CNH: USD/CNH Can't Sustain +7.3200 Levels, CNH/JPY Rebounds

ACGBs (YM -1.0 & XM +0.5) are slightly mixed after a modest sell-off for US tsys. US yields finished flat to 3bps higher across benchmarks, with steeper curves.

• Wednesday’s US CPI report headlines the weekly calendar, with Bloomberg Consensus currently looking for a 0.2% M/M print for core CPI in what’s a close call with a 0.3% M/M. Indeed, our initial review of 13 unrounded analyst estimates sees these generally more detailed projections centred around 0.25% M/M for core CPI in December.
• Cash ACGBs are flat with the AU-US 10-year yield differential at -15bps.
• Swap rates are flat to 1bp lower.
• The bills strip is little changed.
• RBA-dated OIS pricing is little changed across meetings today. A 25bp rate cut is fully priced for April (102%), with the probability of a February cut at 67% (based on an effective cash rate of 4.34%).
• Today, the local calendar will see Westpac Consumer Confidence data.
• AOFM Bond issuance will resume this week, with A$800mn of the 3.50% 21 December 2034 bond to be sold on Wednesday and A$700mn of the 2.75% 21 November 2027 bond to be sold on Friday. 

The USD has softened in early Asia Pac dealings, as headlines crossed from BBG which suggested the incoming Trump administration is discussing a gradual tariff hike plan. 

• BBG notes: "Members of President-elect Donald Trump’s incoming economic team are discussing slowly ramping up tariffs month by month...One idea involves a schedule of graduated tariffs increasing by about 2% to 5% a month." Such a plan would be aimed at increasing negotiating leverage, whilst avoiding a spike in inflation, BBG note's (see this link for more details). Still, the report notes Trump hasn't reviewed or agreed to the plan.
• FX moves aren't dramatic so far, but markets continue to display sensitivity to tariff related headlines as we approach Trump's inauguration date.
• AUD/USD has ticked up to 0.6175/80, from the low 0.6160 region. NZD/USD is back to 0.5580/85. USD/CNH is back under 7.3500, off close to 50pips. USD/MXN is holding under 20.70.   USD/CAD was last near 1.4370/75.  Follow through has been limited.

• The AUD/NZD closed unchanged on Monday, with the cross continuing to trade in very narrow ranges. There hasn't been much to mention over the past 3 month as the cross trades between 1.1000-1.1100, while the AU-NZ 2yr swap remains trading near its highest levels for the past year, although fell 4bps overnight.
• Initial resistance is 1.1100 (round number), with a break here opening a move to 1.1150 (July Highs), to the down side a break below 1.1056 (20-day EMA), would open a move to retest 1.1000 which has acted a key support for the past 3 months.
• RBNZ dated OIS currently pricing in 47bps of cuts at the Feb meeting, while RBA Dated OIS is pricing in a 67% chance of a 25bps cut in Feb.
• Today we have Westpac Australian Consumer Conf at 1030 AEST