ASIA FX: SEA FX Mostly Stronger This Past Week, IDR & PHP Lagging

• Tsys futures are trading lower today and holding just off session lows. TU is -00⅛ at 102-23⅛, while TY is -03 at 108-20+.
• The medium-term trend remains bearish and the recovery that started Jan 13, is considered corrective. The contract has traded through the 20-day EMA, at 108-17. This exposes 109-06, the Dec 31 high, and 109-17+, the 50-day EMA. The bear trigger has been defined at 107-06, the Jan 13 low.
• There was a small block buying of FY earlier, however volumes are low and there hasn't been much else in terms of notable flows today.
• Cash tsys yields are trading 1-2bps higher in Asia, the belly is under-performing slightly, giving back some of Tuesday out performance. The 10yr is +1.2bps at 4.589%. The 2s10s curve is holding steady at 30bps, while the 5s30s is -1bps at 40.306.
• Headlines from Trump have been trickling out throughout the session, however there has been nothing we hadn't already expected. There were comments about 10% tariffs on goods imported from China on Feb. 1 because fentanyl is being sent from China to Mexico and Canada. There has also been comments about sanctions on Russia if they don't negotiate with Ukraine.
• The 2025 Fed rate cut expectations fairly static. Projected rate cuts through mid-2025 this morning, current lvls vs. Friday close* as follows: Jan'25 steady at -0.01bp, Mar'25 at -6.6bp (-7.5bp), May'25 -12.4bp (-12.9bp), Jun'25 -22.3bp (-21.8bp), Jul'25 at -26.1bp (-25.6bp).
• The data calendar remains light with MBA mortgage data and the December Leading Index - more focus will be on $13B 20Y Bond reopening auction, as well as a Fox interview with Pres Trump airing after Wednesday's cash close.

The USD index holds in positive territory, last above 1303, supported by earlier headlines around additional tariff threats from US President Trump (this time extending to China and the EU). Aggregate shifts haven't been large though, with the BBDXY index still fairly close to recent lows. 

• Trump stated China could be hit with 10% tariffs, potentially from Feb 1, while Trump also stated that the EU could see tariffs imposed as well. The tariffs on China would be in response to fentanyl flows from the country. Trump also added that tariff threats on Mexico and Canada of 25% had nothing to do with renegotiating the USMCA treaty, but was also related to drug flows (per BBG). At the start of the session a WSJ article suggested that the tariff threat on these economies was designed to push for an earlier renegotiation of this treaty.
• Aggregate FX moves weren't large, but the market is likely to remain sensitive to on-going tariff speculation.
• NZD/USD is down 0.30%, last near 0.5660/65. Earlier lows were at 0.5650. The Q4 CPI data was close to expectations, but the further cooling in non-tradables inflation, albeit at a moderate pace, has added to 50bps pricing for the Feb RBNZ meeting. NZ-US yield differentials are also lower.
• AUD/USD is down a touch, but at 0.6265/70, remains within recent ranges. The AUD/NZD cross is higher, but hasn't been able to breach 1.1100.
• USD/JPY is higher, last near 155.80, but also is sticking to recent ranges. US yields have ticked higher, but gains are not much beyond 1bps at this stage.
• US equity futures are higher, led by tech, as earlier remarks from Trump around a $100b AI focused investment supporting sentiment. This has likely helped trim the risk off move for FX from the earlier tariff threats.
• Regional equities are mostly higher, but China/HK markets are weaker.
• Later US December leading index prints and ECB President Lagarde and Bundesbank’s Nagel speak.

ACGBs (YM -6.0 & XM -6.0) are weaker and near Sydney session lows.

• Outside of the previously outlined Leading Index, there hasn't been much by way of domestic drivers to flag.
• Cash US tsys are ~1bp cheaper in today’s Asia-Pac session after yesterday’s bull-flattener. Wednesday's US data calendar remains light, with MBA mortgage data and the December Leading Index - more focus will be on the $13B 20Y Bond reopening auction, as well as a Fox interview with Pres Trump airing after Wednesday's cash close.
• Cash ACGBs are 5-6bps cheaper with the AU-US 10-year yield differential at -13bps.
• Swap rates are 4-5bps higher, with EFPs slightly tighter.
• The bills strip has bear-steepened, with pricing -2 to -5.
• A Bloomberg News survey of 48 economists forecast the cash rate to be unchanged at 4.35% at the end of Q1 25 and 4.10% by the end of Q2 25.
• RBA-dated OIS pricing is flat to 4bps firmer across meetings today. A 25bp rate cut is more than fully priced for April (109%), with the probability of a February cut at 69% (based on an effective cash rate of 4.34%).
• Tomorrow, the local calendar is empty.