MNI EXCLUSIVE: RBA Outlook From Former Staffers

Danske Bank believe that “the shutdown-driven delay in macro data releases tilts the Fed towards delivering another rate cut in October”.

• They have adjusted their Fed projections and now expect 25bp cuts in October, January, April and July (previously December, March, June, September).
• Danske maintain their terminal rate view of 3.00-3.25% and “think the Fed should aim to ease financial conditions only gradually”.
• They suggest that “the combination of easing fiscal and monetary policy together with less supply of foreign labour and imported goods risks fuelling inflation beyond the direct tariff impact”.
• They also highlight “alternative data sources continue to point towards a cooling, 'low firing, low hiring' environment in the labour market. Importantly, a large share of the decline still appears supply driven. The weak ADP figure was distorted by both revisions and unusually low seasonal adjustment”.

• RES 4: 118.170 Low Sep 10      
• RES 3: 118.090 High Sep 17 and a key short-term resistance 
• RES 2: 118.040 High Sep 18   
• RES 1: 117.970 High Oct 6   
• PRICE: 117.860 @ 05:44 BST Oct 7
• SUP 1: 117.630/470 Low Oct 1 / Low Sep 25  
• SUP 2: 117.450 1.000 proj of the Sep 8 - 12 - 17 price swing  
• SUP 3: 117.299 1.236 proj of the Sep 8 - 12 - 17 price swing  
• SUP 4: 117.080 Low Sep 2 (cont.) 

Recent gains in Bobl futures still appear corrective and the trend condition is bearish. A price sequence of lower lows and lower highs is intact, and on the continuation chart moving average studies are in a bear-mode position, highlighting a dominant downtrend. Sights are on 117.450, a Fibonacci projection. On the upside, key short-term resistance is 118.090, the Sep 18 high. A move above this level would signal a potential reversal.

JGB futures remain weaker, -6 compared to settlement levels, but well off lows after today’s less weak than feared 30-year auction.

• The 30-year JGB auction delivered mixed results. However, the 30-year has rallied strongly following the result, suggesting that the recent bear-steepening was overdone. Although newly elected Liberal Democratic Party leader Sanae Takaichi is perceived to have an expansionary fiscal and monetary policy stance, a lot of these expectations appear to have been priced into the market.
• MNI - Japan household spending for August was stronger than forecast (+2.3%y/y, versus 1.2% forecast, 1.4% prior). We are below earlier 2025 highs from a y/y momentum standpoint, but the trend has steadily improved from late 2024 lows. It should add, albeit at the margins, to the case for a further BoJ rate hike, although little is priced for the Oct meeting.
• Cash US tsys are little changed in today's Asia-Pac session.
• Cash JGBs have twist-flattened across benchmarks after today’s 30-year auction. The benchmark 30-year yield is 3.9bps lower at 3.267% after setting a fresh cycle high of 3.351% earlier in the session.
• Swap rates are flat to 7bps lower, with swap spreads tighter.
• Tomorrow, the local calendar will see Cash Earnings, BoP Current Account Balance and Trade Balance data.