ASIA FX: A$ Down As Feb Nearly 100% Priced For A Cut, USD Softer Elsewhere
Jan-29 04:51
The USD has lost some ground as Wednesday Asia Pac trade unfolds. The BBDXY index was last back under 1300, off a little over 0.10%. Aggregate G10 moves have remained fairly well contained so far. A lot of Asia markets are closed today, including China/HK and Singapore, which has curtailed liquidity, whilst the FOMC is due later in the Wednesday US session.
- The A$ has seen the largest swings, thanks to the Q4 CPI miss (for both headline and trimmed mean). AUD/USD got to lows of 0.6227, but sits slightly higher in latest dealings near 0.6240 (off around 0.25%). Market pricing for the Feb RBA meeting is close to 95% priced (Westpac joined two other local banks in forecasting a rate move in Feb). April is more than 100% priced. AU-US yield differentials are lower, but haven't seen a sharp move so far today.
- NZD/USD fell in sympathy with AUD, but also sits up from session lows, last near 0.5660/65. Earlier the RBNZ's Conway stated that further easing from the central bank is likely (as they signalled late last year).
- The AUD/NZD cross is back in the 1.1015/20 region, post CPI lows were at 1.1007, levels last seen in Dec 2024.
- Regional equity markets, which are open, are higher, while US futures are also a touch firmer, but have been largely range bound. US yields sit slightly lower, with losses around 1bps or slightly more.
- USD/JPY is a touch lower, last near 155.30 but remains within recent ranges. Monday highs were just short of 156.00 and today we got to 155.79 in earlier dealings. The BoJ Dec Mins were released earlier, with "Many members pointed out that economic activity and prices had been developing in line with the Bank's outlook at the meeting." This obviously came before the central bank raised rates at the Jan policy meeting.
- Looking ahead, we have the Fed decision as the main focus point. No change is expected but the tone will be watched in terms of the outlook. Before the Fed, the BoC is expected to cut rates by 25bps.
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FOREX: A$ And NZ$ Outperform On Higher Yields
Dec-30 04:45
Aussie and kiwi are outperforming against the US dollar during trading so far today. The BBDXY USD index is only slightly lower with US yields little changed. European currencies and the yen are steady.
- AUDUSD has been generally underperforming and technicals continue to signal a bearish downtrend. During today’s APEC trading though it has bounced 0.4% to 0.6239, close to the intraday high, but still 0.15% below last Monday’s close. It has found support from higher ACGB yields, commodity prices including iron ore returning above $100/t.
- NZDUSD is also 0.4% higher at 0.5656 leaving AUDNZD flat at 1.1031. The cross has range traded through the session.
- USDJPY is down 0.1% to 157.78 after a high of 157.99 but has spent the day in a narrow range with little news to give it direction.
- EURUSD is unchanged at 1.0425 and GBPUSD 1.2580.
- US December MNI Chicago & Dallas Fed PMIs and November pending home sales print as well preliminary December Spanish CPI.
FOREX: Baht & Rupiah Strengthen
Dec-30 04:31
The BBDXY USD index is only slightly lower and most Asian currencies stronger against USD. In EM Asia, the Korean won has been volatile but the IDR and THB have strengthened significantly against the greenback helped by year-end rebalancing.
- USDKRW fell to 1465.60 on government commitment to financial stability following continued political instability. Equities are higher.
- USDTHB is 0.5% lower at 33.94, close to the intraday low. The pair is now down 1.7% since the December 19 peak following the more hawkish sounding Fed.
- USDIDR is also down 0.5% to 16158 but off today’s trough of 16142.50. It is down 0.8% since the Fed. The rupiah and baht appear to have benefited from year-end trading, which is light. There hasn’t been market talk of possible central bank intervention.
- USDCNH has moved in the opposite direction to most other Asian crosses and is 0.1% higher at 7.3073 following a high of 7.3086.
- US December MNI Chicago & Dallas Fed PMIs and November pending home sales print as well preliminary December Spanish CPI.
AUSSIE BONDS: Heavy Session Despite Empty Local Calendar
Dec-30 04:12
ACGBs (YM -7.0 & XM -9.5) are slightly above Sydney session lows but remain sharply weaker on a data-light session.
- Today, the local calendar was empty apart from RBA's Jones-Fireside Chat at Conexus at the Superannuation Chair Forum. The next data releases are CoreLogic Home Value and S&P Global PMI Mfg on January 2.
- While cash US tsys are little changed in today’s Asia-Pac session, Friday’s heavy session continues to weigh on the local market.
- US data this week includes MNI PMI and Pending Home Sales on Monday, FHFA housing data on Tuesday, weekly claims and construction spending on Thursday, and ISMs on Friday.
- Cash ACGBs are 6-9bps cheaper with the AU-US 10-year yield differential at -15bps.
- Swap rates are 3-7bps higher, with the 3s10s curve steeper.
- The bills strip is weaker, with contracts -2 to -4.
- RBA-dated OIS pricing is flat to 4bps firmer across meetings, with August. A 25bps rate cut is more than fully priced by April (124%), with a 58% probability of a February cut.
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