GOLD: Gold Braces for Range-Bound Consolidation Below $5,000

Earlier headlines crossed that the EU has no plans to deploy counter measures against the US, at this stage, following Trump's tariff plan. To recap, Trump announced on Saturday a 10% tariff on EU countries from Feb 1, which will then rise to 25% in June of this year, for those countries opposing US efforts to acquire/control Greenland. The countries impacted are Denmark, Norway, Sweden, France, Germany, the UK, the Netherlands and Finland after they not only voiced their opposition but either sent troops or representatives to the island. 

• EU leaders/ambassadors agreed to continue/intensify diplomat efforts to avoid US tariffs being implemented on February 1. Note that US President Trump is in Davos this Wednesday.
• News Wires are reporting that EU counter measures are being considered though: via RTRS: "The EU's options include a package of its own tariff on 93 billion euros of U.S. imports that was suspended for six months in early August and the range of measures under the Anti-Coercion Instrument that could hit U.S services trade or investments." This proposal was considered ahead of the US-EU reaching a trade agreement last year.
• US Tsy Secretary Bessent noted over the weekend: "Treasury Secretary Scott Bessent amplified President Donald Trump’s message to European allies that the US won’t back down on taking over Greenland, saying the continent is too weak to ensure its security." via BBG. 

• Economic Advisor Hassett stated: "“Right now it’s really a good time for cooler heads to prevail and for us to disregard the rhetoric and get to the table and see if there can’t be deal worked out that’s best for everybody,” Hassett said on Fox News’ The Sunday Briefing." via BBG as well.

   

NZGBs are 2-3bps cheaper after US tsys finished last week on a heavy note, 2-5bps cheaper. 

• After some massive US Block/buying in 5s (20k at 108-25.75) and 10s (+50k 111-28) buoyed rates in late morning trade – US futures extended lows in late in the session, more flow driven amid a lack of obvious headline triggers.
• Cash US tsys are closed on Monday for holiday. ADP Weekly NER Pulse and Philadelphia Fed Non-Manufacturing Activity is expected on Tuesday.
• The local data calendar is empty today. PM Luxon makes his State of the Nation speech on Monday at 1255 NZDT/1055 AEDT.
• Q4 CPI data print on Friday and are expected to show inflation returning to the 1-3% band. The RBNZ left the door open for another rate cut at its 18 February meeting but a higher-than-expected inflation print towards to the top of target and activity continuing to recover are likely to mean that it is on hold.
• Bloomberg consensus expects Q4 CPI to rise 0.4% q/q bringing the annual rate down to 2.9% from 3.0% above the RBNZ’s November forecast of 0.2% and 2.7%. Swap rates are
• RBNZ-dated OIS pricing is little changed across meetings. No tightening is priced for February, while December 2026 assigns 37bps.

The USD/JPY Friday night range was 157.82 - 158.40, Asia is currently trading around {USDJPY Curncy}. USD/JPY drifted lower on Friday, it is pretty interesting that it managed this while US Yields looked to be breaking higher through some pivotal areas. The BOJ remains in a tough spot, and their verbal push back increased dramatically last week, can they provide anything of substance at the BOJ meeting this week? A test of the BOJ/MOF resolve continues to look likely as the market moves its focus back toward the important 160.00 area. In today's Asian session, first support is toward the 157.00-157.50 area as dips should continue to be supported as we approach the BOJ this week. CFTC Data showed quite a large increase in Leveraged fund Yen shorts as we approach the meeting, see Graph below.

• Bloomberg - “BOJ Keeps Yen Watchers on Edge for Rate-Hike Clues. The upcoming Bank of Japan meeting offers scope for sharp movements in the yen as investors try to gauge the timing of its next hike — with a looming election adding to the confusion. That means Governor Kazuo Ueda will need to tread carefully during a post-decision press conference to ensure that the widely expected outcome doesn’t trigger another yen selloff.” 
• Bloomberg - “China has started requiring exporters of rare earths to Japan to submit additional documents with more detailed information, including supply chains, Kyodo reported.”
• CFTC Data of last week shows Asset Managers continue to pare back their JPY longs, +30177(Last +47852). The Leveraged community has aggressively increased their own shorts heading into the BOJ, -103741k(Last -68117).
• Options : Close significant option expiries for NY cut, based on DTCC data: 156.00($450m), 159.00($1.48b), 160.00($551m). Upcoming Close Strikes : 155.00($1.26b Jan 20), 156.30($1.25b Jan 22), 1598.50($1.4b Jan 21) - BBG.
• The USD/JPY Average True Range(ATR) for the last 10 Trading days: 81 Points
• Data/Event : Core Machine Orders, Industrial Production

Fig 1 : USD/JPY Spot Daily Chart

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