MNI EUROPEAN OPEN: USD Recovery Continues

Sep-22 05:23By: Jonathan Cavenagh

Europe

EXECUTIVE SUMMARY

FED’S DALY - LABOR MARKET HAS SOFTENED QUITE A BIT - MNI BRIEF
MIRAN WANTS MORE 50BP FED CUTS TO NEUTRAL BY DEC - MNI BRIEF
H-1B WORKERS ABROAD RACE TO US AS TRUMP ORDER SPARKS DISMAY. CONFUSION - RTRS
LAGARDE SAYS ECB HAS HIT INFLATION GOAL BUT UNCERTAINTY REMAINS - BBG
CHINA SEPT LPR REMAINS UNCHANGED - MNI BRIEF

Fig 1: USD BBDXY Index & Tsy 10yr Nominal Yield

Source: MNI - Market News/Bloomberg/Refinitiv.

GROWTH (BBG): “The UK approved a second runway at London Gatwick Airport, the latest infrastructure project pushed by Keir Starmer’s government as he tries to boost economic growth.”

SWEDEN (MNI RISKBANK WATCH): The Riksbank’s Executive Board faces a finely balanced call over whether to make one further 25-basis-point cut at its September meeting next week, after having already cut the policy rate to the middle of its neutral range estimate at 2.0% and as both inflation and unemployment edge higher.

ECB (BBG): “- The European Central Bank has achieved its goal of taming prices but uncertainty persists over the outlook despite the trade deal with the US, President Christine Lagarde said. “Interest rates have to target an inflation level, which we do target, and which we have now reached,” Lagarde told Danish broadcaster DRTV in an interview aired Saturday.”

RUSSIA (BBG): “ French President Emmanuel Macron called the European Union’s remaining energy imports from Russia “very marginal,” challenging Donald Trump’s calls for the bloc to reduce its dependence if it wants the US to step up pressure on Moscow to end the war in Ukraine.”

FED (MNI BRIEF): San Francisco Fed President Mary Daly said Friday the labor market has softened quite a bit over the last year and that is why she supported a 25 basis point cut to interest rates this week.

FED (MNI BRIEF): Federal Reserve Governor Stephen Miran on Friday called for benchmark interest rates to drop by 50 basis point increments to get close to neutral by December, confirming his projection for year-end rates was the lowest among FOMC members at 2.75%-3%. He also said the Fed should not use its balance sheet to cap longer term rates.

FED (MNI BRIEF): Chief Justice John Roberts Friday refrained from acting on the request to act on the President Donald Trump's request to remove Federal Reserve Governor Lisa Cook from her job, instead asking Cook for a response to the DOJ's filing by Sept. 25 at 4pm ET.

US/CHINA (BBG): “A group of senior US House representatives arrived in China on Sunday for talks with President Xi Jinping’s government — the first such official visit in six years — as the world’s largest economies edge closer to a trade deal.”

US/CHINA (BBG): “ US President Donald Trump said he would meet Chinese President Xi Jinping on the sidelines of the upcoming Asia-Pacific Economic Cooperation summit and hailed progress toward finalizing a deal over TikTok, after a highly anticipated call on Friday.”

REGULATIONS (RTRS): Panic, confusion and anger reigned as workers on H-1B visas from India and China were forced to abandon travel plans and rush back to the U.S. after President Donald Trump imposed new visa fees, in line with his wide-ranging immigration crackdown.

OTHER

SOUTH KOREA (RTRS): “South Korea's economy could fall into crisis rivalling its 1997 meltdown if the government accepts current U.S. demands in stalled trade talks without safeguards, President Lee Jae Myung told Reuters.”

CANADA (MNI BRIEF): Finance Minister Francois-Philippe Champagne said Canada's Nov. 4 budget will stick to Mark Carney's campaign fiscal pledges even with major investments addressing the U.S. trade war and a bigger NATO commitment.

ARGENTINA (BBG): “Argentine leader Javier Milei announced plans to meet President Donald Trump in New York on Tuesday after hinting his country is in negotiations to halt a market selloff and avoid a debt crisis.”

JAPAN (BBG): “ Shinjiro Koizumi, a Japanese reform proponent running for the ruling party’s top position, said he will aim to create fresh economic measures immediately to counter inflation and wants to raise average wages by ¥1 million ($6,760) within five years.”

CHINA

LOAN PRIME RATES (MNI BRIEF): China's Loan Prime Rate held steady on Monday, in line with expectations, with more easing expected later in the year as the economy suffers stronger headwinds, according to a statement on the website of People’s Bank of China.

PBOC (SECURITIES DAILY): The People’s Bank of China’s Friday move to adjust the 14-day reverse repo operations to a fixed amount, interest rate tendering, and multiple price bidding system aimed at strengthening the status of the 7-day reverse repo rate as the policy interest rate, said Securities Daily in a commentary.

DEMAND (YICAI): Weak demand is blunting the impact of measures to curb excessive competition, which have only lifted producer prices moderately, Guan Tao, global chief economist at BOCI China, wrote in an article published on Yicai.com.

MNI: PBOC Net Injects CNY260.5 Bln via OMO Monday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY240.5 billion via 7-day reverse repos, with the rate unchanged at 1.40%. The PBOC conducted another CNY300 billion via 14-day reverse repos at bidding rates. The operation led to a net injection of CNY260.5 billion after offsetting maturities of CNY280 billion today, according to Wind Information.

The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.4505% at 10:09 am local time from the close of 1.5096% on Friday.
The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 54 on Friday, compared with the close of 49 on Thursday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Lower At 7.1106 Mon; -1.36% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate lower at 7.1106 on Monday, compared with 7.1128 set on Friday. The fixing was estimated at 7.1157 by Bloomberg survey today.

MNI: China CFETS Yuan Index Down 0.24% In Week of Sep 19

The CFETS Weekly RMB Index was 96.36 on Sep 19, down 0.24% from 96.60 on Sep 12.

MARKET DATA

SOUTH KOREA SEP EXPORTS 20 DAYS Y/Y 13.5%; PRIOR 7.6%
SOUTH KOREA SEP IMPORTS 20 DAYS Y/Y 9.9%; PRIOR 0.4%

CHINA 1YR LOAN PRIME RATE 3.00%; MEDIAN 3.00%; PRIOR 3.00%
CHINA 5YR LOAN PRIME RATE 3.50%; MEDIAN 3.50%; PRIOR 3.50%

MARKETS

US TSYS: Asia Wrap - Yields Continue To Retrace Higher

The TYZ5 range has been 112-22 to 112-27+ during the Asia-Pacific session. It last changed hands at 112-23, down 0-01 from the previous close.

The US 2-year yield has edged higher trading 3.578%, up 0.01 from its close.
The US 10-year yield is trading around 4.141%, up 0.01 from its close.
10-Year Yields could not extend below 4.00% and have bounced as the Fed could not meet the markets very dovish expectations. The first buy-zone is now back towards the 4.20% area where I suspect demand should return initially. A sustained break through 4.00% is needed for the focus to then turn towards the 3.80% area.
Robin Brooks on X: “Germany's real 10-year yield crossed above 1% this month, the first time it's been here since 2011. This is a destabilizing force for the Euro zone, because it pushes up yields everywhere else, including for highly indebted countries. It's already impacting Spain and France...”
ISABELNET on X: “LEI - A 0.5% decline in the US Leading Economic Index (LEI) in August 2025 indicates an ongoing slowdown in US economic activity.”
(Bloomberg) -- Asset-manager net long position in long-bond futures was unwound at a rapid pace in the week to Sept. 16., CFTC data shows. Other bigger positioning shifts saw hedge funds cover shorts in 5-year note futures while asset managers extended net long in ultra-long bond futures.
Data/Events: Chicago Fed Nat Activity Index

Fig 1: 10-Year US Yield Daily Chart

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

JGBS: Market Sells Off As LDP Deliver Speeches

JGB futures are weaker and at session lows, -30 compared to the settlement levels.

Japan’s LDP leadership candidates delivered policy speeches in Tokyo, with lawmaker Toshimitsu Motegi pledging to uphold a policy of no tax increases. Kobayashi announced plans to enhance screening for foreign inward investment. A recent poll shows Takaichi as the top pick to lead the LDP with 28.3% support. Chief Cabinet Secretary Hayashi noted that Japan’s past aversion to a strong yen has diminished but warned that potential Fed rate cuts could strengthen the yen and hurt the export-reliant economy.
The BOJ kept rates at 0.5%, but two members dissented in favour of a 25bp hike, arguing the price target is "more or less achieved" and rates should move "closer to neutral," highlighting stronger hawkish voices within the board. See the full MNI BoJ Review here:
Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after Friday's modest sell-off.
Cash JGBs are 1-5bps cheaper across benchmarks, led by the futures-linked 7-year. The benchmark 10-year yield is 2.3bp higher at 1.667%, a new cycle high.
Swap rates are 2-4bps higher. Swap spreads are mostly wider.
Tomorrow, the local calendar will be closed for a holiday.

AUSSIE BONDS: Grinding Weaker Through The Session

ACGBs (YM -4.0 & XM -5.0) are weaker and at cheaps.

In today's testimony to the House of Representatives Standing Committee on Economics, RBA Governor Bullock stated that the RBA expects recent interest rate cuts to support household and business spending. Labour market conditions are near full employment, though unemployment has risen slightly since the last meeting, with some tightness remaining. Household consumption growth is expected to continue as real incomes rise. Since the August meeting, domestic data have been broadly in line with or slightly stronger than expectations. The overall economic outlook remains clouded by uncertainty.
Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after Friday's modest sell-off.
Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +14bps.
The bills strip is -3 to -4 across contracts.
RBA-dated OIS pricing is giving a 25bp rate cut in September a 5% probability, with a cumulative 27bps of easing priced by year-end.
August CPI data is due on Wednesday.
This week, the AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond on Tuesday, A$1000mn of the 3.00% 21 November 2033 bond on Wednesday and A$900mn of the 2.75% 21 November 2029 bond on Friday.
Tomorrow, the local calendar will see S&P Global PMIs.

BONDS: NZGBS: Bear-Steepener To Start The Week

NZGBs closed showing a bear-steepener, with benchmark yields flat to 3bps higher.

Cash US tsys are 1-2bps cheaper in today's Asia-Pac session after Friday's modest sell-off.
Swap rates closed 1-2bps higher.
Bloomberg - "Kiwibank Now Sees RBNZ Cash Rate Ending Year at 2.25%. Now expect a 50 basis-point cut in October followed by a 25bp cut in November so that the cash rate ends the year at 2.25%. "It has become crystal clear that the Kiwi economy is not recovering" and "the Reserve Bank needs to do more."
RBNZ dated OIS pricing closed little changed across meetings. 33bps of easing is priced for October, with a cumulative 59bps by November 2025.
The local calendar will be empty until Friday's Consumer Confidence data.
On Thursday, the NZ Treasury plans to sell NZ$250mn of the 4.50% May-30 bond and NZ$200mn of the 3.50% Apr-33 bond.

FOREX: Asia FX Wrap - USD Continues To Retrace, BBDXY Probes Above 1200

The BBDXY has had a range of 1198.77 - 1200.20 in the Asia-Pac session; it is currently trading around 1200, +0.15%. The USD continues to grind out gains as the market is being forced to recalibrate, having gone into last week's FOMC a little over its skis in terms of positioning. How far can this market retrace, I suspect sellers would be all over a bounce back toward the 1200/1210 area initially. A break below 1180 has been put off for now, but it feels like it's just a question of time before we have another look down there.

EUR/USD - Asian range 1.1726 - 1.1748, Asia is currently trading 1.1730. The pair rejected the move above 1.1900 and quickly retraced. The market will be looking for dips back towards 1.1700 to find support to build a base from which to move higher again.
GBP/USD - Asian range 1.3458 - 1.3474, Asia is currently dealing around 1.3455. The pair rejected the break higher and has moved back into the middle of its recent range. No clear direction for the moment.
USD/CNH - Asian range 7.1134 - 7.1194, the USD/CNY fix printed 7.1106, Asia is currently dealing around 7.1150. Sellers should be around on bounces while price holds below the 7.2200/2500 area and the PBOC manages the fix lower. Above 7.2500 and we could see a test of the USD Shorts.
Cross asset : SPX -0.10%, Gold $3691, US 10-Year 4.142%, BBDXY 1200, Crude Oil $63.08
Data/Events : EZ Consumer Confidence

Fig 1: GBP/USD Spot 2H Chart

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

JPY: Asia Wrap - USD/JPY Probes Above 148.00, Leveraged Funds Add To JPY Shorts

The USD/JPY range has been 147.88 - 148.38 in the Asia-Pac session, it is currently trading around 148.35, +0.25%. USD/JPY is doing some work just above the 148.00 area. The price is still within its recent 146-149 range, and we need a convincing break on either side to see some clearer direction again. Neither the FOMC nor the BOJ were able to provide any clarity, the market will start turning its focus towards payrolls which seems a lifetime away.

MNI BoJ Review – September 2025: Cautious But Signals Progress: Policy Decision & Dissents: The BOJ kept rates at 0.5%, but two members dissented in favour of a 25bp hike, arguing the price target is "more or less achieved" and rates should move "closer to neutral," highlighting stronger hawkish voices within the board.
Governor Ueda's Tone: Ueda remained balanced, noting "underlying inflation is approaching 2%, but the 2% level has not yet been reached" and that there is "little sign of tariff having impact on Japan's economy," while emphasising ongoing global uncertainty and data dependency.
"JAPAN'S TAKAICHI TOP PICK TO LEAD LDP RACE WITH 28.3%: FNN POLL" - BBG
"JAPANESE PM CONTENDER AND CHIEF CABINET SECRETARY HAYASHI: JAPAN'S PAST AVERSION TO STRONG YEN HAS DIMINISHED, WHEN ASKED ABOUT RISK FED RATE CUT PROSPECTS COULD PUSH UP YEN VS DOLLAR, HURT JAPAN'S EXPORT-RELIANT ECONOMY.” - RTRS
Options : Close significant option expiries for NY cut, based on DTCC data: 146.85($430m), 147.25($897m), 146.80($502m). Upcoming Close Strikes : 145.00($1.52b Sept 24), 150.00($922m Sept 25) - BBG.
CFTC data shows last week asset managers reduced their JPY longs slightly +71162( Last +87239), leveraged funds again used the dip to add their short position believing the support will continue to hold -58811(Last -49951).

Fig 1 : JPY CFTC Data

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

AUD: Asia Wrap - AUD/USD Consolidates Around 0.6600, AM's Reduce Shorts

The AUD/USD has had a range of 0.6581 - 0.6604 in the Asia- Pac session, it is currently trading around 0.6595, +0.02%. US stocks initially tried lower on the H-1B visa story but have failed to follow through in our session. The USD retracement continues to grind higher, time will tell how long the reprieve lasts. The AUD/USD should still see dips supported for now with the first buy-zone back towards the 0.6550 area.

MNI - In today's testimony to the House of Representatives Standing Committee on Economics, RBA Governor Bullock stated that the RBA expects recent interest rate cuts to support household and business spending. Labour market conditions are near full employment, though unemployment has risen slightly since the last meeting, with some tightness remaining. Household consumption growth is expected to continue as real incomes rise. Since the August meeting, domestic data have been broadly in line with or slightly stronger than expectations. The overall economic outlook remains clouded by uncertainty.
"BULLOCK: RBA GETTING CLOSER TO MISSION ACCOMPLISHED ON CPI, RECENT CHINESE ECONOMIC DATA HAVE NOT BEEN SO GREAT - [RTRS]"
"RBA'S HUNTER: LOOKS LIKE ECONOMY IS IN A `CYCLICAL UPTURN” - BBG
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6510(AUD356m), 0.6525(AUD705m), 0.6600(AUD546m). Upcoming Close Strikes : 0.6600(AUD703m Sept 24), 0.6650(AUD908m Sept 23), 0.6720(AUD791m Sept 24) - BBG
CFTC Data last week shows Asset managers started to significantly reduce their shorts, -41095(Last -68333). The Leveraged community has pulled back their shorts to be almost flat, -1519(Last -5081).
AUD/JPY - Asia-Pac range 97.48 - 97.85, Asia is trading around 97.85.The pair has stalled towards 98.50, dips back towards 96.50/97.00 should be expected to be supported now first up.

Fig 1: AUD CFTC Data

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

NZD: Asia Wrap-NZD/USD Trades Heavy Around 0.5850, CFTC Shows Shorts Being Built

The NZD/USD had a range of 0.5847 - 0.5868 in the Asia-Pac session, going into the London open trading around 0.5860, -0.05%. US stocks initially tried lower on the H-1B visa story but have failed to follow through in our session. The USD retracement continues to extend though time will tell how long the reprieve lasts. The NZD underperformance got a real nudge from the poor GDP data last week. While the USD continues to pullback the NZD/USD is a great vehicle to express that but when the USD sellers return the NZD underperformance will once again be best expressed in the crosses. The 0.5800 is important support, I suspect we will see buyers around this area initially. A sustained break through there would turn the focus back towards the 0.5500 lows.

Bloomberg - “Kiwibank Now Sees RBNZ Cash Rate Ending Year at 2.25%. Now expect a 50 basis-point cut in October followed by a 25bp cut in November so that the cash rate ends the year at 2.25%. “It has become crystal clear that the Kiwi economy is not recovering” and “the Reserve Bank needs to do more.”
MNI Brief: China Sept LPR Remains Unchanged. China’s LPR held steady on Monday, in line with expectations, with more easing expected later in the year as the economy suffers stronger headwinds, according to a statement on the website of the PBOC.”
Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6020(NZD374m). Upcoming Close Strikes : 0.5900(NZD372m Sept24) - BBG
CFTC Data of last week shows Asset Managers beginning to rebuild their short positions in the NZD, -11933(Last -3121). The Leveraged community is doing the same as it looks to rebuild its own shorts, -5327(Last -1874). Positioning shows the market is again turning bearish on the NZD.
AUD/NZD range for the session has been 1.1240 - 1.1267, currently trading 1.1255. The Cross has broken above the multiple highs towards the 1.1200 area and is looking to accelerate higher on the back of some very poor NZ Q2 GDP data last week. Dips should now continue to be supported as the market turns its focus towards the 1.1400/1.1500 area.

Fig 1: NZD CFTC Data

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

COMMODITIES: Oil and Gold Both Up in Monday Trade

Oil rose Monday, after a very poor finish last week. WTI is up +0.64% to USD$63.08 bbl and Brent is up +0.66% to USD$67.12 bbl in the Asia trading day.
Late Friday the EU President indicated the latest move is to target refineries, traders and petrochemical companies that are still buying Russian oil in a bid to starve Moscow and end the war in Ukraine. China and India remain the highest profile of buyers but the EU seems intent on casting the net much wider.
This comes as French President Macro describes the EU's reliance on Russia now as 'marginal' as Trump continues to pressure Europe to eradicate Russian purchases.
The EU has already passed a ban that will prohibit importing petroleum products refined from Russia crude starting next year, and the bloc is discussing banning imports of Russian liquefied natural gas from 2027.
WTI remains firmly below all major moving averages today, despite the gains.

Gold is reaching yet another new high as it rises +0.21% today to USD$3,693.00. The recent cut in interest rates gave a further boost to gold, already with strong upward momentum with traders now pouring over Chairman Powell's comments for clues as to the next move.
At $3,693 gold is above all major moving averages with the 20-day of $3,588.90 below.

ASIA STOCKS: HSI Down on EV Decline

The Hang Seng was dragged lower today despite positivity elsewhere in the region by EV car makers. News over the weekend that Warren Buffet had sold down his shares in BYD sent the stock into reverse this morning and is down -3.5%. Japanese shares breathed a sigh of relief as news that the BOJ plans to sell down its equity ETF holdings were revealed, with an ultra long time horizon for the sale. In Korea, Samsung received a boost with its shares up strongly on news it received approval from Nvidia to used its advanced memory chips.

The Hang Seng is down 1% in Monday trade as onshore bourses are up modestly. The CSI 300 is up +0.07%, Shanghai Comp +0.07% and Shenzhen Comp +0.14%.
The NIKKEI is up +1.37% reaching a new high of 45,666.18.
The KOSPI is up +0.55% to reach 3,464.27.
The FTSE Malay KLCI is up just +0.12% in Monday's trade.
The Jakarta Composite is one of the few fallers, down modestly by -0.12%.
The NIFTY 50 is trading near to where it opened on Monday after finishing up last week.

UP TODAY (TIMES GMT/LOCAL)

Date	GMT/Local	Impact	Country	Event
22/09/2025	1230/0830	*	CA	Industrial Product and Raw Material Price Index
22/09/2025	1230/1330		GB	BOE Pill At BIS-ECB-SUERF Workshop
22/09/2025	1345/1545		EU	ECB Lane At BIS-ECB-SUERF Workshop
22/09/2025	1345/0945		US	New York Fed's John Williams
22/09/2025	1400/1600	**	EU	Consumer Confidence Indicator (p)
22/09/2025	1400/1000		US	St. Louis Fed's Alberto Musalem
22/09/2025	1530/1130	*	US	US Treasury Auction Result for 13 Week Bill
22/09/2025	1530/1130	*	US	US Treasury Auction Result for 26 Week Bill
22/09/2025	1600/1200		US	Cleveland Fed's Beth Hammack
22/09/2025	1600/1200		US	Richmond Fed's Tom Barkin
22/09/2025	1715/1315		CA	BOC Sr Deputy speaks at LSE panel on supervision
22/09/2025	1800/1900		GB	BOE Bailey Fireside Chat On Supervision
22/09/2025	1945/1545		CA	BOC Deputy Kozicki speaks at BIS panel on central bank frameworks
23/09/2025	2300/0900	***	AU	Judo Bank Flash Australia PMI
23/09/2025	-		SE	Riksbank Meeting
23/09/2025	0715/0915	**	FR	S&P Global Services PMI (p)
23/09/2025	0715/0915	**	FR	S&P Global Manufacturing PMI (p)
23/09/2025	0730/0930	***	SE	Riksbank Interest Rate Decison
23/09/2025	0730/0930	**	DE	S&P Global Services PMI (p)
23/09/2025	0730/0930	**	DE	S&P Global Manufacturing PMI (p)
23/09/2025	0800/1000	**	EU	S&P Global Services PMI (p)
23/09/2025	0800/1000	**	EU	S&P Global Manufacturing PMI (p)
23/09/2025	0800/1000	**	EU	S&P Global Composite PMI (p)
23/09/2025	0830/0930	***	GB	S&P Global Manufacturing PMI flash
23/09/2025	0830/0930	***	GB	S&P Global Services PMI flash
23/09/2025	0830/0930	***	GB	S&P Global Composite PMI flash
23/09/2025	0900/1000	**	GB	Gilt Outright Auction Result
23/09/2025	0900/1000		GB	BOE Pill Fireside Chat At Pictet Research Institute Symposium
23/09/2025	1000/1100	**	GB	CBI Industrial Trends
23/09/2025	1230/0830	*	US	Current Account Balance
23/09/2025	1230/0830	**	US	Philadelphia Fed Nonmanufacturing Index
23/09/2025	1255/0855	**	US	Redbook Retail Sales Index
23/09/2025	1300/0900		US	Fed Governor Michelle Bowman
23/09/2025	1345/0945	***	US	S&P Global Manufacturing Index (Flash)
23/09/2025	1345/0945	***	US	S&P Global Services Index (flash)