RBNZ: Rates Cut As Expected, OCR Path Revised Lower

European gas fell 2.0% to EUR 33.71 on Friday off the intraday low of EUR 33.41. It reached EUR 36.32 on July 14 but is still up 2.5% over the month. Forecasts for cooler weather over the rest of July have pressured prices more recently.

• The EU announced a reduction in the price cap for Russian crude and further targeting of its shadow fleet as well as measures impacting refined products and another 20 banks losing access to the global payments system SWIFT. It continues to plan a phase out of Russian gas imports.
• Norway’s Gassco announced an unplanned outage impacting 8.0 mcm/d from yesterday.
• Chevron stated that full LNG production has resumed at its Australian Gorgon export facility after repairs to Train 3 began.
• US natural gas is down 4.9% in Monday’s trading to $3.39. It rose 0.7% to $3.57 on Friday to be up 3.2% this month. The slight increase was driven by forecasts of warmer weather for the southern US towards the end of July (Atmospheric G2) thus increasing the prospect of a pickup in cooling demand.
• Ample inventories continue to keep a lid on any price rises as storage stands 6.2% above the 5-year average, according to Bloomberg. Lower-48 US production rose 5.3% y/y on Friday, while demand fell 0.3% y/y. 

US stocks are consolidating near their new all-time highs. This morning has seen US futures open slightly higher, ESU5 +0.12%, NQU5 +0.18%. The risk back drop still looks pretty good and this election outcome only adds to the headwinds for JPY longs, was this morning's reaction simply a “buy the rumour sell the fact” ?

• EUR/JPY - Friday night range 172.73 - 173.11, Asia is trading around 172.50. This pair has had a decent move higher and has led the charge against the JPY longs. Short-term it is starting to look a little stretched but the direction is clear and should expect demand on dips. First support 170.50 area then the more important 168.50 area.
• GBP/JPY - Friday night 199.47 - 199.97, Asia trades around 199.10. The pair continues to find good demand towards its support around 198.00 though momentum higher has stalled for now. 
• NZD/JPY - Friday night range 87.49 - 88.81, Asia is currently dealing 88.20. The pair has also seen upward momentum stall this morning. The Support towards 87.00 needs to hold for the focus to remain on the 90.00/91.00 area.
• CNH/JPY - Friday night range 20.6515 - 20.7301 Asia is currently trading around 20.6800. This pair has pulled back from its highs but the pair still looks like it could continue to press higher. Look for demand now back towards the 2.40/50 area.

Fig 1 : CNH/JPY Hourly Chart

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

ACGBs (YM +0.5 & XM +0.5) are little changed after trading in narrow ranges on a local data-light session.

• Cash US tsys are closed in today’s Asia-Pac session with Japan out for the Marine Day holiday. TYU5 trades slightly higher at 110-27+.
• Cash ACGBs are little changed with the AU-US 10-year yield differential at -7bps.
• The bills strip is slightly weaker, with pricing -1 to -2.
• RBA-dated OIS pricing is 3-13bps softer across meetings versus Thursday’s pre-employment data levels. A 25bp rate cut in August is given a 98% probability, with a cumulative 66bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Today, the local calendar will be empty, ahead of the RBA Minutes for the July Meeting tomorrow.
• A new 21 October 2036 Treasury Bond is planned to be issued via syndication this week (subject to market conditions).