AUSSIE BONDS: Weaker But Away From Lows Post July CPI Beat

The Asia-Pac USD/JPY range has been 147.52 - 148.02, Asia is currently trading around 147.65, -0.03%. USD/JPY found good demand around 146.00 last week and has bounced nicely off its first support. Some demand for USD’s was finally seen as the market takes some risk off the table heading into this week which is filled with event risk and also month-end. Corporate month-end to start the week with most of the USD demand most likely to be seen tomorrow.

• First Squawk on X: “JAPAN SAYS ONLY 1–2% OF $550B U.S. FUND WILL BE DIRECT INVESTMENT; REST TO BE LOANS. Japan expects that just 1% to 2% of its recently announced $550 billion partnership fund with the U.S. will involve actual capital investment, with the remainder provided through loan-based financing, officials said.”
• (Bloomberg) - "Japan’s pledge for a $550 billion US investment fund may have been key to Tokyo getting a trade deal, but neither side seems to agree on what it looks like, Gearoid Reidy writes. The market’s sigh of relief about this pact might still be premature.”
• “The Bank of Japan is likely to hold at its meeting in the coming week. We’ll watch for its assessment of Japan’s trade deal with the US and view on the impact of tariffs on the economic outlook. Inflation pressures still point to the need to pare stimulus. We expect that in October.” - BBG
• "JAPAN ISHIBA CABINET APPROVAL RATING DROPS TO 34.6% IN FNN POLL" - BBG
• Options : Close significant option expiries for NY cut, based on DTCC data: 148.00($1.02b),148.25($1.04b).Upcoming Close Strikes : 145.00($1.3b July 29), 146.00($971m July 31) - BBG.
• CFTC data shows Asset managers surprisingly added slightly to their JPY longs +72326( Last +71610), while leveraged funds have slightly reduced their newly built short JPY position -11571(Last -12606).

Fig 1 : JPY CFTC Data

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

The AUD/USD has had a range of 0.6566 - 0.6586 in the Asia- Pac session, it is currently trading around 0.6567, +0.02%. The pair traded with a heavy tone all through Friday but has attempted to bounce this morning as the market digests news of a US-EU trade deal. The pair failed to gain any momentum above 0.6600 last week and now awaits a very busy calendar this week which could have meaningful implications for risk. Locally the Australian Q2 CPI on Wednesday will be closely watched and could provide a catalyst for some movement. Worth keeping in mind we are approaching the corporate month-end so there could be a demand for some USD’s today but more likely that flow will be executed tomorrow.

• The focus of this week will be Wednesday's Q2 CPI data, which is expected to show the underlying trimmed mean measure making further progress towards the band mid-point of 2.5%. Bloomberg consensus is forecasting a 0.7% q/q rise, bringing the annual rate to 2.7% after 0.7% & 2.9% in Q1. This is slightly higher than the RBA's May Q2 forecast of 2.6%. Services developments will also be monitored. The RBA is expected to cut rates 25bp on August 12.
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6600(AUD608m), 0.6550(AUD555m). Upcoming Close Strikes : 0.6600(AUD968m July29), 0.6600(AUD1.38b July 31), 0.6465(AUD1.01b July31) - BBG
• CFTC Data shows Asset managers added a decent clip to their shorts -53959(Last -38267), the Leveraged community reduced their own shorts to -12010(Last -20048).
• AUD/JPY - Today's Asia-Pac range 97.03 - 97.29, it is trading currently around 96.95, +0.01%. The pair is pressing above its highs of last week. The support between 95.00 - 96.00 held very well last week and the pair is looking to regain its momentum for a move higher. The event-risk coming up this week could provide some short-term headwinds.

Fig 1: AUD CFTC Data

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

Asia Pac stocks are mixed in the first part of Monday trade. This comes despite a better tone to both US and EU equity futures. US futures were last up 0.40-0.55%, with the tech side leading. EU futures were around +1% higher, as market took some comfort from the earlier headlines around a 15% tariff deal between the US and EU (for most EU exports to the US). Positive spillover has been limited to this region so far today. 

• Japan markets are weaker, the Topix off around 0.50%, while the NKY 225 is down around 0.90%. Sell-side analysts have noted profit taking ahead of key earnings in the Chip sector as a potential headwind (via BBG), while political uncertainty also continues. PM Ishiba has vowed to stay on as PM, despite recently losing upper house elections (and after onshore media outlets indicated he would resign in August). 
• In Hong Kong, markets are modestly higher, the HSI up around 0.4%, while the CSI 300 is down a touch in China. Over the weekend we saw profit results remain negative in y/y terms for June, albeit up from the May decline.
• South Korea's Kospi has been volatile, initially rallying at the open, aiding by a large Samsung chip order (for Tesla) but once again the index has struggled above 3200. Focus remains on US-South Korea trade negotiations ahead of the Aug 1 deadline at the end of the week, with officials set to meet later in the week (reportedly July 31).
• Thailand markets are out today, as the US attempts to lead efforts to de-escalate tensions on the Thailand/Cambodian border.
• Indonesia is up +1.25%, one of the better performers in SEA so far today. The initial tone in Indian markets is for modest downside, continuing the recent run of underperformance for these markets.