AUSSIE BONDS: ACGB Dec-34 Auction Result

The KPMG/REC Report on Jobs for January pointed to another downbeat assessment of the UK labour market.

• Most notable is probably that permanent salary growth eased to the "slowest in the current sequence of inflation" and was "well below the historical trend."
• Permanent placements continued to fall (at a relatively similar pace albeit slightly slower than in December). But perhaps more significantly, temporary placements fell at their fastest pace since mid-2020.
• Vacancies fell with the press release noting for permanent workers "the rate of contraction accelerating for the fifth successive month to a near four-and-a-half-year peak."
• Data was collected 9-27 January.
• In terms of implications for the MPC, this is a relatively closely watched release but we don't think it will be enough to really change any individual member's view. In many ways it just reinforces the signals seen in recent months. As we noted in our BOE Review, we think that we need one of Bailey, Breeden or Lombardelli to soften their stance if we are to see a March cut.

USD/CNH sits modestly higher in early Monday dealings, the pair last above 7.3100 (session highs rest at 7.3163). Early USD impetus has been given a boost by Trump tariff headlines, which stated that 25% tariffs will e imposed on Monday for all steel and aluminium imports. No timeline was specified on when they would come into effect though (per BBG). Spot USD/CNY finished Friday just near 7.2950, the highest closing level since Trump's inauguration on Jan 20. The CNY CFETS basket tracker slipped to 100.55 on Friday, lowest levels since mid Dec last year.

• China steel exports to the US are smaller than other major economies, but it is still major aluminium exporter to the US (at least in a relative sense, with Canada the largest). The USD amount of aluminium exports is not large though relative to total exports of China.  
• There is also the reciprocal tariff threat that Trump made last week, which would reportedly apply to all countries. An announcement on this is expected this week, although how China would fare is unclear. BBG notes average tariff levels imposed by China have come down a lot since it entered the WTO back in 2001.
• On Sunday, we had the China Jan inflation figures print, which showed slightly stronger headline and a further pick up in core inflation. Core y/y is now 0.60%y/y, up from recent cycle lows of 0.10% (Sep 2024). This is less deflationary fears at face value, although Jan may have been aided by seasonal spending related to LNY.
• Focus data wise this week will be on the Jan new loans/aggregate finance figures. 

• RES 3: 147.74 - High Jan 15 and bull trigger (cont)
• RES 2: 146.53 - High Aug 6 
• RES 1: 142.73/144.48 - High Dec 9 / High Nov 11  
• PRICE: 140.00 @ 16:41 GMT Feb 7
• SUP 1: 139.88 - Low Feb 07
• SUP 2: 139.38 - 2.764 proj of the Aug 6 - Sep 3 - 9 price swing
• SUP 3: 138.87- 3.000 proj of the Aug 6 - Sep 3 - 9 price swing    

A clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note too that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For bulls, a reversal would open 142.73 and 144.48, the Dec 9 and Nov 11 high respectively. For now, short-term gains are considered corrective.