AUSSIE BONDS: Weaker With US Tsys, RBA's Surprise Still Being Digested

NZDUSD trended lower through the European session and then approached 60c following the US payroll data reaching a low of 0.6007. It finished down 0.3% to 0.6016 but has started today slightly higher at 0.6022. The US labour market held up in May in the face of elevated trade uncertainty with the unemployment rate and hours worked stable. 

• Kiwi underperformed the Aussie moderately leaving AUDNZD up 0.1% to 1.0792. It is currently lower at 1.0788 as NZGB yields are slightly higher in early trading following USTs. Australia is closed.
• RBNZ Chief Economist Conway was interviewed today on Radio NZ and said that the central bank expects core inflation to moderate towards the 2% band mid-point by end-2025 going into 2026 despite the recent pickup in headline inflation. He also expects growth to improve later in the year helped by easier monetary policy, but the “labour market is pretty flat”.
• Q1 manufacturing volumes rose a strong 2.4% q/q up from 1.2% in Q4 while sales jumped 5.1% q/q after 3.0%. Q1 GDP prints on June 19.
• Equities rallied with the S&P up 1.0% and Euro stoxx +0.4%. NZX 50 is down about 0.1% today. Oil prices rose sharply with Brent +2.0% to $66.65/bbl. Copper fell 2% and iron ore is lower at around $95/t.

Yen was an underperformer in the G10 space for Friday's session. It lost 0.90% versus the USD, with USD/JPY testing above 145.00. We track near 144.65/70 in early Monday dealings, down slightly for the session so far. 

• Outside of the NFP beat (albeit with prior downside revisions), the focus was also on better wages data. USDJPY was volatile through the NFP release, but ultimately reached 145.09, essentially matching the initial target of the 50-day exponential moving average.  
• The latest headlines/timeline on a US/China meeting likely provided an additional tailwind, feeding into the cautious optimism surrounding global trade negotiations. The SPX finished up a little over 1% on Friday.
• For USD/JPY technicals, the trend condition still remains bearish despite Friday's rebound. The 50-day EMA, near 145.20 is close by, while key resistance is seen at the May 29 high at 146.28. On the downside, attention is on the next important support at 142.12, the May 27 low. A clear break of this level would confirm a resumption of the bear leg and open 139.89, the Apr 22 low.
• Nomura stated that yen may strengthen to 136 versus the USD by end Sep. It notes: "Japanese investors pivoting out of US assets as yen yields rise — combined with implicit pressure from Washington over the exchange rate during trade talks — could push the currency about 6% higher against the dollar in the coming months" (Bloomberg).
• On the local data front today we have Q1 GDP revisions. Market forecasts are for little change (q/q growth expected at -0.2%). Also out is Apr BoP/trade balance figures and May bank lending data.
• In the option expiry space, note the following for NY cut later today: Y143.55-65($982mln), Y144.00($660mln), Y145.00($512mln). 

AUDUSD reached a low of 0.6479 on Friday following the better-than-expected US payroll data, which showed the labour market holding up in the face of elevated trade uncertainty. The US dollar had been trending higher before the release but took a step up following it and the BBDXY finished +0.3% resulting in all the G10 falling against the greenback. Aussie outperformed though, apart from CAD. AUDUSD was down 0.2% to 0.6492 and has started today slightly higher at 0.6498.

• AUDUSD had broken briefly above 65c early in the APAC session making a high of 0.6517, consistent with bullish trend signals. Initial resistance is at 0.6538, 5 June high. A clear break of key support at 0.6400, 50-day EMA, is needed to point to a short-term reversal. Initial support is at 0.6448, 20-day EMA.
• The yen underperformed on Friday driven by the US payroll data leaving AUDJPY up 0.7% to 94.04, close to the intraday high of 94.13. It is currently trading around 94.00.
• AUDNZD was also boosted by the US numbers and it rose to 1.0797 before settling at 1.0792 to be up 0.1%. It is now at 1.0788.
• AUDEUR oscillated around 0.5700 following the US jobs data making a high of 0.5703. It finished up 0.25% to 0.5698. AUDGBP was up 0.1% to 0.4800 after a peak of 0.4804.
• Equities rallied with the S&P up 1.0% and Euro stoxx +0.4%. Oil prices rose sharply with Brent +2.0% to $66.65/bbl. Copper fell 2% and iron ore is lower at around $95/t.
• Australia is closed today for the King’s Birthday holiday.