EUROZONE ISSUANCE: EGB Supply (2/2)

• The Australian dollar has been the standout performer on Wednesday, largely reflective of the stronger-than-expected inflation data overnight, supportive of the underlying hawkish RBA narrative.
• AUDUSD rallied to print a session high of 0.7117, and despite slipping back below 0.71 through the European morning, a weaker dollar in US hours prompted fresh session highs for the pair as we approach the APAC crossover. The technical focus remains on both the cycle high at 0.7147 and the 2023 highs at 0.7158, the main obstacles to the next leg higher for the pair.
• Both EURAUD and GBPAUD slipped to fresh cycle lows respectively amid the moves, with the former briefly extending the year’s decline to 5.77%. This further narrows the gap to the 2025 lows, located at 1.6358.
• Additionally, AUDNZD’s high of 1.1892 came within four pips of a very notable resistance point, the 50.0% retracement of the Mar 2011 - Mar 2020 bear leg.
• Yen weakness was another notable characteristic of Wednesday’s FX session, amid the government announcing the nominations of Toichiro Asada and Ayano Sato as new Bank of Japan board members. Both university professors, the new nominees are reported to be in favour of easy policy and active fiscal spending, stoking the bearish yen narrative.
• USDJPY topside momentum gathered pace on the break of 156.29 resistance, registering a 156.82 high before broader dollar weakness saw gains moderate across US hours. However, AUDJPY remains pinned to session highs approaching the close, printing the highest level since 1990 above 111.25.
• The broader dollar offer has helped the likes of EURUSD and GBPUSD rise back above 1,18 and 1.3550 respectively, while USDCAD continues to respect 1.3725 pivot resistance.
• US jobless claims highlights a quiet calendar on Thursday, before the focus turns to Friday’s European flash inflation data, US PPI and the MNI Chicago PMI.

Tsy futures trade weaker but off morning lows, curves mixed (2s10s +.614 at 56.981) ahead of the $70B 5Y note auction (91282CQD6) at 1300ET, WI is currently running at 3.603%, 22bp cheaper vs. last month's tail.

• January auction recap: Tsy futures eased slightly after $70B 5Y note auction (91282CPW5) tailed slightly, drawing 3.823% high yield vs. 3.819% WI; 2.34x bid-to-cover vs. 2.35x prior.
• Peripheral stats: Indirect take-up at 60.68% from 59.51% prior, direct take up slipped to 28.47% vs. 31.65% prior, while primary dealer take-up climbed to 10.85% vs. 8.84% prior.

President Donald Trump's net approval rating on trade and inflation has plunged in the wake of last week's Supreme Court ruling, which invalidated the bulk of his tariff agenda, per Silver Bulletin. It is unclear if the SCOTUS ruling is related to the drop, but a trend line appears to have started in the days after the decision. Trump's handling of the economy recorded a smaller drop.

• Silver Bulletin notes several highly negative surveys released in the last few days: "Ipsos/The Washington Post/ABC: -21 net approval rating. CNN/SSRS: -27 American Research Group: -26." The outlet adds that "some of the numbers look even more bearish for Trump than that topline would imply," noting that the share of voters who strongly disapprove of Trump has risen from 31 percent to 45 percent.
• Trump approval a red light for front-line Republicans ahead of November's midterms. According to DDHQ, Democrats now have a 5-point lead on the generic congressional ballot, an advantage that is historically correlated with a strong midterm performance.
• Republicans may be disappointed that Trump declined to outline a clear plan to tackle inflation at yesterday's State of the Union Address. Analysis from Semafor shows that Trump's speech dedicated far less time to the economy than previous SOTU speeches.
• NBC News notes, “Trump said little to acknowledge the economic pain and pessimism that many Americans report they feel when it comes to wages and costs, instead declaring that prices are coming down."  

Figure 1: Trump's net approval rating on the issues

Source: Silver Bulletin