ASIA STOCKS: China Stocks Lag Whilst Region Bourses Strong Post Fed. 

The USD has mostly recovered ground through the first part of Tuesday trade. The BBDXY index is up over 1290, +0.25% firmer versus end Monday levels. The A$ is the clear outlier, close to unchanged, after the RBA delivered a hawkish 25bps cut. 

• AUD/USD tracks near 0.6350/55 in latest dealings, close to post RBA highs, 0.6368. As widely expected the central bank cut rates by 25bps, but pushed against current market pricing for further cuts over the next 12 months. RBA Governor Bullock stated that the central bank won't hit the mid point of its 2-3% target band given current market pricing (which is an input into its inflation outlook).
• The AUD/NZD cross has pushed back into the 1.1130/40 region, close to recent highs (1.1149). Late 2024 highs were at 1.1180, in terms of upside targets. AU-NZ 2yr swap spreads have edged up. Note we have the RBNZ decision tomorrow.
• NZD/USD is back down close to 0.5700, off around 0.50%. To the downside, a hold above the 50-Day EMA at 0.5700 is important, a break here would open a move to 0.5668 (20-day EMA). 0.5763 is upside resistance the Dec 18 high.
• USD/JPY has pushed back above 152.00, earlier lows were at 151.24. Earlier positive remarks on the economy only provided brief support for the yen.
• US cash Tsy has resumed after Monday's holiday, with yields pushing higher, the 10yr back above 4.51%. The Fed's Waller saying recent economic data support keeping interest rates on hold in earlier remarks.
• Elsewhere, US equity futures are up a touch, while Hong Kong markets continue to rally, but this hasn't spilled over more broadly.
• Later the Fed’s Daly and Barr speak and February US Empire manufacturing and NAHB housing print. There are also UK labour market data, February euro area ZEW and January Canadian CPIs. The ECB’s Cipollone participates in an MNI Connect event.

• Tsys futures have continued to slowly sell-off throughout the session, we trade just off lows atm. Yields and the USD are pushing higher following the Fed's Waller saying recent economic data support keeping interest rates on hold, fed funds futures are still pricing in a single cut this year in September.
• TU is -00⅞ at 102-23+, while TY is -08 at 109-02+, a continuation lower would open 108-00, the Jan 16 low, and expose 107-06, the Jan 13 low and bear trigger. Key resistance and the bull trigger is 110-00, Feb 7 high.
• Cash tsys curves have bear-steepened today, yields are 1-4.5bps cheaper. The 2yr is +1.1bps at 4.270%, while the 10yr is back above 4.50%, last +3.7bps at 4.513%. The 2s10s is +2.5bps at 23.954, while the 2s30s is +3bps at 46.413.
• It is a rather quiet week for US data, fed fund futures are little changed so far this week, with the first cut pricing fully priced for the September meeting, with a cumulative 40bps of cuts priced by year end.
• Locally in Asia today, Australia's RBA cut rates by 25bps as expected, however the statement from Bullock has been somewhat hawkish, ACGBs yields are 4.5 to 5bps cheaper today.
• Later today we have Empire Manufacturing and the NAHB Housing Market Index

The RBA cut rates 25bp to 4.10% as was widely expected and framed it as a reduction in restrictiveness but it appears to have been a very cautious and reluctant move. Reading between the lines, the Board warns us not to necessarily expect back-to-back easing. It points out that “upside risks remain” and that easing too quickly could “stall disinflation”. As expected it eased as it was more confident inflation would sustainably move towards the mid-point of the band (which is no longer in its forecast), but it was more hawkish on the labour market and revised down its productivity expectations.

• The updated staff projections showed little change to the outlook beyond Q2 2025. The most noteworthy revision is that it doesn’t have underlying inflation at the 2.5% band mid-point over the forecast horizon which has been extended to Q2 2027. It now stabilises at 2.7% up from 2.5% in November. Only Q2 2025 was revised lower materially by 0.3pp to 2.7%.
• Revisions to the cash rate were minimal and the path still suggests the OCR around 3.6% by year end.
• In the near-term growth was revised lower but is little changed from Q4 2025 on. Private consumption was shifted down over the next 18 months, while public demand was revised up again.
• As expected, the unemployment rate was taken down and is now 4.2% by end-2025 down 0.3pp, it stabilises here. Employment growth is stronger and end-2025 wage growth 0.2pp higher at 3.4%. It noted that the labour market had “tightened a little further in late 2024” and that labour shortages are still impacting “a range of employers”
• “The Board remains cautious on prospects for further policy easing” and on the outlook with “risks on both sides”.