BONDS: NZGBS: Little Changed, Modest Gains For US Tsys

• NZD/USD initially sold off during the Asia/Euro session's on Tuesday, following comments from Trump around 25% tariffs on Canada & Mexico, before a near total reversal as US yields gave back about half the sessions gains during the US session, the pair closed just 0.05% higher for the session at 0.5675.
• CPI came in in line with the prior month at 2.2%, beating estimates of 2.1% y/y. So far there has been very little reaction in FX markets with spot holding steady at 0.5676.
• The pair surged above the 20-day EMA on Tuesday, however fell short of breaking above the yearly highs of 0.5693 (Jan 7 highs), the RSI is above 50 for the first time since early October, while the MACD is printing increasing green bars, signaling potentional momentum change. Focus will now be on breaking the Jan 7 highs, with a break here opening a move to test the 50-day EMA at 0.5731, a level we have no traded above since Oct 4. Initial support is 0.5563 (Jan 17 lows).
• New Zealand Prime Minister Christopher Luxon emphasized a 2025 focus on economic growth, leveraging fiscal discipline and lower interest rates. He aims to attract global investment for infrastructure and partnerships, while Finance and Economic Growth Minister Nicola Willis plans to boost tourism and appeal to high-net-worth investors.
• The GDT auction saw whole milk powder prices rise to $3,988/ton from $3,804, with the weighted average price for all milk products at $4,146/ton. The GDT price index increased by 1.4%.
• Expiries today: 0.5475 (NZD450m). Upcoming notable strikes: 0.5675 (NZD599.1m Jan. 23), 0.5660 (NZD436.4m Jan. 23)
• There is nothing else on the local calendar this morning.

Oil price fell again on Tuesday driven by prospects of higher crude production under the new US administration and the ongoing Gaza ceasefire. The USD index finished 0.1% higher.

• WTI fell below $76.00 to a low of $75.05, below initial support at $75.82, but then recovered to be down 0.5% to $76.00/bbl. The benchmark is 1.8% lower this week but still 6.7% higher this month. The trend structure remains bullish with key resistance at $79.48.
• Brent moved under $80 during late Asian trading to make a low of $78.45, below initial support at $79.42. It finished 0.8% lower at $79.50/bbl to be down 1.6% this week but up 6.5% in January. Despite recent selling, the benchmark is closer to recent highs confirming the continuation of the bull cycle. Initial resistance is at $82.63 and key resistance at $83.79.
• US energy policy is adding significant uncertainty to the outlook for oil. Reduced regulation and the declaration of the national energy emergency are likely to mean an increase in supply. The impact of tariffs is still unclear but sanctions on Iran and Venezuela are likely to be tightened and comments from the Treasury Secretary nominee suggest Russia too.
• The US is a large importer of crude from Canada and the possibility of 25% tariffs from February 1 could increase US fuel prices. The prospect is driving a rush to send oil to the US with both producers and refiners wanting to beat the deadline. Midwest refiners are mainly geared for Canadian heavy crude. 

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. Domestically-driven non-tradeables were slightly lower than expected rising 0.7% q/q (Q3 +1.3%), while tradeables were higher at +0.3% q/q (Q3 -0.2%). More details to follow. See Stats NZ press release here.