AUSSIE BONDS: Cheaper, Q4 GDP In Line, Trump Pledges Balanced Budget

AUDUSD seems to have stabilised after falling sharply following US tariff news over the weekend. The pair fell to 0.6088 but is now around 0.6098 to be down 1.9% on the day. It has now broken below the bear trigger at 0.6131 and round number support at 0.6100 confirming the bearish trend. The USD index is 1.3% higher as 25% tariffs on the US’ largest trading partners are assumed to be inflationary if sustained. 

• Kiwi is also risk-sensitive and has sold off 1.9% against the greenback leaving AUDNZD up 0.2% to 1.1035. The pair has been range trading for most of the APAC session. AUDCAD is down 0.2% to 0.9012 despite the CAD also selling off.
• AUDJPY is down 1.6% to 94.91 after a low of 94.69. AUDEUR is 0.5% lower at 0.5965 and AUDGBP -0.8% to 0.4972.
• Retail sales were stronger than expected at the end of 2024. Q4 volumes rose 1.0% q/q to be +1.1% y/y after 0.5% & 0.2%. December building approvals disappointed with private houses posting their third consecutive monthly decline.
• Equities are selling off with the ASX down 1.8%, Hang Seng -0.4% and Nikkei -2.6%. The S&P e-mini is 1.9% lower. Oil prices are higher with WTI +1.7% to $73.77/bbl off the intraday low of $73.48. Copper is 1.9% lower and iron ore is just under $105/t after falling to $102/t.
• Later the Fed’s Bostic and Musalem speak and US January manufacturing PMI/ISM and December construction print. ECB’s Donnery appears and European January manufacturing PMIs and January CPI are released.

• Gold started this week with a weakening bias, off from Friday’s close of US$2,798.41 to be at $2,772.75 in afternoon trading.
• Last week saw an amazing turnaround from gold to finish 1.00% better for the week after a very poor day, Monday and this week, Gold is showing it doesn’t like Mondays again down -0.90%.
• Whilst gold’s ‘safe haven’ status usually prevails, a strengthening USD on the back of tariff news won over sending gold lower this morning.
• The US announced 25% tariffs on goods from Mexico and Canada, and 10% from China coming into effect from Tuesday.
• The potential for a global trade war is now real and in any period of uncertainty the USD strengthens and already has moved by enough to offset gold’s safe haven status.
• That said, gold started 2025 where it left off last year, performing well and up over 5% year to date. 
•  JPMorgan announced that it plans to deliver US$4bn of gold bullion this month against contracts that expire in February, representing one of the largest physical settlements on record. 

Leveraged funds added to AUD and NZD shorts last week and cut back on GBP longs, per the CFTC positioning update. This data is for the week ending Tuesday the 28th of January. The table below presents the weekly positioning change and outright position by currency and investors type. 

• In terms of contracts, leveraged investors added just over 13k in terms of AUD shorts. This puts outright shorts to -44.2k, which is the largest short since early 2022. For NZD, leveraged shorts are their largest since late 2019.
• GBP longs were cut by leveraged investors, down by 13k.
• For EUR and JPY, we saw both leveraged and asset manager investors add to positions in both currencies. For yen this came after the BoJ hike, although both investor types are still short in an outright sense.
• The broader asset manager bias is for long USD positions, albeit not against the EUR.  

Table 1: CFTC Positioning Update By Currency & Investor Type 

Source: CFTC/MNI - Market/Bloomberg