Markets Daily
US yields and the US$ fell on US July CPI data but then rebounded after a treasury bond auction. AUD slid back to 0.6515. Today’s calendar includes testimony from RBA’s Lowe and Bullock and UK Q2 GDP while Japanese markets are closed for a public holiday.
Yesterday
Australia weekly payrolls data showed a -0.2% decrease in payroll jobs over the month to mid-July. However, the ABS notes (as they did last month) that there can be quite a bit of volatility around the turn of the financial year, usually leading to quite significant revisions. AUD/USD traded very quietly, mostly 0.6530-45.
Currencies/Macro
The US dollar was either stronger or about flat versus the major currencies. EUR/USD initially rose from 1.0980 to 1.1065, spiking higher after the US CPI data, but then returned to 1.0980 following the US treasury auction. GBP/USD spiked to 1.2819 on CPI then slid to 1.2680, net -0.3% on the day. USD/JPY dipped to 143.30 on CPI but then rallied steeply, reaching 144.81, a high since 3 July, overall +0.7% over the day. AUD/USD rose from 0.6575 to 0.6616 on the CPI headlines but then fell through NY trade to 0.6515, net -10 pips on the day. NZD/USD is down 30 pips on the day at 0.6025, reversing from 0.6118 and reaching a two-month low. AUD/NZD rose 0.3% to 1.0825.
US CPI in July rose 0.2%m/m (rounded up from 0.17%) and 3.2%y/y (est. 0.2% and 3.3%y/y, prior 3.0%y/y. Ex-food and energy rose 0.2%m/m (rounded up from 0.16%) and 4.7%y/y (as expected, prior 4.8%y/y).
San Francisco Fed president Daly said the CPI data “came in largely as expected, and that is good news…It is not a data point that says victory is ours. There’s still more work to do. And the Fed is fully committed to resolutely bringing inflation back down to its 2% target.” Atlanta Fed president Bostic said the Fed had been working hard to reduce inflation but also reminded his audience of the Fed’s employment mandate.
Interest rates
US 2yr treasury yields briefly spiked lower following the CPI data, from 4.80% to 4.73%, but later jumped to 4.84% following the slightly disappointing 30yr treasury bond auction. The 10yr yield dipped to 3.94% but closed at 4.10%, net +9bp. The 30yr T-bond yield rose from 4.18% to 4.25%. Markets are pricing the Fed funds rate, currently 5.375% (mid), to be 4bp higher at the next meeting on 21 September.
Australian 3yr government bond yields (futures) rose from 3.76% to 3.81% via 3.72%, while the 10yr yield rose from 4.03% to 4.08% via 4.00%. Markets are pricing the RBA cash rate, currently at 4.10%, to be 2bp higher in September, and to peak at 4.21% in December.
New Zealand markets are pricing the RBNZ OCR, currently 5.50%, to be 2bp higher at the next meeting on 16 August and to peak at 5.63% in November.
Credit spreads were also mixed with Main 2bp tighter to 70.5 while CDX gave up early gains (66.5 mid-session) in line with equity to close in half a bp at 67. Cash spreads were little changed and primary activity subdued in both Europe and the US ahead of CPI.
Commodities
Crude markets took a breather from the circa 20% jump seen since late June as Iranian barrels entering the market became an increasing possibility. The September WTI contract is down $1.58 to $82.82 while the October Brent contract is down $1.18 to $86.37. Iran announced it transferred 5 US prisoners to house arrest in exchange for Washington releasing $6bn in Iranian oil revenue frozen in South Korea. However, the OPEC Monthly forecast a supply deficit of 2.26mbpd this quarter as Saudi Arabia and Russia maintained unilateral production cuts. The IEA will publish its monthly later today. The Brent October-November prompt timespread jumped to the strongest backwardation since March, pointing to the ongoing tightness in the market.
Fuel stockpiles in both Europe and Singapore declined further with inventory of middle distillate falling to the lowest since December 2022, adding to the surge in prices of gasoline and diesel. And European natural gas prices reversed some of the previous day’s gains as talks were scheduled for August 15 to address potential strike action by workers at Chevron and Woodside LNG facilities in Australia. Both the UK NBP and European TTF contracts fell close to 7% on the day but were down circa 15% from the previous day’s highs. China’s Q2 CO2 emissions rose to a new record even as China installed as much solar power in the first half of this year as was installed in all of 2022. CO2 emissions in Q2 were up 10% versus the same quarter last year.
Metals were lower again with copper down 0.6% to $8,348 while nickel fell to a fresh 1 month low at $20,400. Codelco and Anglo were said to be exploring options to coordinate mining activities in a bid to boost output and productivity. Bloomberg BNEF forecast that Indonesia battery grade nickel capacity may jump fourfold as activity ramps up. Chinese battery maker CNGR accounts for almost half of the new projects following the announcement back in 2021 by Tsingshan Holding Group that they had developed a nickel matte conversion plant.
Iron ore markets marked time despite warnings that Chinese iron ore demand may drop as steel cuts loom. The September SGX contract is down 10c from the same time yesterday at $101.40 while the 62% Mysteel index is down $1 at $103.30. Iron ore analyst Tom Price at Liberum noted that steel cuts “loom large” with mills rattled “by a deteriorating backdrop”.
Day ahead
From 9:30am Syd, RBA Governor Philip Lowe and Deputy Governor Michele Bullock along with colleagues Marion Kohler and Brad Jones appear before the House of Representatives Standing Committee on Economics in Canberra. The session usually runs about 3 hours, starting with a largely backward-looking prepared text then the Q&A session where all MPs on the committee ask questions. This is Lowe’s final such appearance.
Japanese markets are closed for a public holiday (Mountain Day).
UK: Growth in GDP is set to stall in Q2 as the cumulative effect of monetary tightening continues to materialise (market f/c: 0.0%qtr, 0.2%yr). The trade deficit should meanwhile persist in June given the growing weakness in export demand (market f/c: –£4.1bn).
US: The PPI is unlikely to materially decelerate further as the influence from base effects moderates (market f/c: 0.2%). While the FOMC’s pause offers some scope for improvement in University of Michigan consumer sentiment, the road to full recovery remains long (market f/c: 71.3 for August versus 71.6 in July).
Stay informed with Westpac IQ
Get the latest reports straight to your inbox.
Related articles
Aussie bulls press the advantage
Browse topics
Disclaimer
©2025 Westpac Banking Corporation ABN 33 007 457 141 (including where acting under any of its Westpac, St George, Bank of Melbourne or BankSA brands, collectively, “Westpac”). References to the “Westpac Group” are to Westpac and its subsidiaries and includes the directors, employees and representatives of Westpac and its subsidiaries.
Things you should know
We respect your privacy: You can view our privacy statement at Westpac.com.au. Each time someone visits our site, data is captured so that we can accurately evaluate the quality of our content and make improvements for you. We may at times use technology to capture data about you to help us to better understand you and your needs, including potentially for the purposes of assessing your individual reading habits and interests to allow us to provide suggestions regarding other reading material which may be suitable for you.
This information, unless specifically indicated otherwise, is under copyright of the Westpac Group. None of the material, nor its contents, nor any copy of it, may be altered in any way, transmitted to, copied of distributed to any other party without the prior written permission of the Westpac Group.
Disclaimer
This information has been prepared by the Westpac and is intended for information purposes only. It is not intended to reflect any recommendation or financial advice and investment decisions should not be based on it. This information does not constitute an offer, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter into a legally binding contract. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice. Certain types of transactions, including those involving futures, options and high yield securities give rise to substantial risk and are not suitable for all investors. We recommend that you seek your own independent legal or financial advice before proceeding with any investment decision. This information may contain material provided by third parties. While such material is published with the necessary permission none of Westpac or its related entities accepts any responsibility for the accuracy or completeness of any such material. Although we have made every effort to ensure this information is free from error, none of Westpac or its related entities warrants the accuracy, adequacy or completeness of this information, or otherwise endorses it in any way. Except where contrary to law, Westpac Group intend by this notice to exclude liability for this information. This information is subject to change without notice and none of Westpac or its related entities is under any obligation to update this information or correct any inaccuracy which may become apparent at a later date. This information may contain or incorporate by reference forward-looking statements. The words “believe”, “anticipate”, “expect”, “intend”, “plan”, “predict”, “continue”, “assume”, “positioned”, “may”, “will”, “should”, “shall”, “risk” and other similar expressions that are predictions of or indicate future events and future trends identify forward-looking statements. These forward-looking statements include all matters that are not historical facts. Past performance is not a reliable indicator of future performance, nor are forecasts of future performance. Whilst every effort has been taken to ensure that the assumptions on which any forecasts are based are reasonable, the forecasts may be affected by incorrect assumptions or by known or unknown risks and uncertainties. The ultimate outcomes may differ substantially from any forecasts.
Conflicts of Interest: In the normal course of offering banking products and services to its clients, the Westpac Group may act in several capacities (including issuer, market maker, underwriter, distributor, swap counterparty and calculation agent) simultaneously with respect to a financial instrument, giving rise to potential conflicts of interest which may impact the performance of a financial instrument. The Westpac Group may at any time transact or hold a position (including hedging and trading positions) for its own account or the account of a client in any financial instrument which may impact the performance of that financial instrument.
Author(s) disclaimer and declaration: The author(s) confirms that (a) no part of his/her compensation was, is, or will be, directly or indirectly, related to any views or (if applicable) recommendations expressed in this material; (b) this material accurately reflects his/her personal views about the financial products, companies or issuers (if applicable) and is based on sources reasonably believed to be reliable and accurate; (c) to the best of the author’s knowledge, they are not in receipt of inside information and this material does not contain inside information; and (d) no other part of the Westpac Group has made any attempt to influence this material.
Further important information regarding sustainability-related content: This material may contain statements relating to environmental, social and governance (ESG) topics. These are subject to known and unknown risks, and there are significant uncertainties, limitations, risks and assumptions in the metrics, modelling, data, scenarios, reporting and analysis on which the statements rely. In particular, these areas are rapidly evolving and maturing, and there are variations in approaches and common standards and practice, as well as uncertainty around future related policy and legislation. Some material may include information derived from publicly available sources that have not been independently verified. No representation or warranty is made as to the accuracy, completeness or reliability of the information. There is a risk that the analysis, estimates, judgements, assumptions, views, models, scenarios or projections used may turn out to be incorrect. These risks may cause actual outcomes to differ materially from those expressed or implied. The ESG-related statements in this material do not constitute advice, nor are they guarantees or predictions of future performance, and Westpac gives no representation, warranty or assurance (including as to the quality, accuracy or completeness of the statements). You should seek your own independent advice.
Additional country disclosures:
Australia: Westpac holds an Australian Financial Services Licence (No. 233714). You can access Westpac’s Financial Services Guide here or request a copy from your Westpac point of contact. To the extent that this information contains any general advice, it has been prepared without taking into account your objectives, financial situation or needs and before acting on it you should consider the appropriateness of the advice.
New Zealand: In New Zealand, Westpac Institutional Bank refers to the brand under which products and services are provided by either Westpac (NZ division) or Westpac New Zealand Limited (company number 1763882), the New Zealand incorporated subsidiary of Westpac ("WNZL"). Any product or service made available by WNZL does not represent an offer from Westpac or any of its subsidiaries (other than WNZL). Neither Westpac nor its other subsidiaries guarantee or otherwise support the performance of WNZL in respect of any such product. WNZL is not an authorised deposit-taking institution for the purposes of Australian prudential standards. The current disclosure statements for the New Zealand branch of Westpac and WNZL can be obtained at the internet address www.westpac.co.nz .
Singapore: This material has been prepared and issued for distribution in Singapore to institutional investors, accredited investors and expert investors (as defined in the applicable Singapore laws and regulations) only. Recipients of this material in Singapore should contact Westpac Singapore Branch in respect of any matters arising from, or in connection with, this material. Westpac Singapore Branch holds a wholesale banking licence and is subject to supervision by the Monetary Authority of Singapore.
U.S.: Westpac operates in the United States of America as a federally licensed branch, regulated by the Office of the Comptroller of the Currency. Westpac is also registered with the US Commodity Futures Trading Commission (“CFTC”) as a Swap Dealer, but is neither registered as, or affiliated with, a Futures Commission Merchant registered with the US CFTC. The services and products referenced above are not insured by the Federal Deposit Insurance Corporation (“FDIC”). Westpac Capital Markets, LLC (‘WCM’), a wholly-owned subsidiary of Westpac, is a broker-dealer registered under the U.S. Securities Exchange Act of 1934 (‘the Exchange Act’) and member of the Financial Industry Regulatory Authority (‘FINRA’). In accordance with APRA's Prudential Standard 222 'Association with Related Entities', Westpac does not stand behind WCM other than as provided for in certain legal agreements between Westpac and WCM andobligations of WCM do not represent liabilities of Westpac. This communication is provided for distribution to U.S. institutional investors in reliance on the exemption from registration provided by Rule 15a-6 under the Exchange Act and is not subject to all of the independence and disclosure standards applicable to debt research reports prepared for retail investors in the United States. WCM is the U.S. distributor of this communication and accepts responsibility for the contents of this communication. Transactions by U.S. customers of any securities referenced herein should be effected through WCM. All disclaimers set out with respect to Westpac apply equally to WCM. If you would like to speak to someone regarding any security mentioned herein, please contact WCM on +1 212 389 1269. Investing in any non-U.S. securities or related financial instruments mentioned in this communication may present certain risks. The securities of non-U.S. issuers may not be registered with, or be subject to the regulations of, the SEC in the United States. Information on such non-U.S. securities or related financial instruments may be limited. Non-U.S. companies may not be subject to audit and reporting standards and regulatory requirements comparable to those in effect in the United States. The value of any investment or income from any securities or related derivative instruments denominated in a currency other than U.S. dollars is subject to exchange rate fluctuations that may have a positive or adverse effect on the value of or income from such securities or related derivative instruments.
The author of this communication is employed by Westpac and is not registered or qualified as a research analyst, representative, or associated person of WCM or any other U.S. broker-dealer under the rules of FINRA, any other U.S. self-regulatory organisation, or the laws, rules or regulations of any State. Unless otherwise specifically stated, the views expressed herein are solely those of the author and may differ from the information, views or analysis expressed by Westpac and/or its affiliates.
UK and EU: The London branch of Westpac is authorised in the United Kingdom by the Prudential Regulation Authority (PRA) and is subject to regulation by the Financial Conduct Authority (FCA) and limited regulation by the PRA (Financial Services Register number: 124586). The London branch of Westpac is registered at Companies House as a branch established in the United Kingdom (Branch No. BR000106). Details about the extent of the regulation of Westpac’s London branch by the PRA are available from us on request.
Westpac Europe GmbH (“WEG”) is authorised in Germany by the Federal Financial Supervision Authority (‘BaFin’) and subject to its regulation. WEG’s supervisory authorities are BaFin and the German Federal Bank (‘Deutsche Bundesbank’). WEG is registered with the commercial register (‘Handelsregister’) of the local court of Frankfurt am Main under registration number HRB 118483. In accordance with APRA’s Prudential Standard 222 ‘Association with Related Entities’, Westpac does not stand behind WEG other than as provided for in certain legal agreements (a risk transfer, sub-participation and collateral agreement) between Westpac and WEG and obligations of WEG do not represent liabilities of Westpac.
This communication is not intended for distribution to, or use by any person or entity in any jurisdiction or country where such distribution or use would be contrary to local law or regulation. This communication is not being made to or distributed to, and must not be passed on to, the general public in the United Kingdom. Rather, this communication is being made only to and is directed at (a) those persons falling within the definition of Investment Professionals (set out in Article 19(5) of the Financial Services and Markets Act 2000 (Financial Promotion) Order 2005 (the “Order”)); (b) those persons falling within the definition of high net worth companies, unincorporated associations etc. (set out in Article 49(2)of the Order; (c) other persons to whom it may lawfully be communicated in accordance with the Order or (d) any persons to whom it may otherwise lawfully be made (all such persons together being referred to as “relevant persons”). Any person who is not a relevant person should not act or rely on this communication or any of its contents. In the same way, the information contained in this communication is intended for “eligible counterparties” and “professional clients” as defined by the rules of the Financial Conduct Authority and is not intended for “retail clients”. Westpac expressly prohibits you from passing on the information in this communication to any third party.
This communication contains general commentary, research, and market colour. The communication does not constitute investment advice. The material may contain an ‘investment recommendation’ and/or ‘information recommending or suggesting an investment’, both as defined in Regulation (EU) No 596/2014 (including as applicable in the United Kingdom) (“MAR”). In accordance with the relevant provisions of MAR, reasonable care has been taken to ensure that the material has been objectively presented and that interests or conflicts of interest of the sender concerning the financial instruments to which that information relates have been disclosed.
Investment recommendations must be read alongside the specific disclosure which accompanies them and the general disclosure which can be found here. Such disclosure fulfils certain additional information requirements of MAR and associated delegated legislation and by accepting this communication you acknowledge that you are aware of the existence of such additional disclosure and its contents.
To the extent this communication comprises an investment recommendation it is classified as non-independent research. It has not been prepared in accordance with legal requirements designed to promote the independence of investment research and therefore constitutes a marketing communication. Further, this communication is not subject to any prohibition on dealing ahead of the dissemination of investment research.