OIL: Bias for Higher Prices on US Iran Threats
- The Trump administration has discussed whether to seize Iranian oil tankers involved to pressure Tehran but have held off, concerned about the regime's near-certain retaliation and the impact on global oil markets, U.S. officials said. (per BBG)
- President Trump has said that the leadership in Tehran “want to make a deal. I think they’d be foolish if they didn’t,” according to remarks to Fox Business. Wednesday in the US he is due to meet with Israeli Prime Minister Benjamin Netanyahu at the White House to discuss the situation with oil investors looking for indications as to the next steps.
- The American Petroleum Industry reported inventories swelled by 13.4 million barrels last week, which would be the largest jump in barrel terms since November 2023 if confirmed. (per BBG)
- WTI edged up +0.8% today to US$64.49 bbl, having traded in a tight range of $64.15 - $64.63.
- Brent has edged up +0.7% today to US$69.30 bbl, having traded in a tight range of $69 - $69.46.
- Longer term trends driven by over supply are likely to be ignored in the short term. With momentum indicators broadly neutral, oil prices are biased to rise on US Iran headlines and Wednesday in the US could bring further indications on the next steps in negotiations.
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EUR: EUR/USD - Catches A Bid In Asia, Look For Sellers Back Toward 1.1665-95
The Friday night range was 1.1618 - 1.1660, Asia is currently trading around {EURUSD Curncy}. The pair is getting an early bounce in Asia as the USD gets sold on reports the FED is to potentially be indicted. We are firmly back in the 1.1450-1.1850 range which dominated the last 6 months of the year and we need a catalyst to get a break and some sort of a trend going again. It will be interesting to see how much of a headwind this news brings for the USD as it was just looking to build a head of team to test higher. On the day look for sellers to reemerge in EUR/USD back toward the 1.1665-1.1695 area.
- CFTC Data of last week shows Asset Managers slightly increasing their long positions in the EUR, +424 424(Last +416 483). The Leveraged community reduced their own longs slightly which have only recently been built up, +22279(Last +24505).
- The EUR/USD Average True Range for the last 10 Trading days: 44 Points
Fig 1 : EUR CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
AUSSIE BONDS: AU-NZ 10Y Differential At FV
The AU–NZ 10-year yield differential currently sits at +28bps, around 10–15bps below its recent peak of approximately +40bps, the widest since October 2020.
- The widening in the long-end spread has been mirrored by shifts in market expectations for the policy rate differential over the next year, as reflected in the AU–NZ 1-year forward 3-month swap (1Y3M) spread.
- A simple regression analysis of the AU-NZ 10-year yield differential against the AU-NZ 1Y3M spread over the past two years shows that the 10-year differential is around fair value based on the regression model.
Figure 1: AU-NZ: 10-Year Yield Differential Vs. FV
Source: Bloomberg Finance LP / MNI
USD: BBDXY - Knee-Jerk Lower To Start The Week On FED News
The BBDXY range Friday night was 1209.18 - 1213.00, Asia is currently trading around {BBDXY Index}. The USD was looking like it was reestablishing some upward momentum to start the year, but this morning's news of possible indictments on the FED have put a dent in that for now. The market's perception is that this is clear political pressure being brought to bare on the FED and so has worrying implications for its so-called independence. The USD has understandably had a knee-jerk lower in Asia, the question is if that move is enough considering what's at stake. On the day, I suspect rallies could remain heavy in the short-term as the market tries to work through what this means. First support is back between 1205-1207, the USD has lacked any clear direction for at least 6 months now and the wider 1185-1230 range looks set to continue for now. This lack of a trend is being reflected in the CFTC data which shows very little positioning in the USD to start the year.
- The Market Ear on X - "US flip from exceptionalism to expansionism is best case for a contrarian US dollar long" (Hartnett)
- Barchart on X - “Google Searches for Dollar "Debasement" soared last quarter to the highest level in history.”
- CFTC Data last week shows Asset managers turning slightly entering the first quarter, -1318(Last +1168). The Leveraged community has turned slightly long after rapidly reducing its short into the end of year, +821(Last +45).
- The BBDXY Average True Range for the last 10 Trading days: 381 Points
Fig 1: USD Index CFTC Data
Source: MNI - Market News/Bloomberg Finance L.P
