AUSTRALIA: VIEW: Westpac Sees No Risk To Rate Outlook From Wages

ACGBs (YM -2.0 & XM -2.0) sit weaker after dealing in narrow ranges in today’s Sydney session.

• Cash US tsys are slightly cheaper, with a steepening bias, in today's Asia-Pac session after Friday's bear-steepener.
• Cash ACGBs are 2-3bps cheaper with the AU-US 10-year yield differential at -6bps. At -6bps, the differential is positioned near the middle of the +/- 30bps range that has held since November 2022.
• The bills strip is slightly cheaper, with pricing -1 to -3.
• RBA-dated OIS pricing is slightly firmer across meetings today. A 25bp rate cut in August is given an 88% probability, with a cumulative 59bps of easing priced by year-end (based on an effective cash rate of 3.84%).
• Tomorrow, the local calendar will see Westpac Consumer Confidence.
• This week, the AOFM plans to sell A$300mn of the 4.75% 21 June 2054 bond tomorrow, A$800mn of the 4.25% 21 March 2036 bond on Wednesday and A$1100mn of the 1.00% 21 November 2031 bond on Friday.

The BBDXY has had a range of 1198.51 - 1200.95 in the Asia-Pac session, it is currently trading around 1200, +0.05%. The BBDXY has once again found decent supply capping the 1200 area. Price action is interesting though in that the price is not violently moving lower from these bouts of strength as it did in the past. The price does look stretched and the market is short so a correction is not out of the question. Axios via (BBG) - Trump To Announce 'Aggressive' Ukraine Weapons Plan : Headlines have crossed from Axios that US President Trump will announce an 'aggressive' Ukraine weapons plan Monday. "President Trump will announce a new plan to arm Ukraine on Monday that is expected to include offensive weapons, two sources with knowledge of the plans tell Axios."

• EUR/USD -  Asian range 1.1662 - 1.1698, Asia is currently trading 1.1680. The pair tried lower on the open but has again seen solid demand again just towards the 1.1650 area in our session. The price is still starting to look a little stretched in the short term and is vulnerable to any correction in the USD, first support is back towards 1.1600 then more importantly the 1.1450 area.
• GBP/USD - Asian range 1.3472 - 1.3504, Asia is currently dealing around 1.3480. Price has rejected the move higher but the USD would need to gain momentum higher for GBP/USD to extend lower in the short-term. First support right here around 1.3500 a break below here would signal a deeper pullback to the more important 1.3350/1.3400 area.
• USD/CNH - Asian range 7.1686 - 7.1758, the USD/CNY fix printed 7.1491, Asia is currently dealing around 7.1700. Sellers should be around on bounces while price holds below the 7.2500 area and the PBOC manages the fix lower.
• Cross asset : SPX -0.45%, Gold $3354, US 10-Year 4.415%, BBDXY 1200, Crude oil $68.41
• Data/Events : Germany BBG Economic Survey, France BBG Economic Survey, EZ BBG Economic Survey, Spain BBG Economic Survey

Fig 1: GBP/USD Spot Hourly Chart

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

NZGBs closed near the session’s worst level, showing a modest bear-steepener. Benchmark yields were flat to 3bps higher. The NZ-US 10-year yield differential closed 2bps tighter at +14bps.

• The New Zealand performance of services index rebounded somewhat in June, rising to 47.3 from 44.1 (per BNZ and Business NZ). We are still sub the early 2025 highs for the index, which was just above the 50 expansion/contraction point.
• (Bloomberg) -- RBNZ balance sheet has shrunk further in June, according to data posted on the central bank website Monday in Wellington. Total assets declined to NZ$72.4b from NZ$77.3b at May 31, and from NZ$84.4b at June 20, 2024, the smallest since November 2020.
• Swap rates closed flat to 2bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed slightly softer across meetings. 19bps of easing is priced for August, with a cumulative 34bps by November 2025.
• Tomorrow, the local calendar will be empty.
• On Thursday, 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.