- Yen is outperforming in the G10 FX space. We have a BoJ speech soon, while focus on BoJ balance sheet reduction has also likely helped. JGB futures are weaker but well off session cheaps, -12 compared to settlement levels. In the US Tsys space, very little has happened so far today, futures are slightly higher, however trading in narrow ranges.
- Various data prints in Australia and NZ today haven't shifted sentiment. Business conditions have moved off post RBNZ easing highs.
- US equity futures are higher, led by tech following a number of late US earnings reports and fresh AI investment hopes. Sentiment hasn't spilled over elsewhere though.
- Later US Q4 GDP, jobless claims, euro area Q4 GDP, December unemployment rate, European Commission January survey and January Spanish CPI print. The ECB is forecast to cut rates 25bp.
MARKETS
- Very little happening in Tsys today, futures are slightly higher, however trading in narrow ranges. TU is unchanged at 102-27⅛, while TY is +03+ at 109-02. A bullish short-term cycle in Treasury futures highlights a corrective phase and the TY contract is holding on to its recent gains. Attention is on 109-12, the 50-day EMA - a level tested on Monday.
- A clear break of this EMA would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition remains bearish. The bear trigger is 107-06, the Jan 13 low. Initial support has been defined at 108-00, the Jan 16 low.
- Cash tsys yields are trading flat to 1bps higher, the 5yr is under-performing, last +1bp at 4.341%, while the 10yr is +0.6bps at 4.534%
- Later today we have GDP, Jobless data & Pending Home Sales
JGBS: Subdued Session, Heavy Data Calendar Tomorrow, incl Tokyo CPI
JGB futures are weaker but well off session cheaps, -12 compared to settlement levels.
- According to MNI’s technicals team, a clear downtrend in JGB futures remains intact and the latest fresh cycle lows reinforce this condition. Note also that moving average studies on the continuation chart are in a bear-mode setup, highlighting a clear downtrend. The move down exposes the 140.00 psychological handle next. For now, short-term gains are considered corrective.
- Outside of the previously outlined International Investment Flows, there hasn't been much by way of domestic drivers to flag. BoJ Deputy Governor Himino is to give a speech at Hitotsubashi University at 1510 local time.
- Japan's debt-servicing costs are expected to rise to ¥35.3 trillion by 2028, a 25% increase from the current fiscal year. (per BBG)
- Cash US tsys are flat to 1bp richer in today’s Asia-Pac session.
- Cash JGBs are 1-2bps cheaper across benchmarks. The benchmark 10-year yield is 1.0bp higher at 1.207% versus the cycle high of 1.262%.
- Swap rates are flat to 1bp lower. Swap spreads are tighter.
- Tomorrow, the local calendar will see Tokyo CPI, Jobless Rate, Job-To-Applicant Ratio, Industrial Production, Retail Sales and Housing Starts data alongside 2-year supply.
JAPAN: BoJ Balance Sheet Declining, Potential Implications For Global Markets
BoJ efforts to curb the size of its balance sheet have stepped up. This could have implications for local asset markets and the yen, but also, global asset markets, as we outline below.
- At the end of last week, the central bank announced it was ending a fund-provisioning program from July of this year. This program had been designed to boost bank lending (see this BBG link). As it stands at the moment the BoJ balance sheet is down a little over 2% in y/y terms for Jan. This is back to late 2022's contraction pace. Efforts by the central bank to curb the balance sheet are arguably not that surprising, given its sits at well over 100% of GDP, well above equivalent balance sheet sizes of the Fed and ECB.
- A contracting balance sheet of the central bank will generally be viewed as tightening financial conditions, all else equal. As such this is likely to be yen positive, but bearish for local bonds and equities. The correlations between y/y changes of the BoJ balance sheet and local equities is around 55% in recent years (for the Topix). Correlations with USD/JPY have been generally negative though in recent years (the broader USD trend potentially dominating).
- Arguably though, BoJ balance sheet shifts may have a bigger influence on global trends, potentially through the capital flow channel. The first chart below plots the BoJ balance sheet y/y change against a global money supply proxy in y/y terms. There has been a reasonable correlation with the two series in recent series.
Fig 1: BoJ Balance Sheet & Global Money Supply Proxy Y/Y
Source: MNI - Market News/Bloomberg
- The global money supply proxy presented above has a stronger correlation with global commodity and equity returns on a contemporaneous basis. However, if we push forward the BoJ balance y/y change by 6 months, the correlations are stronger, particularly in recent years.
- The second chart below plots the balance sheet 6 months forward (in y/y terms) against global commodity and equity returns (y/y). All else equal, the declining BoJ balance sheet will act as a headwind for global asset markets if recent correlations hold.
Fig 2: BoJ Balance Sheet (6 months Forward) & Global Commodities & Equities - Y/Y
Source: MNI - Market News/Bloomberg
STIR: BoJ Dated OIS Softer Than Pre-BoJ Hike Levels
BoJ-dated OIS pricing is flat to 6bps softer across meetings compared to pre-MPM levels.
- Market expectations going into last Friday’s MPM indicated a 98% probability of a 25bp hike today, a cumulative 99% chance by March, and more than a full 25bp increase by May 2025 (108%).
- As it currently stands, March has a 0% chance of another 25bp hike. A 25bp increase is not fully priced until December.
Figure 1: BoJ-Dated OIS – Today Vs. Pre-BoJ MPM (January)
Source: MNI – Market News / Bloomberg
AUSSIE BONDS: Modestly Cheaper After A Subdued Sydney Session, PPI Tomorrow
ACGBs (YM -2.0 & XM -2.5) are modestly cheaper after dealing in narrow ranges in today’s Sydney session.
- Q4 export prices rose significantly faster than imports. They rose 3.6% q/q, the first quarterly rise since Q4 2023, but are still down 8.6% y/y following -6.8% y/y. Import prices increased 0.2% q/q to be down 1.9% y/y after -1.1% y/y in Q3. With China’s growth expected to remain soft this year, a sustained improvement in the terms of trade is unlikely.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s muted reaction to the FOMC decision, statement and presser.
- The FOMC left the target rate steady at 4.25-4.5 but removed reference to progressing towards inflation reaching the goal.
- Cash ACGBs are flat to 1bp cheaper with the AU-US 10-year yield differential -14bps.
- Swap rates are little changed.
- The bills strip is slightly mixed across contracts.
- RBA-dated OIS pricing remains 3-6bps softer than yesterday’s pre-CPI levels across meetings. A 25bp rate cut is more than fully priced for April (133%), with the probability of a February 18 cut at 89% (based on an effective cash rate of 4.34%).
- Tomorrow, the local calendar will see PPI and Private Sector Credit data. The AOFM plans to sell A$800mn of the 2.5% May 2030 bond.
AUSTRALIA: Underlying Inflation Measures Signalling Easing Price Pressures
The Q4 CPI data showed that underlying inflation is heading towards the RBA’s 2-3% target band printing at 3.2% y/y after 3.6% in Q3. Our PCA core is within the band. But CPI excluding food & energy was elevated at 3.6% y/y but 0.1pp lower than Q3 and core services inflation ticked up 0.1pp to 4.2% y/y. Thus if the RBA begins easing in February, it is likely to be cautious.
- There are a number of different ways to measure underlying inflation – trimmed mean, excluding volatile items such as food and energy, the median. We have another version using principal components analysis (PCA) (based on Bank of Canada research). They are either already within the RBA’s band or heading towards it.
- PCA is useful for when there are a large number of variables, as it finds common patterns that explain most of the variance in the data. In this case, it extracts the common movement in prices and thus creates a measure that reflects underlying developments in inflation and not sector-specific shocks.
- The chart below shows PCA CPI against other inflation measures. It is less volatile, with a standard deviation below that of the trimmed mean. After running ahead of the trimmed mean from 2019 until mid-2021, it was well below in Q4 2024 at 2.7% compared to 3.2% y/y. The gap is narrowing though as it was as wide as 1.5pp in Q4 2022.
- While the median CPI was higher in Q4 at 2.6% y/y up from 1.8%, it was either at the top of the RBA’s band or within through 2024. Also both Q3 and Q4 saw the share of components posting annual growth rates above 3% at 39.1%, the lowest since the Covid-impacted Q4 2021 and below the average since 2000.
Australia underlying inflation measures y/y%
Source: MNI - Market News/Refinitiv
AUSTRALIA DATA: Higher Export Prices Should See Q4 Terms Of Trade Improve
Australia’s Q4 export prices rose significantly faster than imports. They rose 3.6% q/q, the first quarterly rise since Q4 2023, but are still down 8.6% y/y following -6.8% y/y. Import prices increased 0.2% q/q to be down 1.9% y/y after -1.1% y/y in Q3.
- Our proxy for the terms of trade rose 3.4% q/q in Q4 but fell 6.8% y/y as it rose 4.4% q/q in Q4 2023. With China’s growth expected to remain soft this year, a sustained improvement in the terms of trade is unlikely.
- The rise in export prices was driven by metalliferous ores +7% q/q (after three straight quarterly falls), natural gas +5.3% q/q, non-ferrous metals +4.1% and iron & steel +3.1%. Commodity prices were boosted by stimulus announcements to support China’s economy and European destocking has boosted LNG. In contrast, export prices for coal and petroleum fell.
- Prices for imported gold and road vehicles rose with the weaker AUD contributing to the latter. Petroleum fell due to weaker global oil prices and softer demand. Telecomms equipment prices were also down.
Australia trade prices y/y%
Source: MNI - Market News/Refinitiv
AUSSIE BONDS: Yield Curve Closes In On Cycle High
The Australian 3/10 cash curve at +58bps is close to its steepest level since early January and above the upper range it had traded in since late 2022.
- The steepening of the Australian curve has coincided with the recent downward movement in the 3-year yield.
- While 2bps higher today, the 3-year yield is down around 30bps since mid-January as RBA easing expectations have gathered momentum.
- RBA-dated OIS pricing remains 3-8bps softer than yesterday’s pre-CPI levels across meetings after yesterday’s FOMC decision.
- A 25bp rate cut is more than fully priced for April (131%), with the probability of a February cut at 89% (based on an effective cash rate of 4.34%).
Figure 1: AU 3/10 Yield Curve (%) Vs. 3-Year ACGB Yield (%)
Source: Bloomberg / MNI - Market News
AUSSIE BONDS: AU-US Curve Correlation Tumbles Over The Past Week
The cross-market curve correlation between Australia and the U.S. has collapsed over the past week, reflecting a shift in focus toward domestic factors rather than global or U.S.-centric drivers.
- This marks the sixth such episode since early 2024, with all but one coinciding with key Australian CPI releases, including this week’s decline.
- The exception was in early December when concerns over Australian economic growth—culminating in a weaker-than-expected Q3 GDP print—drove the divergence.
- In previous instances, the correlation rebounded quickly to near-peak levels, suggesting these dislocations have typically been short-lived.
- However, global yield curve correlations tend to weaken during shifts from synchronized policy tightening to divergent easing cycles. With central banks now charting different paths, the current low correlation may prove more persistent this time around.
Figure 1: Rolling 10-day Correlation – ACGB 3/10 Curve Vs. US Tsy 2/10 Curve
Source: MNI – Market News / Bloomberg
BONDS: NZGBS: Closed Modestly Cheaper, Cons Conf & Home Prices Tomorrow
NZGBs closed near the middle of today’s ranges, 2bps cheaper.
- While NZ ANZ business confidence and activity outlook eased in January they remain elevated, signalling some reduction in optimism following 125bp of RBNZ easing. Confidence fell almost 6 points to 54.4 and the outlook 4 points to 45.8, both still well above the historical averages. The inflation measures were higher across the board though, which will require monitoring but are highly unlikely to derail a 50bp rate cut on February 19 but may slow easing going forward as rates approach neutral.
- Today’s supply of NZ$500mn across May-31, May-36 and May 41 lines saw cover of 3.14x to 3.79x.
- Cash US tsys are little changed in today’s Asia-Pac session after yesterday’s muted reaction to the FOMC decision, statement and presser.
- The FOMC left the target rate steady at 4.25-4.5 but removed reference to progressing towards inflation reaching the goal.
- Swap rates closed flat to 3bps higher, with the 2s10s curve steeper.
- RBNZ dated OIS pricing closed flat to 3bps softer across meetings, with November leading. 48bps of easing is priced for February, with a cumulative 120bps by November 2025.
- Tomorrow, the local calendar will see CoreLogic Home Values and ANZ Consumer Confidence.
NEW ZEALAND: Some Moderation In Post-Easing Exuberance, Watch Price Components
While NZ ANZ business confidence and activity outlook eased in January they remain elevated, signalling some reduction in optimism following 125bp of RBNZ easing. Confidence fell almost 6 points to 54.4 and the outlook 4 points to 45.8, both still well above the historical averages. The inflation measures were higher across the board though, which will require monitoring but are highly unlikely to derail a 50bp rate cut on February 19 but may slow easing going forward as rates approach neutral.
NZ ANZ business survey
Source: MNI - Market News/Refinitiv
- The assessment of activity compared to a year ago remained around neutral signalling that growth remained soft at the start of 2025 but not as bad as it has been. ANZ notes that construction is the only sector still contracting.
- Inflation expectations rose slightly to 2.67% from 2.63% while pricing intentions picked up to 45.7 from 42.7 (2.7 points higher than the Q4 average). Costs also rose with cost expectations up 3.5 points to 73.6, highest since April, and wage expectations almost 4 points higher at 83.1. ANZ suggests the cost increase could be because of the weaker NZD.
NZ ANZ business survey - price/cost components
Source: MNI - Market News/Refinitiv
- Respondents expect costs to increase 2.5% over the next 3 months but with demand still soft there’s likely to be some margin squeeze as prices are predicted to rise only 1.6%.
- The labour market remains weak but appears to have turned a corner with January employment intentions at 14.4 in line with the Q4 average, which was almost 8 points higher than Q3. Employment compared to a year ago improved to -7.1 after -13.3 in December. Q4 data is released on February 5.
NEW ZEALAND: 2024 Deficit Narrows As US Becomes Second Most Important Decision
NZ December trade posted a surplus of $219mn after a deficit of $435mn in November, as exports rose on the month while imports fell in line with very weak domestic demand. The 12mth deficit narrowed to $7.67bn from $8.26bn, also significantly smaller than December 2023’s $13.62bn.
NZ trade balance $bn YTD
Source: MNI - Market News/Refinitiv
- Q4 exports rose 5.5% q/q after 0.4% in Q3, while imports fell 2.2% after rising 1.6%.
- December exports rose 17.0% y/y up from 8.1% driven by growth across NZ’s major destinations. Exports to China rose 21.6% y/y, 10.7% y/y to the US and Australia 8.7%.
- In 2024, the US became NZ’s second most important export destination at 12.7% of the total pushing Australia into third place. Statistics NZ noted that “over the past decade, the value of exports to the US has nearly doubled. This is driven by US purchases of NZ meat which now make up 3.7 percent of our total exports”. Meat exports to the US rose 17% in 2024, while they fell 32% to China.
- Growth to the US rose 9% compared with down 3.2% to China and flat to Australia. There was strong growth in shipments to Europe up 17.4% and the region now accounts for almost 10% of NZ exports.
- December saw strong annual export growth for dairy products, meat and timber, while crude, wine and iron ore were lower.
- Imports in December rose 6.5% y/y with robust annual growth across categories. Consumer goods rose 7.8% y/y and plant & equipment 9.6% y/y (with a large rise in tech).
NZ exports vs imports y/y% 3-mth ma
Source: MNI - Market News/Refinitiv
FOREX: Yen Outperforms Ahead Of BoJ Speech, ECB Later
Outside of a firmer yen backdrop, there has been little in the way of aggregate G10 FX moves so far today. Yen is up close to 0.40%, which has pushed down the BBDXY index to sub 1300 (off 0.20%).
- USD/JPY got to lows earlier of 154.29, but sits slightly higher, last in the 154.55/60 region. This is still up around 0.40% for the session so far in yen terms. Downside focus will rest on Monday's low at 153.72. A clean break sub this level would open up 152.55, a Fib retracement level.
- An earlier BBG report around moves by the BoJ to curb its balance sheet by ending a fund-provisioning program from July of this year drove some early yen support and JGB pressure. US-JP yield differentials are still arguing for lower USD/JPY levels, but haven't shift much on the day.
- We also have a speech from BoJ Deputy Governor Himino coming up in just under 2hrs, which will be gauged for BoJ hike follow up risks.
- In the cross asset space, US equity futures are higher, led by the tech side, following a host of late US earnings results. US yields are closed to unchanged.
- AUD/USD is little changed, last near 0.6230, with little positive spillover from the firmer US equity futures backdrop. Many regional equity markets remain closed though for China LNY.
- NZD/USD is down a touch to 0.5650/55. The NZ ANZ business confidence and activity outlook eased in January they remain elevated, signalling some reduction in optimism following 125bp of RBNZ easing. Confidence fell almost 6 points to 54.4 and the outlook 4 points to 45.8, both still well above the historical averages.
- Later US Q4 GDP, jobless claims, euro area Q4 GDP, December unemployment rate, European Commission January survey and January Spanish CPI print. The ECB is forecast to cut rates 25bp.
AUDNZD: AUD/NZD Testing 100-Day EMA
- The AUD/NZD is trading back towards the lower bounds of the past 4 months, at 1.1022, after hitting 1.1100 earlier in Jan.
- Standard Chartered suggested shorting AUD/NZD targeting 1.0788 with a stop at 1.1103, citing diverging central bank policies. If the RBA begins cutting rates in February, markets may price in further easing, keeping AUD under pressure, while the RBNZ has likely peaked in dovishness.
- All four Australian Major banks have now move their rate cut expectations forward to February, while the OIS market is pricing in a 92% chance of a 25bps cut.
- A short squeeze risk exists for the NZD, as positioning is stretched and downside repricing is limited. The trade is relatively insulated from tariff risks, but AUD remains more vulnerable to China’s economic fluctuations.
- The AU-NZ 2yr swap has seen a steep move lower in Jan, after hitting a high of 68bps, we now trade down at 38bps. The cross is currently trading right on the 100-day EMA, with next key resistance the 200-day EMA, a level we have traded above since mid September.
Chart. AUD/NZD Price vs 100 & 200 Day EMA
ASIA STOCKS: Equities Edge Higher, Following Fed Pause, Softbank's AI Investment
Asian equities edged higher as investors reacted to the Federal Reserve's rate pause, corporate earnings, and central bank policy expectations. Liquidity remained light with China, Hong Kong, South Korea, and Taiwan closed for Lunar New Year.
- India's Nifty 50 is 0.3% higher, extending gains as investors bought the dip. Bajaj Finance (+6.3%) led the index after strong loan growth, while Tata Motors (-9.2%) tumbled on earnings disappointment.
- Japan's Nikkei is +0.35% led by chip-equipment makers Tokyo Electron and Advantest, with focus on an upcoming BOJ speech that could hint at future tightening, the TOPIX is 0.30% higher. SoftBank has reported it will invest $25B in OpenAI, sparking optimism in AI-related, the stock is trading slightly lower although is slowly paring losses.
- Australia's ASX 200 is +0.7% and nearing record highs on rate cut bets after soft inflation data, boosting risk appetite. Buy now pay later firm ZIP money fell over 20% following an earnings miss.
- Indonesia's JCI fell 1.5% and saw the biggest regional decline as trading resumed post-holidays, with weakness in consumer and banking stocks amid concerns over Trump’s potential tariffs.
Overall, rate cut speculation, Fed clarity, and earnings surprises are shaping today’s market sentiment, while trade policy risks and central bank signals remain key catalysts ahead.
GLOBAL MACRO: Could The Tech Sell-off Have More Legs?
DeepSeek’s impact on financial markets was very obvious at the start of the week, particularly in terms of tech share indices (and most obviously through Nvidia’s share price). This steep drop has highlighted concentration risks in the sector and we outline below potential watch points for further signs of stress in this space, which could impact financial markets more broadly.
- Prior to the fall, Nvidia’s stock success brought with it unintended consequences for the S&P 500, leading to it becoming the most concentrated it has been since the dot-com crash of 2000.
- This concentration has also hidden the underlying issues with the members of the S&P where only just over 20% of the stocks were able to outperform the index in recent years.
- Not only via their S&P allocations, but through direct allocations, investors globally are potentially lacking investment diversity, with a dramatic over exposure to a select few tech stocks.
- Importantly, there are signs exist that this new found ‘tech sell-off’ may have more to run.
- Gold usually enjoys ‘safe-haven’ status, meaning that in times of stress in markets, it usually advances. Yet gold, which is coming off one of its best years ever in 2024, fell just over 1% on Monday during the tech sell off.
- Traders indicate that gold contract positions were being liquidated by investors exposed to the tech sector, freeing up capital in markets that were remaining liquid, causing gold to move in a direction opposite to what it normally would have.
- Similarly in Japan, Japanese Government Bond investors began buying JGB’s, another ‘safe-haven’ asset despite the Central Bank raising rates in its most recent meeting.
- Local Japan investors have been buying offshore stocks for the past 7 weeks (per weekly flow data) Since early Dec over Yen2 trillion of flows have left domestic markets into offshore equities making Japanese investors potentially over exposed to US tech (although this only partially reverses prior outflows seen since Oct last year).
- Interconnectivity cannot be ignored in financial markets and whilst moves in recent days may not yet spell the beginning of a sustained move lower, the impact on ‘safe-haven’ assets as a bell weather for broader market implications, cannot be ignored.
- Deepseek’s entrance without question has brought about uncertainty to the entire AI ecosystem at a time where most likely, investors have been ‘jumping on the Nvidia’ bandwagon, to chase even more success.
- To understand what happens next, don’t just watch Nvidia’s share price, rather look for erratic behaviour of other asset classes as a potential indicator that Deepseek’s impact could be more than just the AI ecosystem; and in fact challenge investor appetite and asset allocation globally.
- The geopolitical shifts in this space will also be in focus. Just days before Deepseek’s impact on markets, U.S. President Donald signed an executive order related to AI to "make America the world capital in artificial intelligence."
JAPAN DATA: Local Investors Continue To Buy Offshore Equities
Offshore momentum into local stocks picked up last week. Flows of ¥753bn were the strongest weekly inflows since the first part of October last year. Broader Japan equity momentum has been positive in recent weeks in terms of the Topix, although the Nikkei has struggled. Both indices remain sub late 2024 highs. In the bond space, offshore inflows were positive, but noticeably slower from the prior week. On Friday last week we had the BoJ rate hike, although this was well telegraphed/priced by the market in the lead up to the result. Evidence this week's suggests local investors have picked up the pace of local bond buying, with focus on whether offshore investors follow suit.
- In terms of Japan outbound flows, we saw continued purchases of offshore bonds, for the third straight week, albeit at a reduced pace.
- Japan local investors extended the positive run of flows to offshore equities to the seventh straight week. Still, this only partially reverses the outflows since in Oct/Nov and early December. Since the start of October last year, cumulative outflows have been just over -¥2.3trln. Renewed concerns around AI (amid fresh competition from China) along with some earnings uncertainty has created jitters in global equities since the start of the week. Japan investor trends will be watched in this space.
Table 1: Japan Weekly Offshore Investment Flows
| Billion Yen | Week ending Jan 24 | Prior Week |
| Foreign Buying Japan Stocks | 753.0 | -69 |
| Foreign Buying Japan Bonds | 127.2 | 875.2 |
| Japan Buying Foreign Bonds | 178.0 | 818.4 |
| Japan Buying Foreign Stocks | 217.2 | 489.8 |
Source: MNI - Market News/Bloomberg
OIL: Crude Little Changed Ahead Of Key Events
Oil prices are little changed today after falling around a percent on Wednesday as the Fed left rates on hold and US crude inventories rose. WTI is higher at $72.65/bbl but off the intraday high of $73.07, while Brent is slightly lower at $76.55/bbl following a peak of $76.77. The USD index is down 0.2% which should provide some support to dollar-denominated crude.
- There are a number of key upcoming dates. 25% tariffs against Mexico and Canada are due to be introduced on February 1 but US commerce secretary appointee Lutnick said that they can still be avoided. Over half of US oil imports come from Canada and Midwest refiners are geared for Canada’s heavy crude. The BoC pointed out the uncertainties around trade with the US at its meeting this week.
- OPEC+ meets on February 3 and the US’ plan to increase output is to be discussed, according to Kazakhstan’s energy minister. US President Trump has also told the group to increase production to reduce oil prices. OPEC has delayed plans to begin normalising supply a number of times.
- Later US Q4 GDP, jobless claims, euro area Q4 GDP, December unemployment rate, European Commission January survey and January Spanish CPI print. The ECB is forecast to cut rates 25bp.
Gold Recovers from Move Post Fed Decision.
- Gold is having its worst week for 2025 so far with multiple forces controlling its fortunes.
- As a ‘safe-haven’ asset, gold typically gains in times of volatility and with tariff threats, tech sell-offs and the Fed’s interest rate decision, this week has seen plenty of that.
- Monday saw one of the biggest single day drops in gold for some time as volatility in the tech sector saw gold decline, with some traders indicating that gold positions were being liquidated due equities falling.
- The risk of tariffs is having a push pull effect as President Trump’s threats extend to commodities.
- Gold’s fortunes last year were positively impacted by the expectations for rate cuts yet with the Fed now seemingly on hold, that impetus appears to be waning.
- Opening at US$2,759.36 trended lower for much of the day reaching $2,744.87 around the Fed decision, before recovering a little to finish at $2,759.36 but staged a modest recovery throughout the Asian trading day to reach $2,763.00
PHILIPPINES: Fourth Quarter GDP at +5.2% YoY.
- The Philippines fourth quarter GDP print of +5.2% YoY was in line with Q3.
- The fourth quarter result puts the full year result at +5.6%.
- However, the government has missed its full year target of 6%-6.5%.
- Leading regional peers in cutting rates, the BSP began in August last year and has delivered 75 bps of cuts, despite lingering concerns about inflation.
- In the December release, inflation showed that it remains a concern with both headline and core continuing to rise bringing into question not only the recent rate cuts, but the ability to cut further.
- Whilst the BSP has indicated the need to cut to support growth, there is an acknowledgement that a pause may be necessary given inflationary pressures or the Peso’s performance.
- The Peso has actually outperformed its regional peers over that last three months as the USD has re-asserted itself on tariff uncertainty.
- The Peso is down -0.24% over a three-month time horizon, whereas some of the regional peers are down 2-3%.
- Next week will see the January CPI release and markets will take this as a guide for the next move in rates at the BSP’s meeting on February 13.
- The Philippines 10YR government bond yield peaked in April 2024 at 5.54%, reaching a low of 4.569% in September.
- Yet in the face of interest rate cuts, inflation issues are dominating with yields climbing back to a peak of 5.61%.
INDIA: Country Wrap: India’s Budget to Come.
- Prime Minister Narendra Modi’s government will likely focus on steps to boost consumption in India’s upcoming budget, while sticking to the roadmap of narrowing the fiscal deficit at a time when growth is slowing in Asia’s third-largest economy. (Source: BBG)
- The Reserve Bank of India (RBI) is learnt to have developed ‘supervisory discomfort’ with a couple of small finance banks (SFBs) due to high concentration risks and rising asset quality stress. (source: Economic Times).
- As the Indian government walks a tight rope between fiscal prudence and reviving growth, experts suggest it will likely favor cutting deficit in its annual budget over spending aimed at turbocharging Asia's third-largest economy. (source: CNBC)
- Following Monday’s decline, India’s NIFTY 50 has had a strong week, pairing back losses and has opened up today stronger again by +0.30%.
- INR: the rupee is quiet today with regional peers out, marginally down at 86.57.
- Bonds: bonds are quiet at the open with the 10YR yield down at 6.682%
UP TODAY (TIMES GMT/LOCAL)
| Date | GMT/Local | Impact | Country | Event |
| 30/01/2025 | 0630/0730 | ** |  FR | Consumer Spending |
| 30/01/2025 | 0630/0730 | *** | FR | GDP (p) |
| 30/01/2025 | 0700/0800 | ** |  SE | Retail Sales |
| 30/01/2025 | 0700/0800 | ** |  DE | Import/Export Prices |
| 30/01/2025 | 0800/0900 | ** | SE | Economic Tendency Indicator |
| 30/01/2025 | 0800/0900 | *** |  ES | HICP (p) |
| 30/01/2025 | 0800/0900 | ** |  CH | KOF Economic Barometer |
| 30/01/2025 | 0900/1000 | *** |  IT | GDP (p) |
| 30/01/2025 | 0900/1000 | *** | DE | GDP (p) |
| 30/01/2025 | 0930/0930 | ** |  GB | BOE M4 |
| 30/01/2025 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 30/01/2025 | 1000/1100 | ** |  EU | Unemployment |
| 30/01/2025 | 1000/1100 | * | EU | Consumer Confidence, Industrial Sentiment |
| 30/01/2025 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Q/Q |
| 30/01/2025 | 1000/1100 | *** | EU | EMU Preliminary Flash GDP Y/Y |
| 30/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 30/01/2025 | 1000/1000 | ** | GB | Gilt Outright Auction Result |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Deposit Rate |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Main Refi Rate |
| 30/01/2025 | 1315/1415 | *** | EU | ECB Marginal Lending Rate |
| 30/01/2025 | 1330/0830 | * |  CA | Payroll employment |
| 30/01/2025 | 1330/0830 | *** |  US | Jobless Claims |
| 30/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 30/01/2025 | 1330/0830 | *** | US | GDP |
| 30/01/2025 | 1345/1445 | EU | ECB Governing Council Meeting press conference | |
| 30/01/2025 | 1500/1000 | ** | US | NAR Pending Home Sales |
| 30/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 30/01/2025 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
| 30/01/2025 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
| 31/01/2025 | 2330/0830 | * |  JP | Labor Force Survey |
| 31/01/2025 | 2330/0830 | ** | JP | Tokyo CPI |
| 31/01/2025 | 2350/0850 | ** | JP | Industrial Production |
| 31/01/2025 | 2350/0850 | * | JP | Retail Sales (p) |
| 31/01/2025 | 0030/1130 | * |  AU | Producer price index q/q |
| 31/01/2025 | 0700/0800 | ** | DE | Retail Sales |
| 31/01/2025 | 0730/0830 | ** | CH | Retail Sales |
| 31/01/2025 | 0745/0845 | *** | FR | HICP (p) |
| 31/01/2025 | 0745/0845 | ** | FR | PPI |
| 31/01/2025 | 0855/0955 | ** | DE | Unemployment |
| 31/01/2025 | 0900/1000 | *** | DE | North Rhine Westphalia CPI |
| 31/01/2025 | 0900/1000 | *** | DE | Bavaria CPI |
| 31/01/2025 | 0900/1000 | ** | EU | ECB Consumer Expectations Survey |
| 31/01/2025 | 1000/1100 | ** | IT | PPI |
| 31/01/2025 | 1300/1400 | *** | DE | HICP (p) |
| 31/01/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | *** | US | Personal Income and Consumption |
| 31/01/2025 | 1330/0830 | *** | US | Employment Cost Index |
| 31/01/2025 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 31/01/2025 | 1330/0830 | US | Fed Governor Michelle Bowman |
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