NZD: NZD Falls Ahead Of RBNZ Meeting Today, Milk Prices Fall
- The NZD was the worst performing G10 currency on Tuesday, falling 0.54% to 0.5708, broad USD strength didn't help the currency as tsys yields rose following comments from the Feds Bowman where she warned upside inflation risks still remain, while an expected 50bps cut by the RBNZ today saw traders selling the pair.
- Global Dairy Trade auction results showed a slight decline, with the average price for whole milk powder falling to $4,153 per ton from $4,169 a 0.2% drop. The weighted average price for all dairy products was $4,370 per ton, while the GDT price index dropped 0.6%.
- New Zealand's REINZ House Price Index fell 0.2% m/m and 1.4% y/y in January, with the median house price dropping 1.7% y/y to NZ$750,000 (-3.8% m/m). Sales rose 18% y/y to 3,774 but fell 38% m/m, though seasonally adjusted sales increased 4.8% m/m. The median time to sell extended to 54 days, with January sales impacted by summer vacations.
- For the time being we remain above the 50-day EMA and 0.5700 although the the RSI is ticking back down again however still above 50 at 55, while the MACD indictor is printing green bars. Key levels to watch include, resistance is 0.5763 (Dec 18 highs), while 0.5790 (100-Day EMA) becomes a target. To the downside, a break back below the 50-Day EMA at 0.5700 would open a move to 0.5673 (20-day EMA) and the Feb 12 lows of 0.5600.
- RBNZ dated OIS is pricing in a 98% chance of a 50bps cut, another 25bps cut in April with a toss up between another 25bps cut in May/July, currently there is cumulative 113bps of cuts priced through to November.
- RBNZ cash rate will be announced at Midday AEDT, alongside the Monetary Policy Statement, while the RBNZ Gov will speak an hour later
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ASIA: Government Bond Issuance Today.
- Philippines To Sell PHP 7.0Bln 91D Bills (PH0000058455).
- Philippines To Sell PHP 7.0Bln 182D Bills (PH0000058927).
- Philippines To Sell PHP 8.0Bln 364D Bills (PH0000059800).
- Bank of Korea to Sell KRW1.2Tn 91-Day Bonds.
- South Korea to Sell KRW2.4tn 10-Year Bonds.
AUD: A$ Rallies On US-China News, AUDUSD Holding Around 62c
The G10 were down against the US dollar on Friday but the Aussie was one of the better performers as risk appetite improved following news that President-elect Trump had requested a trip to China to meet President Xi signalling possibly better-than-expected relations between the two. AUDUSD rose to 0.6227 on the news before trending lower to 0.6193 to be down 0.3% on Friday. It is currently around 62c. The USD index rose 0.3%.
- The bearish trend in AUDUSD continues with lower lows and lower highs. Moving-average studies are also in a bear mode. On Friday the pair fell to 0.6165. Initial support is at 0.6131, January 13 low, and resistance at 0.6233, 20-day EMA.
- With the yen underperforming in the better risk environment, AUDJPY rose 0.4% to 96.79 after a high of 97.17. AUDNZD is 0.1% higher at 1.1092 after a low of 1.1065. AUDEUR was down slightly at 0.6029. AUDGBP is 0.2% higher at 0.5089.
- Equities rallied with the S&P up 1% and Euro stoxx +0.8%. Oil prices were lower with Brent falling 0.7% to $80.79/bbl. Copper fell 2% on Friday while LME base metals rose 1.9% on the week. Iron ore is around $101.50/t.
- Today there are no data or events in Australia.
USD: Goldman Sachs On USD - Volatility Likely To Pick Up, But Firmer USD Outlook
Goldman Sachs: "USD: Into the storm. We expect that coming US policy changes will add to the case for Dollar strength, even beyond the strong asset returns that have proven a high bar to beat in recent years. That said, we see some near-term risks given the market's building expectation for quick action on tariffs, and the Dollar's demonstrated proclivity to weaken on signs of a more graduated approach to tariffs. We think investors are probably taking “Day 1” pledges too literally; while it has become common for presidents to sign some executive orders on the first day, these are often more symbolic or aimed at rolling back policies from the previous administration. And it is not just investors that are expecting a clear signal from next week. For example, the Bank of Japan cited uncertainty around the incoming US administration’s policies as one factor impacting its decision to keep rates steady in December. This strikes us as overly optimistic for a quick resolution of that uncertainty. While the president can take relatively quick action on trade under a range of existing authorities, there are a number of measures that our economists expect to be seriously considered but ultimately not enacted. That implies a series of back-and-forth headlines, just like last time. Rather than next week bringing clarity, we think the storm is just rolling in. We expect it will pay to be patient."
