GOLD: US Inflation Paused Golds Rally, Briefly. 

G10 FX has extended gains that were evident at the NY/Asia Pac cross over. Lighter liquidity may be in play as we await Asian markets to swing into full gear. Outside of the earlier gradual tariff proposal reportedly being considered by the Trump administration (per BBG), headline drivers have been limited. 

• AUD, NZD, GBP and EUR all sit around 0.30% higher for the session so far. NOK is up by 0.30% as well. AUD/USD is back close to 0.6190/95, NZD near 0.5600. GBP/USD is around 1.2240, EUR.USD back in the 1.0270/75 region.
• USD/JPY is lower but at 157.30/35 is trailing broader G10 gains so far (yen up just 0.10%). Likewise for USD/CAD, last near 1.4360
• USD/CNH is at 7.3400, up around 0.10% in CNH terms. USD/MXN is under 20.65, but hasn't shifted much since the NY close. 

• Tsys futures closed lower, however off session lows as cash trading returned following Japan being out of an extended weekend. Gains were limited however due to rising oil prices and a heavy session of corporate issuances, with 10 high grade corporate issues pricing. TU closed -0-00¼ at 102-16⅛, while TY closed-0-05 at 107-07+
• There was a late session risk on move that saw equities trades well off session lows, this looked to be linked to chatter that an Israeli ceasefire-hostage deal may be reached over the next 24hrs
• Cash yields closed flat to 2.5bps cheaper, with the belly of the curve leading the losses. The 5yr closing +2.3bps at 4.597%, while the 10yr closed +1.9bps at 4.778%, it briefly traded above 4.80% at one stage during trading. The 2s10s rose 2bps to 39.643
• There was heavy selling in SOFR futures which drove front-end Treasury yields higher in the first half of the US session, with 2-year yields rising above 4.4% and 10-year yields exceeding 4.8%. Large flows included 22,000 Mar25 and 30,000 Jun25 SOFR contracts sold simultaneously, alongside Dec25 and 2-year note futures, adding pressure to the front end.
• NY Fed consumer inflation expectations saw a mixed month for December, with the 1Y holding steady at 3.0%, the 3Y jumping 40bps to 3.0% and the 5Y falling 20bps to 2.7%. The 3Y measure is its highest since Nov 2023 and came amidst its highest uncertainty since May.
• Later today we have PPI & Federal Budget Balance, focus will then turn to Wednesday’s US CPI.

USD/CNH is tracking near 7.3435 in early Tuesday dealings. CNH rose a little over 0.20% for Monday's session, outperforming broader USD index trends, which were close to unchanged. Spot USD/CNY remained very steady, closing at 7.3320. The CNY CFETS basket tracker firmed by a little over 0.20% to finish Monday trade at 101.65 (per BBG), but this is still under recent highs. 

• CNH received support from the raft of PBoC comments and actions. Emphasis on maintaining a stable yuan and preventing FX overshooting were key highlights. Raising the amount institutions can borrow offshore is also seen as a positive, but is unlikely to alter the yuan trend.
• CNH sensitivity to the US tariff outlook has been on display this morning, with support coming through after BBG reported that the incoming Trump administration was considering a gradual tariff hike plan, although Trump hasn't agreed to this proposal. USD/CNH dipped from above 7.3500 to current levels as the headlines crossed.
• Any further USD/CNH pull back may bring the 20-day EMA support zone into play, which rests near 7.3270. US-CH yield differentials are mixed, with the 10-yr spread elevated, but 2yr differential off recent highs.
• The China securities regulator vowed to stabilize the market following the poor start to major equity indices since the start of the year (see this BBG link).
• The local data calendar is empty today, but we still await new loans/aggregate finance figures for Dec.