FOREX: A$ & NZD Near Important Resistance Levels, USD Lower For The Week
The USD BBDXY index sits little changed in the first part of Friday dealing, last near 1292.4. We have seen slight outperformance from NZD and AUD, but aggregate moves are modest at this stage.
- The BBDXY index is comfortably down for the week, with EUR and EU related currencies outperforming. Ukraine peace hopes, coupled with no fresh tariffs in the near term, is weighing on USD sentiment.
- For today, NZD/USD is up a little over 0.20%, last near 0.5690. This brings us back within striking distance of the 50-day EMA (near 0.5700), which also coincides with early Feb highs.
- Earlier we had a surge in the NZ PMI back above 50.0, while Jan NZ food prices were also very strong. This comes ahead of next week's RBNZ meeting. A 50bps cut is expected. Today's data outcomes may have more influence on the RBNZ outlook beyond next week's meeting.
- NZ-US 2yr swap spreads also remain within recent ranges, last near -78bps, so we may need more upside on this front to sustain higher NZD levels.
- AUD/USD has edged up, but at 0.6320 is still short of key resistance at 0.6331 (the Jan 24 high). Iron ore prices are higher, amid supply fears due to weather conditions in Western Australia
- We have seen a continued rally in Hong Kong equities, while China markets are also higher today. Tech optimism continues to fuel gains.
- US equity futures are up a touch, while US yields are little changed.
- USD/JPY is near 152.80, unchanged for the session, but yen has been a notable underperformer the past week, particularly against EU currencies.
- Looking ahead, we have EU GDP, while in the USD retail sales is likely to be the main focus point. Will also hear from the Fed's Logan.
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ASIA STOCKS: Asian Equities Mixed, Ahead Of US CPI Tonight
Asian markets traded mixed as investors awaited key US inflation data for clues on Federal Reserve policy. The MSCI Asia Pacific Index was little changed, with modest gains in Japan, South Korea, and Hong Kong, while Chinese equities were mixed. The PBOC injected significant short-term liquidity to ease a cash squeeze ahead of the Lunar New Year, highlighting its easing stance. Indian stocks extended gains, driven by energy and utility sectors, while foreign outflows from Indian equities continued in January. South Korea's unemployment rose to its highest level since mid-2021 amid political uncertainty. Meanwhile, oil prices steadied after recent declines, and the dollar consolidated after the previous session's losses. Overall, sentiment remained cautious ahead of the U.S. CPI report, which could shape global monetary policy expectations.
FOREX: Yen Marginally Higher As Ueda Speaks, Steady Trends Elsewhere
G10 FX trends have been quite muted in the first part of Wednesday trade. The USD BBDXY index was last near 1314 little changed for the session.
- Aggregate G10 moves are not much beyond 0.10% at this stage, as the market awaits the key US CPI release later.
- USD/JPY is marginally lower, but is close to 157.70/75 in latest dealings. Headlines from BoJ Governor Ueda have crossed, reiterating that a decision on whether to raise rates will be made next week (so largely echoing Deputy Governor Himino's remarks from yesterday). Yen moved slightly firmer as Ueda spoke, presumably due to the fact he didn't pushback on Himino's remarks.
- US yields sit modestly lower, the 10yr back under 4.78%. Regional equity sentiment is mixed, while US futures are close to flat at this stage.
- EUR/USD is back under 1.0300 marginally. Headlines from ECB's Lane have crossed (speaking in HK). Economic growth is expected to recover further and if inflation stabilizes around 2% rates will go to neutral. 3% policy is not the lower bound Lane added (per BBG). FX sentiment hasn't shifted though.
- AUD/USD was weaker in earlier trade, but at 0.6190/95 has recovered some ground.
- NZD/USD is back around 0.5605/10, but short of Tuesday intra-session highs. We have seen another sharp rise in onshore NZGB yields today. Earlier data from the Westpac/McDermott Miller employment confidence index highlighted: "Employment confidence picked up by 2.4 points to 91.6 in the December quarter, led by an improvement in perceptions of job availability."
- Looking ahead, ahead of the US CPI print, we get UK inflation data.
US TSYS: Yields Holding Steady Ahead Of CPI
- Tsys yields are holding steady throughout the session curves are a touch flatter, the belly is outperforming with the 7yr -1.6bps at 4.688%, the 2yr is -0.8bps at 4.358%, while the 10yr is trading -1.4bps at 4.778%
- Futures are steady with TY +01 at 107-12+. While the 2s10s curve is about 1bps lower at 41.327.
- Ranges have been narrow across all tenors ahead of CPI tonight. We have seen a 0.5-1bps cooling in rate cut expectations across the next few meetings
