AUSSIE 3-YEAR TECHS: (H5) Monitoring Resistance

Q4 NZ CPI was close to Bloomberg consensus expectations at 0.5% q/q and 2.2% y/y after 0.6% & 2.2% in Q3, above the RBNZ’s November forecast of 0.4% & 2.1%. The slightly higher outcome was driven by international airfares with the volatile component accounting for almost a quarter of the quarterly increase. With the data printing close to the RBNZ’s projections and non-tradeables easing, another 50bp cut on February 19 seems likely given the weakness of the economy.

• Headline inflation was impacted by a number of volatile components, such as airfares & cars, and so the underlying measures are likely to be the focus of the RBNZ with its own sector factor model estimates due at 1500 NZDT (1300 AEDT) today.
• Domestically-driven non-tradeables were slightly lower than expected rising 0.7% q/q and 4.5% y/y, the lowest quarterly rate since Q3 2020, and below the RBNZ’s projections of 0.8% & 4.7%. It rose 1.3% q/q and 4.9% y/y in Q3. Rents continue to grow strongly rising 0.8% q/q making a 15% contribution to Q4 CPI. Services prices rose 1.4% q/q and picked up to 4.8% y/y from 4.5%, still elevated.
• Stats NZ notes that excluding petrol prices, which fell 9.2% y/y, headline inflation would have been higher at 2.7% y/y.
• Vegetable prices were down 14.6% y/y. Thus the CPI ex food rose 0.8% q/q and 2.4% y/y.
• Tradeables were higher at +0.3% q/q but still down 1.1% y/y after -0.2% & -1.6%. This quarterly rise was the first since Q3 2023 suggesting that the disinflationary impact from goods prices is over. It was also higher than the RBNZ projected (-0.2% & -1.5%). Goods prices were flat though to be up 0.6% y/y. 

NZ CPI y/y%

• AUD/NZD is off recent highs and right back in the middle of the past 4 month range. NZ CPI beat has so far done little move the dial, with focus now turning to Australia CPI data next Wednesday.
• The AU-NZ 2yr swap saw a large 20bps drop on recently, this did little to move spot. Other large 20bps moves over the past year has seen the spot price move 100-200+ pips, see chart.
• AUD/NZD trades right on the 50-day EMA, a level we have bounced off over the past month.
• There are no notable option expiries in the near team. 

After making highs of 7.2965 in early EU trade yesterday, USD/CNH mostly tracked lower as the US session unfolded. We track near 7.2650 in early Wednesday dealings, after positing little net change yesterday. Intra-session lows from Tuesday remain intact at 7.2524. Onshore USD/CNY spot finished up at 7.2656, leaving little CNH-CNY basis currently. The CNY CFETS basket fell 0.46% to 100.99, fresh lows in the index back to late Dec. 

• The lack of upside follow through in USD/CNH post yesterday's tariff headlines for Mexico and Canada, likely reflected that nothing specific was mentioned y Trump in relation to China. This suggests there is perhaps some negotiating room between the two sides before Trump takes any specific action.
• EUR/USD rose back above 1.0400, likely seeing some positive spill over to the yuan as well. The single currency likely benefiting from no specific tariff threat from Trump.
• For USD/CNH technicals, we are wedged between the 50 (7.2860) and 100-day (7.2474) EMAs. Implied vols for USD/CNH sit off recent highs. The 1 month is back to 5.35%, against recent highs around 6.67%. We have seen similar trends across other parts of the implied vol curve.
• China Vice Premier Ding Xuexiang stated that China would boost its imports (see this BBG link). China also stated it was willing to talk to new US Secretary of State, despite him being on the sanctioned list (see this BBG link). This is a further sign we may see discussions on trade issues first before the US decides on any tariffs steps.
• The local data calendar is empty today.