JPY: USD/JPY Dips To 20-day EMA Supported, Trend Conditions Still Bullish

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• China kicks off the week with trade data for November with expectations for improvement following last months' declines, with exports trending back towards the 3-year average.
• CPI and PPI are out Wednesday with modest improvements forecast for CPI, whilst PPI remains firmly negative.
• The CSI 300 remains above the full year P/E forecast whilst the Hang Seng remains below and USDCNY trends downwards.
• The OMO withdrew over CNY800bn of liquidity last week and the week ahead sees modest maturities of existing 7-day reverse repo.  

The focus of the week is on Tuesday’s RBA decision but Thursday’s November jobs data will also be important. The RBA is unanimously expected to leave rates at 3.6% with the market pricing in no chance of a move in either direction. Therefore, the statement will be scrutinised to gauge the Board’s thinking regarding the outlook and especially if there is a change to the balance of risks and a shift to concern about upside ones to inflation after October trimmed mean printed at 3.3%. 

• The RBA press conference with Governor Bullock will be held at 1430 AEDT.
• October employment surprised to the upside posting a 42.2k rise with the unemployment rate falling back to 4.3%. Bloomberg consensus is forecasting a 20k rise in November with the unemployment rate rising 0.1pp to 4.4% but the data can be volatile and the RBA’s Bullock suggests that the 3-month average is a better indicator. It also looks at the underemployment & youth unemployment rates as well as vacancies and hours worked.
• Tuesday sees the November NAB business survey print, which has been showing a gradual improvement in activity and stable price/cost pressures.

NZGBs are 2-3bps cheaper after US tsys finished last week 4bps cheaper across the curve. Friday’s mixed US data spurred some position squaring.

• U of Mich consumer sentiment was higher than expected in the preliminary December release, as better expectations offset disappointing current conditions.
• The delayed US personal income and outlays report for September saw a decline in goods spending offset by services consumption.
• This week is dominated by the FOMC decision, widely expected to deliver a third consecutive 25bp cut after NY Fed Williams’ uncharacteristic guidance following the delayed September payrolls report. It’s likely to be a contentious meeting, though, with many FOMC members preferring to pause.
• Today’s push higher in yields sees NZGBs 15-31bps cheaper than pre-RBNZ levels, with the 5-year leading. On a relative value basis, the 5-year swap is at its cheapest valuation since mid-2022, based on the 2-/5-/10-year butterfly spread (see chart).
• Swap rates are 4bps higher.
• RBNZ-dated OIS pricing is little changed across meetings. 1bp of easing is priced for February, while November 2026 assigns 35bps of tightening.
• The local calendar will be empty until next Wednesday, when RBNZ Governor Breman hosts a media Q+A alongside Net Migration data.

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