CNH: USD/CNH Can't Sustain +7.3200 Levels, CNH/JPY Rebounds
Feb-12 22:43
USD/CNH spiked towards 7.3250 in Wednesday US trade, as the US CPI printed stronger than expected. We quickly reversed though, falling back sub 7.3050. The pair tracks near 7.3100 in early Thursday dealings, after posting little net aggregate change for Wednesday's session. USD/CNY onshore spot finished up at 7.3069. The CNY CFETS basket tracker edged down a little to 100.66 (per BBG).
- Little has changed from a USD/CNH technical standpoint, with the 20-day EMA support zone just above 7.3000 still intact. Wednesday highs in the pair were also short of the earlier Feb highs of 7.3365 (from the 4th).
- The US CPI beat from Wednesday saw US yields rise across the Tsy benchmarks. US-CH yield differentials have risen, but remain sub recent cycle highs. This backdrop suggests USD/CNH dips will remain supported, even putting the tariff threat to one-side.
- CNH/JPY continued to recover though, with the pair moving back above 21.00, as yen faltered amid higher US yields.
- China equities remain on the front foot, the Golden Dragon index rebounding 2.73% in US trade on Wednesday, now up in 4 out of the last 5 sessions. Tech optimism plus potential help for troubled property develop Vanke were positives. The CSI 300 was up 0.95% in onshore trade on Wednesday.
- Still, relative equity outperformance hasn't aided CNH much of late.
- On the data front we still await the Jan new loans and aggregate finance data.
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AUSSIE BONDS: Slightly Mixed, Modest Sell-Off In US Tsys, Light Local Calendar
Jan-13 22:28
ACGBs (YM -1.0 & XM +0.5) are slightly mixed after a modest sell-off for US tsys. US yields finished flat to 3bps higher across benchmarks, with steeper curves.
- Wednesday’s US CPI report headlines the weekly calendar, with Bloomberg Consensus currently looking for a 0.2% M/M print for core CPI in what’s a close call with a 0.3% M/M. Indeed, our initial review of 13 unrounded analyst estimates sees these generally more detailed projections centred around 0.25% M/M for core CPI in December.
- Cash ACGBs are flat with the AU-US 10-year yield differential at -15bps.
- Swap rates are flat to 1bp lower.
- The bills strip is little changed.
- RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (102%), with the probability of a February cut at 67% (based on an effective cash rate of 4.34%).
- Today, the local calendar will see Westpac Consumer Confidence data.
- AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold on Wednesday and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday.
FOREX: USD Ticks Down On Potential Gradual Tariff Proposal
Jan-13 22:11
The USD has softened in early Asia Pac dealings, as headlines crossed from BBG which suggested the incoming Trump administration is discussing a gradual tariff hike plan.
- BBG notes: "Members of President-elect Donald Trump’s incoming economic team are discussing slowly ramping up tariffs month by month...One idea involves a schedule of graduated tariffs increasing by about 2% to 5% a month." Such a plan would be aimed at increasing negotiating leverage, whilst avoiding a spike in inflation, BBG note's (see this link for more details). Still, the report notes Trump hasn't reviewed or agreed to the plan.
- FX moves aren't dramatic so far, but markets continue to display sensitivity to tariff related headlines as we approach Trump's inauguration date.
- AUD/USD has ticked up to 0.6175/80, from the low 0.6160 region. NZD/USD is back to 0.5580/85. USD/CNH is back under 7.3500, off close to 50pips. USD/MXN is holding under 20.70. USD/CAD was last near 1.4370/75. Follow through has been limited.
AUDNZD: AUD/NZD Continues To Track Sideways
Jan-13 22:06
- The AUD/NZD closed unchanged on Monday, with the cross continuing to trade in very narrow ranges. There hasn't been much to mention over the past 3 month as the cross trades between 1.1000-1.1100, while the AU-NZ 2yr swap remains trading near its highest levels for the past year, although fell 4bps overnight.
- Initial resistance is 1.1100 (round number), with a break here opening a move to 1.1150 (July Highs), to the down side a break below 1.1056 (20-day EMA), would open a move to retest 1.1000 which has acted a key support for the past 3 months.
- RBNZ dated OIS currently pricing in 47bps of cuts at the Feb meeting, while RBA Dated OIS is pricing in a 67% chance of a 25bps cut in Feb.
- Today we have Westpac Australian Consumer Conf at 1030 AEST
