MNI EUROPEAN OPEN: USD/JPY Off Highs Following FinMin Comments

EXECUTIVE SUMMARY

• TRUMP EXPECTED TO MEET SENATE REPUBLICANS IN WASHINGTON ON WEDNESDAY, HILL AIDE SAYS - RTRS 
• US ADDS TENCENT AND TESLA’S CHINA BATTERY MAKER TO BLACKLIST - BBG 
• MARK CARNEY SAYS HE’S CONSIDERING RUNNING TO SUCCEED TRUDEAU - BBG 
• JAPAN’S KATO: WILL TAKE ACTION AGAINST ANY EXCESSIVE FX MOVES - BBG 

Fig. 1: USD/JPY Versus US-JP 10yr Yield Differential 

Source: MNI - Market News/Bloomberg

UK

RETAIL (BBG): “The British Retail Consortium, KPMG in London publish the Dec. retail sales monitor showing total retail sales +3.2% y/y vs Nov. -3.3% y/y” 

EU

TURKEY (POLITICO): ““We will not consent to the disintegration of Syria or the disruption of its unitary structure under any guise. If we see a risk in this regard, we will take the necessary steps swiftly,” Erdoğan said at a press conference.”

US.

POLITICS (RTRS): “Donald Trump is expected to meet Republican U.S. senators on Wednesday, a Republican aide said on Monday, as the president-elect urges his party to combine his priorities into one massive bill.” 

TECH (WSJ): "Nvidia chief Jensen Huang held forth at a consumer-electronics showcase in Nevada on Monday, touting his inroads in AI agents, self-driving cars and robotics on a day when his company's valuation reached its highest level."  

US/CHINA (BBG): “The US has blacklisted Tencent Holdings Ltd. and Contemporary Amperex Technology Co. Ltd. for alleged links to the Chinese military, targeting the world’s biggest gaming publisher and top electric-vehicle battery maker in a surprise move weeks before Donald Trump takes office.” 

WEATHER (RTRS): “The first major winter storm of the new year barreled into the U.S. mid-Atlantic states on Monday, closing down federal offices and public schools in Washington, D.C., after dumping a foot of snow in parts of the Ohio Valley and Central Plains.” 

OTHER 

CANADA (BBG): “Mark Carney, the former governor of the Bank of Canada and Bank of England, said he’s considering entering the race to replace Justin Trudeau as Canada’s prime minister.” 

CANADA (MNI): Prime Minister Justin Trudeau said Monday he will step down March 24 amid an internal Liberal Party rebellion fed by Canadians’ anger over the cost-of-living squeeze and a threatened U.S. trade war, after months of insisting he would fight this year’s election.

JAPAN (BBG): “Japanese Finance Minister Katsunobu Kato reiterates the government’s existing stance on the foreign exchange market, saying authorities will take appropriate actions against excessive moves.” 

CHINA 

STIMULUS (BBG): “China will hold a briefing on promoting large-scale equipment upgrades and consumer goods trade-in programs with greater intensity and scope 10am Wednesday, according to a notice issued by the country’s State Council Information Office.” 

GROWTH (SECURITIES TIMES): “More than 20 provinces, including Guangdong and Jiangsu, have carried over “trade-in” measures from last year aimed at encouraging consumers and companies to replace old goods into this year, the Securities Times reports Tuesday, citing its analysis of public data.” 

GOLD (CSJ): “Global central banks are likely to sustain their gold-buying behavior, while overseas markets have room to expand their bullion allocations, further reinforcing the upside potential for international gold prices, China Securities Journal reports on Tuesday, citing industry analysts.” 

US/CHINA (XINHUA/BBG): "Chinese Vice Premier He Lifeng held a video talk with U.S. Treasury Secretary Janet Yellen, vowing to stabilize China-US economic relations during the transition period, Xinhua reports." 

CHINA MARKETS

MNI: PBOC Net Drains CNY150.6 Bln via OMO Tuesday

MNI (BEIJING) - The People's Bank of China (PBOC) conducted CNY7.1 billion via 7-day reverse repos, with the rate unchanged at 1.50%. The operation led to a net drain of CNY150.6 billion after offsetting the maturity of CNY157.7 billion today, according to Wind Information. 

• The seven-day weighted average interbank repo rate for depository institutions (DR007) fell to 1.5153% at 10:00 am local time from the close of 1.6127% on Monday.
• The CFETS-NEX money-market sentiment index, measuring interbank money-market liquidity, closed at 42 on Monday, compared with the close of 38 on Friday. A higher reading points to tighter liquidity condition, with 50 representing an equilibrium.

MNI: PBOC Sets Yuan Parity Higher At 7.1879 Tues; -2.42% Y/Y

MNI (BEIJING) - The People's Bank of China (PBOC) set the dollar-yuan central parity rate higher at 7.1879 on Tuesday, compared with 7.1876 set on Monday. The fixing was estimated at 7.3197 by Bloomberg survey today.

MARKET DATA

UK DEC. BRC LIKE-FOR-LIKE RETAIL SALES +3.1% Y/Y; EST. -0.2%; PRIOR -3.4%

AUSTRALIA NOV. BUILDING APPROVALS -3.6% M/M; EST. -1.0%; PRIOR +5.2%
AUSTRALIA NOV. PRIVATE-SECTOR HOME APPROVALS -1.7% M/M; PRIOR -4.0%

JAPAN MONETARY BASE DEC. -1.0% Y/Y; PRIOR -0.3%
JAPAN MONETARY BASE DEC. Y660.3T; PRIOR Y667.9T

MARKETS

US TSYS: Slightly Richer Ahead Of JOLTS & ISM Services Data

TYH5 is 108-18+, 0-01+ from NY closing levels. 

• According to MNI’s technicals team, the trend condition in 10-year futures remains bearish. Recent weakness reinforces the current bear cycle - the contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108.00, a Fibonacci projection. Short-term gains are considered corrective below the 109-10+ 20-day EMA.
• Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener.
• Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.

JGBS: Little Changed After A Solid 10Y Auction Supports Market

JGB futures are in slight positive territory, +2 compared to the settlement levels.

• Outside of the previously outlined Monetary Base date, there hasn't been much by way of domestic drivers to flag.
• Cash bonds are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
• Cash JGBs are flat to 1bp cheaper across benchmarks beyond the 1-year but richer than pre-10-year auction levels. The benchmark 10-year yield is 0.2bps lower at 1.134% after dealing as high as 1.143% earlier.
• The 10-year JGB auction delivered solid results, with the low price beating expectations, the cover ratio nudging higher and the tail shortening. Weaker sentiment toward global long-end bonds and expectations of further near-term tightening by the BoJ didn’t appear to weigh significantly on demand.
• The swaps curve has twist-steepened, pivoting at the 10-year, with rates 1bp lower to 3bps higher.
• Tomorrow, the local calendar will see the Consumer Confidence Index alongside BoJ Rinban Operations covering 1-25-year JGBs. 

AUSSIE BONDS: Slightly Cheaper, Subdued Session, CPI Monthly Tomorrow

ACGBs (YM -2.0 & XM -1.0) are slightly weaker in a relatively subdued Sydney session. 

• Outside of the previously outlined building approvals, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
• Cash ACGBs are 1bp cheaper with the AU-US 10-year yield differential at -14bps.
• Swap rates are 2-3bps higher.
• The bills strip has bear-steepened, with pricing flat to -6 across contracts.
• RBA-dated OIS pricing is flat to 4bps firmer, with late 2025 leading. A 25bp rate cut is more than fully priced by April (108%), with a February cut at a 58% chance.
• November CPI is released tomorrow and is likely to be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting the headline to pick up 0.1pp to 2.2%. The trimmed mean was 3.5% the previous month.
• The local calendar shows retail sales and trade balances on Thursday.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.

BONDS: NZGBS: Cheaper But A Subdued Session, US JOLTS & ISM Services Later Today

NZGBs closed 1-2bps cheaper after a relatively subdued session. In relative terms, the NZGB 10-year’s performance was mixed, with the yield differential to US tsys 2bps wider but unchanged against ACGBs. 

• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest bear-steepener. Tuesday’s US data calendar includes JOLTS, ISM Services and Tsy 10Y Re-Open.
• Today, the local calendar was empty ahead of ANZ Commodity Prices, the sole release for the week.
• Swap rates are 1-2bps higher.
• Swap rates closed flat to 2bps higher, with the 2s10s curve steeper.
• RBNZ dated OIS pricing closed little changed. 52bps of easing is priced for February, with a cumulative 127bps by November 2025.

FOREX: USD/JPY Off Highs On FinMin Comments, A$ & NZD Outperform

The USD BBDXY index sits little changed in the first part of Tuesday dealing. The index last down a touch to under 1304. We are still above intra-session lows from Monday (sub 1300), which after reports that the incoming Trump administration would scale back its tariff plans (which was later denied). Yen and CHF have underperformed, while A$ and NZD have outperformed, leaving markets with a slight risk on feel in the FX space. 

• USD/JPY got to multi month highs of 158.42, but sits lower now, last near 158.00 (close to Dec 26 highs - 158.08). Comments from the Japan FinMin around excessive FX moves, prepared to act, tempered upside USD/JPY momentum. However, the remarks don't appear to represent an escalation on what has been said recently by Japan officials.
• A consolidated break above 158.00, could see 159.45 targeted (July 12 highs). Of course this would put us back in the mid 2024 intervention zone. There is also less sponsorship from US-JP yield differentials for this recent move higher in the pair, with yield differentials lower in the 2yr space and sideways for the 10yr.
• AUD/USD is up around 0.20%, last 0.6260, still sub intra-session highs from Monday ( just above 0.6300). It is a similar backdrop for NZD, up a little over 0.30% to 0.5660/65.
• Regional equities are mostly positive, except for Hong Kong/China, following US blacklisting of tech bellwethers, including Tencent. This hasn't impacted broader FX risk appetite though.
• A speech in Las Vegas from Nvidia's CEO, which focused in part on new graphics card, hasn't shifted aggregate US equity futures. We are around flat at this stage.
• US yields have ticked lower, likely leaning some pressure on the USD.
• Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.

EQUITIES: HK/China Shares Lower On US Blacklisting, Tech Firmer Elsewhere

Asia Pac equities are once again mixed. Hong Kong and to a lesser extent China markets, have struggled amid fresh US additions to the Blacklist (for companies that have alleged links to the China military). These have included Tencent and CATL, a battery maker. The HSI is off around 2.0% at this stage, while the CSI and Shanghai Composite indices are down more modestly. Trends are more positive elsewhere in the region, aided by tech trends. 

• Nvidia's CEO has been in Las Vegas and announced new computer graphics processors, but broader Nasdaq futures sit little changed, last around flat after a strong cash trading start to the week in Monday US trade.
• Tech sensitive plays in terms of South Korea and Taiwan are firmer but away from best levels. The Taiex still up around 1.0%, the Kospi near 0.65%. Investors may have been hoping for more out of the Nvidia presentation.
• Yesterday saw very strong inflows into local Taiwan stocks, in excess of $1.5bn amid broader tech optimism, as Microsoft unveiled plans for AI data centers and Foxconn posted stronger Q4 results.
• Japan markets are performing better today, up +1% for the Topix, which the Nikkei is around 2% higher. Weaker yen levels, along with positive tech spill over are likely aiding sentiment.
• Elsewhere, aggregate shifts are more modest, Australia's ASX 200 up around 0.30%, but Indonesia and Philippine markets track slightly lower. 

OIL: Crude Down Slightly, December OPEC Output Lower

Oil prices continue to hold onto most of last week’s gains and are only down slightly today. They have declined moderately this week following technical indicators suggesting last week’s rally was overdone. WTI is 0.2% lower at $73.42/bbl, close to the intraday high after a low of $73.18. Brent is down 0.2% to $76.18/bbl, also close to today’s peak following a brief move below $76.00. The USD is flat.

• Concerns over excess supply in 2025 persist with both the production and consumption outlooks uncertain. Bank of America has restated that new production from non-OPEC countries is likely to exceed global demand growth. Later today industry-based data on US inventories is released.
• A Bloomberg survey showed OPEC output declining 120kbd in December driven by UAE with moderate increases in Libya and Nigeria offset by cuts in Iran and Kuwait.
• Later the Fed’s Barkin speaks and US November trade, JOLTS job openings, December services ISM and preliminary December euro area CPI and November unemployment rate are released.

GOLD: Holding Within Recent Ranges, Simple 100-day Support Zone Intact

Gold is a touch higher in the first part of Tuesday trade. Bullion was last near $2640, up a touch for the session, but remaining well within Monday's intra-session ranges. Dips sub the simple 100-day MA (last near $2626) have been supported in recent months. This is helping keep a modest uptrend in play, but Nov/Dec highs from 2024, above $2700 are still some distance away.

• Cross asset trends have been mixed so far today, with the aggregate USD indices little changed, while US yields are down a touch. Regional equities are mostly higher outside of a Hong Kong drop.
• Onshore China media has highlighted analysts stating that central bank allocation to gold is likely to continue in 2025 (per CSJ, see this BBG link). This has been a key source of support for bullion in recent years. 

UP TODAY (TIMES GMT/LOCAL) 

Date	GMT/Local	Impact	Country	Event
07/01/2025	0730/0830	***	CH	CPI
07/01/2025	0745/0845	***	FR	HICP (p)
07/01/2025	0830/0930	**	EU	S&P Global Final Eurozone Construction PMI
07/01/2025	0900/1000	**	EU	ECB Consumer Expectations Survey
07/01/2025	0900/1000	***	DE	Bavaria CPI
07/01/2025	0930/0930	**	GB	S&P Global/CIPS Construction PMI
07/01/2025	1000/1000	**	GB	Gilt Outright Auction Result
07/01/2025	1000/1000	**	GB	Gilt Outright Auction Result
07/01/2025	1000/1100	***	EU	HICP (p)
07/01/2025	1000/1100	**	EU	Unemployment
07/01/2025	1000/1100	***	IT	HICP (p)
07/01/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
07/01/2025	1330/0830	**	US	Trade Balance
07/01/2025	1330/0830	**	CA	International Merchandise Trade (Trade Balance)
07/01/2025	1355/0855	**	US	Redbook Retail Sales Index
07/01/2025	1500/1000	*	CA	Ivey PMI
07/01/2025	1500/1000	***	US	ISM Non-Manufacturing Index
07/01/2025	1500/1000	***	US	JOLTS jobs opening level
07/01/2025	1500/1000	***	US	JOLTS quits Rate
07/01/2025	1630/1130	*	US	US Treasury Auction Result for Cash Management Bill
07/01/2025	1800/1300	**	US	US Note 10 Year Treasury Auction Result
08/01/2025	0030/1130	***	AU	CPI Inflation Monthly
08/01/2025	0700/0800		SE	Flash CPI
08/01/2025	0700/0800	**	DE	Retail Sales
08/01/2025	0700/0800	**	DE	Manufacturing Orders
08/01/2025	0745/0845	**	FR	Consumer Sentiment
08/01/2025	0745/0845	*	FR	Foreign Trade
08/01/2025	1000/1100	**	EU	EZ Economic Sentiment Indicator
08/01/2025	1000/1100	*	EU	Consumer Confidence, Industrial Sentiment
08/01/2025	1000/1100	**	EU	PPI
08/01/2025	1000/1000	**	GB	Gilt Outright Auction Result
08/01/2025	1000/1000	**	GB	Gilt Outright Auction Result
08/01/2025	1005/1005		GB	BOE's Woods Financial Services Regulation hearing
08/01/2025	1200/0700	**	US	MBA Weekly Applications Index
08/01/2025	1315/0815	***	US	ADP Employment Report
08/01/2025	1330/0830	***	US	Jobless Claims
08/01/2025	1330/0830		US	Fed Gov Waller