MNI US OPEN - RBA Holds Cash Rate at 4.35%, Hikes Discussed

NEWS

RBA (MNI): RBA Holds Cash Rate at 4.35%

The Reserve Bank of Australia board held the cash rate steady at 4.35% Tuesday, noting it remained vigilant against upside risks to inflation. In a statement, the board noted the economic outlook remained uncertain and recent data have demonstrated “the process of returning inflation to target is unlikely to be smooth.”

RBA (MNI): Hikes Discussed as Bullock Steers Narrow Path

The Reserve Bank of Australia board discussed hiking the cash rate at its latest meeting, noting upside price risks remained, but decided to maintain its current course along the "narrow path" that aims to avoid recession while protecting employment, Governor Michele Bullock told reporters Tuesday. "We do observe that inflation is coming down," she said. "Maybe it's going down a bit more slowly than we'd like but it is coming down. We are observing the labour market ease so we're seeing all the right signs. We do feel there is a genuine narrow path here to bring inflation back down without having unemployment rise very sharply."

US/INDIA (BBG): US, India Resume Talks on Sensitive Technologies During Visit

Cooperation between the US and India remains on course in strategic areas including chips, artificial intelligence and space, according to a joint statement from the two countries after a meeting of their national security advisers in New Delhi. The Monday meeting between US National Security Adviser Jake Sullivan and his Indian counterpart Ajit Doval marks the first high-level visit to India from a top US official following the re-election of Indian Prime Minister Narendra Modi earlier this month.

US (BBG): Biden Backs Advanced Nuclear Reactors With $900 Million

The Biden administration intends to provide up to $900 million to spur the initial deployment of small modular reactor technology, the Energy Department announced Monday. Small modular reactors, or SMRS, are more compact versions of the large-scale nuclear reactors deployed across the country today. Nuclear energy proponents say next-generation reactors are crucial to meeting climate goals of achieving net-zero emissions from the US power sector by 2035.

FRANCE (BBG): Le Pen’s Party Asks French Voters for an Absolute Majority

National Rally leader Jordan Bardella called on supporters to hand his party and its allies a resounding victory in France’s snap election to enable him to govern, setting a high bar for the far right to take the reins of policymaking. While polls indicate Marine Le Pen’s party is best placed to become the largest group in the National Assembly following two rounds of voting starting June 30, projections don’t show it winning more than half of the 577 seats.

EU (MNI): EUCO Fails to Reach Agreement on Commission, Council, Parl't Presidents

The informal meeting of European Union member state leaders on the evening of17 June failed to reach an agreement on the next leaders of the EU's three political institutions and its foreign policy head. The division of positions among the various European political groups following the European Parliament elections can take some time to reach agreement as the various parties jostle for position and influence.

ECB (MNI): More Steps Needed on Integrated Financial Services - ECB

The European Central Bank sees an urgent need for policy action to mobilise savings, develop euro area bonds for attracting foreign investment and securing European and financial resilience, a report on Financial Integration and Structure in the Euro Area published Tuesday says. “Achieving a fully integrated financial services market also requires facilitating cross-border banking and harmonising regulatory frameworks and disclosure requirements”, the ECB's report said, adding that “financial integration has been disappointing” with little progress since the start of the monetary union and especially the last two years.

BOJ (MNI): BOJ's Ueda Sees Possible July Lift to Policy Rate

Bank of Japan Governor Kazuo Ueda told lawmakers Tuesday the Board could raise the policy interest rate at the July 30-31 meeting when the bank announces the detailed plan to reduce its government bond buying. Ueda, however, noted raising the policy interest rate will depend on developments of economic activity and prices at that time. He also any hike decision would be separate from the JGB reductions.

RUSSIA/N. KOREA (BBG): Putin to Visit North Korea, Vietnam as War in Ukraine Stalls

Russian President Vladimir Putin will visit North Korea and Vietnam in rare trips to long-time partners as he faces renewed challenges in his war on Ukraine. Putin will travel to North Korea from Tuesday and Wednesday and go on to Vietnam from there through Thursday, according to Kremlin statements. Kim Jong Un’s regime has been a steadfast supporter of Putin’s war on Ukraine and the two countries are set to deepen their military cooperation during the visit.

GLOBAL (BBG): Central Banks Plan to Boost Gold Reserves Amid Heightened Risks

A large number of central banks are still planning to buy gold in the coming year, spurred by heightened geopolitical and financial risks. About 20 central banks expect to raise their holdings, according to a World Gold Council report. That’s the highest since the WGC started its gold reserves survey in 2018. Buying by central banks has underpinned the precious metal’s record-breaking rally this year, countering a stronger dollar and the shifting outlook for interest rates, which would typically undermine gold.

MNI NBH PREVIEW - JUNE 2024: Market Instability Justifies Slower Easing Pace

The National Bank of Hungary is expected consider both a 25bp or 50bp rate cut this week, with consensus leaning towards the former. Deputy Governor Virag has repeatedly stated that he sees the base rate within the 6.75-7.00% range by the end of June, leaving the central bank with just the 25bp, or 50bp, rate cut options. Beyond this meeting, there is a greater degree of uncertainty among sell-side over the projected path of monetary policy.

MNI BCCH PREVIEW - JUNE 2024: Smaller 25BP Cut Expected, Caution to Prevail

Chile’s central bank is expected to slow the easing pace further in June and cut the overnight rate by 25bp to 5.75%. While options of both 25bp and 50bp may be on the table, the BCCh is likely to side with consensus expectations, as they did in May. The aggressive easing cycle to this point and a recent hawkish shift for both LatAm and global central banks further bolster the likelihood of a 25bp cut.

BITCOIN (BBG): Bitcoin Touches a One-Month Low in a Broad Crypto Market Selloff

Bitcoin touched a one-month low as outflows from digital-asset investment products and the prospect of higher-for-longer US borrowing costs sapped the cryptocurrency market. The largest digital asset shed as much as 2.7% on Tuesday, reaching a level last seen in mid-May, before paring some of the drop to trade at $65,530 as of 8:05 a.m. in London. Smaller tokens such as Ether, Solana and Dogecoin also sank.

DATA

EUROZONE DATA (MNI): Final Data Confirms Mixed May HICP Print

• EUROZONE MAY FINAL CORE HICP +0.4% M/M, +2.9% Y/Y

Eurozone Final HICP confirmed the May flash prints, at +2.6% Y/Y (vs +2.4% in April) and +0.2% M/M (vs +0.6% in April). Energy ended its 12-month deflationary period. Whilst processed food, alcohol & tobacco and non-energy industrial goods (NEIG, or core goods) disinflated Y/Y, services and unprocessed food inflation accelerated in May. Core inflation on an annual basis printed in line with flash at +2.9% Y/Y (+2.7% April), and on a monthly basis it slowed to +0.4% M/M from +0.7% in April. In terms of the larger country, France, Portugal, and Finland saw downwardly revisions from flash HICP Y/Y by 0.1pp to 2.6%, 3.8%, and 0.4%, respectively. Greece and Ireland meanwhile saw upwardly revisions, to 2.4% and 2.0%.

GERMANY JUN ZEW CURRENT CONDITIONS -73.8 (MNI)
GERMANY ZEW JUN ECONOMIC EXPECTATIONS 47.5 (MNI)

FOREX: USD Off Late Monday Lows, Awaiting Fed Cues

• The greenback is firmer within a range early Tuesday, helping ease major pairs off the late highs posted on Monday. EUR/GBP trades either side of the 1.0725 handle, while GBP/USD is back below 1.27.
• Data so far today was oriented around Europe, with Eurozone CPI unrevised in the final reading at 2.6% Y/Y for May. Germany's ZEW survey was lower-than-expected, however, but added little weight to the single currency.
• The CHF is the session's best performer, despite global equities trading well. Moves come ahead of this Thursday's SNB rate decision, at which markets remain evenly split on expecting either a rate cut or hold - but today's further strength would provide more space for easier policy ahead.
• Focus for the duration of the Tuesday session turns to May retail sales data from the US and the industrial production release. Markets expect advance retail sales to have accelerated to 0.3% on the month, from 0.0% in April.
• Central bank speak is busier, with  ECB's Vujcic, Cipollone, de Guindos & Knot as well as Fed's Barkin, Collins, Logan, Kugler, Goolsbee & Collins. 

EGBS: Off Lows; Peripherals Tighten as Political Uncertainty Fades a Touch

 Core/semi-core EGBs are off intraday lows, though Bund futures are still a touch weaker on the day.

• The removal of some of last week’s French political risk premium appeared to weigh on Bunds this morning, with weakness coinciding with a second day of narrowing for German ASWs.
• Hawkish impulses from the RBA’s post-decision press conference will have also weighed at the margin.
• Yesterday’s low provided support for Bund futures, which are -16 ticks at 132.27. Recent gains have cancelled a bearish technical theme, with Friday’s high at 133.21 the first resistance.
• OAT futures are flat at 124.03, off intraday highs of 124.32.
• Eurozone final May core HICP confirmed flash estimates at 2.9% Y/Y, while the German ZEW survey was weaker-than-expected on the Expectations and Current Situation metrics.
• Neither of those data points were particularly market moving.
• The German cash curve has bear flattened, with yields flat to 3bps higher. E4bln of 2.10% Apr-29 Bobl supply was well digested.
• 10-year peripheral spreads to Bunds are tighter, owing to the aforementioned fading of some French political uncertainty.
• Today’s scheduled ECB speakers include Vujcic, Cipollone, de Guindos and Knot, while US retail sales headline the broader macro data schedule at 1330BST.

GILTS: Little Changed to a Touch Firmer, 5-Year Supply Easily Digested

Adjustments to yesterday’s late move higher in oil markets and the RBA decision applied modest pressure to gilts in early trade. The presence of 5-Year gilt supply also weighed into the bidding dealing.

• There were no signs of RV concession ahead of this morning’s 5-Year gilt auction, but that didn’t prevent solid demand and pricing metrics, allowing gilts to move away from session lows.
• Futures last unchanged at 98.33, sticking within the lower end of yesterday’s range.
• Friday’s low in the contract (98.21) held late on Monday.
• Zooming out, last week’s rally in gilt futures instilled a bullish theme, resulting in a print above the May 16 high (98.89). A clear break of this hurdle would reinforce bullish conditions. Conversely, initial firm support is seen at the 20-day EMA (97.45).
• Cash gilt yields are little changed to 2bp lower on the day, flattening.
• Gilts see some light outperformance vs. core global peers across the curve.
• SONIA futures are either side of unchanged, while BoE-dated OIS is little changed on the day, showing just over 40bp of cuts through year end.
• Kantar’s food price inflation metric moderated for a sixteenth consecutive month, printing +2.1% Y/Y, a welcome sign for policymakers.
• Brightmine wage data will hit in the early hours of Wednesday morning.
• Further out, tomorrow’s CPI data and Thursday’s BoE decision headline this week’s UK schedule. Expect our previews of those events later today.

EQUITIES: E-Mini S&P Clears Bull Trigger, Confirming Extension of Bull Cycle

The trend condition in Eurostoxx 50 futures remains bullish, however, a corrective cycle has resulted in a pullback from the May high, and this bear remains in play for now. Last week’s move lower resulted in a break of 4943.00, the Jun 11 low, highlighting potential for a deeper retracement. Scope is seen for a move towards 4762.00, the Apr 19 low and a key support. Firm resistance is at 5046.00, Jun 12 high. The uptrend in S&P E-Minis remains intact and the contract traded higher Monday, confirming an extension of the current bull cycle. Price has recently cleared 5430.75, the May 23 high and bull trigger. The move has confirmed a resumption of the uptrend. Moving average studies are in a bull-mode position too, highlighting bullish sentiment. Sights are on 5572.00 next, a Fibonacci projection. Key short-term support has been defined at 5267.75, the May 31 low. Initial support is 5419.80, 20-day EMA.

• Japan's NIKKEI closed higher by 379.67 pts or +1% at 38482.11 and the TOPIX ended 15.75 pts higher or +0.58% at 2715.76.
• Elsewhere, in China the SHANGHAI closed higher by 14.355 pts or +0.48% at 3030.246 and the HANG SENG ended 20.57 pts lower or -0.11% at 17915.55.
• Across Europe, Germany's DAX trades higher by 6.62 pts or +0.04% at 18075.25, FTSE 100 higher by 20.63 pts or +0.25% at 8162.94, CAC 40 down 3.85 pts or -0.05% at 7567.72 and Euro Stoxx 50 up 3.32 pts or +0.07% at 4883.74.
• Dow Jones mini down 37 pts or -0.1% at 38781, S&P 500 mini down 2.75 pts or -0.05% at 5475.75, NASDAQ mini up 23.5 pts or +0.12% at 19944.75.

Time: 09:50 BST

COMMODITIES: WTI Futures Extend Current Bull Phase Following Move Higher Monday

WTI futures traded higher yesterday, extending the current bull phase. The climb has resulted in a print above at $80.62, the May 29 high and a key resistance. A clear break of this hurdle would cancel a recent bearish theme and pave the way for $82.93, a Fibonacci retracement point. Initial firm support to watch is $77.83, the 20-day EMA. A break would be seen as an early potential reversal signal. Gold is unchained and is trading closer to its recent lows. A sharp sell-off on Jun 7 reinforced a S/T bearish theme. The yellow metal has traded through the 50-day EMA, at 2314.6. The break confirms a resumption of the reversal that started May 20 and signals scope for a deeper correction. This has opened $2277.4, the May 3 low. Clearance of this price point would strengthen a bearish theme. Initial firm resistance is $2387.8, the Jun 7 high.

• WTI Crude down $0.49 or -0.61% at $79.84
• Natural Gas up $0.01 or +0.32% at $2.794
• Gold spot down $6.99 or -0.3% at $2312.21
• Copper down $5.35 or -1.21% at $437.4
• Silver down $0.29 or -0.98% at $29.1755
• Platinum down $1.28 or -0.13% at $970.76

Time: 09:50 BST