MNI EUROPEAN OPEN: USD Consolidates Ahead Of Key Data

Jul-02 05:20By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

US SENATE PASSES TRUMP’S SWEEPING TAX-AND SPENDING BILL, SETTING UP HOUSE BATTLE - RTRS
TRUMP STICKS WITH JULY 9 TAIRFF DEADLINE WHILE CRITICIZING JAPAN - BBG
TRUMP SAYS ISRAEL AGREED TO TERMS FOR 60-DAY GAZA CEASEFIRE - BBG
US, INDO-PACIFIC PARTNERS ANNOUNCE MINERALS INITIATIVE AS RUBIO HOSTS COUNTERPARTS - RTRS
MNI DISCUSSES THE RBA’S INTERNATIONAL OUTLOOK - MNI

Fig 1: Australia Retail Sales Y/Y Lost Momentum In May

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

PRODUCTIVITY (MNI BRIEF): The Office for Budget Responsibility is "open-minded" on changing its productivity forecast, which has been widely criticized as over-optimistic, top OBR official David Miles told lawmakers on the Lords Economic Affairs Committee.

BOE (MNI BRIEF): Bank of England Governor Andrew Bailey downplayed the recent pick-up in UK inflation and said that there were signs of softening in the economy.

FISCAL (BBG): “Keir Starmer dramatically abandoned his flagship welfare reforms to avoid a historic defeat, leaving the UK prime minister’s authority badly damaged and his government facing a widening fiscal hole to fill.”

FX (MNI BRIEF): This year could be seen as a pivotal period in the future for the status of the U.S. dollar as the world's currency reserve, European Central Bank president Christine Lagarde said on Tuesday in the ECB Forum in Sintra, noting that investors are looking for options beyond the greenback.

UKRAINE (BBG): “ The Trump administration is halting the transfer of artillery rounds and air defenses to Ukraine, depriving the country of much-needed weapons as it endures stepped-up missile and drone attacks from Russia.”

MIDEAST (BBG): “ President Donald Trump said Israel has agreed to the conditions needed for a 60-day ceasefire in Gaza, adding that the plan would now be presented to Hamas.”

TARIFFS (BBG): “ President Donald Trump said he is not considering delaying his July 9 deadline for higher tariffs to resume and renewed his threat to cut off talks and impose duty rates on several nations, including Japan.”

FISCAL (RTRS): “U.S. Senate Republicans passed President Donald Trump's massive tax-and-spending bill on Tuesday by the narrowest of margins, advancing a package that would slash taxes, reduce social safety net programs and boost military and immigration enforcement spending while adding $3.3 trillion to the national debt. The legislation now heads to the House of Representatives for possible final approval, though a handful of Republicans there have already voiced opposition to some of the Senate provisions.”

GEOPOLITICS (RTRS): “The United States announced the launch of a critical minerals initiative with Australia, India and Japan on Tuesday as part of efforts to counter China, although ties between the partners have been strained by trade frictions and other disagreements.”

OTHER

INDIA (BBG): “An internal committee of the Reserve Bank of India is in favor of retaining the current inflation target in an upcoming government review, according to people familiar with the matter, giving investors some reassurance about the continuity of monetary policy.”

AUSTRALIA (MNI): MNI discusses the RBA's international outlook. On MNI Policy MainWire now, for more details please contact sales@marketnews.com.

AUSTRALIA (RTRS): “Australian retail sales barely grew for a fourth straight month in May as gains in clothing purchases were offset by a rare drop in food sales, bolstering the case for another cut in interest rates next week.’

CHINA

LIQUIDITY (YICAI): "Interbank market liquidity is expected to remain loose in July, given a reduction in maturing certificates of deposit and a likely acceleration in fiscal spending, Yicai.com reported, citing analysts."

FISCAL (SECURITIES DAILY): "China issued CNY2.16 trillion of local special bonds in the first half of the year, up 44% y/y and roughly half of the CNY4.4 trillion total planned this year, reflecting the government's proactive fiscal policy stance, Securities Daily reported."

HOUSING (SHANGHAI SECURITIES NEWS): "Chinese provinces are implementing Beijing’s directive to broaden the use of funds raised through special local bond issuance, extending their application to areas such as the purchase of unsold homes and the repayment of corporate debts, the Shanghai Securities News reports."

MNI: PBOC Net Drains CNY266.8 Bln via OMO Wednesday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY98.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The operation led to a net drain of CNY266.8 billion after offsetting the maturity of CNY365.3 reverse repo today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4800% at 09:47 am local time from the close of 1.5457% on Tuesday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 44 on Tuesday, compared with the close of 52 on Monday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1546 Weds; +1.51% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1546 on Wednesday, compared with 7.1534 set on Tuesday. The fixing was estimated at 7.1634 by Bloomberg survey today.

MARKET DATA

AUSTRALIA MAY RETAIL SALES M/M 0.2%; MEDIAN 0.5%; PRIOR 0.0%
AUSTRALIA MAY BUILDING APPROVALS 3.2%; MEDIAN 4.0%; PRIOR -4.1%

JAPAN JUNE MONETARY BASE Y/Y -3.5%; PRIOR -3.4%

SOUTH KOREA JUNE CPI M/M 0.0%; MEDIAN 0.1%; PRIOR -0.1%
SOUTH KOREA JUNE CPI Y/Y 2.2%; MEDIAN 2.1%; PRIOR 1.9%
SOUTH KOREA JUNE CPI EX FOOD & ENERGY Y/Y 2.0%; MEDIAN 2.0%; PRIOR 2.0%

MARKETS

US TSYS: Asia Wrap - Yields Drift Higher

The TYU5 range has been 111-27 to 111-30+ during the Asia-Pacific session. It last changed hands at 111-27, down 0-00+ from the previous close.

The US 2-year yield has drifted higher trading around 3.776%.
The US 10-year yield has edged higher trading around 4.25%, up 0.01 from its close.
The 10-year yield has seen a bounce after a very strong move lower with some paring back of longs ahead of NFP. Any bounce back to the 4.35% area would offer buyers a decent level to add again.
(Bloomberg) - “Jerome Powell repeated that the Fed probably would have cut rates further this year absent Trump’s expanded use of tariffs, although he didn’t rule out easing at July’s meeting.”
“The $3.3 trillion US tax and spending bill passed the Senate after JD Vance cast the tie-breaking vote. The House is expected to vote on the package Wednesday, but passage isn’t guaranteed.”(BBG)
Data/Events: MBA Mortgage Applications, ADP, Challenger Job Cuts

Fig 1: 10-Year US Yield Daily Chart

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

JGBS: Cash Bond Twist-Flattener, 30Y Supply Tomorrow

JGB futures are weaker and at Tokyo session lows, -13 compared to settlement levels.

(Bloomberg) -- "Japan will continue actively negotiating tariffs in good faith with the US for both countries' mutual benefit, Deputy Chief Cabinet Secretary Kazuhiko Aoki says at a regular press conference on Wednesday."
(Bloomberg) Japan’s 30-year bond auction on Thursday will likely see “modest to safe” results, according to Barclays Securities’ strategists Ayao Ehara and Shinichiro Kadota.
Cash US tsys are ~1bp cheaper in today's Asia-Pac session. Wednesday's US data focus is on MBA Mortgage Applications at 0700ET, Challenger Jobs at 0730ET followed by ADP Employment Change at 0815ET. No scheduled Fed speakers. Thursday is a heavy data day with NFP added due to the Independence Day holiday closure on Friday.
Cash JGBs have twist-flattened across benchmarks with yields 1bp higher to 1bp lower, pivoting at the 20-year. The benchmark 10-year yield is 1.4bps higher at 1.408% versus the cycle high of 1.596%.
Swaps are slightly mixed across maturities.
Tomorrow, the local calendar will see Weekly International Investment Flow and S&P Global Composite & Services PMI data alongside 30-year supply.

AUSSIE BONDS: Cheaper, Narrow Ranges Ahead Of Key US Data

ACGBs (YM -4.0 & XM -2.5) are modestly weaker after trading in narrow ranges.

Cash US tsys are little changed in today's Asia-Pac session after yesterday's twist-flattener. Wednesday's US data focus is on MBA Mortgage Applications at 0700ET, Challenger Jobs at 0730ET followed by ADP Employment Change at 0815ET. No Fed scheduled Fed speakers. Thursday is a heavy data day with NFP added due to Independence Day holiday closure on Friday.
Cash ACGBs are 3bps cheaper with the AU-US 10-year yield differential at -11bps.
Today’s Jun-35 auction showed solid pricing for ACGBs, with the weighted average yield coming in 0.45bps below prevailing mid-yields. However, the cover ratio nudged lower to 3.3625x. The AOFM plans to sell A$1000mn of the 2.25% 21 May 2028 bond on Friday.
The bills strip has bear-flattened, with pricing -1 to -4.
RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in July is given a 95% probability, with a cumulative 82bps of easing priced by year-end (based on an effective cash rate of 3.84%).
Tomorrow, the local calendar will see Trade Balance and S&P Global Composite & Services PMIs.

BONDS: NZGBS: Closed Subdued Session Modestly Cheaper

NZGBs closed 1-2bps cheaper after a subdued session. There were 2bp ranges across the benchmarks.

Cash US tsys are little changed in today's Asia-Pac session. Wednesday's US data focus is on MBA Mortgage Applications at 0700ET, Challenger Jobs at 0730ET followed by ADP Employment Change at 0815ET. No Fed scheduled Fed speakers. Thursday is a heavy data day with NFP added due to Independence Day holiday closure on Friday.
The NZ-US yield differential closed 2bps tighter on the day. At +25bps, the NZ-US 10-year differential is in the top half of the -20bp to +40bps range seen this year.
Swap rates closed 1-2bps higher, with the 2s10s curve steeper.
RBNZ dated OIS pricing closed little changed across meetings. 4bps of easing is priced for July, with a cumulative 33bps by November 2025.
Tomorrow, the local calendar will see Cotality Home Values, ANZ Commodity Prices and NZ Government 11-Month Financial Statements.
The NZ Treasury launched a syndicated tap of the May 2031 nominal bond. Treasury expects to issue at least NZ$4bn and will cap it at NZ$6bn. Issue will be priced July 3 with initial price guidance +21-24 bps over the May 2030 nominal bond. The Treasury has cancelled the July 3 bond auction.

FOREX: Asia FX Wrap - USD Consolidates As The Market Eyes NFP

The BBDXY has had a range of 1188.23 - 1190.00 in the Asia-Pac session, it is currently trading around 1189. The USD has traded sideways today after initially trying lower. The larger picture remains one of USD weakness, short-term though price is beginning to look a little stretched and we could see more profit-taking heading into NFP. In the current environment rallies should continue to be met with supply, first resistance is back towards the 1205/1215 area.

EUR/USD - Asian range 1.1788 - 1.1810, Asia is currently trading 1.1800. While the USD remains on the back foot the EUR will continue to be supported, short-term it is starting to look stretched the first support is back towards 1.1500/1.1600. The medium term targets will now be towards 1.2000 and beyond.
GBP/USD - Asian range 1.3732 - 1.3753, Asia is currently dealing around 1.3745.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 potentially now target levels back towards 1.4200. Short-term momentum seems to be stalling first support is back towards 1.3500/1.3600.
USD/CNH - Asian range 7.1598 - 7.1662, the USD/CNY fix printed 7.1546 Asia is currently dealing around 7.1650. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
Cross asset : SPX +0.27%, Gold $3340, US 10-Year 4.25%, BBDXY 1189, Crude oil $65.50
Data/Events : Italy Unemployment, France Budget Balance, EZ Unemployment, Spain Unemployment

Fig 1: EUR/USD Spot Daily Chart

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

AUD: Asia Wrap - Disappointing Retail Data Finds Bids Around 0.6560

The AUD/USD has had a range of 0.6565 - 0.6583 in the Asia- Pac session, it is currently trading around 0.6583. The pair tested lower on the back of a lower than expected retail sale sprint, bids emerged back around 0.6560 and the pair has erased all of its losses going into London. US Equity futures have drifted higher in Asia, ESU5 +0.30%, NQU5 +0.35%. The market will be watching for signs of this move building upward momentum for a more significant move higher, could the catalyst be NFP on Thursday ?

Australian retail sales rose a modest 0.2%m/m in May, after a revised flat outcome in April (originally reported as a -0.1% dip). The market consensus for the May outcome was a +0.5% rise. Other data showed May building approvals up 3.2%m/m, which was slightly below the 4.0% forecast. The April fall was revised to -4.1%m/m.
(Bloomberg) -- Weak retail sales confirm our concerns about Australia’s consumers, who are keeping their wallets shut despite the Reserve Bank starting rate cuts in February and May. So far, there’s little sign the moves are reviving spending, and a stronger rebound likely hinges on additional easing.
The AUD/USD is breaking through the top of its recent range as the pressure on the USD increases. First support is seen back towards 0.6500.
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 back to 0.6900/0.7000.
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6550(AUD654m). Upcoming Close Strikes : 0.6600(AUD2.55bm July4).
AUD/JPY - Today's range 94.30 - 94.53, it is trading currently around 94.50, +0.1%. Choppy price action as the pair establishes a range between 92.00 - 96.00. Momentum higher seems to be stalling, a break sub 0.9350 would be needed to see the focus turn lower once more.

Fig 1: AUD/USD spot Daily Chart

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

JPY: Asia Wrap - Quiet Session, Trades Sideways

The Asia-Pac USD/JPY range has been 143.32 - 143.75, Asia is currently trading around 143.60, +0.15%. USD/JPY has traded sideways in our session. This pair continues to trade with an offered bias, first resistance is back towards 144.50/145.00 and there should be sellers again eager to participate towards that level. The market will be waiting for NFP on Thursday to provide a potential catalyst to test the 142.00/140.00 area once more.

(Bloomberg) -- “Japan will continue actively negotiating tariffs in good faith with the US for both countries' mutual benefit, Deputy Chief Cabinet Secretary Kazuhiko Aoki says at a regular press conference on Wednesday.”
“Japan's super-long bonds are set to remain under pressure in the medium term as local life insurers may offload holdings to sidestep impairment losses on deeply discounted debt.” (per BBG)
"ISHIBA: TALKS WITH US SEEM MORE ABOUT INVESTMENT THAN TARIFFS” - BBG
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 to probe the lower end of its range again, can the NFP on Thursday provide that ?
Options : Close significant option expiries for NY cut, based on DTCC data: 144.00($598m), 144.75(698m).Upcoming Close Strikes : 140.00($1.04b July3).

Fig 1 : USD/JPY Spot Hourly Chart

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

NZD: Asia Wrap - NZD/USD Continues To Be Well-Supported

The NZD/USD had a range of 0.6090 - 0.6106 in the Asia-Pac session, going into the London open trading around 0.6100, +0.05%. A tight range in a relatively quiet Asian session, US Equity futures have also drifted higher in Asia, ESU5 +0.30%, NQU5 +0.38%. The pair is breaking through its recent highs and attempting to build momentum for a potential look back towards the 0.6400/0.6500 area. The relentless pressure on the USD is providing a tailwind and dips towards 0.6000 should continue to see demand. The market will be eyeing NFP on Thursday so there is a good chance we will consolidate until we see if that gives the USD a further nudge lower.

(Bloomberg) -- “Donald Trump said he’s not considering delaying his July 9 deadline for higher tariffs to resume. He sees a Japan deal as unlikely, saying it should be forced to pay a rate of “whatever the number is that we determine.”
Whole Milk Prices Nearly 12% Off May Highs : Overnight the whole milk price auction saw a sharp fall. We fell to $3859 from $4084 prior, which was a 5.1% drop between the two auctions. The whole milk price is off close to 12% from its highs at the start of May.
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 0.6400/0.6500 area.
CFTC Data shows Asset Managers have cut their shorts and are now beginning to build a long in NZD +12195, the Leveraged community maintained their short that had just been added to -11981.
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5800(649m). Upcoming Close Strikes : none.
AUD/NZD range for the session has been 1.0777 - 1.0796, currently trading 1.0780. 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: A Mixed Day as Tariff Threats Echo Around the Region

Asia stocks were mixed today as the markets await the next raft of US data. As President Trumps latest headlines focus on tariff threats for Japan the tariff deadline looms for most countries. The threat towards Japan was a reminder for Korean investors who drove the KOSPI lower today as Nvidia's supplier SK Hynix slumped. Hong Kong got a bump from Casino stocks as June numbers came in ahead expectations.

The Hang Seng stood out with gains today of +0.62% whilst CSI 300 rose just +0.07%. The Shanghai Comp did very little, down -0.04% whilst Shenzhen was the worst performer, down -0.45%
The TAIEX in Taiwan was down modestly by -0.12%
The KOSPI had two strong days of gains, only to fall on tariff fears today by -0.82%
The FTSE Malay KLCI gained +0.44% capping off five successive days of gains.
The Jakarta Composite is down -0.91% for a second successive day of falls.
The FTSE Straits Times rose by +0.48% whilst the PSEi in the Philippines is down -0.39%.
The NIFT 50 is down modestly by -0.10% offsetting yesterday's gains.

OIL: Price Action Limited Today for Oil

Both Brent and WTI had limited price movement today, consolidating overnight moves.
Having finished the US session with gains of +0.52%, WTI opened at US$65.56 bbl and slipped marginally to $65.46 and sits just below the 50-day EMA of $65.54.
Brent had gone the other way overnight, closing down -0.74% at US$67.25 bbl and is at $67.15 in the Asia trading day, remaining below all major moving averages. The nearest being the 50-day EMA of $68.36
The IEA forecasts that global oil demand will rise by up to 2.5m barrels a day from 2024-2030 despite EV's forecasting to displace up to 5m barrels per day over the next decade which comes at a time when the OPEC+ group intend to increase production by a further 400k barrels from August.
President Donald Trump vowed to fill up the nation’s emergency oil stockpile, signaling he would take advantage of low crude prices to replenish the reserve that was drawn down under former President Joe Biden.
The two-week average for global stockpiles of crude oil rose by a substantial 1.4m b/d over the last three months as large builds of floating storage in the Middle East added to spare inventories, according to Goldman Sachs

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
02/07/2025	0800/1000		EU	ECB de Guindos Chairs Sintra Panel
02/07/2025	0900/1100	**	EU	Unemployment
02/07/2025	0900/1000	**	GB	Gilt Outright Auction Result
02/07/2025	0900/1100		EU	ECB Cipollone Chairs Sintra Panel
02/07/2025	1030/1230		EU	ECB Lane Chairs Sintra Panel
02/07/2025	1030/1130		GB	BOE Taylor On Panel At Sintra Conference
02/07/2025	1100/0700	**	US	MBA Weekly Applications Index
02/07/2025	1215/0815	***	US	ADP Employment Report
02/07/2025	1415/1615		EU	ECB Lagarde Gives Closing Sintra Remarks
02/07/2025	1430/1030	**	US	DOE Weekly Crude Oil Stocks
03/07/2025	2300/0900	*	AU	S&P Global Final Australia Services PMI
03/07/2025	2300/0900	**	AU	S&P Global Final Australia Composite PMI
03/07/2025	0030/0930	**	JP	S&P Global Final Japan Services PMI
03/07/2025	0030/0930	**	JP	S&P Global Final Japan Composite PMI
03/07/2025	0130/1130	**	AU	Trade Balance
03/07/2025	0145/0945	**	CN	S&P Global Final China Services PMI
03/07/2025	0145/0945	**	CN	S&P Global Final China Composite PMI
03/07/2025	0630/0830	***	CH	CPI
03/07/2025	0700/0300	*	TR	Turkey CPI
03/07/2025	0715/0915	**	ES	S&P Global Services PMI (f)
03/07/2025	0715/0915	**	ES	S&P Global Composite PMI (final)
03/07/2025	0745/0945	**	IT	S&P Global Services PMI (f)
03/07/2025	0745/0945	**	IT	S&P Global Composite PMI (final)
03/07/2025	0750/0950	**	FR	S&P Global Services PMI (f)
03/07/2025	0750/0950	**	FR	S&P Global Composite PMI (final)
03/07/2025	0755/0955	**	DE	S&P Global Services PMI (f)
03/07/2025	0755/0955	**	DE	S&P Global Composite PMI (final)
03/07/2025	0800/1000	**	EU	S&P Global Services PMI (f)
03/07/2025	0800/1000	**	EU	S&P Global Composite PMI (final)
03/07/2025	0830/0930		GB	Decision Maker Panel data
03/07/2025	0830/0930		GB	BOE Credit Conditions Survey
03/07/2025	0830/0930	**	GB	S&P Global Services PMI (Final)
03/07/2025	0830/0930	***	GB	S&P Global/ CIPS UK Final Composite PMI
03/07/2025	1230/0830	***	US	Jobless Claims
03/07/2025	1230/0830	**	US	WASDE Weekly Import/Export
03/07/2025	1230/0830	**	CA	International Merchandise Trade (Trade Balance)
03/07/2025	1230/0830	***	US	Employment Report
03/07/2025	1230/0830	**	US	Trade Balance
03/07/2025	1230/0830	**	US	Trade Balance
03/07/2025	1345/0945	***	US	S&P Global Services Index (final)
03/07/2025	1345/0945	***	US	S&P Global US Final Composite PMI