AUSSIE BONDS: Firmer & Flatter On Global Lead
ACGBs have firmed, catching up to the overnight move in futures/core global FI markets, which centred on the factors outlined elsewhere (Fed communique, pre-U.S. CPI positioning, cautious comments from an ECB hawk re: QT & a dovish MNI ECB sources piece). This leaves the major benchmarks running 6.0-8.5bp richer across the curve, while YM is +7.0 & XM is +7.5, as futures operate a touch below their late overnight/early Sydney highs and the curve bull flattens.
- Bills are 2-9bp richer through the reds, with the strip bull flattening.
- Meanwhile, RBA dated OIS pricing comes in a touch when it comes to the terminal cash rate, showing around the 3.80% mark vs. a little below 3.90% seen late yesterday, while Feb ’23 meeting pricing continues to show around 20bp of tightening.
- There hasn’t been much in the way of meaningful domestic news flow to digest since yesterday’s Sydney close, leaving global matters at the fore.
- Looking ahead, trade balance data headlines the domestic docket today, while Chinese inflation data will also generate some interest. However, participants will likely have at least one eye on the U.S. CPI print, which will cross in NY hours, perhaps limiting risk taking desires/capability.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
JPY: USD/JPY Close To Month To Date Highs
The yen was the weakest performer within G10 FX at the start of the week. USD/JPY finished around 0.80% higher for Monday's session, putting the pair back at 137.70. Overnight highs came in at 137.85, near month to date highs. A firmer US cash Tsy yield backdrop, which extended gains from Friday's session, weighed on the yen and supported the USD more broadly.
- The short-term outlook is bullish, and a corrective cycle remains in play, following the recovery from 133.63, the Dec 2 low. This phase has allowed an oversold trend condition to unwind.
- An extension higher would open 138.70, the 20-day EMA. This average marks the first key short-term resistance.
- The main event risk is tonight's US CPI print. Locally, the data calendar is empty today.
- The authorities are reportedly considering introducing a minimum tax rate on incomes of 3b yen, although such a proposal wouldn't be implemented until 2025.
NZD: Higher US Yields Support Greenback, Food Prices On Tap
NZD/USD prints $0.6383, down ~0.4% in yesterday's trading.
- The pair firmed in the European session yesterday, retesting Fridays highs before meeting resistance at $0.6420. US Treasury yields rose spilling over into USD strength, NZD/USD had a peak to trough fall of ~0.9% before finding support at $0.6370 and recovering to deal at current levels.
- US Equities advanced, the S&P500 was ~1.4% firmer and the NASDAQ 100 rose ~1.2%, and the DXY finished up ~0.2%.
- REINZ Nov House Sales YoY printed early this morning at -36.1% vs -34.7% prior.
- Technically, bulls look to target the high from 12 Aug at $0.6468, a break through there would open the way to the high from 3 June at $0.6576. Bears need to breach the 20-day EMA at $0.6251 to re-establish the downtrend.
- On the wires shortly we have Nov Food Prices MoM, the prior reading was 0.8%.
AUD: AUD Underperforms Overnight, Watch For Aussie Survey Data Today
MNI (Australia) - The AUD underperformed the rest of the G10, except Japan, against the USD as metal prices fell. The DXY rose 0.2% over yesterday as UST yields increased ahead of the CPI and Fed. AUDUSD has started the day around 0.6750 after reaching a high on Monday of 0.6805.
- AUDNZD continued its downtrend and is now at 1.0572. After range trading through the day AUDJPY rose to 92.96 overnight. AUD lost 0.7% against the EUR and GBP to be about 0.6407 and 0.5501 respectively.
- Despite the drop in AUD yesterday, the trend condition for AUDUSD remains bullish. It has been trading above the key support of 0.6635, the 50-day EMA. If it broke this support then the trend would turn bearish.
- Equity markets were mixed overnight with the S&P 500 closing up 1.2% but the Eurostoxx down 0.5%. Oil prices were higher on the closure of the Keystone pipeline which connects oil fields in Canada to US refiners. WTI rose 3.5% and is now around $73.50/bbl. Copper prices were down 1.8% as the USD rose and also on the possibility that rising Covid cases in China could disrupt activity. Iron ore also eased to $108.70.
- This morning there is CBA household spending intentions for November, December Westpac consumer confidence and NAB business conditions/confidence for November. Tonight US CPI for November prints.
