CNH: USD/CNY Fixing Edges Up, Error Term Widens

• CHINA SETS YUAN CENTRAL PARITY AT 7.1726 TUES VS 7.1717

In Tokyo morning trade, JGB futures are sharply higher, +61 compared to settlement levels, after trading resumed after yesterday’s holiday.

• The Japan services PPI edged up to 3.1%y/y in Jan. This was in line with market forecasts and compared to the revised 3.0% gain from Dec (which was originally reported as a 2.9% rise). The m/m shift was -0.5%, after a flat outcome in Dec.
• The services PPI is very close to recent cycle highs and consistent with elevated headline inflation pressures, even if m/m services PPI readings have lost some momentum in recent months.
• Later today, department store sales print, along with machine tool orders (both for Jan). There is also an Auction for Enhanced-Liquidity 15.5-39-year.
• Cash US tsys are 1-2bps richer in today’s Asia-Pac session after yesterday’s modest gains.
• Cash JGBs are 1-6bps richer across benchmarks, with the 7-year leading. The benchmark 10-year yield is 5.3bps lower at 1.377% versus the cycle high of 1.466%, set last week.
• Swap rates are 1-3bps lower. Swap spreads are generally wider.

• Weaker than expected US data gave rate hikes a boost, seeing gold reach new highs.
• Gold touched US$2,956.18 briefly before giving back early gains, finishing at $2,950.77
• The weaker than expected data saw treasury yields lower, boosting gold.
• Gold has had an exceptional start to the year despite hopes of early rate cuts diminishing.
• Gold has been boosted by the uncertainty from tariffs with investors seeking the safe haven that is gold.
• Looking ahead for the week, gold will look to US data Friday where personal consumption price index will provide the next insight as to the potential for a move in rates.