AUSSIE BONDS: Slightly Richer But Off Bests, RBA Minutes On Tuesday

The Asia-Pac USD/JPY range has been 144.93 - 145.44, Asia is currently trading around 144.93. USD/JPY has drifted lower in a muted Asian session, -0.25%. With the USD bouncing across the board as risk digests the potential of the US entering the fray in the middle east, the long JPY positions continue to be challenged. You would normally expect the JPY to outperform in this scenario but the outsized move in oil and a market that is already positioned very long is providing headwinds to the trade.

• Japan Data -  Exports Dip Y/Y, Trade Surplus With US Narrows : Japan's May trade data was close to expectations, with export growth at -1.7%y/y, versus -3.7% forecast. The April outcome was +2.0%. On the import side, we were -7.7%y/y, against a -5.9% forecast (-2.2% was recorded for April). The trade deficit was -637.6bn, close to forecasts but wider than the -115.6bn print in April.
• "ISHIBA: HAD FRANK DISCUSSIONS ON TARIFFS WITH TRUMP, WILL WORK WITH US TOWARD A WIN-WIN DEAL" - BBG
• "ISHIBA: TARIFFS WILL HAVE BIG IMPACT ON COMPANIES, NAMELY AUTOS, SAYS JAPAN MUST NOT SACRIFICE NATIONAL INTEREST FOR DEAL" - BBG
• “ISHIBA: WAGE INCREASE MORE IMPORTANT THAN CUTTING SALES TAX, IMPACT OF CASH HANDOUT IS MORE IMMEDIATE THAN TAX CUT" - BBG
• USD/JPY found decent demand yesterday every time it had a look towards the 144.50 area yesterday. This price action stands out considering the risk backdrop and could hint at a market that is already very long JPY.
• Price is back in the middle of its recent 142.00 - 147.00 range and will need a break either side of that to get a clearer direction. Can FOMC be that catalyst ?
• The market is clearly looking for 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: 144.00($725m). Upcoming Close Strikes : 146.00($1.92b June 20), 143.00($925m June 20)

Fig 1 : USD/JPY Spot Hourly Chart

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

NZGBs closed little changed after a subdued session. 

• Cash US tsys are slightly cheaper ahead of today’s FOMC Decision including a Summary of Economic Projections (Dots). The June FOMC meeting communications should reflect an increasingly patient attitude since May and certainly since March’s projections.
• The NZGB 10-year underperformed its $-bloc counterparts, with the NZ-US and NZ-AU yield differentials widening 2-3bps.
• Westpac Q2 consumer confidence picked up to 91.2 from 89.2 in Q1.
• Swap rates closed unchanged.
• RBNZ dated OIS pricing closed little changed across meetings. 4bps of easing is priced for July, with a cumulative 26bps by November 2025.
• Tomorrow, the local calendar will see Q1 GDP. Bloomberg consensus is forecasting the production-based measure to rise 0.7% q/q again, bringing the annual rate to -0.8%, higher than forecast by the RBNZ in May. The central bank is expecting a rise of 0.4% q/q.
• With rates now in the “neutral zone” and RBNZ Governor Hawkesby saying the MPC doesn’t have a bias, and especially if GDP prints stronger than it expects, the RBNZ may be on hold on July 9.
• Tomorrow, the NZ Treasury plans to sell NZ$225mn of the 3.00% Apr-29 bond, NZ$175mn of the 2.75% Apr-37 bond and NZ$50mn of the 2.75% May-51 bond.

The NZD/USD had a range of 0.6010 - 0.6034 in the Asia-Pac session, going into the London open trading around 0.6025. The NZD has drifted higher in a quiet Asian session, still holding above 0.6000.

• NZ Data -  Westpac Consumer Confidence Signals Spending Outlook Remains Soft. Westpac Q2 consumer confidence picked up to 91.2 from 89.2 in Q1, while the number of pessimists declined they continue to outnumber optimists with the breakeven-index 100. Sentiment also remains below Q4 2024’s 97.5. Households remain cautious about the outlook despite 225bp of RBNZ easing given heightened global uncertainty, an unbalanced recovery and a soft labour market.
• "NZ TREASURY CONFIDENT OF 2025 GROWTH DESPITE WEAK MAY DATA" - BBG
• The USD is finally looking like it could potentially bounce as the risk backdrop deteriorates. We have seen this before, is this time different ?
• The NZD is back to testing its support around the 0.6000 area, a break back below here and we could see a deeper pullback. 
• While the support around 0.5850 holds in NZD/USD there should be buyers around on dips. A clear sustained break above 0.6050/0.6100 is needed for the pair to push higher.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5760(NZD1.16b). Upcoming Close Strikes : 0.5830(NZD300m June 23), 0.5755(NZD300m June20)

• AUD/NZD range for the session has been 1.0758 - 1.0776, currently trading 1.0770. A top looks in place now just above 1.0900, the cross topped out last week towards the 1.0800/25 sell area, but the momentum lower seems to have stalled for now, with the range for June basically being captured within a 1.0750 - 1.0800 range.

  Fig 1: NZD/USD Spot Hourly Chart

  

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