FOREX: Risk On Equity Tone Aiding A$ Gains, Yen and CHF Softer
G10 FX trends have turned more risk on in recent dealings. The Aust jobs beat kicked things off, while further broad based equity gains are aiding sentiment as well, with JPY and CHF underperforming.
- The China data helped stabilize onshore equity sentiment, another positive for the likes of AUD. The data was reasonably close to expectations, albeit with retail sales not showing further easing, a likely welcome development.
- This is unlikely to shift the narrative around China growth, but given the run of disappointing data outcomes, is helping equities off depressed levels (CSI 300 last up over 1%).
- AUD/USD was last around session highs, close to 0.6620, up 0.3%. Earlier we were near 0.6570 ahead of the jobs data. AUD/JPY is back back to recent highs last near 97.65. The pair hasn't been above 98.00 since the start of the month. Iron ore is holding lwoer, but away from worst levels.
- NZD/USD has ticked higher, last near 0.6000, but is still underperforming AUD. The AUD/NZD cross is back to 1.1030, just off month to date highs.
- USD/JPY is ticking higher, amidst the positive equity tone, last near 147.50, still shy of recent highs. The Q2 GDP beat earlier hasn't provided any lasting positive yen impetus. USD/CHF was last 0.8660.
- US equity futures are up, led by the Nasdaq, which is testing Wednesday highs.
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AUD: A$ Weakens Further Against US$ & Euro But Continues Strengthening Vs Kiwi
AUDUSD has continued moving lower during today’s APAC session after falling 0.4% on Monday. The pair is down 0.2% to 0.6744, close to the intraday low, as the US dollar has strengthened (BBDXY +0.1%) and Aussie and HK equities sell off.
- AUDNZD continues to trend higher driven by rate expectations in opposing directions. The pair is up 0.1% today to 1.1142 after rising 0.4% yesterday. AUDJPY is also 0.1% higher to 106.97 after a high of 107.05. AUDEUR is down a further 0.2% to below 62c at 0.6192. AUDGBP is also 0.2% lower at 0.5203, close to the intraday low.
- Equities are mixed with the ASX down 0.2% and Hang Seng -1.2% but CSI 300 flat and Nikkei +0.5%. The S&P e-mini is also higher at +0.2%. Oil prices are down with WTI -0.3% to $81.66/bbl. Copper is also lower at -0.3% and iron ore is down to around $107/t.
- Later the Fed’s Kugler speaks. There are US June retail sales, trade prices and July NAHB housing, as well as June Canadian CPI and euro area July ZEW data.
ASIA STOCKS: Asian Equities Mixed, Trumps Odds Increase
Asian stocks are mixed today, despite gains on Wall Street with the possibility of a second Donald Trump term increasing, PredictIt now has Trump at a 68% chance on winning the elections. Trump trades have been the focus today, with regions perceived to benefit from a Trump presidency out-performing, while the bonds market continues to see curve steepener trades. Regionally it has been a slow session, with very little in the way of economic data or market headlines.
- Japanese equities are benefiting from growing expectations of a US rate cut, with the futures market currently fully pricing in a cut in September, while Japan is also expected to gain from a Trump presidency. Later we have Tertiary Industry Index which is expected to to 0.1% m/m for May, down from 1.9% prior. The Topix is 0.75% higher, while the Nikkei is up 0.50%
- South Korean stocks are lower today, small-cap stocks are not faring too well with the Kosdaq down 1.65%, while the Kospi is down 0.12%. President Yoon Suk Yeol holds cabinet meeting after returning home from a five-day trip to US, which included the NATO summit. In June, South Korea's export price index rose 12.2% year-on-year and 0.9% month-on-month, while the import price index increased 9.7% year-on-year and 0.7% month-on-month, according to the BOK.
- Taiwan equities are higher today as semiconductor names are contributing most to the gains, with the Taiex up 0.82%
- Australian equities are a touch lower today after reaching a record high on Monday. Miners declined due to falling commodity prices amid weak Chinese demand and after Rio Tinto's quarterly production report. Conversely, financial stocks rose, mirroring gains in US financial stocks following positive results from Goldman Sachs and BlackRock. The ASX200 is down 0.25% and back below 8,000.
- Elsewhere, New Zealand equities are little changed, Malaysian equities are 0.1% higher, Philippines equities are 0.40% higher, while Singapore equities are down 0.45% and Indonesia equities are down 0.10%
AUSSIE BONDS: Richer & At Session Highs, Buoyed By Cash US Tsys, Local Calendar Light
ACGBs (YM +7.0 & XM +6.0) are richer and close to Sydney session highs. With the domestic calendar light, local traders have found direction from cash US tsys, which are 1-2bps richer in today’s Asia-Pac session. The US calendar will see Retail Sales and Import/Export Prices data, and upcoming earnings from Bank of America, Charles Schwab, State Street and Morgan Stanley
- The market’s focus, however, remains on Thursday’s Employment Report. Bloomberg consensus expects a +20k employment change following May’s +39.7k, with the unemployment rate rising to 4.1% from 4.0% prior.
- Cash ACGBs are 6-7bps richer, with the AU-US 10-year yield differential at +5bps.
- Swap rates are 6-7bps lower.
- The bills strip has bull-flattened, with pricing +2 to +7.
- RBA-dated OIS pricing is 5-8bps softer for 2025 meetings. Terminal rate expectations sit at 4.39%, the lowest level since the release of May’s higher-than-expected CPI Monthly data.
- NZ sees the release of Q2 CPI data tomorrow.
