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Daily Market Briefing, Asia Pacific

Treading water

• Holding steady. A quiet start to the week with US bond yields easing back slightly and US equities edging a little higher.• GBP & EUR bounce. UK and EU agreed a new deal on Northern Ireland’s trading arrangements. But GBP continues to face structural headwinds.• Retail sales in focus. AUD has consolidated. After softening into year-end consensus is looking for Australian retail sales to bounce back in January. A quiet start to the week. The adjustment in expectations around how high the US Fed could lift interest rates this cycle and the flow through to bonds have driven markets...

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Another US inflation surprise

• Higher US rates. Strong US inflation data generated another repricing in US rate expectations, propelling the USD even higher.• Fed needs to do more. Sticky inflation means the US Fed has more work to do. Positive US data can reinforce the upswing in US yields.• AUD slump. AUD is now ~6% below its early-February peak. Will this weeks Australia/China data provide an offset to the stronger USD? The outlook for US Fed policy continues to drive markets. US rate hike expectations took another leg higher on Friday, pushing US bond yields back up towards their peaks. This in turn...

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USD recovery continues

• Mixed markets. US equities are a little stronger, with US bond yields slightly lower. However, the USD remains firm.• US data focus. Initial jobless claims remain low, a sign the labour market is still tight and that the US Fed has more work to do.• AUD pressure. AUD slipped below 0.68 overnight before recovering modestly. We see further near-term downside on the back of a stronger USD. While market moves have generally been modest, underlying themes have remained the same, especially in FX markets. US equities whipped around overnight, but have ended the day in positive territory (S&P500 +0.6%),...

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AUD underperformance

• Higher for longer. The Fed meeting minutes reaffirmed a hawkish bias. Elevated US interest rate expectations are supporting the USD.• AUD pressure. Weaker than expected wages data has seen RBA rate hike bets pared back. Relative differentials point to further AUD weakness.• AUD crosses. European growth indicators continue to surprise, pointing to a lower AUD/EUR. AUD/NZD weighed down by a ‘hawkish’ RBNZ. A mixed night across the major markets, with European and US equities consolidating and bond yields down a few basis points. After hitting a fresh 3-month high the US 10-year bond yield has eased back slightly, but...

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Rates rethink

• Higher bond yields. Stronger services PMI data in Europe and the US has seen interest rate markets adjust further. This has weighed on risk sentiment.• USD firm. The lift in US yields is supporting the USD. AUD has drifted back. Locally, wages data is released today.• AUD/NZD in focus. RBNZ announcement today. Will the RBNZ stay the course and hike by 50bps, or will it hold back given the cyclone impacts? A negative night for markets with investor sentiment shaken by another jump in bond yields as positive economic data fueled expectations central banks, particularly the US Fed, have...

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