AUD: Reaction To CPI

In Tokyo morning trade, JGB futures are little changed, +2 compared to settlement levels.

• The BOJ’s December meeting opinions showed growing confidence that rate hikes are appropriate to achieve the price target, with several members noting real rates remain negative, the yen is weak because policy is too accommodative, and delaying action could sustain price pressures.
• While the neutral rate is seen as hard to pin down and still some distance away, members favoured a flexible, meeting-by-meeting approach, with some suggesting hikes every few months, while stressing the need to closely monitor economic impacts as the likelihood of meeting the outlook continues to rise.
• Cash US tsys are flat to slightly richer, with a flattening bias, in today's Asia-Pac session.
• Cash JGBs are little changed across benchmarks. The benchmark 10-year yield is 0.4bp higher at 2.045% versus the cycle high of 2.104%.
• Swap rates are showing no net change. 

Aussie found support from stronger Asian equities and commodities to outperform most of the G10 on Friday with AUDUSD up 0.2% to 0.6716 off the intraday high of 0.6725. The pair is currently around 0.6712. The BBDXY USD index was down only slightly.

• AUDUSD reached a low of 0.6697 before recovering. It held above the 20-day EMA at 0.6614. The pair continues to trade above key resistance at 0.6707, 17 September high, reinforcing the bullish trend condition with the focus now on 0.6723, 21 October 2024 high.
• With the yen underperforming, AUDJPY rose 0.6% to 105.17, the intraday peak but also the highest since mid-2024. The pair has been trending higher since April this year. It has started today slightly lower at around 105.0.
• NZDUSD was flat on Friday at 0.5837 and is currently around 0.5826. It rallied from a low of 0.5818 to 0.5842. Kiwi underperformed Aussie though leaving AUDNZD 0.3% higher at 1.1512 and is currently +0.1% to 1.1522. The pair has trended higher since April as global trade risks dissipated and monetary policy expectations between the two countries diverged. It stabilized around 1.14-1.16 over November/December.
• Most equity markets were shut but the S&P e-mini was flat but the Nikkei rose 0.7% and CSI 300 +0.3%. Oil prices fell with Brent -2.3% to $60.80/bbl. Copper soared 5% and iron ore is around $104-105/t.
• There are no data or events in Australia or NZ today.  

TYH6 is dealing at 112-17, -0-01 from closing levels in today's Asia-Pac session.

• Thin holiday-related trading remains as geopolitical tensions drive flight-to-quality flows.
• Focus remains on the ongoing US blockade of Venezuela, which is aimed at regime change, although there has also been the US bombing of militants in Nigeria on Christmas Day to digest.
• President Trump and President Zelenskyy met in Florida and the former sounded optimistic on progress for a peace deal. He had spoken to Putin on the phone earlier.
• US equity futures are dealing little changed.
• On Friday, cash US tsys finished mixed, curves twisting steeper with 2s-10s holding modestly higher vs. weaker Bonds after the bell.
• Monday’s US data sees Pending Home Sales MoM (1000ET), Dallas Fed Mfg Activity (1030). FOMC minutes for the December meeting will be released at 1400ET Tuesday.