FOREX: USD Index Consolidates Within Recent Ranges, Watching Risk Trends

ACGBs (YM -2.5 & XM -3.0) are weaker after a relatively subdued session (see chart). There has been no cash US tsys trading today with the market closed for MLK Holiday.

• The Melbourne Institute inflation gauge for December picked up to 3.5% from November’s 3.2% posting at 1.0% m/m increase. This was the sharpest monthly increase in two years bringing the annual rate to its highest since April 2024 but as this series is headline it continues to be impacted by the timing of government electricity rebates.
• Cash ACGBs are 3bps cheaper.
• RBA-dated OIS pricing shows tightening across all meetings, with the probability of a 25bp hike rising from 29% for February to 91% by June and 141% by December 2026.  
• Tomorrow, the local calendar will be empty.  
• The highlight of this week will be December jobs data released on Thursday. Bloomberg consensus expects November’s 21.3k decline to be fully unwound with a 27k rise in employment but that the unemployment rate should tick up 0.1pp to 4.4%. The data tend to be volatile and so the 3-month average gives a better indication of the trend.
• A new 21 October 2037 Treasury Bond is planned to be issued via syndication this week (subject to market conditions).

Bloomberg Finance LP

Asia Pac markets are mixed in Monday trade, with most focus on the weekend's tariff threat from US President Trump on EU countries in relation to Greenland. Regionally, Japan markets are down, as are Hong Kong, but China markets are mixed. Tech plays are higher, while most South East Asian markets are lower US and EU stocks futures are notably weaker in the first part of trade. EU stock futures off around 0.90%, while Eminis are down 0.85%, Nasdaq futures are off 1.2%. EU nations aren't retaliating yet ahead of the Feb 1 tariff deadline, but are considering measures. The economic impact could be significant if the full threat of the 25% tariff rate by the US (in June) is realised. 

• Japan's NKY 225 is down around 0.90%, continuing to move off recent highs. Earlier we had weaker than expected core machine orders, raising uncertainty over the Capex outlook, while PM Takaichi is holding a 6pm JST press conference, where an election is expected to be called. Fiscal concerns is weighing on JGBs, while yen is slightly stronger.
• China Q4 GDP and Dec activity figures were close to expectations. Full year growth was 5%, but momentum slowed in H2 2025, as retail spending eased and property remained a headwind. The CSI 300 is  off a modest 0.23% at the lunch time break, while the Shanghai Composite is 0.13% higher. Today's data is expected to continue to see calls for policy support, although it it likely to remain incremental rather than large scale.
• The Kospi and Taiex remain supported on dips, last up 0.90$ and 0.55% respectively. Carry over momentum from last week, particularly post TSMC results is aiding sentiment. Note in South Korea, the NPS will have a meeting next Monday, where its allocation to local stocks may be raised.
• In South East Asia, most markets are down, although Philippines and Indonesia are showing some resilience.   

The NZD/USD had a range today of 0.5741-0.5773 in the Asia-Pac session, it is currently trading around {NZD Curncy}. The NZD has pushed higher in our session as the USD bears the brunt for the Greenland saga. The NZD has technically put in what looks like a top around 0.5850 and while this continues to cap it should imply bounces are faded. The strength of the recent data though is starting to mount  and is something to keep in mind. On the day, the NZD bears will continue to look for sellers again back toward 0.5770-0.5800 area hoping any bounce will be capped below the pivotal 0.5800-0.5850 area. A move above 0.5850 would signal we could see a reversal in trend and force a short market to start paring back positions.

• Bloomberg -- “NZ'S LUXON SAYS ECONOMY RECOVERING, 2026 WILL BE BRIGHTER YEAR. AIMS TO TRANSLATE OPTIMISM INTO JOBS, HIGHER INCOMES. BUDGET TO INCLUDE SAVINGS, NO EXTRAVAGANT PROMISES" - BBG
• CFTC Data of last week shows Asset Managers again increasing their short positions in the NZD, -45756(Last -40649). The Leveraged community slightly reduced their own shorts, -10133(Last -10605).
• Options : Closest significant option expiries for NY cut, based on DTCC data: 0.5735(NZD300m), 0.5895(NZD300m). Upcoming Close Strikes : 0.5650(NZD343m Jan 22), 0.5740(NZD692m Jan 22) - BBG
• The NZD/USD Average True Range for the last 10 Trading days: 33 Points

Fig 1: NZD/USD Spot Daily Chart

Source: MNI - Market News/Bloomberg Finance L.P