AUSSIE BONDS: Holding Richer After Q4 CPI Miss, FOMC Later Today

The BBDXY USD index is only slightly lower and most Asian currencies stronger against USD. In EM Asia, the Korean won has been volatile but the IDR and THB have strengthened significantly against the greenback helped by year-end rebalancing.

• USDKRW fell to 1465.60 on government commitment to financial stability following continued political instability. Equities are higher.
• USDTHB is 0.5% lower at 33.94, close to the intraday low. The pair is now down 1.7% since the December 19 peak following the more hawkish sounding Fed. 
• USDIDR is also down 0.5% to 16158 but off today’s trough of 16142.50. It is down 0.8% since the Fed. The rupiah and baht appear to have benefited from year-end trading, which is light. There hasn’t been market talk of possible central bank intervention.
• USDCNH has moved in the opposite direction to most other Asian crosses and is 0.1% higher at 7.3073 following a high of 7.3086.
• US December MNI Chicago & Dallas Fed PMIs and November pending home sales print as well preliminary December Spanish CPI.  

ACGBs (YM -7.0 & XM -9.5) are slightly above Sydney session lows but remain sharply weaker on a data-light session. 

• Today, the local calendar was empty apart from RBA's Jones-Fireside Chat at Conexus at the Superannuation Chair Forum. The next data releases are CoreLogic Home Value and S&P Global PMI Mfg on January 2.
• While cash US tsys are little changed in today’s Asia-Pac session, Friday’s heavy session continues to weigh on the local market.
• US data this week includes MNI PMI and Pending Home Sales on Monday, FHFA housing data on Tuesday, weekly claims and construction spending on Thursday, and ISMs on Friday.
• Cash ACGBs are 6-9bps cheaper with the AU-US 10-year yield differential at -15bps.
• Swap rates are 3-7bps higher, with the 3s10s curve steeper.
• The bills strip is weaker, with contracts -2 to -4.
• RBA-dated OIS pricing is flat to 4bps firmer across meetings, with August. A 25bps rate cut is more than fully priced by April (124%), with a 58% probability of a February cut. 

Oil prices are little changed during APAC today with volumes remaining light. WTI is around $70.64/bbl following a high of $70.75 and Brent is $73.83/bbl (March contract) after reaching $73.92. Surplus concerns continue to offset geopolitical developments resulting in range trading. The USD index is slightly lower. 

• The possibility that conflict in the Middle East will impact oil supplies continues to worry markets. Israel now appears to be focussing on the Iran-backed Houthi rebels in Yemen.
• The strength of China’s oil demand has worried markets and while there is some optimism that increased stimulus in 2025 may boost it, the lack of details limited the upside to oil. US exports of crude to China fell 46% in 2024, according to Kpler, due to weak demand but also China shifting to other sources such as Iran and Russia.
• Increased US supply was a factor that contributed to OPEC’s decision to delay its output normalisation but the outlook has become clouded with the election of Trump to the US presidency. He is likely to boost US production further while tightening sanctions on Iran.
• US December MNI Chicago & Dallas Fed PMIs and November pending home sales print as well preliminary December Spanish CPI.