US OUTLOOK/OPINION: Jan PPI: PCE Categories In Focus After Upside CPI Surprise

• NZD/USD edged slightly higher on Monday, closing the session +0.22% at 0.5569, rebounding from multi-year lows but remaining under bearish pressure. The RSI at 31 signals persistent oversold conditions, while a weakening MACD suggests limited bullish momentum
• Technical indicators suggest bearish momentum, with spot trading below all key moving averages, the pair is at risk of testing the 13-year low of 0.5470 if it breaks below 0.5500. Initial support is 0.5543 (Jan 10 lows), while to the upside a break above 0.5643 (20-day EMA) before any sort of momentum change can occur.
• The NZ-US 2yr swap rose 6bps on Monday, closing at -87.5bps. On Friday it hitting a new yearly lows of -95.5bps just off all time lows of -100bps
• NZIER's Quarterly Survey of Business Opinion shows improved business confidence in Q4, with a net 16% of firms expecting economic improvement and 9% anticipating better trading in Q1. However, challenges persist, as 26% reported worse trading conditions in Q4, while 15% expect to raise prices in Q1.
• Leveraged funds raised their net short position on the NZD to 13,547 contracts a 15% jump from prior, the most in more than five years, while Asset managers saw 3% just in short positions, according to the latest Commodity Futures Trading Commission data for the week ended Jan. 7.
• No large nearby strikes Tues. Upcoming notable strikes: 0.5875 (NZD606m Jan. 15), 0.5885 (NZD453.7m Jan. 16), 0.6075 (NZD425.8m Jan. 15)
• The local calendar is empty today

In local morning trade, NZGBs are 4-5bps cheaper after another weak session for US tsys, albeit less so than Friday. US yields finished flat to 3bps higher across benchmarks. 

• NY Fed consumer inflation expectations saw a mixed month for December, with the 1Y holding steady at 3.0%, the 3Y jumping 40bps to 3.0% and the 5Y falling 20bps to 2.7%. The 3Y measure is its highest since Nov 2023 and came amidst its highest uncertainty since May.
• Swap rates are 3-5bps higher, with the 2s10s curve flatter.
• RBNZ dated OIS pricing is 1-7bps firmer across meetings. 48bps of easing is priced for February, with a cumulative 120bps by November 2025.
• The NZIER Business Q4 Opinion Survey showed that a net 16% of businesses expect the economy to improve, vs 1% expecting it to get worse in Q3. This was the first positive outlook since Q2 2021. After seasonal adjustment, a net 9% of businesses expect the economy to improve, vs a revised 4% expecting deterioration in Q3. A net 26% of businesses reported a decline in their own trading activity in Q4.
• On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$175mn of the 3.50% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.

Yen crosses were a focus point as Monday trade unfolded. From lows near 190.00, GBP/JPY recovered and sits back near 192 in early Tuesday dealings. This was still a 0.30% drop and the 5th straight fall for the pair. EUR/JPY fell by a similar amount but rebounded off 160.00 (last near 161.10). For USD/JPY, we were supported under 157.00 and track near 157.60 in early Tuesday dealings, after seeing little net change for Monday's session. 

• As EU stocks recovered from session lows, yen crosses found some support. EU indices still finished down for Monday's session (-0.46%), while US markets were mixed, SPX firmer  (+0.16%), but the Nasdaq weaker (-0.38%).
• Key yen crosses still sit below important support points. For GBP/JPY the 20-day EMA is back above 195.00, for EUR/JPY this level is back near 162.55.
• For USD/JPY, not much has changed from a technical standpoint, although upward momentum has waned to some degree. Focus will rest on downside support at the 20-day EMA at 156.71.
• US yields ticked higher on Monday, with US-JP yield differentials resuming uptrends in the aftermath of Friday's NFP beat, but this hasn't been a key driver of USD/JPY sentiment in recent sessions.
• Locally today, onshore markets return, with focus on a speech from BoJ Deputy Governor Himino in Kanagawa, which kicks off at 10:30am local time.
• On the data front, we have Nov BoP figures, along with bank lending for Dec out early. later on the Dec Eco watchers survey is out.