CNH: Onshore & Offshore Spot Targeting Simple 200-day MA Levels

ACGBs (YM -2.0 & XM -2.0) are slightly cheaper but around Sydney session highs on a data-light day.

• Cash US tsys are ~1bp richer in today’s Asia-Pac session after Friday’s heavy post-payrolls session. Headlines have crossed from Bloomberg, with US President Trump stating that the US will announce tariffs of 25% on all steel and aluminium imports from Monday. Trump didn't announce a time when these tariffs will take effect.
• The Australian government is still trying to secure exemptions to new 25% tariffs that Donald Trump says will be imposed on all steel and aluminium imported into the United States, making the case for “free and fair trade” with America. (per Guardian)
• Cash ACGBs are 1-2bps cheaper with the AU-US 10-year yield differential at -10bps.
• Swap rates are 1-2bps higher.
• The bills strip -1 to -3.
• This week, the AOFM plans to sell A$400mn of the 2.75% 21 May 2041 bond on Wednesday and A$700mn of the 1.50% 21 June 2031 bond on Friday. 

Asian equities are mostly lower today as investors reacted to U.S. President Donald Trump’s announcement of 25% tariffs on steel and aluminum imports. Japan’s Nikkei 225 and Topix Index both fell 0.3% earlier as concerns over inflationary pressures and reduced expectations for U.S. rate cuts weighed on sentiment, though traders held back on aggressive selling following a trade meeting between Japan and the U.S, the Nikkei is now trading 0.10% higher. South Korea’s Kospi is trading -0.15%, Taiwan's TAEIX is 0.85% lower while both Australia's ASx 200 and New Zealand's NZX 50 trading 0.35% lower.

• Steel and aluminum stocks across Asia declined sharply, with South Korea’s Posco Holdings (-3.6%), Japan’s Nippon Steel (-2.6%), and Australia’s South32 (-1.4%) among the notable losers. The broader commodity market saw gains, as aluminum (+0.6%) and copper (+1.6%) rose on the London Metal Exchange, while zinc fell 0.4%.
• Chinese e-commerce stocks, including Alibaba and JD.com, outperformed as Trump delayed the suspension of de minimis exemptions, temporarily maintaining duty-free status for low-value imports from China. Meanwhile, analysts believe the overall economic impact of U.S. steel and aluminum tariffs on emerging Asia will be limited, as past experiences in 2018 showed little disruption to exports.

AUDUSD fell sharply to 0.6231 from just under 0.6270 following news of 25% US tariffs on all steel and aluminium imports. It has been recovering since then rising to around 0.6270 but is now at 0.6255 to be down 0.3% today, as the US dollar strengthened (USD BBDXY +0.3%).

• Australia’s overall aluminium exports accounted for only 4% of total exports in 2024 and so US tariffs are likely to have a minimal impact. Australia was the 10th largest source of US aluminium imports in 2023 but they were only 2.2% of the total. But the likely negative impact on global growth from increased trade protectionism is pressuring Aussie.
• AUDJPY is up 0.1% to 95.07 after falling to 94.32 following the tariff headlines. AUDNZD is 0.1% higher at 1.109 after a low of 1.104. AUDEUR is down slightly to 0.6070 and AUDGBP -0.15% to 0.5051.
• Equities are mixed with the ASX down 0.3% but the Hang Seng up 1.1% and S&P e-mini +0.2%. Oil prices have continued rising with WTI +0.7% to $71.46/bbl. Copper is up 0.35% but iron ore is lower at around $106/t.
• Later US January NY Fed 1-year inflation expectations print and ECB President Lagarde speaks.