FOREX: Yen Losses Further Ground, Steady Trends Elsewhere
Feb-12 04:45
Yen losses have dominated G10 trade so far in Wednesday trade. The yen losing nearly 0.80% against the dollar, USD/JPY last near 153.65/70. Other moves have been much more modest in the G10 space. Outside of some modest NZD gains, most pairs sit close to flat. The BBDXY has ticked up on account of yen weakness, the USD index last around 1301.50.
- Yen weakness has likely been driven by the firmer core yield backdrop. These trends have continued in Asia Pac markets today, although US Tsy yield gains are not much beyond 1bps at this stage. US-JP 10yr government bond yield differentials also haven't ticked higher so far today.
- Onshore Japan markets have returned today, so there may also be some catch USD demand in play. BoJ Governor Ueda appeared before parliament earlier, noting there is a risk that higher food inflation impacts inflation expectations more broadly. Ueda reiterated that further hikes will depend on the economy and price developments.
- Current USD/JPY post levels are close to option expiry levels for NY cut later on Wednesday (Y153.50-70($1.7bln). The 50-day EMA resistance point rests above 154.00.
- AUD/USD is little changed last near 0.6300, close to its 50-day EMA resistance zone. Hong Kong equities are higher, although trends elsewhere (including in China) are more mixed. NZD/USD is marginally higher at 0.5660. NZD/JPY has tested above 87.00, but hasn't been able to sustain such gains so far. AUD/JPY is already above this resistance point.
- Looking ahead, Fed Chair Powell testifies to the House financial services committee and the Fed’s Bostic and Waller also speak. January US CPI prints and Bloomberg consensus is expecting no change in the headline at 2.9% but for core to ease 0.1pp to 3.1%. January budget and real earnings data are also out. The ECB’s Elderson speaks at an MNI Connect event and BoE’s Greene appears.
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FOREX: Fresh Lows For GBP, EUR, & AUD, Yen Outperforms
Jan-13 04:44
The USD remains on the front foot, particularly against GBP and EUR, which typically don't move much during the Asia Pac time zone. The USD BBDXY index was last above 1321.7, above intra-session highs from Friday's US session.
- As the session has unfolded GBP losses have accelerated. GBP/USD was last near 1.2130/35, off a little over 0.60% and the worst G10 performer so far today. This is fresh lows in the pair back to 2023.
- There don't appear any fresh catalysts for the move, other than continuation of losses from last week, amid financial stability/twin deficit concerns.
- EUR/USD is back to 1.0210, testing under Friday lows as well. This puts the pair back to levels last seen in 2022. We are around 0.30% weaker against the USD. SEK is off around 035% as well, last near 11.26 against the USD.
- AUD and NZD initially showed some resilience but this hasn't been sustained. AUD/USD was last sub 0.6135, fresh lows back to 2020. NZD/USD is close to 0.5550. We had Australian and NZ data prints, but they didn't shift the sentiment needle.
- Equity sentiment has been weak throughout the region, following losses in US markets on Friday (weighed by higher US yields post NFP). There has been no US Tsy cash trading so far today, with Japan markets out.
- Yen is benefiting from the risk averse tone, with USD/JPY upticks towards 158.00 sold. We were last near 157.50, around 0.15% stronger in yen terms.
- There were a raft of headlines earlier around PBoC support for the yuan, but this didn't support CNH greatly.
- Looking ahead, it is relatively quiet with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance on tap.
AUSSIE BONDS: Short End Leads Market Lower, US CPI On Wed & AU Jobs On Thu
Jan-13 04:39
ACGBs (YM -15.0 & XM -10.0) are sharply weaker and hovering near Sydney session cheaps.
- Outside of the previously outlined MI Inflation Index and ANZ-Indeed job advertisements, there hasn't been much by way of domestic drivers to flag.
- There have been no cash dealings in US tsys in today’s Asia-Pac session with Japan out for a holiday. TYH5 is, however, weaker at 107-07+, -0-05 from NY closing levels. This week, CPI and PPI inflation measures are on Wednesday and Thursday respectively. The scheduled Fed speaker docket is muted with the Fed Blackout on Friday.
- Cash ACGBs are 10-14bps cheaper, led by the short end.
- Swap rates are 9-12bps higher, with the 3s10s curve flatter.
- The bills strip has sharply bear-steepened, with pricing -5 to -15.
- RBA-dated OIS pricing is 3-16bps firmer across meetings today. A 25bp rate cut is now less than fully priced for April (97%), with the probability of a February cut at 65% (based on an effective cash rate of 4.34%).
- Tomorrow, 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.
US TSYS: Tsys Futures Edge Lower, Cash Trading Remains Closed
Jan-13 04:32
- Not surprisingly it has been a quiet session for Tsys with cash trading closed with Japan out. Short-end tsys futures have broken below Friday's lows, however ranges have remained tight. TU has traded sideways since this morning, last -00⅞ at 102-15+, while TY is -04+ at 107-08.
- There was a decent flattening across curves on Friday, with the 2s10s dropping 4.5bps to 38bps, while the 5s30s & 2s30s both fell about 10bps. The 10yr closed at 4.759%, breaking above the 2024 highs, with sights now on the 2023 highs of 5.01%.
- Former Fed Vice Chair Randal Quarles dismissed concerns over the Fed's independence under Trump, emphasizing its structural resilience to political pressure. He noted that tariffs are unlikely to drive inflation significantly and predicted limited labor market impacts from potential deportations. With US inflation progress stalling and a resilient labor market, the markets are now expect just one Fed rate cut in 2025 and not until October/December meetings.
- Projected rate cuts through mid-2025 have cooled slightly throughout the session vs. Friday morning levels*: Jan'25 at -0.7bp (-1.7bp), Mar'25 -5.1bp (-10.1bp), May'25 -9.2bp (-15.9bp), Jun'25 -16.9bp (-25.6bp), Jul'25 -18.7bp (25.5bp).
- The calendar is light on today, with just NY Fed 1-Yr Inflation Expectations & Federal Budget Balance, focus will turn to PPI & CPI later in the week.
