JPY

• Mixed markets. US yields & the USD Index lower. But AUD underperforms as concerns about China’s economic trajectory remain in place.• China deflation risks. China CPI/PPI inflation underwhelmed, another sign the post-COVID recovery is faltering. Measures are needed to reinvigorate demand.• US inflation. US CPI (released Weds night AEST) is a focal point. Base-effects point to a further step down in inflation. This could exert more pressure on the USD. A relatively quiet start to the new week across markets. Overnight, European and US equities posted modest gains (S&P500 +0.2%), oil prices gave back some ground (WTI crude -0.9%),...

• US payrolls. Non-farm payrolls came in lower than expected. But other detail in the report shows that the US labour market is still tight.• Softer USD. The USD weakened. US CPI in focus this week. Base-effects point to a further step down in inflation. This could exert more pressure on the USD.• AUD rebound. AUD has bounced back. In addition to the US CPI, RBA Governor Lowe speaks on Wednesday. We think the AUD may recover more ground. A tumultuous week for markets was brought to a close by the release of the US labour market report on Friday....

• Rates reprice. Stronger than expected US & European data jolted bond yields higher. US 2yr yield spiked to a cyclical high before settling near ~5%.• AUD struggles. AUD remains on the backfoot. Higher rates for longer is a negative for global growth. Policy expectations are also against the AUD.• US payrolls. US non-farm payrolls data released tonight. Another solid report could reinforce the upswing in global interest rate pricing. A case of good economic news is bad news for markets overnight. Robust data jolted markets into re-evaluating how high interest rates may need to go to take the heat...