THAILAND: VIEW: JP Morgan Expects Another 75bp Of Easing In 2025

ACGBs (YM +6.0 & XM +5.0) are stronger but off session bests after business conditions improved in December, driven by the retail sector and increased consumer spending.

• The NAB survey showed that conditions climbed 3 points to +6, reversing declines from the prior month and almost returning to its long-run average. The gains were led by a “notable uplift” in retail which re-entered positive territory for the first time since November 2023. Business confidence edged up 1 point to -2.
• Cash US tsys are ~2bps cheaper in today’s Asia-Pac session after yesterday’s strong rally.
• Cash ACGBs are 5-6bps richer with the AU-US 10-year yield differential at -12bps.
• Swap rates are 4-5bps lower.
• The bills strip has bull-flattened, with pricing +3 to +7.
• Tomorrow’s Q4 CPI data could be pivotal in determining whether the RBA initiates a long-anticipated monetary easing cycle. It may also influence the timing of an election, which must be held by May 17. Economists predict the trimmed-mean CPI will have declined to 3.3%, marking its lowest level in three years.
• RBA-dated OIS pricing is 1-5bps softer across meetings today. A 25bp rate cut is more than fully priced for April (123%), with the probability of a February cut at 78% (based on an effective cash rate of 4.34%). 

USD/CNH tracks at 7.2800 in latest dealings, very close to session highs (7.2803). This still leaves us just under the 50-day EMA (near 7.2835/40), while highs over the past week have been close to 7.3000 (which the 20-day EMA resistance point is close to). 

• CNH has dipped around 0.35% so far today, in line with broader USD index gains, although outperforming most of the G10, with yen, EUR and AUD and NZD all off by 0.50% or more.
• There is no onshore anchor point for USD/CNH, given onshore markets have started the LNY break period (returning next Wednesday).
• Broader USD gains have been fueled by fresh Trump tariff headlines, although fresh direct threats against China don't appear evident so far. Earlier remarks from Trump stated he wanted a much higher universal tariff rate than 2.5% (which according to the FT is what incoming Treasury Secretary Bessent is pushing for as an initial step on tariffs, before rising gradually).
• USD/CNH implied vols re slightly firmer, but the 1 month at 5.40%, is still comfortably sub pre-inauguration levels (above 6%). The 1 month risk reversal is also sitting off pre-inauguration highs, last slightly back from flat, at -0.21. 

• Despite the safe-haven status it enjoys, gold suffered yesterday as the USD gained as markets came to grips with the latest tariff threats, and a tech route saw a flight to the dollar.
• With President Trump threatening tariffs on steel, aluminum and copper imports, the USD gained – which typically limits the upside for gold prices.
• The tech route wiped $1trillion from the NASDAQ on fears that the US may not have the AI superiority it thinks, giving support to the USD.
• Gold fell 1% and trading today has oscillated around where bullion closed yesterday.
• Opening at US$2,740.81 gold barely moved today to trade down to $2,739.84.