CNH: CNH/JPY Off Highs But Uptrend Still Intact, USD/CNH Flatter Trend Persists
Spot USD/CNH starts Thursday trade near 6.9700, near intra-session lows from Wednesday. Broader USD indices ticked down on Wednesday, but most of the focus in the G10 space remains on USD/JPY, which moved off recent highs, assisted by increased FX jawboning from Japan officials, who reiterated that appropriate measures will be taken against speculative moves. CNH/JPY tracks just under 22.73 currently, off recent highs of 22.8579. The pair is still in an uptrend though, with 20-day EMA support back under 22.4800. Spot USD/CNY finished up Wednesday trade at 6.9729, while the CNY CFETS basket tracker is at 98.76, fresh highs back to April last year.
- Downside focus will be on recent lows at 6.9628 and from there the 6.9500 region, although the pace of decline in USD/CNH has slowed since we fell under 7.00 just before year end. All key EMAs are tracking lower, the 20-day now around 6.9930. The RSI (14) for the pair continues to hold close to oversold territory.
- In the cross asset space, US-CH yield differentials edged lower on Wednesday, but remain within recent ranges.
- To recap, local equities finished weaker on Wednesday, the CSI 300 off 0.40%, as the authorities tightened margin financing requirements. The China to global equity ratio is still slightly higher, largely thanks to weakness elsewhere led by US falls. Current CNH trends have outperformed this ratio in recent months.
- On the data front, we still await Dec new loans/aggregate finance data. Yesterday's better than expected Dec trade figures pointed to this remaining a bright spot for the China economy.
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COMMODITIES: Oil Declines on Ukraine News as Gold Steadies
- President Trump says a deal to end Russia’s war in Ukraine is closer than ever after talks as US negotiators offered more significant security guarantees to Kyiv as part of a renewed push to end the Russia-Ukraine war.
- An agreement to end the war could see the lifting of sanctions on Russia and the flow of Russian oil, adding to the concerns of oversupply in 2026.
- Indian officials stated that the increased scrutiny at ports and from banks is having an affect with Russian oil imports continuing to drop.
- Electricity output from fossil fuels is set to make its first annual decline in generation in more than a decade in China due to the increase in renewables as data out showed that China's oil demand rose +4.5% in November.
- WTI slid to its slowest in more than 5-Years overnight. WTI finished the US trading session with losses of -1.4% to finish at US$56.67 bbl, further below all major moving averages.
- Brent was down -1.2% to finish at US$60.42 bbl and is approaching oversold on the 14-day relative strength index.
- Gold finished the US trading day with modest gains as it closed above a key resistance level. Ending the day at US$4,305.01 it is the first time back above US$4,300 since October and now sits just on 1% below the recent high.
- The modest rally overnight was enough to see bullion reach overbought on the 14-day relative strength index, having spent most of September and October overbought.
- Overnight BBG published data suggesting that ETF flows into gold related stocks continues as flows have ramped up over recent weeks.
- Gold traders focus now will be on the November non-farm payrolls report out tomorrow as their next guide for the likely movement in interest rates by the Federal Reserve.
BONDS: NZGBS: Yesterday's Post-Breman Speech Rally Extends
NZGBs are 4-7bps richer, with the 5-year leading, after US tsys finished slightly richer following a generally quiet session.
- After rising 75bps from its October low, the 5-year yield has declined 15bps since RBNZ Governor Breman yesterday pushed back against investor bets on an interest-rate hike next year.
- Bloomberg - "RBNZ's Breman Sees Risk That Higher Home-Loan Rates Curb Growth. "Our role is if we cut the OCR, we do that to stimulate the economy and we expect to see healthier growth. If the banks hike mortgages and that reduces growth we have to take that into consideration. My consideration is that it's a risk that it dampens the growth that we're starting to see."
- NZ food prices fell 0.4% m/m (+4.4% y/y) in November.
- NZ Job ads index rises 0.8% m/m, a fifth straight rise, following a revised 1.3% increase in October.
- The REINZ House Price Index fell 0.2% y/y — the first annual decline since April.
- Swap rates are 9-10bps lower.
- RBNZ-dated OIS pricing is little changed across meetings. No tightening is priced for February, while November 2026 assigns 42bps.
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NEW ZEALAND: Food Prices Fall Again In Nov, Gains In most Other Segments Though
New Zealand food prices fell a further 0.4%m/m in Nov, the third consecutive monthly fall. We sit at 4.4%y/y for Nov, slightly down from the 4.7%y/y pace seen in Oct. We are gradually moving off recent cycle highs for food inflation (around 5% recorded mid 2025). Fruit and vegetables fell by 4.5%, as the main source of weakness for this segment.
- In terms of the other segments, we saw positive m/m gains for Nov. Rents edged up 0.1%m/m, while gas and petrol were again up strongly, 2.2%m/m and 1.8%m/m respectively (electricity was +0.1%, but down from the 0.5% gain seen in Oct). Air travel, both domestic (+6.5%m/m) and international (+0.4%m/m), rebounded from falls in Oct. Accommodation services rose 1.3%m/m, down from the 4.8% rise in Oct.
- In y/y terms, besides food, rent y/y inflation moderated to 1.4% from 1.6% in Oct. Most other categories saw firmer y/y trends though, except from domestic air travel, which remained negative.
- New RBNZ Governor Breman stated yesterday, "We remain confident that annual headline consumers price index inflation will decline towards the 2 per cent target mid-point by the middle of next year.”
