NZD: NZD/USD - Gets A Boost As Apple Investment Helps Risk Extend Higher
The NZD/USD had a range of 0.5923 - 0.5951 in the Asia-Pac session, going into the London open trading around 0.5950, +0.30%. US equities shrugged off any growth concerns and surged higher, preferring to concentrate on potential rate cuts and further Tech investments. This morning the Apple announcement has seen US futures trade better bid, ESU5 +0.25%, NQU5 +0.30%. NZD/USD bounced nicely off its 0.5850 support but depending on your view I would suspect sellers could return on any bounce back toward 0.6000. For the moment back in the 0.5850-0.6100 range looking for a catalyst to break and give clearer direction.
- Steady Inflation Expectations, August Cut Likely. Q3 inflation expectations were stable in the RBNZ’s survey of forecasters, economists and industry leaders. 1-year ahead they remained at 2.4%, while 2-years ahead at 2.3% - both within the 1-3% target band but remaining above the mid-point. 1-year troughed at 2.1% in Q4 2024 while 2-year in Q3 2024 at 2.0%. With expectations stable, its measure of core moderating 0.1pp to 2.8% in Q2, wage inflation heading towards 2% and economic growth remaining lacklustre, the RBNZ seems likely to cut rates 25bp to 3% on August 20.
- BNZ Notes That Weak Hours Worked Signal Soft Q2 GDP - While the Q2 headline labour market data were not as weak as BNZ expected, the details showed “a picture that is at least as soft as we had feared, and one which is certainly weaker than the Reserve Bank had expected” in May. Thus BNZ is sticking with its view that the RBNZ will cut rates 25bp on August 20 and October 8.
- Westpac Economics - “We expect the RBNZ will deliver another 25bp rate cut at this month’s policy review. But the picture beyond that time is less clear. It’s unlikely that the RBNZ will call time on the easing cycle just yet as the economy is yet to decisively and sustainably turn. However, with mixed economic conditions in recent months, there are questions about the pace and extent of any further policy easing (if any).”
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5970(NZD496m). Upcoming Close Strikes : 0.5920(NZD483m Aug 11), 0.5930(NZD646m Aug 11). - BBG
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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MNI: RBA LEAVES CASH RATE AT 3.85%
- MNI: RBA LEAVES CASH RATE AT 3.85%
JPY: Asia Wrap - USD/JPY Finds Supply Towards 146.50
The Asia-Pac USD/JPY range has been 145.83 - 146.45, Asia is currently trading around 146.00, +0.05% having found decent supply towards the 146.50 area in our session. USD/JPY price action was telling overnight as it marched relentlessly higher challenging a market positioned the wrong way. Price is still well within the wider 142.00 - 148.00 range and the pair will probably continue to take its cue from the US rates market.
- (Bloomberg) -- “Japan’s super-long bonds extended their recent declines, pushing the yield on 30-year debt back above 3% and within sight of a record high. The moves come as investors weigh the impact of a new Aug. 1 deadline for US tariffs and as concern mounts that an upper house election in Japan on July 20 will usher in higher government spending.”
- Zerohedge on X: - “Impact of new tariff on Japan (if remains unchanged): JPM strategist Rie Nishihara expects a reciprocal tariff of 24% will lead to 0.4%-0.9% drag in Japan GDP and 7% decline in TOPIX 2025 EPS. The downside scenario estimated by Rie for NKY is 34,000.”
- (Bloomberg) -- Japanese Finance Minister Katsunobu Kato says that he’s not planning to hold talks specifically on currencies with US Treasury Secretary Scott Bessent in the near future.
- USD/JPY has lost all downside momentum for now and is back in its wider 142.00 - 148.00 range. The Market is long JPY and should the USD manage to follow through with yesterday's price action the risk is a move back to the top end of the range to further challenge the conviction of the shorts.
- Options : Close significant option expiries for NY cut, based on DTCC data: 146.60($948m).Upcoming Close Strikes : 144.50($860m July9).
- CFTC data shows Asset managers increased their JPY longs slightly +94753, while leveraged funds maintained their longs they have tried to rebuild +15798.
Fig 1 : USD/JPY Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
ASIA STOCKS: Stocks Advance on Hope of Further Negotiations
The headlines overnight focused on the imposition of tariffs on Japan and Korea and the sending of letters to other countries. However markets today focused on President Trump's suggestions that he remains open to further negotiations, further delaying tariffs until August. These comments eased earlier concerns .
- China's major bourses were strong with the Hang Seng leading the way with gains of +0.79%, CSI 300 up +0.74%, Shanghai Comp up +0.58% and Shenzhen rising +1.07%
- In Taiwan, the TAIEX was one of the few fallers, down -0.61% today.
- The KOSPI had a slow start to the day but things improved on Trumps comments and it has gained +1.40% to be one of the best performers of the major bourses.
- The FTSE Malay KLCI is down -0.54% and the Jakarta Comp down just -0.05%.
- The FTSE Straits Times in Singapore is up +0.45% and the PSEi in the Philippines down -0.17%
- The NIFTY 50 is doing very little following yesterday finishing flat.
