NEW ZEALAND: Spare Capacity Building In Labour Market

USD/CNH traded with an upside bias on Friday, testing above 7.3600, although fell short of end 2024 highs of 7.3695. We track close to 7.3600 in early Monday dealings. CNH was close to unchanged for Friday's session. Spot USD/CNY broke above 7.3000, finishing up above 7.3200. This is fresh highs in onshore spot back to 2023. This move helped USD/CNH push higher. The CNY CFETS basket tracker tracked higher though, now above 102.00, fresh highs since 2022. 

• 2022 highs for USD/CNH, just under 7.3750, are within striking distance. The 20-day EMA is back near 7.3100 on the downside.
• The combination of further policy easing steps from China, with the PBoC reiterating late last week that RRR and interest rate cuts would be delivered at the appropriate time. along with US resilience continues to drive higher US-CH yield differentials. The 10yr spread is close to +300bps.
• Focus today will also be on the USD/CNY fixing, given Friday's spot break higher in USD/CNY. Some offset came from lower USD index levels though. Friday's fixing implied a 7.3316 cap for USD/CNY spot. The fixing has remained sub 7.2000 during this recent cycle move higher in USD/CNH.
• Local equities have started the year softly, the CSI 300 back sub 3800 at the end of last week. An expansion of the consumer trade in program didn't lift sentiment materially in this space.
• Locally today we have the Caixin services PMI for Dec. The market expects a 51.4 outcome (prior was 51.5). The official services PMI was better than forecast but detail suggested softer inflation outcomes (note the Dec prints on Thursday). 

In local morning trade, the NZGB 10-year is 1bp cheaper after US tsys finished near NY session cheaps on Friday. Early support evaporated following the December manufacturing ISM survey. 

• The ISM survey beat expectations but still pointed to soft if improving sectoral dynamics. The headline reading of 49.3 improved from 48.4 prior and a 9-month high, besting the survey expectation of 48.4.
• US curves finished with mildly flatter. US projected rate cuts through mid-2025 were steady to lower vs. Friday morning's levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -13.2bp (-14.4bp), May'25 -17.8bp (-19.5bp), Jun'25 -26.5bp (-28.2bp).
• This week, economic data and US Treasury supply are brought forward to accommodate Thursday's "day of mourning" to honour President Carter. The Federal holiday sees most markets closed; the exception so far is CME rates, which will operate on a shortened session.
• Thursday's weekly jobless and continuing claims will be released on Wednesday according to the Dept of Labor site.
• Swap rates are 2bps higher.
• RBNZ-dated OIS pricing is slightly mixed. 54bps of easing is priced for February, with a cumulative 130bps by November 2025.
• The local calendar is light again this week, with tomorrow’s ANZ Commodity Prices as the sole release. 

The US bank on property developments and the policy/CNY outlook into early 2025. 

Goldman Sachs: Property sales higher than year-ago levels: Our latest high-frequency tracker shows that both new and existing home sales are notably above year-ago levels in top-tier cities. For example, the 30-city daily new home sales have increased nearly 40% yoy and the 16-city daily existing home sales have risen more than 50% yoy. These are consistent with the views of our property equity research team and our own research that China's property market stabilization will likely be led by top-tier cities. That said, given the significant inventory overhang in lower-tier cities, property prices at the national level have further room to fall and homebuilding activity is likely to remain depressed for years to come.

Policy news: Although more details about this year's monetary and fiscal arrangements will only be unveiled at the "Two Sessions" in early March, recent policy announcements provided some clues. The Q4 Monetary Policy Committee (MPC) statement pledged to accelerate credit extension in early 2025 and to cut RRR and the policy rate at the appropriate time. Interestingly, the emphasis on FX management changed from "flexibility" (弹性) to "resilience" (韧性), suggesting a shift toward controlling the speed of depreciation upon US tariff announcements. On January 3, the National Development and Reform Commission (NDRC) held a press conference and announced that the government-subsidized consumer goods trade-in program will be expanded to products such as smart phones, computer tablets and smart watches in 2025."