Morning wrap (28.05.2025)

Equity markets across the Asia-Pacific region are experiencing a mixed trading session. Chinese indexes are fluctuating within a narrow range of +/- 0.30%, while Australia's AU200.cash index is down 0.70%, Japan's JP225 has dropped 1.25%, and Singapore’s SG20cash index is up 0.20%.

The US dollar moderately strengthened against most major currencies, continuing Tuesday's rebound. The exception was the New Zealand dollar (NZD), which rose after the RBNZ delivered a slightly less dovish tone than expected.

The Reserve Bank of New Zealand cut its OCR rate by 25 basis points to 3.25% with a 5–1 vote. Projections point to further easing, with the OCR expected to fall to 2.85% in Q1 2026.

The bank cited global tariff uncertainties and weakening demand as key risks. NZDUSD rose in response to the announcement.

The RBNZ’s Q1 minutes confirmed inflation is within the target range, and the bank is well-positioned for upcoming developments. The committee weighed holding rates steady versus a cut and concluded that easing better supports the price stability mandate. The full effects of earlier cuts have yet to be felt. International risks, particularly tariffs, influenced the decision.

New York Fed President John Williams stated there is little appetite for rate cuts. He emphasized the need for decisive action when inflation deviates from target levels. High uncertainty, including U.S. trade policy, warrants a cautious stance. His remarks reinforce the Fed’s current position of maintaining rates.

Japan has reportedly proposed purchasing up to $6.94 billion worth of U.S. semiconductors. This move is part of ongoing trade discussions aimed at reducing Japan’s large trade surplus with the U.S.

BoJ Governor Ueda expressed concerns over the volatility of long-term Japanese government bond (JGB) yields. He warned such swings could raise funding costs, even as short-term rates remain stable. A weak 40-year JGB auction (bid-to-cover ratio of 2.2) has intensified worries. U.S. trade policy was cited as a source of market instability.

Donald Trump has once again announced plans to take Fannie Mae and Freddie Mac public, this time clarifying that federal guarantees would remain. This marks a more specific proposal compared to his previous vague remarks. The plan may renew investor interest in these mortgage giants amid growing criticism of Trump’s business dealings.

Australia's monthly CPI came in at 2.4% YoY, slightly above the expected 2.3%, while the trimmed mean (core inflation) hit 2.8% YoY. Though both remain within the RBA's 2–3% target range, the figures slightly reduce the likelihood of an imminent rate cut. The next RBA meeting is scheduled for July, with markets split over the bank’s next move.