BONDS: NZGBS: Richer With US Tsys After Volatility, US PPI Lower Than Expected

Gold prices trended lower through Monday as safe haven flows moderated and reached a low of $3383.03/oz following news that Iran wants to discuss an end to the hostilities and a resumption of negotiations on its nuclear agenda conditional on the US remaining out of the conflict. They finished down 1.4% to $3385.23 to be up 2.9% in June. Bullion has started today up 0.3% to $3395.5 though following US President Trump’s comments that Iran should have signed a nuclear deal when it had the chance and that people should evacuate Tehran.

• Trump has reiterated that Iran wants to start negotiations but since it is in the stronger position Israel plans to continue weakening Iran’s military capability. Iran wants to ensure that the US doesn’t join the conflict. But Iran and Israel continued attacks overnight demonstrating ongoing geopolitical risks that could drive another rise in gold prices.
• The improvement in risk appetite associated with this news and higher US yields pressured bullion on Monday. The USD index was off its intraday low to be flat on the day.
• The bullish theme in gold remains intact with initial resistance at $3451.3, Monday’s intraday high, followed by $3500.1, the bull trigger. Initial support is at $3335.5, 20-day EMA.
• Equities rallied with both the S&P and Euro stoxx up 0.9% but the S&P e-mini has begun today down 0.4%. Oil prices were lower with Brent down 2.3% to $72.50/bbl. Copper was unchanged. Silver was slightly higher at $36.32.

The overnight range was 143.65 - 144.88, Asia is currently trading around 144.60. USD/JPY has ignored the broad USD weakness as JPY longs are pared back in the crosses in response to US Equities moving higher and now eyeing all time highs. 

• MNI - The BoJ is expected to keep its policy rate unchanged at 0.50% at its June 16-17 meeting. The key area of interest will be Governor Kazuo Ueda's post-meeting press conference. Investors will closely examine his comments for any signals on the timing and likelihood of future rate hikes. The second area of market focus is on the BoJ's JGB purchase program. Market expectations suggest a slower pace of reductions during fiscal year 2026. If the BoJ chooses to maintain the current pace of 400 billion reductions per quarter in FY2026, this would be interpreted as a mildly hawkish move.
• (Bloomberg) - “The recent softening of the yen could already partly reflect expectations for a cautious policy update from the BOJ alongside negative spill-overs for Japan from the Middle East conflict,” wrote Lee Hardman, senior currency analyst at MUFG. “While the BOJ is expected to leave their policy rate unchanged tomorrow, there is a strong expectation amongst market participants heading into the meeting that they will adjust their plans for QT,” he said."
• USD/JPY continues to hold above its support back towards the 142.00 area, with oil surging again and US yields bouncing this pair has drifted back to the middle of its recent range.
• Price is back in its recent 142.00 - 147.00 range and will need a break either side of that to get a clearer direction. The large interest around 145.00 expired overnight.
• The market still seems confident of a move lower in USD/JPY but with positioning quite large now we have seen the risk of pullbacks increase. A break above 147.00 would be needed to challenge the conviction of any shorts.
• Options : Close significant option expiries for NY cut, based on DTCC data: 143.25.($350m). Upcoming Close Strikes : 146.00($1.85b June 20).
• CFTC data shows Asset managers maintained their already extensive JPY longs, leveraged funds looked to have pared back their own longs once more.

• Data/Event : BOJ

  Fig 1 : USD/JPY Spot Daily Chart

  

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

US President Trump has posted on Truth Social, stating that Iran should have signed the deal he told them to sing, while also re-iterating that Iran cannot have a nuclear weapon. He also noted that everyone should evacuate Tehran immediately, see below for the full post.

• US President Trump's Truth Social Post: ""Iran should have signed the “deal” I told them to sign. What a shame, and waste of human life. Simply stated, IRAN CAN NOT HAVE A NUCLEAR WEAPON. I said it over and over again! Everyone should immediately evacuate Tehran!"
• It remains to be seen if the last reference in terms of the evacuation of Tehran is reference to an expected pick up in military activity from either the Israel or US side.
• It has been noted over the past day or so of a pick in US military activity. Rtrs reported: "The U.S. military has moved a large number of refueling aircraft to Europe to provide options to President Donald Trump as Middle East tensions erupt into conflict between Iran and Israel, two U.S. officials told Reuters on Monday, speaking on condition of anonymity."
• Tensions appeared to ease somewhat on Monday as Iran signaled it was willing to negotiate. Strikes by both Israel and Iran have continued though.
• Oil prices have edged higher following the Trump comments, last near $72.10/bbl for WTI. Session lows today were at $71/bbl. US equity futures have also nudged down, last off around 0.25% for Eminis.