CHINA:  Futures Lower Despite Liquidity Injection from OMO. 

NZD/USD is the weakest performer in the G10 space, off nearly 0.45%, last near 0.5650/55. Other G10 currencies are all down against the USD, but losses aren't large at this stage. The USD BBDXY index is up a touch to be above 1303 in latest dealings, so still only modestly above recent lows. 

•  NZD has underperformed as the market has digested the Q4 CPI print. NZ yields are lower, while markets are close to fully priced for a 50bps cut at the Feb policy meeting. NZ-US 2yr swap spreads are lower as well, last -75bps.
• Earlier tariff threats from US President Trump (expanded to include China and the EU) is also likely an NZD headwind. AUD/USD is down modestly, last 0.6265. The AUD/NZD cross is up to 1.1080/85, but still under recent highs.
• Yen and EUR are both around 0.1% weaker versus the USD. USD/CNH is up 0.20% and holding above 7.2800 (but is sub intra-session highs from Tuesday).
• In the cross asset space, US yields have ticked up, while US equity futures are higher, led by tech, aided by earlier plans announced by President Trump and key tech executives on AI investment plans for the US. China and Hong Kong equities are weaker though.
• There is little in the way of further risk events for today's Asia Pac session. 

The RBNZ’s sector factor model estimate of Q4 core inflation eased 0.2pp to 3.1% y/y, close to the top of the 1-3% target band. Q3 was revised down 0.1pp to 3.3%. Given that headline was impacted by volatile components such as air fares, the move lower in underlying inflation is good news and another 50bp rate cut in February remains the base case. But underlying non-tradeables inflation is proving sticky and will continue to be watched closely.

NZ core CPI y/y% (RBNZ sector factor model)

• Moderation in core non-tradeable inflation remains slow and it was down only 0.1pp to 4.6% y/y, the lowest since Q1 2022 but still elevated. The series average is 3.3%. Its moderation from the peak remains significantly less than the overall core, but restrictive monetary policy and weak demand should help to bring it still lower.
• Core tradeables inflation was only 0.2% y/y in Q4 after 0.4%. The headline number picked up driven by volatile second-hand car prices. The drop in the underlying measure signals that weak discretionary spending is weighing.

NZ core CPI y/y% (RBNZ sector factor model)

ACGBs (YM -5.0 & XM -4.5) are weaker and near Sydney session lows.

• Australia’s Dec. Leading Index fell 0.02% m/m to 97.17.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s bull-flattener.
• Cash ACGBs are 4-5bps cheaper with the AU-US 10-year yield differential at -14bps.
• Swap rates are 4bps higher, with EFPs slightly tighter.
• The bills strip has bear-steepened, with pricing -1 to -5.
• The Australian economy will expand 0.4% in Q4 24 and +0.5% in Q1 25, according to the latest results of a Bloomberg News survey conducted from Jan. 16 to Jan. 21. 48 economists joined this survey and forecast the cash rate to be unchanged at 4.35% at the end of Q1 25 and 4.10% by the end of Q2 25.
• RBA-dated OIS pricing is flat to 3bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (109%), with the probability of a February cut at 69% (based on an effective cash rate of 4.34%).