US TSYS: Futures Re-Open Slightly Weaker, Focus On Wednesday’s FOMC Decision

This week the focus will be on Tuesday’s RBA decision and a 25bp rate cut is widely expected by economists. There are also Q4 wages on Wednesday and January jobs data on Thursday. 

• The RBA statement and updated forecasts will be released at 1430 AEDT with Governor Bullock’s press conference at 1530 AEDT. 30 out of 34 analysts surveyed on Bloomberg are forecasting 25bp of easing and market pricing is at an 83% chance.
• On Friday, Governor Bullock, Deputy Governor Hauser, Assistant Governor (Economic) Hunter and Assistant Governor (Financial System) Jones appear before the House of Reps Economics Standing Committee.
• On Wednesday, the Q4 WPI is released and is forecast to post another 0.8% q/q rise bringing the annual rate down to 3.2% from 3.5% in Q3.
• January employment is projected to rise 20k on Thursday after 56.3k the previous month, which would drive the unemployment rate up 0.1pp to 4.1%. The participation rate is expected to be stable at 67.1%.
• Westpac’s leading index for January is out on Wednesday. It has been signalling a gradual improvement in growth.
• On Friday, preliminary February S&P Global PMIs are published. In January they all printed above the breakeven-50 mark. 

In local morning trade, NZGBs are little changed despite a strong end to last week from US tsys.

• 2- and 10-year US tsys finished 5-6bps richer after a large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus). It represented the biggest sequential drop in 22 months.
• A similarly weak "control group" figure led to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
• This week’s US data schedule is relatively light, partly due to today’s Presidents Day holiday.
• NZ performance of services index rose to 50.4 in January from a revised 48.1 in December. "The PSI is consistent with stabilization rather than elevation, but its latest move upwards is encouraging”: BNZ
• NZ net migration showed a net gain of 27,092 people in the year ended Dec 31 — the lowest since December 2022. The gain follows a revised 30,322 increase in the year through November.
• Swap rates are flat to 2bps lower, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is little changed. 48bps of easing is priced for February, with a cumulative 116bps by November 2025.

USD/JPY lows on Friday got close to 152.00, as broader USD sentiment continued to falter. The pair tracks near 152.20/25 in early Monday dealings, after rising a bit over 0.30% for Friday's session. broader USD indices were lower, the BBDXY off 0.30%, the DXY slumping 0.56%, as weaker US retail sales saw US Tsy yields lower. 

• For USD/JPY technicals, key support and the bear trigger is unchanged at 150.93, the Feb 7 low. Clearance of this level would resume the bear cycle that started on Jan 10. On the topside, the 50-day EMA, at 154.44, remains intact for now. So, for now we still remain within recent important pivot points.
• Yen lagged broader USD trends last week, losing 0.60% against the USD (despite Thurs/Fri gains), the only G10 currency not to rise versus the USD.
• The US 10yr Tsy yield finished up under 4.48%, off 5bps, while the 2yr lost 5bps to 4.26%. The 10yr yield is still above earlier Feb lows sub 4.40%.
• This reflected a large miss in US January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus), which represented the biggest sequential drop in 22 months.
• Japan is seeking an exemption from reciprocal tariffs (per NHK). This follows an earlier request for Japan to also be exempt from steel and aluminium tariffs.
• On the data front today we have Q4 GDP out. The market expects a 0.3% q/q reading, unchanged from Q3 last year. Business spending is expected to rebound, but consumer spending is forecast to dip.
• Note as well in the option expiry space for NY cut later: Y148.20($986mln), Y152.00-20($1.1bln).