Oil Prices Dip Slightly Amid Focus on Russian Sanctions and U.S. Inflation Data 
Japan Declines Comment on BOJ’s Absence From Global Support Statement for Fed Chair Powell. Source: Asturio Cantabrio, CC BY-SA 4.0, via Wikimedia Commons 
U.S. Treasury Yields Expected to Decline Amid Cooling Economic Pressures 
Bank of Canada Holds Interest Rate at 2.25% Amid Trade and Global Uncertainty 
US Futures Rise as Investors Eye Earnings, Inflation Data, and Wildfire Impacts 
Fed May Resume Rate Hikes: BofA Analysts Outline Key Scenarios 
Geopolitical Shocks That Could Reshape Financial Markets in 2025 
UBS Projects Mixed Market Outlook for 2025 Amid Trump Policy Uncertainty 
Bank of England Expected to Hold Interest Rates at 3.75% as Inflation Remains Elevated 
Wall Street Analysts Weigh in on Latest NFP Data 
Moody's Upgrades Argentina's Credit Rating Amid Economic Reforms 
Stock Futures Dip as Investors Await Key Payrolls Data 
U.S. Urges Japan on Monetary Policy as Yen Volatility Raises Market Concerns 
Philippine Central Bank Signals Steady Interest Rates as Inflation Rises and Growth Slows 
European Stocks Rally on Chinese Growth and Mining Merger Speculation 
ECB’s Cipollone Backs Digital Euro as Europe Pushes for Payment System Independence 
The Australian dollar was weaker, AUDUSD continues to slide down 0.45% at 0.7506 despite the RBA left the cash rate unchanged at 1.5% and provided little forward guidance. The Bank’s comments on the housing market were tweaked, with the removal of the comment noting that risks had diminished. This was not surprising given recent evidence of fresh strength in the housing market.
We still see rates on hold at 1.5% at this point, but with the risks tilted towards lower rates given persistently low inflation and falling inflation expectations.
Although no fireworks have been delivered by the RBA for the rest of the year, AUDUSD spot is substantially rich on our short and long-term fair value models and spec positioning in the currency is now fairly long, so AUD can be a potent vol to be long if either Fed re-pricing or a China rethink forces the valuation gap to narrow in a volatile fashion.
6M 35D AUD calls/USD puts (delta-hedged):
Cost-of-carry is also low in slightly longer-dated expiries along a fairly flat vol curve and with strikes on the weak side of the risk reversal.
AUD realized vols are not stellar, but the implied-realized bleed is no more than 0.5-0.7 % pts., which is palatable for a vega hedge. Despite their mild uptick in recent days, AUD vols remain solid value in our view.
