AUSSIE BONDS: Slightly Weaker, Light Local Calendar Next Week

The BBDXY has had a range of 1206.31 - 1208.31 in the Asia-Pac session, it is currently trading around 1207, -0.05%. The BBDXY surged higher with US yields in response to the CPI print. “Today’s inflation print showed that tariffs are having an impact on core goods and that impact is likely to get larger from here, limiting how much the Fed can cut and boosting the dollar,” said a currency strategist at Barclays” - BBG

• EUR/USD -  Asian range 1.1601 - 1.1616, Asia is currently trading 1.1615. The pair is testing its first support around the 1.1600 area. The price still looks a little stretched in the short term and is vulnerable to any correction in the USD, first support around 1.1600 then more importantly the 1.1450 area.
• GBP/USD - Asian range 1.3382 - 1.3401, Asia is currently dealing around 1.3385. Price has rejected the move higher and Bailey’s hint that bigger rate cuts are on their way if the job market deteriorates further has added further headwinds. The pair has moved very quickly to test important support around 1.3350/1.3400. I would think there could be demand first up around here but a sustained break below and a deeper pullback towards 1.3000/1.3200 could be on the cards.
• USD/CNH - Asian range 7.1733 - 7.1757, the USD/CNY fix printed 7.1526, Asia is currently dealing around 7.1840. Sellers should be around on bounces while price holds below the 7.2000 area and the PBOC manages the fix lower. Above 7.2000 and we could see a test of the USD Shorts.
• Cross asset : SPX -0.15%, Gold $3335, US 10-Year 4.475%, BBDXY 1207, Crude oil $66.76
• Data/Events : Italy CPI & Trade Balance

Fig 1: GBP/USD Spot hourly Chart

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

NZGBs closed slightly mixed with a steepener 2/10 curve. Benchmark yields finished 1bp lower to 1bp higher. 

• NZGBs held by international investors increased to 62.7% from a month earlier in June.
• The fortnightly whole milk powder auction saw prices rise 1.7% versus the previous auction result, per GDT. This put prices back to $3928, from $3859 prior. It was the first rise since early May for the auction outcome.
• Swap rates closed little changed.
• RBNZ dated OIS pricing closed slightly firmer across meetings. 18bps of easing is priced for August, with a cumulative 32bps by November 2025.
• Tomorrow, the local calendar will see June food price data, with Q2 CPI on Monday.
• (Bloomberg Economics) -- New Zealand’s June price data are likely to show inflation holding in the Reserve Bank of New Zealand’s 1%-3% target band. In May, food prices rose 0.5% month on month, following a 0.8% gain in April. In year-on-year terms, prices climbed 4.4% after rising 3.7% in April.
• Tomorrow, the NZ Treasury plans to sell NZ$200mn of the 4.50% May-30 bond, NZ$200mn of the 4.25% May-36 bond and NZ$50mn of the 1.75% May-41 bond.

The NZD/USD had a range of 0.5944 - 0.5966 in the Asia-Pac session, going into the London open trading around 0.5945, +0.01%. The USD has surged higher on the back of the US CPI showing clear signs that tariffs are beginning to impact the core goods data. US yields and the USD have both reacted as the market further reduces its rate cut expectations for the year. NZD/USD has broken below its recent support just below 0.6000 and the price action now suggests we could have a look back towards the important 0.5850 support area. Look for supply now on bounces back towards 0.6000 to cap initially.

• (Bloomberg Economics) -- New Zealand’s June price data are likely to show inflation holding in the Reserve Bank of New Zealand’s 1%-3% target band. In May, food prices rose 0.5% month on month, following a 0.8% gain
• "NZ JUNE GOVT. BONDS HELD BY FOREIGNERS RISE TO 62.7%"  :  BBF
• NZ Milk Prices Rise At Auction For The First Time Since May : Overnight the fortnightly whole milk powder auction saw prices rise 1.7% versus the previous auction result, per GDT. This put prices back to $3928, from $3859 prior.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6000(NZD382m). Upcoming Close Strikes : 0.5932(NZD317m July18). - BBG
• CFTC Data shows Asset Managers added slightly to their newly built longs in NZD +9229, the Leveraged community added slightly to their shorts last week -8654.
• AUD/NZD range for the session has been 1.0942 - 1.0970, currently trading 1.0970. The cross has broken out of its recent range and is now trying to push through the more pivotal 1.0950 area. Dips back to 1.0850/1.0900 should now be supported as the pair tries to build momentum to move higher. 

Fig 1: NZD/USD Spot Daily Chart

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