NZD: NZD/USD - Drifts Back Toward 0.5750 Heading Into FOMC

The NZD/USD had a range today of 0.5616 - 0.5634 in the Asia-Pac session, going into the London open trading around 0.5630, +0.15%. A combination of what looks like the end of the US shutdown and better China Inflation data has seen the NZD start the week drifting back up off its lows. The NZD continues to trade heavy but it is prudent to be wary of what the reaction to the end of the US shutdown might look like. I am a little wary of positioning in the NZD market though I still suspect any decent bounce will again attract sellers. The first sell area on a pullback would be around 0.5750 and then the more pivotal 0.5850 area.

• "NZ'S PM LUXON WANTS BANKS TO PASS ON RBNZ RATE CUTS FASTER" - BBG
• Bloomberg reports the NZ Treasury says, “New Zealand Economic Recovery Still Emerging. New Zealand’s economy has more spare capacity than previously assumed while a broad-based recovery is still emerging, the Treasury Department says in its Fortnightly Economic Update.”
• Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5380(NZD460m Nov 13), 0.5600(NZD538m Nov12), 0.5800(NZD461m Nov 12) - BBG

Fig 1: NZD/USD Spot Daily Chart

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

ACGBs (YM -5.0 & XM -5.0) are weaker with US tsys after headlines that key US Senate Democrats will advance a GOP bill to end the government shutdown. Risk appetite is firmer.

• Cash ACGBs are 3-4bps cheaper with the AU-US 10-year yield differential at +26bps.
• The bills strip has bear-steepened, with pricing -2 to -5.
• The main takeaway from RBA Deputy Governor Hauser's Q&A today was that the economy could already be close to trend growth, and therefore, supply constraints make further rate cuts difficult.
• RBA-dated OIS pricing is showing a 25bp rate cut in December at an 8% probability, with a cumulative 16bps of easing priced by mid-2026.
• Tomorrow, the local calendar will see Westpac Consumer and NAB Business Confidence data.
• However, the highlight of this week's AUS calendar will be Thursday's October jobs data. The unemployment rate rose 0.2pp to 4.5% in September.
• Last month's weak employment data triggered a solid ACGB rally, but those gains were more than fully reversed after the much hotter-than-expected Q3 CPI report. YM1 is currently testing horizontal support at 96.28 (see chart).
• This week, the AOFM plans to sell A$1200mn of the 4.25% 21 December 2035bond on Wednesday and A$800mn of the 1.75% 21 November 2032 bond on Friday.
   

Bloomberg Finance LP

The USD/JPY range today has been 153.45 - 154.03 in the Asia-Pac session, it is currently trading around 153.95, +0.35%. The pair initially gapped higher on the Asian open as reports of a potential deal on the US shutdown made the rounds; it has continued to build on these initial gains as these reports of Dems crossing the aisle have been confirmed. USD/JPY found solid demand around the 153.00 area on Friday again, this positive scenario returns the focus back toward the 154-155 area resistance area once more. A sustained break above is needed to potentially see the uptrend regain upward momentum, the focus would then turn toward the 160 area where I would start to become wary of intervention risks.

• "JAPAN PM TAKAICHI:  NOT RULING OUT SALES TAX CUT AS OPTION IN FUTURE, BUT IMMEDIATE PRIORITY IS TO COMPILE PACKAGE OF STEPS TO CUSHION BLOW FROM RISING COST OF LIVING, CHANGING SALES TAX RATE WOULD TAKE TIME, SO DECISION ON WHETHER TO DO SO WOULD NEED TO TAKE INTO ACCOUNT WAGE, INFLATION LEVELS AT THE TIME - [RTRS]"
• MNI: BOJ board members largely agreed on the need to raise the policy interest rate eventually, but saw no urgency to act at the Oct 29-30 meeting, preferring to confirm sustained wage momentum and the firmness of underlying inflation, according to the summary of opinions released Monday.
• Options : Close significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : none - BBG.

Fig 1 : USD/JPY Spot Daily Chart

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