MNI EUROPEAN OPEN: USD Edges Up Ahead of NFP

EXECUTIVE SUMMARY

• TRUMPS ORDERS $200B IN MORTGAGE BOND PURCHASES - MNI BRIEF
• TRUMP TO MEET MACHADO IN OPENING FOR VENEZUELA OPPOSITION - BBG
• HUGE ANTI-GOVERNMENT PROTESTS IN TEHRAN OTHER IRANIAN CITIES, VIDEOS SHOW - BBC
• JAPAN CALLS FOR SMOOTH TRADE WITH CHINA FOR RARE EARTHS, FOOD - BBG
• CHINA DECEMBER CPI NEAR THREE-YEAR HIGH - MNI BRIEF 

Fig 1:  China CPI & PPI Y/Y Trends

Source: Bloomberg Finance L.P./MNI 

UK

PRIVATE CREDIT (BBG): "A prominent group of lawmakers from the UK’s House of Lords has criticized the Treasury for its “limited grasp” of risks related to the boom in private capital markets and said that the Bank of England needs to move faster in its plans for stress testing the sector." 

UK/EU (FT/BBG): "UK Prime Minister Keir Starmer will exclude the City of London from his push for “closer alignment” with the EU, the Financial Times reports, citing unidentified British government officials." 

EU

UKRAINE (NYT): "Ukraine on Thursday awarded a bid to mine a major state-owned lithium deposit to investors that include a billionaire friend of President Trump, as his administration has indicated it is looking for investment opportunities in the war-torn country."  

US/UKRAINE (NYT): "The president told The Times that he felt “strongly” that Russia would not invade Ukraine again. President Trump indicated that he was ready to commit to the United States being involved in Ukraine’s future defense — but only, he said, because he was confident that Russia would not try to invade the country again." 

US

MORTGAGES (MNI BRIEF): President Donald Trump on Thursday said he is instructing his "Representatives” to buy USD200 billion in mortgage bonds, claiming that doing so will drive rates and monthly payments down.

MORTGAGE BONDS (BBG): "Mortgage bonds rose and home-lender stocks rallied after President Donald Trump said he was directing the purchase of $200 billion of the securities in a move to bring down the cost of housing." 

FED (MNI BRIEF): Treasury Secretary Scott Bessent on Thursday called on the Federal Reserve to "do its part" in helping to spur investment in the United States, suggesting the need for looser monetary policy. 

INFLATION (MNI): The New York Fed's median measure of short-term consumer inflation expectations ticked up two tenths in December, while job finding expectations declined to a series low and job loss expectations worsened, according to the bank's Survey of Consumer Expectations. 

GEOPOLITICS (BBG): "President Donald Trump said the US military was preparing for strikes against drug cartel facilities, just days after he ordered an operation to capture Venezuelan strongman Nicolas Maduro." 

US/VENEZUELA (BBG): "President Donald Trump said he planned to meet with Venezuelan opposition leader and Nobel Peace Prize recipient María Corina Machado as soon as next week, his first show of support for her in the days since last weekend’s operation to capture strongman Nicolas Maduro." 

JAPAN

JAPAN/CHINA (BBG): "Japan called for smooth shipments of food and rare earths following reports that Beijing is hindering trade on those goods as the dispute between Asia’s two largest economies escalates." 

OTHER

IRAN (BBC): "Huge crowds of protesters have been marching through Iran's capital and other cities, videos show, in what is said to be the largest show of force by opponents of the clerical establishment in years." 

CANADA (MNI INTERVIEW): Canada needs a range of new resource projects and overseas markets to counter U.S. threats to its sovereignty as President Donald Trump’s move to seize Venezuelan oil reserves underlines the risk of relying too heavily on crude exports, top former government adviser Rachel Samson told MNI.

CHINA

INFLATION (MNI BRIEF): China’s Consumer Price Index rose 0.8% y/y in December, up from November's 0.7% growth to hit the highest level since February 2023, in line with expectations for a 0.8% gain, according to data from the National Bureau of Statistics released Friday. 

MARKET DATA

JAPAN NOV HOUSEHOLD SPENDING Y/Y 2.9%; MEDIAN -1.0%: PRIOR -3.0% 
JAPAN NOV P LEADING INDEX CI 110.5; MEDIAN 110.5; PRIOR 109.8
JAPAN NOV P COINCIDENT INDEX 115.2; MEDIAN 115.1; PRIOR 115.9

CHINA DEC CPI Y/Y 0.8%; MEDIAN 0.8%; PRIOR 0.7% 
CHINA DEC PPI Y/Y -1.9%; MEDIAN -2.0%; PRIOR -2.2% 

SOUTH KOREA NOV BOP CURRENT ACCOUNT BALANCE $12236.7MN; PRIOR $6813.8MN

MARKETS 

US TSYS: Markets Ready for NFP, Yields Inch Higher on Low Volumes

The US bond market remains focused on today's non-farm payrolls report, which is a critical guide for Federal Reserve policy expectations. Yields have been range bound over the last week with most maturities locked in a 2-3bps range and very little priced in for the January meeting.  

Bond futures had a typical trading day ahead of NFP with low volumes and limited movements.  The 10-Yr is up +01 at 112-09+ wedged between its topside resistance from the 100-day EMA of 112-14+ and downside resistance from the 200-day EMA of 112-00+.

Cash saw modestly higher yields of +0.5 - +0.9bps across the curve.  

• The 2-Yr is up +0.5bps at 3.495%
• The 5-Yr is up +0.9bps at 3.738%
• The 10-Yr is up +0.8bps at 4.177%
• The 30-Yr is up +0.7bps at 4.846%

The outlier risks remain for a significantly below forecast release, given very little is priced into rate expectations for the end January meeting.  

Please see our Non-Farm Payrolls preview here:  

Hidden PDF

There are no government bond auctions of significance tonight

JGBS: Twist-Flattener, 5/40 Curve Flatter But Mid-Range

JGB futures are holding weaker, -19 compared to settlement levels, but have moved away from session cheaps seen in the aftermath of today’s stronger than expected household spending data. 

• Japan real household spending rose 2.9%y/y in Nov, well above the -1.0% forecast and -3.0% Oct outcome. In m/m terms spending was up 6.2%, the strongest monthly rise since 2021.
• Real spending outcomes have been running ahead of the real cash earnings measure. This divergence widened in Nov. Whilst yesterday's labour earnings data was disappointing, the BoJ regional economic report still pointed to positive wage momentum for 2026 - via our policy team: many branch managers reported expectations for sustained pay increases, with several pointing to wage growth at levels similar to or higher than those seen in 2025.
• Cash US tsys are slightly cheaper in today's Asia-Pac session, with consensus looking for nonfarm/private payrolls growth of 69k/75k. The December data will carry more signal to the market and Fed than the highly unusual November report.
• Cash JGBs are holding a twist-flattening across benchmarks in today's session, with yields 2.2bps higher (5-year) to 4.2bps lower (40-year) (see chart).
• Swap rates are 1bp higher to 3bps lower, with the curve flatter.
• The local market is closed on Monday for a holiday.

Source: Bloomberg Finance LP

AUSSIE BONDS: Cheapening Ahead Of US Payrolls But Still Richer Than Pre-CPI

ACGBs (YM -1.0 & XM -2.0) are weaker, hovering near session lows, ahead of tonight’s US payrolls data (see chart).

• Cash US tsys are slightly cheaper in today's Asia-Pac session, with consensus looking for nonfarm/private payrolls growth of 69k/75k.
• Cash ACGBs are 1-2bps cheaper with a steeper curve and the AU-US 10-year yield differential at +52bps, its lowest level since early December. In the month leading into this week's CPI release, the spread had traded in a 55-65bps range, marking its widest levels since mid-2022.
• The price action had effectively consolidated the differential's breakout above the 30bps range that had prevailed since November 2022. This widening coincided with a steady lift in market-implied expectations for the RBA cash rate.
• The bills strip is little changed.
• RBA-dated OIS pricing is 3-13bps softer than Wednesday’s pre-CPI levels, with December 2026 leading. Nonetheless, pricing continues to show tightening across all meetings, with the probability of a 25bp hike rising from 28% for February to 91% by June and 138% by December 2026.
• On Monday, the local calendar will see Household Spending and ANZ-Indeed Job Advertisements data.
• Next week, the AOFM plans to sell A$300mn 4.75% 2054 bond on Tuesday, A$1bn 4.25% 2036 bond on Wednesday and A$700mn 3.25% 2029 bond on Friday.

Bloomberg Finance LP

BONDS: NZGBS: Strong Relative Performance Ahead Of US Payrolls

NZGBs closed at session bests, 2bps richer across benchmarks, after a typical pre-US payrolls Friday. 

• NZGBs relative performance was even more impressive, with the NZ-US and NZ-AU 10-year yield differentials 6bps and 4bps lower, respectively (see chart).
• Cash US tsys are slightly cheaper in today's Asia-Pac session ahead of the release of the December employment report. Consensus looks for nonfarm/private payrolls growth of 69k/75k with primary dealer analysts a touch higher for nonfarm. It would see similar monthly rates to those in November after nonfarm payrolls fell heavily in October on federal government deferred resignations showing up.
• The local calendar was empty today. The next release will be NZIER Business Opinion Survey data on Tuesday.
• Swap rates closed 1-2bps lower, with the 2s10s curve steeper.
• RBNZ-dated OIS pricing is little changed across meetings. No tightening is priced for February, while October 2026 assigns 20bps.
• Interest-rate expectations across the $-bloc over the past month, looking out to June 2026, have been little changed overall, with the notable exception of NZ, where expectations softened by 16bps. Elsewhere, US pricing edged 3bps higher, while Australia and Canada eased by 5bps and 1bp, respectively.

Bloomberg Finance LP

FOREX: USD Firms, USD/JPY Challenging YTD Highs, CNH Outperforms Post Fix

Broader USD trends remain positive, although aggregate index moves are muted. The BBDXY index unable to sustain earlier highs above 1210, Cross asset moves are fairly modest at this stage, US Tsy yields up a touch (10yr around 4.17%), while US equity futures are close to flat. Regional equity trends are positive, but gains aren't large. Gold and silver aren't moving much, while oil is up but sub Thursday US session highs, Brent last $62.40/bbl. This all comes ahead of the key NFP print in the US later. A Supreme Court ruling on the legality of the Trump tariffs could also come later today US time. 

• The main exception to USD upside is USD/CNH, which is holding near 6.9800 in latest dealings (session lows were at 6.9757), after the USD/CNY fixing set a fresh low since 2024 earlier. This is aiding CNH outperformance on key crosses. CNH/JPY is back above 22.53, not far from earlier 2026 highs above 22.54.
• USD/JPY is above Thursday highs, last 157.25/30 and testing 2026 highs to date (157.30). More important resistance will be eyed at 157.89 the Nov 20 high and bull trigger. Earlier data stronger than expected household spending but this didn't benefit the yen.
• There is over $700mn in option expiries for NY cut later at 158.00 strike, which may come into focus if we see an upside NFP later during the US session.
• Japan FinMin Katayama has spoken about risks of China's export controls on global supply chains and called for smooth trade flows (with earlier reports from Japan also pointing to delays on food export to China). The FinMin will also attend a critical mineral in the US.
• AUD and NZD are both down a touch, but remain above Thursday lows. AUD/USD last 0.6690/95, while NZD/USD was near 0.5740/45. Both currencies are slightly higher versus the yen so for in Friday trade, but this came after declines in Thursday trade for these crosses.
• EUR/USD is holding near 1.1650, while GBP/USD is off a touch to 1.3430. 

ASIA: AI/Tech Lead Continues, Nifty 50 Below Key Level

With the exception of the Hang Seng and NIFTY 50, Asian markets have had a strong week this week taking leads from Wall Street whilst the AI / tech thematic remains. Key names in Taiwan and Korea continue to deliver weekly gains, with TSMC up over 6% and SK Hynix 9% for the week  As we approach the NFP Friday, markets will get its next guide on monetary policy with little expectations priced in for the FED's January meeting.  Chinese stocks saw one of their strongest starts in some time with the CSI 300 Index reaching a four-year high.  

• The NIKKEI at 51,838 is up +1.3% Friday and +2.9% for the week, having hit a new high of 52,518 Tuesday.  
• The KOSPI is up only +0.40% on profit taking on tech names, but +6% for the week.  
• China's bourses onshore all up between +2.5% - 4.3% with Shenzhen the outperformer whilst offshore the Hang Seng is down -0.65% for the week.  
• The NIFTY 50 hit new highs last week and has fallen gradually each day since to lose -1.7% for the week, and through the 50-day EMA.  
• SE Asia's major bourses are up for the week with SE Thai and FTSE Malay's gains modest, whilst the JCI delivered almost +2.5% gains

Oil Up Strongly for Week as WTI Nears Key Tech Level

• Following the very strong rally last night, oil has fallen modestly with no new news to drive sentiment.  
• Oil prices were strong overnight with both WTI and Brent up on renewed supply concerns stemming from developments in several major oil-producing regions. Geopolitical instability and potential disruptions in Russia, Iraq, and Iran fueled market anxiety with political protests in in protests in Iran are being closely monitored.
• As sources suggest a Russian oil tanker was damaged by a drone attack, President Trump was quoted today as saying he was supportive of a Russian sanctions bill.   
• U.S. President Trump's administration intensified pressure on Venezuela's oil sector, seizing two Venezuela-linked tankers and continue discussing plans to control the nation's oil industry whilst news that Chevron is loading Venezuela oil in vast quantities bound for the US and Exxon and ConocoPhillips are looking at their options in the country.
• WTI is down -0.40.% today at US$58.17 bbl yet remains with gains of +1.5% for the week.  WTI is near to the 50-day EMA of US$58.55 which has proven a strong resistance point since late September.
• Brent is lower by -0.45% at US$62.42 bbl, whilst remaining up +2.6% for the week and its largest weekly gain in over 10 weeks if sustained.  
• Oil markets will continue to monitor geopolitics as the key driver Friday, with one eye on the non farm payrolls release. 

Gold Halves O/N Gains, Eyes Strong Week Ahead of NFP

• Gold has given back around half of Thursday's gains during the Asia trading day as investors ready for tonight's non farm payrolls as Initial jobless claims were lower than expected, potentially adding to the move lower today.  
• Non farm payrolls will possibly provide some insight as to the future path for the Federal Reserve on monetary policy.  Following recent cuts, there is limited priced into markets for the upcoming meeting.  
• Gold is down -0.33% today at US$4,462.90 whilst remaining up over 3.00% for the week.  Gold currently sits above the 20-day EMA of US$4,381 with all major moving averages sloping upward.  The upward slope suggests that the positive trend could remain in place for the near term.  
• The current forecast for NFP is a modest increase from the month prior and with only around 3bps of cuts priced in for January, expectations for monetary policy changes remain low.  The seemingly outlier risks tonight remain for markets for an unexpected weak number for the December employment read.  

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
09/01/2026	0700/0800	**	DE	Trade Balance
09/01/2026	0700/0800	**	DE	Industrial Production
09/01/2026	0700/0800	**	SE	Private Sector Production m/m
09/01/2026	0700/0800	***	NO	CPI Norway
09/01/2026	0745/0845	*	FR	Industrial Production
09/01/2026	0745/0845	**	FR	Consumer Spending
09/01/2026	0800/0900	**	ES	Industrial Production
09/01/2026	0800/0900	**	CH	Unemployment
09/01/2026	0900/1000	*	IT	Retail Sales
09/01/2026	1000/1100	**	EU	EZ Retail Sales
09/01/2026	1200/0700	**	BR	Brazil Final CPI
09/01/2026	1245/1345		EU	ECB Lane Keynote at Danish Economy Conference
09/01/2026	1330/0830	***	CA	Labour Force Survey
09/01/2026	1330/0830	***	CA	Labour Force Survey
09/01/2026	1330/0830	***	US	Housing Starts
09/01/2026	1330/0830	***	US	Housing Starts
09/01/2026	1330/0830	***	US	Employment Report
09/01/2026	1330/0830	***	US	Employment Report
09/01/2026	1330/0830	***	US	Employment Report
09/01/2026	1330/0830	***	US	Employment Report
09/01/2026	1330/0830	***	US	Employment Report
09/01/2026	1330/0830	***	US	Employment Report
09/01/2026	1500/1000	***	US	U. Mich. Survey of Consumers
09/01/2026	1500/1000	**	US	University of Michigan Surveys of Consumers Inflation Expectation
09/01/2026	1500/1000		US	Minneapolis Fed's Neel Kashkari
09/01/2026	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
09/01/2026	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
09/01/2026	1800/1300	**	US	Baker Hughes Rig Count Overview - Weekly
09/01/2026	1835/1335		US	Richmond Fed's Tom Barkin