RBNZ: MNI RBNZ Review - February 2025: Slower Easing Pace Now Likely

• Gold prices continued to rise during the course of Tuesday following a Wall Street Journal Report that incoming President Trump may not implement tariffs immediately, being closely followed by potentially imminent tariffs for Mexico and Canada.
• Trump indicated that a possible tariff on all foreign imports is a possibility he is considering, something that is likely to impact gold.
• The report’s release drove the USD weaker thus supporting gold.
• Gold opened at US$2, 708.2 before moving lower briefly then rallying to $2,726.80 in the Asia trading session.
• Gold remains above all key technical levels with the upward trend entrenched
• Key technical levels are 20-day EMA $2,674.40, 50-day EMA $2,656.22, 100-day EMA $2,616.35 and 200-day EMA $2,510.28.
• Pakistan’s deal with Saudi Arabia to buy a stake in the gold mining project owned by Barrick Gold Corp remains unresolved as Pakistan officials hope to secure some refining activities within the country rather than the raw product leaving for elsewhere.
• The mining sector could be in for a massive year of M&A as BBG reports on rumours that two of the largest global mining companies, Rio Tinto and Glencore are in early stages of merger talks. 

Oil prices have continued to decline today after falling over 1% on Monday. Prices jumped following US President Trump’s statement that he thinks a 25% tariff on imports from Canada and Mexico will be enacted from February 1. The US receives 4mbd from Canada, so tariffs could result in higher US fuel prices. He also declared that the SPR would be refilled, the EV mandate ended and US output increased. 

• WTI is down 0.8% to $76.75/bbl. It fell to $76.09, below initial support at $76.16, before Trump’s statements and then reached $77.18. Brent is only down 0.1% to $80.10/bbl after falling to $79.64 in early trading, holding just above support, and then rising to $80.46.
• Trump declared a “national energy emergency” to be able to increase domestic oil and gas production and reverse Biden’s climate change policies, according to Bloomberg. Uncertainty remains elevated though with no details yet or if he will even be able to use it. Energy permit regulations were also eased, while he said that crude imports from Venezuela would likely be stopped.
• With Trump planning to boost energy production, he said that if the EU wants to avoid tariffs it needs to buy more US oil & gas. EU President von der Leyen has already discussed increased LNG shipments with him.
• He also overturned Biden’s ban on offshore oil & gas drilling but it will require Congressional approval and may face legal challenges.
• The US has tightened sanctions against Russia and Iran by targeting tankers and this may be intensified. Data showed China’s crude imports from Russia in 2024 rose 1% to a record and from Malaysia, which Iranian and Venezuelan crude transits through, rose 28%, while Saudi shipments fell 9%. But that may change with some Chinese ports already preventing vessels carrying Iranian crude from docking.
• Later US January Philly Fed non-manufacturing, UK labour market, euro area/German ZEW and Canada’s December CPI data are released.

ACGBs (YM +5.0 & XM +6.5) are stronger and near Sydney session highs. 

• Today’s move was all about US tsys. Cash US tsys are 6-9bps richer in today’s Asia-Pacific session, with a flattening bias, following yesterday’s holiday. The session has been marked by volatility, driven by reports that Trump suggested tariffs on Canada and Mexico might take effect on February 1. While gains were briefly pared, US tsys have since rebounded, trading near session bests.
• Cash ACGBs are 6bps richer with the AU-US 10-year yield differential at -13bps.
• Swap rates are 5bps lower.
• The bills strip has bull-flattened, with pricing flat to 54.
• RBA-dated OIS pricing is flat to 5bps softer across meetings today. A 25bp rate cut is more than fully priced for April (110%), with the probability of a February cut at 68% (based on an effective cash rate of 4.34%).
• The local calendar is light this week after key December labour market data last Thursday. The highlights are the Westpac Leading Index tomorrow and S&P Global PMIs (P) on Friday. The focus is now on Q4 CPI data released on Wednesday, January 29.
• The AOFM plans to sell A$800mn of the 2.75% 21 June 2035 bond tomorrow and A$700mn of the 1.50% 21 June 2031 bond on Friday.