CNH: USD/CNH Tracks Recent Ranges, Onshore Spot Can't Sustain +7.2900 Levels

TYH5 is 108-06, unchanged from NY closing levels. 

• Cash bonds drifted sideways for most of yesterday's session after establishing cheaps following the morning's data. Yields finished 2-7bps higher, with the curve steeper.  
• The JOLTS report saw surprisingly elevated job openings in November, but the quits rate reversed a surprise increase from October. Job openings were 8090k (cons 7740k) in November after an upward revised 7,839k (initial 7,744k) in October.
• Headline ISM strengthened to 54.1, a little higher than the 53.5 expected (52.1 prior), with New Orders (54.2, 53.7 prior) and Employment (51.4, 51.5 prior) exactly matching survey expectations. But Prices Paid soared to 64.4 (57.5 expected, 58.2 prior), jumping by the most since January to the highest level in 22 months.

European natural gas prices rose 1.3% on Tuesday to EUR 47.92, the intraday high, but are still down 2% this month. There has been downward pressure from technicals and positioning but cold weather is accelerating withdrawals of fuel from storage which drove prices higher yesterday.  

• Bloomberg is reporting that large parts of Europe are forecast to have the coldest weather in four years, including Spain. According to Weather Services International -15C is forecast for Salzbug on Monday and -7C in Madrid. Gas storage levels are under 70% and the spread of the cold snap across the region is likely to accelerate the drawdown as heating demand increases.
• US natural gas fell 6.2% to $3.44 on Tuesday and is now down 5.2% this month. It sold off as forecasts indicated that there will be some reprieve from the current freezing weather over January 17-18, according to NatGasWeather.
• Later today EIA US inventory data is released and is forecast to show a 42 bcf drawdown compared to the 5-year average of -93 bcf for the same week. As of December 27, stocks were around 4.7% above this average, according to Bloomberg.
• There has been less demand from Asia due to a mild winter with some reselling in China, according to ENN Group. Japan is also in the process of restarting nuclear power. This is good news for Europe who competes with Asia for global LNG supplies. Although 2024 saw record LNG imports into Asia. 

ACGBs (YM -3.0 & XM -4.5) are weaker after stronger than expected ISM services and JOLTS data weighed on US tsys and further eroded Fed rate cut risks. The subsequent bear-steepener (yields 2-7bps higher) and more hawkish Fed outlook hit stocks. 

• The NASDAQ dropped ~2%, the S&P 500 down ~1% and the Dow slipped ~0.5%. Nvidia opened with a better than 2% gain to an intraday record peak of $153 after bullish news from the CES trade show, but the stock reversed in the afternoon and plunged 6% to $140.14 at the close.
• Cash ACGBs are 3-5bps cheaper with the AU-US 10-year yield differential at -16bps.
• November CPI is released today and will likely be watched closely ahead of Q4 data on January 29. It will also include more updates for services components than the October release. Bloomberg consensus is forecasting the headline to pick up 0.1pp to 2.2%. The trimmed mean was 3.5% the previous month.
• Swap rates are 3-5bps higher, with the 3s10s curve steeper.
• The bills strip is -2 to -4 across contracts.
• RBA-dated OIS pricing is flat to 3bps firmer across contracts, with later 2025 leading. A 25bp rate cut is more than fully priced by April (100%), with a February cut at a 56% chance.
• The local calendar shows retail sales and trade balances tomorrow.
• AOFM Bond issuance is expected to resume in the week beginning 13 January 2025.