JPY: Yen Lags USD Sell Off Amid Higher Core Yields, PPI Out Today

In post-Tokyo trade, JGB futures closed with a downtick, -2 compared to settlement levels, after US tsys finished cheaper on Friday. 

• US tsys gapped richer after lower-than-expected jobs gains for January, and a small dip in the unemployment rate -- but quickly reversed on robust two-month net revisions along with a smaller-than-expected benchmark revision.
• Wage growth meanwhile also surprisingly accelerated but against a notable caveat of average weekly hours sliding to lows last seen in the depths of the pandemic and mid-2010.
• Fed rate cut expectations were trimmed to 37bp of cuts for 2025 vs 43bp pre-data.
• Headlines have crossed from Bloomberg, with US President Trump stating that the US will announce tariffs of 25% on all steel and aluminium imports from Monday.
• The meeting between Japan PM Ishiba and US President Trump from late last week will likely be seen as a success from a Japanese standpoint. The US leader doesn't appear to have Japan in his crosshairs from a trade standpoint at this stage, although does want to eliminate the trade deficit the US has with Japan. Ishiba spoke about raising Japan's imports of US LNG and boosting Japan's investment in the US.
• Today, the local calendar will see Current Account Balance, Bank Lending and Eco Watchers Survey.

• Friday’s moves was all about US data and key releases gave mixed messages about the US economy and the potential for rate rises.
• Non-farm payrolls were softer than expected at 143k (vs consensus 175k), but the University of Michigan’s inflation expectations survey (1 year forward) rose more than expected to +4.3% from +3.3% in January.
• Whilst the payrolls number may increase the potential for a rate cut, the inflation outlook dampens that outlook.
• Gold behaved accordingly having rallied hard just after payrolls, to giving that rally back to end virtually where it started the day.
• Opening at US$2,856.28, gold peaked at $2,886.78 only to surrender those gains to finish Friday’s trading session at $$2,861.07 and is set to open marginally higher in Asian trade.
• With tariff headlines coming from Trump on aluminum and steel and claims that Elon Musk has found ‘irregularities’ at treasury.
• Gold’s ascent through all key technical levels continued last week as bullion moved further away from the 20-day EMA of $2,784.43, pulling all major technicals higher in signs that the bullish momentum is likely to continue.
• The coming fortnight sees major gold producers report earnings, and likely to provide insight into gold’s outlook.
• Safe haven demand remains a key determinant of gold’s fortunes and as US data provides mixed results for the outlook for rates, the strength of the USD in the face of tariff threats remains a key factor that determines gold’s fortunes in the near term. 

The yen is outperforming broader USD gains in the first part of Monday trade. This follows fresh tariff headlines from US President Trump, that 25% tariffs will be imposed on all steel and aluminium imports today (although no timeline was specified in terms of when they will come into effect). USD/JPY was last little changed at 151.50/55. We saw dips on Friday sub the 151.00 level supported on a number of occasions. A clean break sub 150.93 (the low from last Friday) could see the Dec 9 low from last year targeted at 149.69. On the upside, the Jan 6 high was at 152.89.

• The meeting between Japan PM Ishiba and US President Trump from late last week will likely be seen as a success from a Japan standpoint. The US leader doesn't appear to have Japan in his crosshairs from a trade standpoint at this stage, although does want top eliminated the trade deficit the US has with Japan. Ishiba spoke about raising Japan imports of US LNG and boosting Japan investment into the US.
• CAD is off 0.55% against the USD (major steel exporter to the US), while EUR is down 0.30% and AUD off 0.40%, although EUR and the A$ are away from lows for the session. AUD/JPY is back under 95.00, last near 94.65/70, session lows rest at 94.30/35.
• Not being is Trump's trade crosshairs, coupled with traditional safe haven qualities is aiding yen so far today.
• Friday's session saw US-JP yield differentials tick higher in the wash up of the NFP report. This likely help keep dips under 151.00 supported.
• The local data calendar has Dec current account and trade balance figures today. We also have Jan bank lending figures and the eco watchers survey.