MNI EUROPEAN OPEN: Trump to Decide in Two Weeks
EXECUTIVE SUMMARY
- U.S. SPY AGENCIES ASSESSMENT WORRIES ON IRAN BUILDING BOMB - NYT
- TRUMP TO DECIDE WITHIN TWO WEEKS WHETHER TO STRIKE IRAN - BBG
- AUSTRALIA'S BIGGEST INVESTORS CUTTING TREASURIES - MNI
- JAPAN SEES UPSIDE RISK TO INFLATION - MNI
Fig 1: Japan CPI and Core Climb
Source: MNI - Market News/Bloomberg/Refinitiv.
UK
Consumer Confidence (BBG): “GfK in London reports consumer confidence rose to -18 in June vs -20 in May’
EU
MIDDLE EAST (RTRS): “Israel and Iran's air war entered a second week on Friday and European officials sought to draw Tehran back to the negotiating table after President Donald Trump said any decision on potential U.S. involvement would be made within two weeks.”
TRADE TALKS (BBG) : “ The European Union is continuing intensive trade talks with the US ahead of a July 9 tariff deadline set by President Donald Trump and is “making progress,” according to EU Economy Commissioner Valdis Dombrovskis. “Our preference is to find a mutually acceptable solution and in a sense to park those trade tensions,” he told a news conference after a meeting of euro-area finance ministers in Luxembourg on Thursday.”
FRANCE (BBG): “Banks in France are facing a combined tax bill of as much as €5 billion ($5.7 billion) over contentious trades that local authorities say were designed to escape levies on dividend payments, according to a lawmaker.”
US
US/IRAN (NYT): “U.S. intelligence officials said Iran was likely to pivot toward producing a nuclear weapon if the U.S. attacked a main uranium enrichment site, or if Israel killed its supreme leader.”
US/IRAN (BBG): “President Donald Trump will decide within two weeks whether to strike Iran, his spokeswoman said, as Israel hit more Iranian nuclear sites and warned its attacks may bring down the leadership in Tehran.”
POLITICS (RTRS): “Democrats want new leaders for their party, which many feel isn't focusing enough on economic issues and is over-emphasizing issues like transgender rights and electric vehicles, a Reuters/Ipsos poll found.”
PROTESTS (RTRS): “ A U.S. appeals court let Donald Trump on Thursday retain control over California's National Guard while the state's Democratic governor proceeds with a lawsuit challenging the legality of the Republican president's use of the troops to quell protests and unrest in Los Angeles.”
OTHER
AUSTRALIA (MNI INTERVIEW) : The Reserve Bank of Australia’s cash rate is only moderately restrictive at 3.85% and one or two 25 basis point cuts would have little impact on the real economy, a former RBA economist told MNI, arguing a 3% level by year-end as priced by markets would be justified.
AUSTRALIA (BBG): “A number of Australia’s biggest investors say they are cutting their holdings of US Treasuries, citing concern over President Donald Trump’s tariff and tax plans.”
CANADA (MNI BRIEF) : Geopolitical Borrowing Option Responsible- Carney.
Prime Minister Mark Carney said Thursday that Canada's option to borrow CAD95 billion in case of a geopolitical disruption this fiscal year is part of good planning amid the trade dispute with the U.S. and global military conflicts.
JAPAN (MNI) : BOJ Minutes: Price Upside Risk; Early 2% Target Hit. A few Bank of Japan board members flagged potential upside risks to inflation, with one suggesting the 2% price target could be achieved earlier than projected, according to minutes from the April 30-May 1 policy meeting released Friday.
JAPAN (MNI BRIEF) : Japan’s annual core consumer inflation rate accelerated to 3.7% y/y in May from 3.5% in April, driven by rising food prices excluding perishables, particularly higher rice costs, data from the Ministry of Internal Affairs and Communications showed Friday.
CHINA
LPR Unchanged (MNI BRIEF) : China's Loan Prime Rate held steady on Friday, in line with expectations following the 10 basis-points cut in May, according to a People's Bank of China statement.
MNI China Press Digest June 20: Exports, Trade-in, Tech Bonds
MNI: PBOC Net Drains CNY41.3 Bln via OMO Friday
MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY161.2 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY41.3 billion after offsetting the maturity of CNY202.5 reverse repo today, according to Wind Information.
- The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5068% at 09:53 am local time from the close of 1.5441% on Thursday.
- The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 51 on Thursday, compared with the close of 50 on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.
MNI: PBOC Sets Yuan Parity Lower At 7.1695 Fri; +1.09% Y/Y
MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1695 on Friday, compared with 7.1729 set on Thursday. The fixing was estimated at 7.1826 by Bloomberg survey today.
MARKET DATA
JAPAN NATIONAL CPY YOY MAY 3.5%, EST 3.5% PRIOR 3.6%
JAPAN NATIONAL CPY EX FRESH FOOD YOY MAY 3.7%, EST 3.6%, PRIOR 3.5%
JAPAN NATIONAL CPI EX FRESH FOOD, ENERGY YOY MAY 3.3%, EST 3.2%, PRIOR 3.0%
CHINA 1-YEAR LOAN PRIME RATE 3.00%, EST 3.00%, PRIOR 3.00%
CHINA 5-YEAR LOAN PRIME RATE 3.50%, EST 3.50%, PRIOR 3.50%
MARKETS
US TSYS: Asia Wrap - Short-End Yields Edge Lower
The TYU5 range has been 110-26+ to 110.30 during the Asia-Pacific session. It last changed hands at 110-28+, up 0-03 from the previous close.
- The US 2-year yield has edged lower trading around 3.9225%, down 0.02 from its close.
- The US 10-year yield trades around 4.39%, unchanged from its close.
- This has seen the yield curve steepen in Asia - 2s10s +1.29 at 45.816, 5s30s +2.01 at 91.627.
- (Bloomberg) -- “Bloomberg - “Australian investors, including State-owned Funds SA and Queensland Investment Corp., are reducing their holdings of US Treasuries due to concerns over President Donald Trump's tariff and tax plans.”
- The June FOMC communications had a hawkish tilt overall, despite the immediate dovish reaction to the updated Dot Plot retaining the median expectation of 50bp in rate cuts by end-2025.
- The 10-year yield continues to find decent supply back towards its 4.30/35% support, this area needs to hold if yields are to move higher. The range looks to be 4.30% - 4.60% for now a break either side would provide a clearer direction.
- Data/Events: Philadelphia Fed Business Outlook, Leading Index
JGBS: Twist-Steepener Holds After Core CPI Beat
JGB futures are weaker and hovering near session lows, -9 compared to settlement levels.
- Japan's May nationwide CPI saw headline at 3.5%y/y, which was as expected (the April outcome printed at 3.6%). The ex-fresh food core measure rose 3.7%y/y (against a 3.6% forecast and 3.5% prior outcome). The measure, which excludes fresh food and energy, was 3.3%y/y, also above expectations and prior outcomes (3.2% forecast and 3.0% in April).
- Our Japan policy team noted, "Services prices, a key BOJ focus for assessing the strength of the wage-price cycle, rose 1.4% y/y in May, slightly up from 1.3% in April, but remained below the 2% mark, indicating weak momentum and the need for further gains to achieve the BOJ's inflation target sustainably."
- "AKAZAWA: JULY 9 IS NOT DEADLINE FOR JAPAN-US TRADE TALKS, TO EXAMINE WHAT KEPT FROM REACHING A TRADE DEAL" – BBG
- Cash US tsys have twist-steepened, with yields 2bps lower to 1bp higher, in today's Asia-Pac session after yesterday's holiday.
- Cash JGBs are mixed across benchmarks, with the curve steeper and yields 1bp lower to 3bps higher. The benchmark 20-year yield is 0.3bp higher at 2.376% ahead of Tuesday's supply.
- The swap curve has bear-steepened, with rates 1-3bps higher.
- On Monday, the local calendar will see Jibun Bank PMIs.
AUSSIE BONDS: Little Changed, Subdued Session To End Week
ACGBs (YM flat & XM +0.5) are little changed on a subdued data-light Sydney session.
- Cash US tsys have twist-steepened, with yields 2bps lower to 1bp higher, in today's Asia-Pac session after yesterday's holiday.
- The June FOMC communications had a hawkish tilt overall, despite the immediate dovish reaction to the updated Dot Plot retaining the median expectation of 50bp in rate cuts by end-2025. Fed Chair Powell was far from emphatic about the prospect of rate cuts, all but taking a cut at the July meeting off the table. (See MNI Fed Review here)
- Cash ACGBs are little changed, with the AU-US 10-year yield differential at -17bps.
- The bills strip is modestly richer, with pricing +1 to +2.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in July is given a 79% probability, with a cumulative 72bps of easing priced by year-end.
- On Monday, the local calendar will see S&P Global PMIs.
- Next week, AOFM plans to sell A$1000mn of the 1.75% 21 November 2032 bond on Monday and A$1000mn of the 3.50% 21 December 2034 bond on Wednesday.
FOREX: Asia Wrap - Market Quick To Sell USD's Again
The BBDXY has had a range of 1207.12 - 1209.76 in the Asia-Pac session, it is currently trading around 1207. The market has very quickly reversed the moves pricing in the imminent participation of the US into the Middle East conflict, from being almost 1.2% down the market has come back to almost where it started. ESU5 -0.2%, NQU5 -0.2%. Interesting though Seymour Hersh printed an article on his substack reporting that “heavy American bombing” will begin this weekend.
- EUR/USD - Asian range 1.1495 - 1.1530, Asia is currently trading 1.1525. EUR has rejected the move above 1.1600 but dips should continue to find demand, first support back towards the 1.1400 area then 1.1100/1200. Price action does not look great in the short-term with a potential false break above 1.1500/1.1600.
- GBP/USD - Asian range 1.3450 - 1.3500, Asia is currently dealing around 1.3495. The GBP bounced nicely off its support around 1.3400 and is now looking back towards the Weekly 1.35/36 pivot. First support is seen around the 1.3400 area, a sustained move back below here and we could see a deeper correction unfold.
- USD/CNH - Asian range 7.1771 - 7.1874, the USD/CNY fix printed 7.1695. Asia is currently dealing around 7.1815. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
- Cross asset : SPX -0.2%, Gold $3355, US 10-Year 4.39%, BBDXY 1207, Crude oil $75.67
- Data/Events : Ger PPI, FRA Buss Confidence, EZ M3 Money Supply,
Fig 1: GBP/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JPY: Asia Wrap - JPY Underperformance In The Crosses, USD/JPY Steady
The Asia-Pac USD/JPY range has been 145.12 - 145.56, Asia is currently trading around 145.25, -0.13%. USD/JPY has drifted lower in a muted Asian session, the JPY underperformed in the crosses though as risk bounced back on the hopes the US would not be joining the conflict this weekend. Based on their recent history though it would be unwise to think there is a zero risk of this weekend seeing the US starting to drop bombs in Iran.
- Our Japan policy team noted, "Services prices, a key BOJ focus for assessing the strength of the wage-price cycle, rose 1.4% y/y in May, slightly up from 1.3% in April, but remained below the 2% mark, indicating weak momentum and the need for further gains to achieve the BOJ's inflation target sustainably."
- “JAPAN GOVT MULLS BUILDING STATE-OWNED SHIPYARD, NIKKEI SAYS" - BBG
- "AKAZAWA: JULY 9 IS NOT DEADLINE FOR JAPAN-US TRADE TALKS, TO EXAMINE WHAT KEPT FROM REACHING A TRADE DEAL" - BBG
- USD/JPY price action continues to point to a market that is positioned long JPY.
- Price is back in its recent 142.00 - 146.50 range and will need a break either side of that to get a clearer direction.
- The market believes we could see a decent move lower in USD/JPY but with positioning at extremes we have seen the risk of pullbacks increase. A break above 146.50/147.00 would begin to challenge the conviction of any shorts.
- Options : Close significant option expiries for NY cut, based on DTCC data: 146.00($1.92b). Upcoming Close Strikes : 144.50($1.18b June 25)
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
AUD: Asia Wrap - AUD/USD Bounces As Market Prices Out US Entering Conflict
The AUD/USD has had a range of 0.6463 - 0.6495 in the Asia- Pac session, it is currently trading around 0.6495. The AUD has edged higher in our session +0.2% as the market prices out the chances of the US joining in the conflict. Recent history reminds us that there is still every chance we see some sort of US strike this weekend, and the article printed by Seymour Hersh points to that very fact.
- Seymour Hersh: "This is a report on what is most likely to happen in Iran, as early as this weekend, according to Israeli insiders and American officials I’ve relied upon for decades. It will entail heavy American bombing. I have vetted this report with a longtime US official in Washington, who told me that all will be “under control” if Iran’s Supreme Leader Ali Khamenei “departs.” Just how that might happen, short of his assassination, is not known.”
- (AFR) "Interest rates in Australia and the United States may be on hold for longer than the market and borrowers are hoping, thanks to resilient jobs numbers that suggest there is no pressing need to cut rates aggressively."
- The AUD looked as if it might trade back down to its 0.6350/0.6400 support before that statement, but has bounced overnight off the 0.6450 area.
- Price remains in the wider 0.6350 - 0.6550 range for now, a sustained break above 0.6550/0.6600 is needed for the move higher to accelerate.
- Technically buyers should continue to be around on dips while the support in the AUD/USD holds, a close back below 0.6350 is needed to challenge the newly formed uptrend.
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6650(AUD708m). Upcoming Close Strikes : none
AUD/JPY - Today's range 93.97 - 94.35, it is trading currently around 94.30.Choppy price action as the pair establishes a range between 92.00 - 96.00. A break back below 91.50/92.00 is needed to see the move lower regain momentum and the focus turn back to the year's lows again.
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
NZD: Asia Wrap - NZD/USD Reclaims 0.6000 As Risk Reverses
The NZD/USD had a range of 0.5979 - 0.6008 in the Asia-Pac session, going into the London open trading around 0.6005, +0.2%. The NZD has bounced in our session as the timeline for the US to enter the war is pushed out, not sure how far it can go until we get this weekend out of the way and the risk it still presents.
- (BBG): Trump Plans to Decide Within Two Weeks on Whether to Strike Iran. White House spokeswoman Karoline Leavitt said Trump’s message on Thursday is that “based on the fact that there’s a substantial chance of negotiations that may or may not take place with Iran in the near future, I will make my decision whether or not to go within the next two weeks.”
- The NZD bounced off the 0.5960 area on this news and has looked to challenge the 0.6000 area again in our session. Can the market completely price out the risk the US still goes in this weekend ?
- Technically while the support around 0.5850 holds in NZD/USD there should be buyers around on dips towards this area. A clear sustained break above 0.6050/0.6100 is needed for the pair to get momentum to push higher.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5830(NZD300m June 23)
- AUD/NZD range for the session has been 1.0805 - 1.0823, currently trading 1.0815. The cross is struggling to get any momentum back above 1.0800, it needs to hold above here and start extending higher to put a higher low in place. A failure to hold up here and the drift lower would be back on.
Fig 1: NZD/USD Spot Hourly Chart
Source: MNI - Market News/Bloomberg Finance L.P
ASIA STOCKS: The KOSPI Leads in Challenging Week
Major bourses put in a strong end to what has been a challenging week, given the happenings in the middle east. The KOSPI is the stand out for the week with solid returns whilst most others are down.
- The Hang Seng is up over +1.1% today for a strong finish to the week, yet down by -1.6% in the last five days. The CSI 300 is up just +0.24% today and down -0.31% for the week. The Shanghai Comp is up just +0.08% and down -0.36% for the week. The Shenzhen Comp is the outlier down -0.28% Friday and down -1.29% for the week.
- In Taiwan, the TAIEX fell -0.39% today and is down -0.70% for the week.
- The KOSPI is up +0.85% today and better by almost 4% for the week on hopes of a new government stimulus.
- The FTSE Malay KLCI is up just +0.22% and down -0.35% for the week.
- The Jakarta Composite is down -0.72% today and -3.4% for the week
- The FTSE Straits Times is up +0.09% today, and down -0.35% for the week whilst the PSEi in the Philippines is flat and down -1.6% for the week.
- The NIFTY 50 in India is up +0.37% todya nad holding on to gains of +0.60% for the week.
Oil Up Again, On Track For Weekly Gain
- WTI is up +0.62% in the Asian trading day at US$75.88 bbl and up +3.6% for the week.
- The rally this month has seen oil shift from being below all major moving averages, with a bearish momentum, to above all major moving averages. The strength of the rally has dragged all moving averages slope upwards, a sign that the bullish momentum could continue.
- Brent is going in the opposite direction, down -1.9% in the Asia trading day yet remains up by over 4% for the week.
- The CEO of Shell warned of a "huge impact" on global trade if the conflict results in the blockage of the key shipping route, the Strait of Hormuz. It is estimated that as much as a quarter of the world's oil trade passes through the Strait that is the passage between the Persian Gulf and the Indian ocean with Iran having history of focusing on ships in those waters. Citibank analysts suggest an obstruction to the passage could see oil at $90 bbl rapidly.
- Already tracking data is showing fewer ships in the straits.
- News abounds in terms of apparent 'approval' for the US to strike Iran but with the time frame remaining uncertain. Oil looks like it could trade sideways waiting for further headlines on the US's next move.
- China's oil refiners are not currently concerned about potential interruptions to Middle Eastern supplies due to the nation's record stockpile of 1.18 billion barrels according to BBG. The high stock buffer, soft refining margins, and seasonal weakness in demand are giving refiners room to maneuver, and they are not in a rush to find alternative sources to Iranian crude.
- Markets are seemingly in a holding pattern waiting for the US's decision on Iran and even gold's safe haven status was not enough for it to deliver a weekly fall.
- Gold is down in the Asian trading day today by -0.45% at US$3,356.50 and thus far is down -2.2% for the week.
- Gold sits atop its 20-day EMA of $3,350.09 and if this technical is broken, the next key level is the 50-day EMA of $3,282.28
- Despite the weekly drop, gold is up +28% this year with market strategists suggesting that up to $3,500 could be the target.
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 20/06/2025 | 0600/0700 | *** |  GB | Public Sector Finances |
| 20/06/2025 | 0600/0700 | *** | GB | Retail Sales |
| 20/06/2025 | 0600/0800 | ** |  DE | PPI |
| 20/06/2025 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 20/06/2025 | - |  EU | ECB de Guindos at ECOFIN Meeting | |
| 20/06/2025 | 1230/0830 | * |  CA | Industrial Product and Raw Material Price Index |
| 20/06/2025 | 1230/0830 | ** |  US | WASDE Weekly Import/Export |
| 20/06/2025 | 1230/0830 | ** | US | Philadelphia Fed Manufacturing Index |
| 20/06/2025 | 1230/0830 | ** | CA | Retail Trade |
| 20/06/2025 | 1400/1600 | ** | EU | Consumer Confidence Indicator (p) |
| 20/06/2025 | 1530/1630 | GB | BOE to announce Q3 APF sales schedule | |
| 20/06/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 20/06/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
