BONDS: NZGBS: Richer After Mixed Q4 Employment Data, UE Rate Up

NZD/USD is up from earlier lows (0.5748), last around 0.5760/65, which leaves us down a touch versus end Friday levels. Market sentiment is slightly risk averse in the FX space to start Monday trade, as markets react to the weekend news of Venezuelan leader Maduro being captured and taken to the US. Still, aggregated moves are very modest at this stage. The A$ is weaker, off by around 0.20%, while JPY and CHF are marginally stronger. USD/MXN sits up a touch, +0.30%, as well. 

• Focus as the session progresses will be how broader risk sentiment unfolds, fall out on oil prices and US equity futures watch points, although significant moves are likely needed to impact NZD sentiment.
• For NZD/USD, broader technicals remain in play. Recent lows around 0.5740 remain intact, which if broken could bring 0.5700 into focus. On the upside, interest may rest around the 100-day EMA near 0.5785/90. Late Dec highs for the pair are some distance away at 0.5853.
• Local NZ markets return today after the new year break. The local data calendar is very light this week, with just Dec Cotality home value figures out later this evening. Next week we get Nov filled jobs, along with food prices as well. 

Oil may start the week lower following the US ousting of Venezuelan dictator Maduro but there is a lot of uncertainty ahead for the country and its oil sector. Venezuela is currently being run by Maduro’s ally Rodriguez but President Trump has warned her to cooperate. The oil industry has been neglected and private investment will be needed to increase output as well as a lifting of sanctions. So while the weekend’s developments could result in an increase in global supplies it is likely to take time and the outlook is unclear.  

• Secretary of State Rubio has said that it will take time for democracy to return as most of the opposition lives outside of Venezuela. He said oil is important to the future of the country and royalties will go to the Venezuelan people.
• In the 1990s, Venezuela produced over 3mbd and OPEC reported that recently it was 1mbd which is above its 2020 trough. The industry needs significant investment after an extended period of neglect which will be a long process and so there is unlikely to be an increase in Venezuelan oil exacerbating the 2026 market surplus. Chevron has kept a presence in the country producing about a third of its crude output.
• US Gulf refineries are geared for heavy, sour crude – the type from Venezuela, according to Bloomberg.
• Oil was little changed on Friday given ongoing thin volumes due to holidays. WTI fell 0.2% to $57.33/bbl off the intraday low of $56.60, while Brent was down 0.1% to $60.80/bbl after falling to $60.01. 

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