INDIA: RBI on Hold as Tariff Threat Hovers

• Gold edged lower in the Asia trading day ahead of a week that could be dominated by tariff headlines.  
• As the July 9 deadline for US tariffs draws nearer, some of the major equity bourses fell as did gold.  
• Gold had opened at US$3,337.16 at this morning's open and by early afternoon was down -0.90% at $3,307.38.  
• With the US Treasury Secretary Scott Bessent indicating that there could possibly be extensions due ongoing negations, it seems likely that risk appetite for many asset classes could remain muted this week.  

• The move lower sees gold edge towards the 50-day EMA of $3,298.28.

  

source: Bloomberg Finance LP / MNI 

The AUD/USD had a range Friday night of 0.6507- 0.6565, Asia is trading around 0.6510. The AUD/USD drifted off the 0.6600 area once again as stocks pared back some of its recent gains as the market eyes the tariff deadline approaching this week. Look for more consolidation again in the AUD/USD as the pair continues to try build a base from which to move higher. The risk to this is clearly around President Trump escalating trade tensions this week, which could make it a choppy week. First support is towards 0.6500 then more importantly the 0.6350/0.6400 area.

• (Bloomberg) -- “Australia’s May spending data presents a conundrum — are consumers struggling, or thriving? Weak retail trade data on Wednesday suggests consumers, plagued by uncertainty, are keeping their wallets shut. Stronger-than-expected broader spending data on Friday shows a weather-related pickup in winter clothes shopping was complemented by a discretionary surge in car sales and hospitality spending.”
• The AUD/USD is attempting to break through the top of its recent range as the pressure on the USD increases. The move higher does seem to be stalling though as the market eyes the tariff deadline. First support is towards 0.6500 then more importantly the 0.6350/0.6400 area.
• The AUD needs a sustained break above 0.6600 to potentially start building momentum for an extended move higher, a close back above 0.6600 and the focus would turn back to 0.6900/0.7000.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD884m), 0.6500(AUD 510m), 0.6700(AUD 652m). Upcoming Close Strikes : 0.6650(AUD857m July 10), 0.6375(AUD722m July 8)

Fig 1: AUD/USD spot Hourly Chart

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

The TYU5 range has been 111-08+ to 111-12+ during the Asia-Pacific session. It last changed hands at 111-10+, up 0-03+ from the previous close. 

• The US 2-year yield has moved lower trading around 3.855%, down 0.02 from its close.
• The US 10-year yield has edged lower trading around 4.33%, down 0.02 from its close.
• The 10-year yield saw a strong bounce in reaction to the better NFP print. This 4.35/40% area offers those who would like to express a long the opportunity to fade. A sustained close back above 4.40/4.45% area though would not be great for the bulls and would see more of the longs prepared back.
• US President Trump has posted via Truth Social that the US will start delivering letters outlining tariff levels to various countries starting 12pm Monday, US eastern time. Trade deals will also be announced at the same time.
• (Bloomberg) -- The Treasury’s willingness to fund more at the short-end of the yield curve will further compromise the Federal Reserve’s independence and increasingly leave monetary policy de facto in fiscal hands. The dollar will be a casualty, and the yield curve will steepen.
• Data/Events: Bond investors will be focusing on the Fed Minutes and the demand for 10 & 30-year maturities this week.

Fig 1: 10-Year US Yield Daily Chart

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