FOREX: AUD and NZD Outperforming Amid Risk Stabilisation
Feb-06 10:35
- Weakness in the equity/crypto space late Thursday added to the recent turbulence for precious metals, resulting in a brief spike higher for the dollar in early APAC trade Friday. EURUSD saw fresh pullback lows of 1.1766 overnight but has recovered back to 1.18 since, as risk sentiment has somewhat stabilised and the broader theme of the USD recovery consolidates.
- This also resulted in overnight lows of 0.6897 for AUDUSD which was followed by a notable bounce back to 0.6975, which explains the relative AUD strength on Friday. The most recent pullback from last week’s 0.7094 cycle highs in AUDUSD has been allowing the recent overbought trend condition to unwind. A break of the 20-day EMA intersecting at 0.6880 would be a bearish short-term development, while the overall bullish theme remains intact.
- Idiosyncratic drivers in the UK also weighed heavily on the pound Thursday, allowing GBPAUD to consolidate its notable 3.5% downswing in 2026.
- 156.50 has been capping short-term declines for USDJPY, which is now consolidating around the 157.00 mark as we approach this weekend’s Japanese election. There is sizeable demand for options looking for gains north of the year's highs and re-entering territory at which markets have speculated the MoF could intervene. These are consistent with scepticism around PM Takaichi's "responsible" fiscal policy. It remains to be seen in which directions her plans tilt after the election, which polls suggest will result in Takaichi’s LDP party securing a majority.
- Canadian employment data highlights Friday’s calendar, before preliminary reads of UMich sentiment and inflation expectations. Fed’s Jefferson will speak on the economic outlook.
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PORTUGAL T-BILL AUCTION RESULT: TC Results
Jan-07 10:35
| Type | 10-month BT |
| Maturity | Nov 20, 2026 |
| Amount | E1.25bln |
| Target | E1.00-1.25bln |
| Previous | E750mln |
| Avg yield | 1.99% |
| Previous | 2.01% |
| Bid-to-cover | 1.69x |
| Previous | 2.16x |
| Previous date | Sep 17, 2025 |
GERMAN AUCTION RESULTS: New 2.90% Feb-36 Bund
Jan-07 10:33
| 2.90% Feb-36 Bund* | Previous | |
| ISIN | DE000BU2Z064 | DE000BU2Z056 |
| Total sold | E6bln | E3bln |
| Allotted | E4.542bln | E2.344bln |
| Avg yield | 2.83% | 2.67% |
| Bid-to-offer | 0.98x | 1.60x |
| Bid-to-cover | 1.29x | 2.04x |
| Avg Price | 100.60 | 99.420 |
| Low Price | 100.58 | 99.410 |
| Pre-auction mid | 99.356 | |
| Previous date | 26-Nov-25 |
GILTS: Resistance Broken In Futures, Trend Support Broken In 10s, Curve Flattens
Jan-07 10:30
The rally stemming from yesterday’s German CPI data and ongoing geopolitical risks extends further.
- Futures have broken resistance at the November 27 top (91.93), trading as high as 92.05. Next level of upside interest noted at the November 12 high (92.31).
- Yields 2.5-7.5bp lower.
- 2-Year yields have registered the lowest level seen since August ’24.
- 10-Year yields have broken uptrend support drawn off the late ’21 lows (admittedly after several adjustments being made for similar breaches during ’25), which switches focus to the cluster of October and November lows (basing at 4.369%).
- The GBP4.25bln auction of the 4.125% Mar-31 gilt passed smoothly.
- BoE-dated OIS moves to price 43bp of easing through year-end vs. 40.5bp late yesterday.
- SONIA futures 0.5-5.5 firmer, strip flattens. SFIH6/Z6 moves to fresh cycle lows, nearing the May ’24 base (-27.5).
- The latest BoE DMP survey will be released tomorrow.
- As a reminder, we think that progress on headline CPI and official labour market data will not be sufficient to justify the next BoE rate cut, at least not in isolation. It is likely that the Bank will also need to see progress on inflation expectations data as well as further DMP prints and a non-adverse result from the Agents' Pay Survey.
Fig. 1: 10-Year Gilt Yield (%)
Source: MNI - Market News/Bloomberg Finance L.P.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA (bp) |
Feb-26 | 3.712 | -1.3 |
Mar-26 | 3.619 | -10.6 |
Apr-26 | 3.509 | -21.6 |
Jun-26 | 3.441 | -28.5 |
Jul-26 | 3.368 | -35.8 |
Sep-26 | 3.335 | -39.1 |
Nov-26 | 3.300 | -42.5 |
Dec-26 | 3.293 | -43.2 |
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