FOREX: Yen Outperforms Ahead Of BoJ Speech, ECB Later
Outside of a firmer yen backdrop, there has been little in the way of aggregate G10 FX moves so far today. Yen is up close to 0.40%, which has pushed down the BBDXY index to sub 1300 (off 0.20%).
- USD/JPY got to lows earlier of 154.29, but sits slightly higher, last in the 154.55/60 region. This is still up around 0.40% for the session so far in yen terms. Downside focus will rest on Monday's low at 153.72. A clean break sub this level would open up 152.55, a Fib retracement level.
- An earlier BBG report around moves by the BoJ to curb its balance sheet by ending a fund-provisioning program from July of this year drove some early yen support and JGB pressure. US-JP yield differentials are still arguing for lower USD/JPY levels, but haven't shift much on the day.
- We also have a speech from BoJ Deputy Governor Himino coming up in just under 2hrs, which will be gauged for BoJ hike follow up risks.
- In the cross asset space, US equity futures are higher, led by the tech side, following a host of late US earnings results. US yields are closed to unchanged.
- AUD/USD is little changed, last near 0.6230, with little positive spillover from the firmer US equity futures backdrop. Many regional equity markets remain closed though for China LNY.
- NZD/USD is down a touch to 0.5650/55. The NZ ANZ business confidence and activity outlook eased in January they remain elevated, signalling some reduction in optimism following 125bp of RBNZ easing. Confidence fell almost 6 points to 54.4 and the outlook 4 points to 45.8, both still well above the historical averages.
- Later US Q4 GDP, jobless claims, euro area Q4 GDP, December unemployment rate, European Commission January survey and January Spanish CPI print. The ECB is forecast to cut rates 25bp.
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FOREX: Yen Continues To Benefit From Risk Pullback
Currency moves have been muted during today’s APAC trading given Japan, South Korea and Thailand are closed and volumes are generally light. The USD BBDXY index is off its intraday low to be down moderately. A deterioration in risk appetite has weighed on Aussie and Kiwi while benefiting the yen, as China’s December manufacturing PMI printed below expectations and is only just above the breakeven-50 mark.
- The yen outperformed the G10 on Monday and today USDJPY is down 0.3% to 156.40, close to the intraday low.
- AUDUSD is down 0.1% to 0.6215 after a low of 0.6211 earlier as the softer China manufacturing PMI and commodity/equity prices weigh. AUDJPY is 0.4% lower at 97.20.
- Kiwi has underperformed Aussie with NZDUSD down 0.2% to 0.5630 after a low of 0.5627. AUDNZD is 0.1% higher at 1.1040 after falling to 1.1024 early in trading.
- European currencies are little changed with EURUSD at 1.0407 and GBPUSD 1.2549.
- USDCNH fell to 7.3053 after the yuan fixing below Monday’s level. It is now flat on the day.
- Equities are generally weaker with the CSI 300 down 0.6%, ASX -0.9% but Hang Seng up 0.1%. The S&P e-mini is slightly lower. Copper is down 0.3% and iron ore down towards $100/t.
- Germany, Italy, Switzerland, Sweden and Norway have holidays, the UK closes at 12:30 and France at 14:05.
- US October house price data and December Dallas Fed print later.
OIL: Crude Supported By China Data, Heading For December Rise
Oil prices have continued to move higher during APAC trading today and look set to finish December higher. They were boosted yesterday by forecasts for colder weather in the US and Europe, which also drove natural gas prices higher. Brent is up 0.5% to $74.38/bbl after a high of $74.59 earlier, and WTI is also 0.5% higher at $71.36/bbl after reaching $71.60. The USD index is down around 0.1%.
- Brent is currently up 4% in December, while WTI is 5.5% higher. Both benchmarks are likely to be little changed over the year with Brent currently up 0.3% and WTI +2.6%.
- Oil prices have found support from China’s manufacturing PMI remaining above 50 in December even though it was down 0.2 points and slightly lower than expected. The composite rose to 52.2 from 50.8 driven by non-manufacturing. Oil markets have been concerned about the strength of China’s demand for some time and are watching closely for any impact from policy stimulus.
- The supply outlook remains unclear but a market surplus is expected for 2025. US industry-based inventory data is published later today. There have been crude drawdowns but gasoline stocks have continued to build.
- Germany, Italy, Switzerland, Sweden and Norway have holidays, the UK closes at 12:30 and France at 14:05.
- US October house price data and December Dallas Fed print later.
GOLD: Heading For One Of The Best Annual Gains This Century
Gold is little changed in today’s Asia-Pac session, after closing 0.6% lower at $2606.50 on Monday.
- Gold is on track for one of its most significant annual gains this century, rising 26% amid a combination of persistent geopolitical risks and a surge in central bank purchases.
- Lower interest rates have also been a key driver, as gold — being a non-yielding asset — becomes more attractive in such an environment.
- While bullion has edged lower since Donald Trump’s decisive victory in November’s US presidential election, its performance in 2024 remains ahead of most other commodities.
- According to MNI’s technicals team, Monday’s move down undermined the recent bullish theme. A resumption of weakness would signal scope for an extension towards the key support at $2536.9, the Nov 14 low. Moving average studies are in a bull mode position.
