings. 6bps of easing is priced for July, with a cumulative 32bps by November 2025.
- On Monday, the local calendar will see Mfg Activity data alongside a Radio NZ interview with RBNZ Chief Economist Paul Conway.
FOREX: USD Index Steady, Equity Futures Up From Earlier Lows, US NFP Later
Aggregate FX moves have been fairly modest in Friday trade to date, as markets await the US NFP print later. The BBDXY sits unchanged in latest dealings, close to 1208.15.
- US equity futures were weaker in the first part of trade but now sit back modestly in the green. We saw cash losses in Thursday trade amid the fallout from the Trump/Musk spat. Headlines crossed earlier from US President Trump when asked about the feud, stating it is fine. A call will reportedly take place between Trump and Musk Friday US time.
- US Tsy yields are little changed as the markets await the NFP print later.
- USD/JPY has drifted a little higher, last around 143.80/85, +0.20% versus end Thursday levels in the US. We haven't breached overnight highs of 143.97. Earlier we had softer than expected April real household spending, which followed yesterday's negative wages print.
- Japan's Akazawa met the US's Lutnick yesterday US time, speaking for 110mins. Japan again pressed the US for a review of tariffs, while also discussing non-trade barriers and expanding trade. BBG notes that Japan may seek tariff concessions by pledging to make more cars in the US and cooperate on rare earths (see this link) Japan also remains on the US Tsy's FX monitoring list.
- NZD has outperformed the AUD, but local news flows has been very light. NZD/USD is above 0.6040. AUD/USD is close to 0.500. The AUD/NZD cross is back to 1.0755, still up from recent lows.
- Looking ahead, the main focus will be on the US NFP print.
ASIA STOCKS: Stocks Falter into Week's End
As news filtered through of talks between President Trump and President Xi, it failed to bolster stocks as most major bourses fell in the Asia trading day. The markets seemingly have eyes for the non-farm payrolls tonight as a guide for the next direction in interest rates. With limited major economic data out today, eyes were turned to India where the RBI surprised markets, cutting by 50bps and the cash reserve ratio by 100bps in what could be interpreted as a warning to markets of tougher times for one of the world's biggest economies.
- The Hang Seng is down -0.21% today but up +2.4% for the week. CSI 300 -0.12% and +0.37% for the week. Shanghai Comp -0.06% today and +0.56% for the week. Shenzhen -0.14% today and +0.71% for the week.
- The KOSPI is closed today and up 4% for week, with 2 days closed for holidays.
- The FTSE Malay KLCI is down -0.10% today, and down -0.16% for the week.
- The Jakarta Composite is closed today and is down -0.86% for the week.
- Singapore's FTSE Straits Times is up +0.16% and +0.75% for the week whilst the PSEi in the Philippines is flat and down -0.56% for the week.
- India's NIFTY 50 is flat and little changed for the week..
- China's official news agency Xinhua reported that US President Donald Trump and Chinese President Xi Jinping spoke Thursday with no conversation details provided. The conversation was a 90-minute discussion with Trump acknowledging that the trade relationship had 'gotten off track'. The call drove optimism with oil markets up on ideas that discussions could provide an pathway forward to resolution.
- WTI opened at US$63.26 bbl in Asia trading and is down -0.08% to $63.20. WTI is currently up for the week just under 4%
- Brent opened at US$65.26 bbl and is down -0.11% to $65.19. Brent is currently up just over 2% for the week.
- Saudi Arabia wants OPEC+ to continue with accelerated oil supply hikes in the coming months to regain lost market share. The kingdom wants the group to add at least 411,000 barrels a day in August and potentially September to take advantage of peak demand during the northern hemisphere summer. This comes as Russia's crude oil production for May was below its OPEC+ target.
- Global oil investments are expected to drop 6% in 2025, driven by economic uncertainties, lower demand expectations, and lower prices according to an IEA report.
- Oil markets will wait for Non-Farm payrolls tonight for a guide on the US economy and the direction of interest rates.
Gold Up as Equities Falter Friday
- As equities retreated into Friday, gold got a boost and is set to finish the week strongly.
- Gold rose +0.53% in the Asia trading day to US$3,370.42.
- Gold is currently up +2.51%, recovering all of the losses from the week prior.
- Yet another Central Bank reported an increase in reserves with the Bank of Ghana reporting that gold reserves increased to 32.16 tons in May.
- Gold remains above all major moving averages, the nearest being the 20-day EMA of $3,318.71.
- All major moving averages remain upward sloping, a sign that the bullish momentum remains for gold.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 06/06/2025 | 0600/0800 | ** |  DE | Trade Balance |
| 06/06/2025 | 0600/0800 | ** | DE | Industrial Production |
| 06/06/2025 | 0645/0845 | * |  FR | Industrial Production |
| 06/06/2025 | 0645/0845 | * | FR | Foreign Trade |
| 06/06/2025 | 0830/1030 |  EU | ECB Lagarde Video Message For CIBP Anniv | |
| 06/06/2025 | 0900/1100 | ** | EU | Retail Sales |
| 06/06/2025 | 0900/1100 | *** | EU | GDP (final) |
| 06/06/2025 | 0900/1100 | * | EU | Employment |
| 06/06/2025 | 1230/0830 | *** |  CA | Labour Force Survey |
| 06/06/2025 | 1230/0830 | *** |  US | Employment Report |
| 06/06/2025 | 1230/0830 | *** | CA | Labour Force Survey |
| 06/06/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 06/06/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 06/06/2025 | 1900/1500 | * | US | Consumer Credit |
| 07/06/2025 | 0730/0930 | EU | ECB's Lagarde Speech In Monaco | |
| 07/06/2025 | 0940/1140 | EU | ECB's Schnabel in Dubrovnik panel discussion | |
| 07/06/2025 | 0940/1040 |  GB | BOE Greene On Central Bank Decoupling Panel |
