US TSYS: Cash Closed, Risks of Better NFP Not Priced

• Gold has started the week off strongly as geopolitical risks remain in focus for investors.  
• Gold is up +1.3% in Monday trading in Asia at US$4,568 to reach a new all time high for the precious metal.  
• News hit of the US central bank being served with grand jury subpoenas from the Justice Department relating to the renovations of the Fed's headquarters and saw USD weakness Monday with the threat of criminal charges looming.  The news again challenges FED independence, driving investors to safe haven assets like gold.  
• Escalating geopolitical tensions in Iran and Venezuela and the ongoing conflict in Ukraine were the key focus for gold this week, now adding the FED issues to that list.  
• The US President repeatedly attacked the FED chairman last year, undermining the independence of the Central Bank and those attacks have escalated today.  

• The move higher Monday sees gold near to overbought on the relative strength index, where it spent much of September and October last year.  

  

ACGBs (YM -1.0 & XM -0.5) are slightly weaker after today’s household spending data.

• MNI Techs: Prices bounced Thursday. This keeps prices well below prior resistance at 96.615, the Sep 12 high, and refocuses attention on 95.480 as the next major support (see chart).
• Earlier data showed stronger than expected Nov household spending figures. This series has replaced the retail sales print as the main monthly indicator for household spending trends in Australia.
• The spending data may add a little to the RBA hike case for 2026, although inflation data is likely to remain the key swing factor.
• Cash US tsys have traded in today’s Asia-Pac session due to Japan being out on holiday.
• Cash ACGBs are 1bp cheaper with the AU-US 10-year yield differential at +53bps.  
• The bills strip is little changed.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 32% for February to 93% by June and 138% by December 2026.  
• Tomorrow, the local calendar will see Westpac Consumer Confidence.
• The AOFM plans to sell A$300mn 4.75% 2054 bond on Tuesday, A$1bn 4.25% 2036 bond on Wednesday and A$700mn 3.25% 2029 bond on Friday.

Bloomberg Finance LP

The BBDXY has had a range today of 1208.84 - 1212.76 in the Asia-Pac session; it is currently trading around {BBDXY Index}. The USD was looking like it was reestablishing some upward momentum to start the year, but this morning's news of possible indictments on the FED have put a dent in that for now. This market's perception is that this is clear political pressure being brought to bear on the FED and so has worrying implications for its so-called independence. The USD has understandably had a knee-jerk lower in Asia, the question is if that move is enough considering what's at stake. On the day, I suspect rallies could remain heavy in the short-term as the market tries to work through what this means. First support is back between 1205-1207, the USD has lacked any clear direction for at least 6 months now and the wider 1185-1230 range looks set to continue for now. This lack of a trend is being reflected in the CFTC data which shows very little positioning in the USD to start the year.

• EUR/USD -  Asian range 1.1622-1.1671, Asia is currently trading {EURUSD Curncy}. The pair has bounced nicely in early Asia as the USD reacts to the FED news. On the day look for sellers to reemerge in EUR/USD back toward the 1.1665-1.1695 area. 
• GBP/USD - Asian range 1.3391-1.3441, Asia is currently dealing around {GBPUSD Curncy}. The pair had the look of potentially topping out above 1.3500 but it will be important to see how it reacts over the day to the USD headwinds. On the day, I am looking for a rally back toward the 1.3460-1.3490 to find sellers initially. 
• Cross asset : SPX -0.55%, Gold $4570, BBDXY 1211, Crude Oil $59.15
• Data/Events : Germany Current Account Balance, EZ Sentix Investor Confidence

Fig 1: GBP/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P