JPY: USD/JPY Back Sub 153.00 On US Yield Drop
Feb-13 22:30
Yen gains accelerated post the Asia close on Thursday. USD/JPY got back to 152.70 by the NY session, but we track slightly higher in early Friday dealings (last in the 152.80/85 range). Yen gained just over 1.0% for the session, to be the third best performed in the G10 space behind SEK, with CHF and NOK gains similar to yen. Broader USD sentiment was on the backfoot as Tsy yields reversed the Wednesday gain.
- For USD/JPY technicals, key upside focus is on the 50-day EMA, which we have pierced recently, but haven't been sustained. We sit some distance off this level now. On the downside we have the Feb 12 low at 152.38, then the Feb 7 low at 150.93.
- The market analysed some notably soft details within the PPI data report, translating that into a more negative read for the Fed’s preferred measure of inflation (PCE). This weighed on US yields, which largely reversed Wednesday's CPI inspired gains.
- USD sentiment was also weighed on vague reciprocal tariff headlines, as markets reacted positively to delaying any implementation until April 2 which gives more time for negotiations to continue.
- The better global equity tone didn't weigh materially on yen against crosses, as noted above only SEK outperformed yen in the G10 space.
- On the data front today we just have weekly offshore investment flows.
- Note the sizable option expiry pipeline for NY cut later on Friday: Y150.00($1.9bln), Y150.90-00($1.6bln), Y152.00($2.8bln), Y153.85($670mln), Y154.00($1.2bln), Y155.00($882mln), Y155.50($1.3bln), Y156.00($1.7bln).
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NZD: NZD/USD Closes Back Above 0.5600, Employment Confidence Rises
Jan-14 22:10
- NZD/USD closed 0.34% higher on Tuesday, at 0.5602. The pair was supported by China's recent stimulus measures and improved market sentiment tied to US President-elect Trump's potential gradual tariff implementation.
- PBOC officials reiterated plans to use monetary tools, stabilize the Yuan, and support liquidity, while emphasizing China’s role in driving global economic growth. Meanwhile, the BBDXY retreated from recent highs, falling 0.44% as hawkish Fed sentiment pushed Treasury yields higher, with markets now focusing on upcoming US CPI data for further direction, following a softer than expected PPI print overnight.
- New Zealand's Employment Confidence Index rose 2.4 points to 91.6 in Q4, signaling continued labor market pessimism but with signs of stabilization. Perceptions of current job opportunities improved for the first time in two years, while expectations for job security and earnings remained relatively steady.
- Technical indicators still remain bearish, with spot trading below all key moving averages, the pair is at risk of testing the 13-year low of 0.5470 if it breaks below 0.5500. Initial support is 0.5543 (Jan 10 lows), while to the upside a break above 0.5640 (20-day EMA) before any sort of momentum change can occur.
- The NZ-US 2yr swap rose 15bps on Tuesday, closing at -72bps. On Friday it hit a new yearly lows of -95.5bps just off all time lows of -100bps
- Expiries for today include 0.5875 (NZD606m), 0.6075 (NZD425.8m). Upcoming notable strikes: 0.5885 (NZD453.7m Jan. 16), 0.6300 (NZD381m Jan. 16), 0.5555 (NZD311.8m Jan. 16)
- The local calendar is empty today
JPY: Yen Underperforms USD Pullback, Despite Firmer BoJ Hike Odds
Jan-14 22:05
USD/JPY tracked modestly higher post the Asia Pac close on Tuesday, getting to highs of 158.20. We sit a little softer now, last near 158.00, but yen still lost 0.30% for Tuesday's session, the worst performer in the G10 space. The rebound in EUR/USD was in focus, while EUR/JPY got back to 162.80/85, up 0.90%, and comfortably off recent lows near 160.00.
- For USD/JPY technicals, trend conditions are unchanged. Bulls still remain in the drivers seat, with upside focus on 158.87, the Jan 10 high. Initial firm support is 156.78, the 20-day EMA.
- The generally positive tone to global equities for Tuesday, albeit with modest aggregate moves, likely weighed on yen against key crosses. Even the troubled pound managed a small rise against the USD for Tuesday's session.
- US yields were mixed, softer at the front end, following the weaker than forecast US PPI. Back end yields held modest gains though, the 10yr near 4.79%. US-JP yield differentials have tracked sideways at the front end 2yr tenor and sit just off recent highs for the 10yr.
- On the data front today, we have Dec money stock figures first up, then Dec preliminary machine tool orders. These prints are unlikely to shift market sentiment.
- BoJ rate hike odds for next week's policy meeting are higher, last near 60%, up from recent lows around 40%. Yesterday Deputy Governor Himino noted a rate hike would be discussed at the meeting. “It is important for the BOJ to judge the timing of rate hike in an appropriate manner. But it is difficult for the bank to judge when the appropriate timing would be,” Himino said.
- Still, these shifts haven't generated much yen support at this stage.
BONDS: NZGBS: Yesterday’s Sell-Off Extends Ahead Of US CPI Later Today
Jan-14 22:02
In local morning trade, NZGBs are 3-4bps cheaper, extending yesterday’s QSBO-induced sell-off.
- Overnight, US yields finished slightly mixed after US PPI printed softer than expected. They were lower at the front end but higher at the back end. The 10-year yield finished at 4.79%.
- Focus turns to tomorrow's headline CPI inflation data for December where rental inflation is expected to accelerate to an average figure that firmly rounds to 0.3% M/M in December. Core goods inflation will be closely looked at amidst heavy focus on potential tariffs under the second Trump administration but also with a further near-term dampening factor from continued US dollar appreciation. Fed Beige Book is released at 1400ET.
- Swap rates are 6-7bps higher.
- RBNZ dated OIS pricing is 1-7bps firmer across meetings. 44bps of easing is priced for February, with a cumulative 103bps by November 2025. Pricing for the November meeting is some 35bps firmer than Friday’s closing level.
- Today, the local calendar is empty.
- On Thursday, the NZ Treasury plans to sell NZ$250mn of the 3.00% Apr-29 bond, NZ$175mn of the 3.50% Apr-33 bond and NZ$75mn of the 1.75% May-41 bond.
