MNI EUROPEAN OPEN: US - China Trade Agreement Signed

Jun-27 05:27By: Jamie Grant

Europe

EXECUTIVE SUMMARY

FED OFFICIALS LEANING AGAINST A JULY CUT - BBG
US - CHINA TRADE AGREEMENT SIGNED - BBG
NO CONFIDENCE VOTE AGAINST EU COMMISSION PRESIDENT TO FAIL - POLITICO
TOKYO CORE CPI DECLINES - MNI

Fig 1: Tokyo CPI ex Fresh Food Declined to 3.1% in June from 3.6% in May

Source: MNI - Market News/Bloomberg/Refinitiv.

TRADE (POLITICO): “In a world blighted by tariffs and increasing protectionism, U.K. Prime Minister Keir Starmer is starting to realize that teamwork really is the only way to make his free trade dream a reality. “I do think that it's [a] difficult environment, but there are significant opportunities if we're agile about it, if we understand the world we're living in, and get ahead of the curve,” Starmer told businesses in Westminster on Thursday as he set out the U.K.’s first Trade Strategy since Brexit.”

BUDGET (BBG) : “Keir Starmer agreed to pare back a divisive £5 billion ($6.9 billion) cut to welfare to quiet a rebellion by his own party, a decision that will likely leave both Britain’s fiscal plans and the prime minister’s own leadership in need of repair. “

TRADE (POLITICO): “Late at night, after a dinner of dumplings and duck legs, the European Union’s leadership excitedly revealed a new plan to combat the hell-raising American president’s trade war: Take him on at his own wild game. For six months, Donald Trump has upended the global trading order, threatening and announcing tariffs, then easing them to open negotiations, while warning that punitive levies will be reimposed if the terms are not to his liking.”

EU POLITICS (POLITICO): “A potentially imminent vote of no confidence in European Commission President Ursula von der Leyen is almost certain to fail, but would at the same time compound her embarrassment over the Pfizergate scandal.”

FRANCE DEFICIT (POLITICO): “The French government said it will cut nearly €5 billion in spending this year to help meet its budget deficit target of 5.4 percent of gross domestic product. The economy ministry said Thursday that cuts were required because state spending this year has been higher than the 2025 budget accounted for — though the amount of money brought in by tax revenues is in line with expectations, at least for now.”

FED (BBG) : “ Majority of Fed Officials Leaning Against July Interest-Rate Cut. A flurry of Federal Reserve officials this week made clear they’ll need a few more months to gain confidence that tariff-driven price hikes won’t raise inflation in a persistent way.”

TRADE WAR (BBG): “ The US and China finalized a trade understanding reached last month in Geneva, US Commerce Secretary Howard Lutnick said, adding that the White House has imminent plans to reach agreements with a set of 10 major trading partners. The China deal, which Lutnick said had been signed two days ago, codifies the terms laid out in trade talks between Beijing and Washington, including a commitment from China to deliver rare earths used in everything from wind turbines to jet planes. “

OTHER

JAPAN Tokyo CPI (MNI Brief): Japan June Tokyo Core CPI Rises 3.1% Vs. May 3.6%. Tokyo’s core inflation slowed to 3.1% y/y in June from 3.6% in May, but remained above the Bank of Japan’s 2% target for the eighth consecutive month, data from the Ministry of Internal Affairs and Communications showed Friday.

JAPAN (MNI BRIEF): Japan H’hold Assets at JPY2,195 Trln End-March. The balance of financial assets held by Japanese households stood at JPY2,195 trillion at the end of March, up 0.3% y/y, but down from the record JPY2,230 trillion seen at the end of December, preliminary fund flow data released by the Bank of Japan on Friday showed.

AUSTRALIA (MNI INTERVIEW): The Australian government has a real opportunity to advance tax reform that could boost productivity growth, with some of the country’s most entrenched systems – such as sales tax and negative gearing – now open for debate, a prominent think tank economist told MNI, though he added that any resulting improvement is likely to be modest without complementary reforms in other areas.

CHINA

MNI China Press Digest June 27: Yuan, Rare Earth, Fiscal

NEW EV LAUNCH (CNBC) Chinese smartphone company Xiaomi is taking aim straight at rival Tesla with a new electric SUV. Xiaomi’s luxury YU7 SUV will start at 253,500 yuan ($35,322), CEO Lei Jun said Thursday, pointing out that the vehicle is 10,000 yuan cheaper than Tesla’s Model Y, which starts at 263,500 yuan in China. The company secured 200,000 pre-orders within just three minutes. By comparison, when Tesla launched the new Model Y in China this January, it garnered approximately 50,000 pre-orders over a 24-hour period.

MNI: PBOC Net Injects CNY364.7 Bln via OMO Friday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY525.9 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net injection of CNY364.7 billion after offsetting the maturity of CNY161.2 reverse repo today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.6403% at 09:50 am local time from the close of 1.6850% on Thursday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 50 on Thursday, the same as the close on Wednesday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1627 Fri; +1.46% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1627 on Friday, compared with 7.1620 set on Thursday. The fixing was estimated at 7.1744 by Bloomberg survey today.

MARKET DATA

NEW ZEALAND ANZ CONSUMER CONFIDENCE MoM JUN 6.4%, -5.5% PRIOR

NEW ZEALAND ANZ CONSUMER CONFIDENCE INDEX JUNE 98.8, 92.9 PRIOR

JAPAN JOBLESS RATE MAY 2.5%, 2.5% PRIOR

JAPAN JOB TO APPLICANT RATIO MAY 1.24x, 1.26x PRIOR

JAPAN TOKYO CPI YOY 3.1%, EST 3.3%, PRIOR 3.4%

JAPAN TOKYO CPI EX-FRESH FOOD YOY JUNE 3.1%, EST 3.3%, PRIOR 3.6%

JAPAN TOKYO CPI EX-FRESH FOOD, ENERGY YOY JUNE 3.1%, EST 3.3%, PRIOR 3.3%

JAPAN RETAIL SALES YOY MAY 3.1%, EST 3.3%, PRIOR 3.3%

JAPAN RETAIL SALES MoM MAY -0.02%, EST 0.3%, PRIOR 0.7% REVISED

JAPAN DEPT. SALES, SUPERMARKET SALES YOY MAY 0.6%, PRIOR 1.5%

CHINA INDUSTRIAL PROFITS YTD YOY MAY

CHINA INDUSTRIAL PROFITS YOY MAY

MARKETS

US TSYS: Asia Wrap - Yields Drift Higher, Led By The Front-End

The TYU5 range has been 111-29 to 112-02 during the Asia-Pacific session. It last changed hands at 111-30, down 0-02+ from the previous close.

The US 2-year yield has moved higher trading around 3.74%, up 0.02 from its close.
The US 10-year yield has edged higher trading around 4.255%, up 0.01 from its close.
The 10-year yield has accelerated through its support, this should clear the way for a move lower with the 4.10% area the first target.
10-year yields should now find demand on any bounce back to the 4.35/40% area.
Bloomberg - “Republican lawmakers will remove the Section 899 protective measure — or so-called revenge tax — from Trump’s bill after a request from Scott Bessent.”
Guy LeBas on X: “(Section 899 removal)Worth more to the long end of the curve than the SLR relief proposal. Explains the persistent afternoon bid in USTs.”
Data/Events:Personal Income, PCE, Core PCE, U. of Mich. Sentiment

Fig 1: 10-Year US Yield Daily Chart

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

JGBS: Little Changed, Subdued Session Despite Tokyo Core CPI Miss

JGB futures are weaker and at session lows, -11 compared to the settlement levels.

Tokyo's core inflation slowed to 3.1% y/y in June from 3.6% in May, but remained above the Bank of Japan's 2% target for the eighth consecutive month. The core-core CPI, which excludes both fresh food and energy and is a key indicator of underlying inflation, also eased to 3.1% y/y in June from 3.3% in May, but stayed above 2% for the fourth straight month.
(Bloomberg) - "Kato says that there were diverging opinions at the primary dealers' meeting regarding debt buybacks. He added that discussions have taken place about the potential impact of buybacks on the market. Govt not in a situation now where debt buybacks can be implemented, given the need to go through the budgetary process."
(Bloomberg) -- Japan will take additional action to ease the impact of US tariffs on the auto sector as needed and “without hesitation,” its economy minister says.
Cash US tsys are 1-2bps cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's gains.
Cash JGBs are mixed across benchmarks, with yield 2bps lower (40-year) to 1bp higher (10-year).
Swap rates are little changed.
On Monday, the local calendar will see Industrial Production and Housing Starts.

AUSSIE BONDS: Cheaper & At Cheaps On A Data-Light Session

ACGBs (YM -3.0 & XM -4.0) are weaker and at lows on a data-light day.

Cash US tsys are 1-2bps cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's gains. Today's US Calendar: Personal Income, PCE, Core PCE, U. of Mich. Sentiment.
Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at -11bp.
The bills strip is slightly weaker, with pricing -1 to -2.
RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut in July is given a 94% probability, with a cumulative 81bps of easing priced by year-end.
On Monday, the local calendar will see Melbourne Institute Inflation and Private Sector Credit.
Next week, the AOFM plans to sell A$1200mn of the 2.75% 21 June 2035 bond on Wednesday and A$1000mn of the 2.25% 21 May 2028 bond on Friday.
In 2025-26, the AOFM plans to: issue a new October 2036 Treasury Bond (by syndication and subject to market conditions); conduct 2 Treasury Bond tenders most weeks; hold 1-2 Treasury Indexed Bond tenders each month.
Issuance of Treasury Bonds (including Green Treasury Bonds) in 2025-26 is expected to be around $150 billion. Issuance of Treasury Indexed Bonds in 2025-26 is expected to be between $2billion and $3 billion.

BONDS: NZGBS: Closed With A Bear Steepener As Short End Reverses Losses

NZGBs closed showing a modest bear-steepener, with benchmark yields flat to 3bps higher. Short end to medium term NZGBs did, however, manage to finish off the session’s worst levels (2bp cheaper).

The NZ-US 10-year yield differential closed 4bps wider at +26bps.
Cash US tsys are 1-2bps cheaper, with a flattening bias, in today's Asia-Pac session after yesterday's gains. Today's US Calendar: Personal Income, PCE, Core PCE, U. of Mich. Sentiment.
Lending to all borrowers NZ$8.58b — most since November 2021, according to the RBNZ. Gains 24% y/y.
Swap rates closed 1-2bps higher, with the 2s10s curve steeper.
RBNZ dated OIS pricing closed flat to 1bp firmer across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
Interest rate expectations across dollar-bloc economies softened over the past week, led by an 18bp decline in the US. New Zealand followed with an 11bp drop, while Canada and Australia each saw a 7–8bp easing.
On Monday, the local calendar will see Filled Jobs and ANZ Business Confidence.

FOREX: Asia FX Wrap - The USD Sell-Off Takes A Breather In The Asian Session

The BBDXY has had a range of 1193.62 - 1195.64 in the Asia-Pac session, it is currently trading around 1194. A very quiet trading range in Asia today. With the market now looking for more US rate cuts, an already bearish outlook for the USD has seen the move lower gather pace overnight. The move sub 1200 is potentially signalling the start of a deeper move back to 1150 and beyond. “FX traders are focusing on call options in the 1.20-to-1.25 area, along with higher implied volatility. That’s a clear signal that fresh funds are piling into bullish euro strategies.”(BBG). “KASHKARI: WOULDN'T BET AGAINST DOLLAR AS PREEMINENT CURRENCY.”(BBG)

EUR/USD - Asian range 1.1681 - 1.1710, Asia is currently trading 1.1695. While the USD remains on the back foot the EUR will continue to be supported first support back towards 1.1500. This move seems to be accelerating and will now be looking towards 1.2000 and beyond.
GBP/USD - Asian range 1.3717 - 1.3750, Asia is currently dealing around 1.3735.This move higher now looks to have broken convincingly higher and with the USD looking like it is set for another leg lower Cable could now target levels back towards 1.4200.
USD/CNH - Asian range 7.1618 - 7.1717, the USD/CNY fix printed 7.1627. Asia is currently dealing around 7.1685. 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 4.385%, BBDXY 1207, Crude oil $65.67
Data/Events : Spain GDP & PPI, France Consumer Confidence

Fig 1: GBP/USD Spot Weekly Chart

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

JPY: Asia Wrap - USD/JPY Back In The Middle Of Its Range

The Asia-Pac USD/JPY range has been 144.20 - 144.81, Asia is currently trading around 144.55, +0.1%. USD/JPY has been directionless in our session, drifting back into the middle of its wider 142.00 - 148.00 range. Surprisingly the removal of the section 899 or so called revenge tax from Trump’s bill has had little impact so far on the USD or US Yields.

(Bloomberg) - “Kato says that there were diverging opinions at the primary dealers’ meeting regarding debt buybacks. He added that discussions have taken place about the potential impact of buybacks on the market. Govt not in a situation now where debt buybacks can be implemented, given the need to go through the budgetary process”
“Japan has been monitoring developments surrounding the US Section 899 “revenge tax”. Kato says there’s a need to seek US understanding regarding the OECD’s global corporate tax framework.”
JAPAN DATA - Tokyo's core inflation slowed to 3.1% y/y in June from 3.6% in May, but remained above the Bank of Japan's 2% target for the eighth consecutive month. The deceleration was mainly driven by a smaller rise in crude oil prices (+3.6% vs. +8.7% in May), though this was partially offset by higher prices for non-perishable food (+7.2% vs. +6.9%) and household durable goods (+3.3% vs. +2.7%)
The rejection of 148.00 points to a potential top being in place now and shows just how quick the market is to return to selling USD’s. USD/JPY is looking for a fresh catalyst in the middle of its range, while the USD continues to move lower this should see sellers on any bounce for now.
Price now back in its wider 142.00 - 148.00 range, I am not sure that the brief spike higher would have seen positioning altered too much and the long JPY trade remains alive and well.
Options : Close significant option expiries for NY cut, based on DTCC data: 143.05($600m).Upcoming Close Strikes : 143.85($885m June 30), 145.00($923m July 1)

Fig 1 : USD/JPY Spot Daily Chart

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

AUD: Asia Wrap - Quiet Session

The AUD/USD has had a range of 0.6543 - 0.6561 in the Asia- Pac session, it is currently trading around 0.6545. A tight range in a very quiet Asian session, the announcement that a trade deal has been finalised with China and that the section 899 or so called revenge tax was removed from Trump’s bill has had little impact so far. The USD has broken some key levels and is still looking vulnerable, this could see the AUD/USD continue to probe above 0.6550 looking to gain some momentum to ultimately break higher. CFTC data showed that both Asset managers and Leverage Funds remain short the AUD, this would potentially be pared back should the move higher accelerate.

Bloomberg - “The US and China finalized a trade understanding reached last month in Geneva, Howard Lutnick said, adding that the White House has imminent plans to reach agreements with a set of 10 major trading partners. The US will ease China trade limits after receiving rare earths.”
“Republican lawmakers will remove the Section 899 protective measure — or so-called revenge tax — from Trump’s bill after a request from Scott Bessent.”(BBG)
The AUD/USD is attempting to break through the top of its recent range as the pressure on the USD increases.
The AUD needs a sustained break above 0.6550/0.6600 to potentially start building momentum for an extended move higher, a close back above 0.6600 and the focus would turn towards the 0.6900/0.7000 area.
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD526m), 0.6500(AUD 480m), 0.6570(AUD 350m). Upcoming Close Strikes : 0.67500(AUD1.27b July 2).
AUD/JPY - Today's range 94.45 - 94.85, it is trading currently around 94.55. Choppy price action as the pair establishes a range between 92.00 - 96.00. Should risk build on this move, focus could turn back to the 96.00 area.

Fig 1: AUD/USD spot Daily Chart

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

NZD: Asia Wrap - NZD/USD Consolidating Gains, Eyes 0.6100

The NZD/USD had a range of 0.6046 - 0.6076 in the Asia-Pac session, going into the London open trading around 0.6065, +0.12%. A tight range in a very quiet Asian session, the announcement that a trade deal has been finalised with China and that the section 899 or so called revenge tax was removed from Trump’s bill has had little impact so far. The USD has broken some key levels and is still looking vulnerable, this could see the NZD/USD continue to probe the 0.6100 area looking to gain the momentum to ultimately break higher.

(Bloomberg) - “RBNZ publishes new residential mortgage lending data for May, on website. Lending to all borrowers NZ$8.58b — most since November 2021, Gains 24% y/y, Increases 1.4% m/m after seasonal adjustment.”
“NZ JUNE CONSUMER CONFIDENCE RISES 6.4% M/M, NZ JUNE CONSUMER CONFIDENCE INDEX RISES TO 98.8: ANZ”(BBG)
A huge bounce from sub 0.5900 and the NZD has now established a foothold above 0.6000, with the USD breaking lower the NZD/USD looks to be building for a potential break higher of its own. A clear break of 0.6100 could provide the momentum to begin a larger move higher, initially targeting the 0.6400 area.
Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5850(NZD404m July 1)
AUD/NZD range for the session has been 1.0791 - 1.0815, currently trading 1.0795. 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 clearer direction.

Fig 1: NZD/USD Spot Daily Chart

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

ASIA STOCKS: Key Bourses Deliver Strong Weekly Gains

Following the simmering of tensions in the Iran-Israel conflict, several key bourses in Asia are on track to deliver a positive week. As news circulates that a trade deal has been reached between the US and China coupled with renewed hope of cuts from the Federal Reserve, sentiment improved towards the end of the week and it will be interesting to see if it can extend into next week.

China's Hang Seng did very little today yet is on track to finish the week up +3.3%. The CSI 300 was flat also yet remains up +2.5% for the week. The Shanghai Comp fell -0.20% but is up +2.4% for the week and the Shenzhen Comp is up +0.73% and over +4.6% for the week.
In Taiwan, TAIEX is marginally softer but remains up +1.8% for the week buoyed by from strong inflows and a surging TWD.
The KOSPI finished the week off with two consecutive days of near on -1% falls but is holding onto weekly gains of +0.94%
The FTSE Straits Times in Singapore is up +0.64% today and over 2% for the week whilst the PSEi in the Philippines jumped +1.13% today and is just shy of +1% for the week.
The NIFTY 50 has opened flat in morning trade having delivered a +1.2% gain yesterday. For the week currently it is up +1.7% for the week.

Oil Suffers Huge Falls for the Week

Oil finished the US session up with minor gains overnight and carried that over into the Asian trading day.
WTI opened at US$65.30 bbl and gained +0.61% to reach $65.63
Despite gains for the last three days the huge falls on Monday and Tuesday sees WTI currently down over -12%
Brent finished the US session with minor gains and that continued today, rising +0.50% to $68.10.
For the week however Brent is down -11.60%
CNN reports that the US has discussed the lifting of sanctions on Iran as a possible incentive to begin talks as an Iranian law comes into place to suspend cooperation with the UN Nuclear watchdog.
Shell Plc (+0.50%) has no intention of making a takeover offer for BP Plc (+1.50%), refuting earlier reports of active merger talks between the two companies.
Oil's attention for now may veer away from the Iran-Israel tensions and focus on a possibly announcement on a trade agreement between the US and China.

Gold Set for Weekly Drop

Gold finished the US session modestly down and that weakness flowed over into the Asia trading day, with bullion down by just over 1%
At US$3,291.42 gold sits fractionally above the 50-day EMA of $3,209.90 having traded through the 20-day EMA earlier
For the week, gold has lost ground by -2.27% yet remains over 24% higher year to date
The Shanghai Gold Exchange has expanded to Hong Kong with two new contracts and a bullion vault, broadening its international reach and strengthening China's influence in commodity and currency markets. The new contracts will be denominated in yuan and settled by cash or physical delivery, with the goal of promoting wider use of the yuan in international trade and reducing reliance on the US dollar.
Calls to bring Germany’s gold home are growing, and now voices in Italy are urging that country’s government to do the same. Germany owns the second-largest gold reserves in the world at 3,352 tonnes. Italy ranks number three with 2,452 tonnes. Both countries utilize the New York Federal Reserve Bank, storing more than a third of their gold reserves in the bank’s Manhattan vaults. (source FX Street)

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
27/06/2025	0600/0800	**	SE	PPI
27/06/2025	0645/0845	***	FR	HICP (p)
27/06/2025	0645/0845	**	FR	PPI
27/06/2025	0645/0845	**	FR	Consumer Spending
27/06/2025	0700/0900	***	ES	HICP (p)
27/06/2025	0800/1000	**	IT	ISTAT Consumer Confidence
27/06/2025	0800/1000	**	IT	ISTAT Business Confidence
27/06/2025	0900/1100	*	EU	Consumer Confidence, Industrial Sentiment
27/06/2025	1000/1200	**	IT	PPI
27/06/2025	1130/0730		US	New York Fed's John Williams
27/06/2025	1230/0830	***	CA	Gross Domestic Product by Industry
27/06/2025	1230/0830	***	US	Personal Income and Consumption
27/06/2025	1230/0830	***	CA	Gross Domestic Product by Industry
27/06/2025	1315/0915		US	Cleveland Fed's Beth Hammack
27/06/2025	1400/1000	***	US	U. Mich. Survey of Consumers
27/06/2025	1400/1000	**	US	University of Michigan Surveys of Consumers Inflation Expectation
27/06/2025	1500/1100		CA	Finance Dept monthly Fiscal Monitor (expected)
27/06/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly
27/06/2025	1700/1300	**	US	Baker Hughes Rig Count Overview - Weekly