NZD: NZD/USD - Drifts Back Towards 0.6000 As Risk Turns Lower
The NZD/USD had a range today of 0.6028-0.6040 in the Asia-Pac session, it is currently trading around 0.6032. The NZD has again failed back toward the 0.6100 area as risk topped out again last night and the USD pulled back. We have seen this movie before so the question is whether risk actually breaks down and we get a decent correction or are the dips once again supported and we continue to chop sideways. Recency bias suggests the latter but there does seem to be some trouble brewing under the hood. On the day, the first support is back toward 0.5985-0.6015 a break below here could signal a deeper pullback toward 0.5900. For now the 0.6100 area continues to cap but the bulls will be hoping for risk to firm up to have another go.
- MNI AU - PMI Off Dec Highs But Still Pointing To Firm Growth Outlook: The BusinessNZ manufacturing PMI eased slightly in Jan, but maintained the bulk of the improvement we saw late last year. We printed at 55.2, versus 56.1 in Dec (the 56.1 read was the highest print since late 2021). The Jan outcome is still pointing to supportive cyclical conditions. The sub indices moved off Dec highs, with new orders at 56.4, versus 59.9 prior. The employment index printed at 52.9 (versus 53.7 prior), but we are above 2025 lows.
- MNI AU - NZ Inflation Expectations Edge Up But From Low Levels: New Zealand 2yr ahead inflation expectations rose to 2.37% (for the Q1 print) from 2.28% prior. This is back to Q1 2024 highs for the print, but the trend rise has been very modest over this period. The trough in 2yr ahead inflation expectations was near 2.0% in the second half of 2024, and we remain well off end 2022 highs of 3.62%. 1yr ahead inflation expectations posted a firmer rise to 2.59% from 2.39%, but likewise remain well off end 2022 highs (just above 5.0%). The data points to an edging up in inflation expectations, but not a pace that is likely to alarm the RBNZ around the need to shift rates higher in the near term.
- Options : Closest significant option expiries for NY cut, based on DTCC data: none. Upcoming Close Strikes : 0.5700(NZD400m Feb18), 0.6050(NZD395m Feb 16), 0.6200(NZD430m Feb 16) - BBG
- The NZD/USD Average True Range for the last 10 Trading days: 57 Points
Fig 1: NZD/USD Spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
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AUD: AUD/USD-Drifts Up To 0.6700, Needs To Hold Below 0.6720-30 To try Lower
The AUD/USD has had a range today of 0.6677 - 0.6700 in the Asia- Pac session, it is currently trading around {AUDUSD Curncy}. The AUD has drifted back toward 0.6700 during our session as Asian stocks, Crypto and Metals outperform. The AUD price action has been constructive but its failure to extend higher would be a little concerning as the USD tries to mount a comeback. Technically while the AUD remains above 0.6600 dips should continue to find support. On the day, the risk is another test of the 0.6650 area which has been so supportive in recent weeks. In the short-term watch for sellers back toward the 0.6700-0.6720 area looking for a test of the 0.6650 support, a sustained move back above 0.6730 and we could see the upward momentum re-established.
- MNI AU: Job Vacancies Ease, Trend Mostly Sideways, Jobs Data Next Thursday: Today's data showed job vacancies down -0.2%q/q (ending in Nov). This follows a -2.7% decline in the prior quarter. Job vacancies remain around 30% off 2022 highs, but the trend though was only down modestly, to end Nov just under 327k. To Nov we were down 5.2%y/y. The q/q trend is relatively steady, not too far from flat for 2025. The data is unlikely to shift RBA thinking around labour market trends. Note we get Dec jobs data next Thursday (22nd of Jan).
- MNI: China To Assess Housing Stimulus On Q1 Performance. Authorities in China are expected to assess the need for substantial property market stimulus after Q1, following recent signals in high-level government reports, although local governments are likely to remain constrained by funding gaps and potential spillover effects on surrounding cities, advisors and analysts told MNI. {NSN T8U2JA33O5C0 <GO>}
- Options : Closest significant option expiries for NY cut, based on DTCC data: 0.6650(AUD630m), 0.6700(AUD776m), 0.6750(AUD961m). Upcoming Close Strikes : 0.6600(AUD1.98b Jan16), 0.6640(AUD1.14b Jan16), 0.6800(AUD2.51b Jan16) - BBG
- The AUD/USD Average True Range for the last 10 Trading days: 44 Points
Fig 1: AUD/USD spot Daily Chart
Source: MNI - Market News/Bloomberg Finance L.P
JGBS AUCTION: 5-Year Supply Shows Lacklustre Demand Metrics
Today’s 5-year JGB auction delivered weakish demand signals. The low price was below expectations at 99.81, the bid-to-cover ratio fell to 3.0811x from 3.1676x, and the tail widened to 0.05 from 0.04.
- The result aligns with the weakish results seen at this month’s 10-year and 30-year auctions, and last month’s poor 2-year auction.
- Back in December, Reuters reported that the Japanese government will increase issuance of 2-year and 5-year JGBs from January as part of its stimulus-funding plan. Issuance rose by around Y100bn today. Reuters also noted that there was no changes to the planned issuance for 10-40-year tenors.
- Overall, with an outright yield and the 2s/5s curve near cycle highs, today’s outcome points to generally poor demand conditions.
- In the aftermath, the 5-year sector is slightly cheaper in afternoon trading.
JGBS AUCTION: 5-Year JGB Auction Results
The Japanese Ministry Of Finance (MoF) sells Y1,928.0bn 5-Year JGBs:
- Average Yield (%): 1.639 (prev. 1.435)
- Average Price: 99.82 (prev. 99.84)
- High Yield (%): 1.650 (prev. 1.444)
- Low price: 99.77 (prev. 99.80)
- % Allotted At High Yield (%): 0.4826 (prev. 37.7565)
- Bid/Cover: 3.0811x (prev. 3.1676x)
