MEXICO: USDMXN Edging Lower Following Retail Sales Data / Bessent Comments

The bid in gilts (covered in the previous bullet) seems to help wider core global FI markets off session lows.

• German yields now little changed to 1.5bp lower on the day, while U.S. Tsy yields are 2.5-5.5bp lower.
• Flattening biases also apparent on both curves.
• A reminder that Tsys are playing catch up after the observance of MLK day in the U.S. and resultant closure of cash markets on Monday.

Gilts outperform over the last 40 minutes or so, with pricing of this morning’s syndicated tap of the Jan-40 line now in the rear-view and any hedging related pressure passing.

• The offering attracted record demand.
• Futures to fresh session highs above 91.80 at typing, bulls eye resistance at the Jan 17 high (91.96).
• Yields now 2.0-2.5bp lower across the curve, with the long end now outperforming after some modest curve steepening ahead of the supply

• The New Zealand dollar was the best performing G10 currency on Monday, fuelled by the less imminent timeline for US tariff implementation and the associated optimism for risk sentiment. This allowed NZDUSD to extend its recovery from last week’s lows to 2.65%. However, bearish technical conditions still remain in place and today’s reversal underscores this theme.
• The significant volatility comes ahead of Q4 inflation data, which includes the RBNZ’s estimates of core CPI, scheduled for release later today at 2145 GMT. Bloomberg consensus forecasts for headline inflation are in line with the RBNZ’s November projections at 2.1% y/y. The expected quarterly increase of 0.5% is slightly higher than the RBNZ’s 0.4%.
• Domestically-driven non-tradeables inflation will be watched closely. It is forecast to rise 0.8% q/q and 4.7% y/y down from 1.3% q/q & 4.9% in Q3. Consensus is in line with the RBNZ.
• Following the sharp contraction in Q3 and Q4 growth, another 50bp rate cut from the RBNZ on February 19 is likely, especially if inflation prints around the band’s mid-point.
• For NZDUSD, 50-day EMA resistance remains untested, intersecting today at 0.5729. Key multi-year supports reside at 0.5512 (2022 low) and 0.5470, the low seen shortly after the onset of the covid pandemic in early 2020.