FED: QT End-Dates Continue To Be Pushed Back (2/2)

USD/JPY tracked modestly higher post the Asia Pac close on Tuesday, getting to highs of 158.20. We sit a little softer now, last near 158.00, but yen still lost 0.30% for Tuesday's session, the worst performer in the G10 space. The rebound in EUR/USD was in focus, while EUR/JPY got back to 162.80/85, up 0.90%, and comfortably off recent lows near 160.00. 

• For USD/JPY technicals, trend conditions are unchanged. Bulls still remain in the drivers seat, with upside focus on 158.87, the Jan 10 high. Initial firm support is 156.78, the 20-day EMA.
• The generally positive tone to global equities for Tuesday, albeit with modest aggregate moves, likely weighed on yen against key crosses. Even the troubled pound managed a small rise against the USD for Tuesday's session.
• US yields were mixed, softer at the front end, following the weaker than forecast US PPI. Back end yields held modest gains though, the 10yr near 4.79%. US-JP yield differentials have tracked sideways at the front end 2yr tenor and sit just off recent highs for the 10yr.
• On the data front today, we have Dec money stock figures first up, then Dec preliminary machine tool orders. These prints are unlikely to shift market sentiment.
• BoJ rate hike odds for next week's policy meeting are higher, last near 60%, up from recent lows around 40%. Yesterday Deputy Governor Himino noted a rate hike would be discussed at the meeting. “It is important for the BOJ to judge the timing of rate hike in an appropriate manner. But it is difficult for the bank to judge when the appropriate timing would be,” Himino said.
• Still, these shifts haven't generated much yen support at this stage. 

In local morning trade, NZGBs are 3-4bps cheaper, extending yesterday’s QSBO-induced sell-off.

• Overnight, US yields finished slightly mixed after US PPI printed softer than expected. They were lower at the front end but higher at the back end. The 10-year yield finished at 4.79%.
• Focus turns to tomorrow's headline CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December. Core goods inflation will be closely looked at amidst heavy focus on potential tariffs under the second Trump administration but also with a further near-term dampening factor from continued US dollar appreciation. Fed Beige Book is released at 1400ET.
• Swap rates are 6-7bps higher.
• RBNZ dated OIS pricing is 1-7bps firmer across meetings. 44bps of easing is priced for February, with a cumulative 103bps by November 2025. Pricing for the November meeting is some 35bps firmer than Friday’s closing level.
• Today, the local calendar is empty.  
• 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.

AUD/USD attempted to break back above 0.6200 late in Tuesday Asia Pac trade, but found selling interest. Dips were supported sub 0.6170, keeping overall ranges fairly tight. We track near 0.6190 in early Wednesday dealings (up around 0.20% for Tuesday's session). Broader USD indices were softer on Tuesday, the BBDXY index down 0.44%, largely thanks to a rebound in the single currency, with EUR/USD up 0.60%, regaining the 1.0300 handle. 

• There is little change in terms of the AUD/USD technical backdrop, with bearish conditions still intact. Note that MA studies are in a bear-mode position too. Scope is seen for an extension towards the 0.6100 handle next. Initial firm resistance to monitor is 0.6240, 20-day EMA. The 50-day EMA is at 0.6358.
• US yields were mixed, softer at the front end, but supported at the back end, the 10yr yield holding above 4.78%. The US PPI print was softer than expected, which comes ahead of tonight's key US CPI print. EUR/USD was also aided by firmer German yields. AUD/EUR is back closer to 0.6000, but holding within recent ranges, while EUR/GBP rose above 0.8400, fresh multi month highs.
• Global equity market sentiment was mostly positive, although aggregate moves weren't large. AUD/JPY is a little higher, last near 97.80, but remains within recent ranges.
• Commodity indices saw the aggregate Bloomberg index down 0.27%, as oil lost some ground. The base metals sub index was flat.
• The local data calendar is empty today, with domestic focus on tomorrow's Dec jobs data.