USD: Broader USD selling is emerging

Jan-15 07:52
  • Some broader USD selling is driving the bounce in Cable, taking its cue from the bid in Bond futures, US Tnotes (TYH5) breaks the overnight high, and eye a test to 107.18+, Yesterday's high.
  • USDJPY is just finding support at the mentioned 156.92, was Monday's low, so far printed a 156.98 low.

Historical bullets

STIR: SONIA Markets Around Late Friday Levels, ~75bp Of '25 BoE Cuts Priced

Dec-16 07:51

SONIA markets little changed, with the recovery in the long end of core global FI markets unconvincing at this stage.

  • Futures hover at/around late Friday lows, last flat to -3.0.
  • BoE-dated OIS also little changed, showing essentially 0 odds of a movement in rates later this week, followed by 20bp of cuts through February, 27.5bp of easing through March and 76bp of cuts through ’25.
  • December '25 pricing hasn't been able to push through 3.5x 25bp cuts (88.75bp) in recent weeks, given the BoE's preference for gradual easing and the still sticky inflation backdrop.
  • Labour market (Tuesday) and CPI (Wednesday) data will provide the major domestic inputs ahead of this week's BoE decision.
  • Today’s flash PMI data could also impact the short end.
  • We still look for BoE cuts in February & May.
  • To us, the most realistic dovish outcome at this week’s meeting would probably be 3 dovish dissents voting for a cut (with rates remaining unchanged), although there may be as little as one dovish dissenter (Dhingra). More on that and the tier 1 data to come in our usual run of previews.
  • Goldman Sachs recommend closing SFIZ4/Z5 flatteners for profit and moving to an outright long in SFIZ5
  • They believe that the case for steady BoE cuts is becoming clearer, pointing to last week’s GDP & manufacturing data.

BoE Meeting

SONIA BoE-Dated OIS (%)

Difference vs. Current Effective SONIA Rate (bp)

Dec-24

4.695

-0.5

Feb-25

4.502

-19.8

Mar-25

4.426

-27.4

May-25

4.261

-43.9

Jun-25

4.179

-52.1

Aug-25

4.057

-64.3

Sep-25

4.034

-66.6

Nov-25

3.967

-73.3

Dec-25

3.939

-76.1

STIR: 117.5bps of Easing Priced Through End '25; Flash PMIs Headline Today

Dec-16 07:48

ECB-dated OIS price ~116bps of easing through the end of next year, corresponding to a deposit rate of just over 1.8%. That’s over 10bp more hawkish than before the ECB’s December decision, where rates were cut by 25bps and the bank’s pledge to keep policy “sufficiently restrictive” was removed.

  • OIS markets more than fully price 25bp cuts at the January and March ECB gatherings, with 100bps of easing priced through June 2025. Meanwhile, Euribor futures are flat to -2.0 ticks through the blues today.
  • Over the weekend, the hawkish Holzmann suggested rates to stimulate the economy would not be the right approach. He noted on Friday that neutral rates are “around 2%”.
  • Kazaks also expressed caution with the idea of taking rates below neutral (in his view, “closer to 2% than to 3%”), but remains open to the idea of discussing larger (than 25bp) reductions.
  • ECB President Lagarde speaks at a conference on “Annual Economics Conference: Pillars of Resilience Amid Global Geopolitical Shifts” today. Her keynote speech is scheduled for 0815GMT/0915CET.
  • The December flash PMIs are also due today, with French data due at 0815GMT, followed by German (0830GMT) and Eurozone-wide (0900GMT) prints. 

 

Meeting DateESTR ECB-Dated OIS (%)Difference Vs. Current Cut-adjusted Effective ESTR Rate (bp)
Jan-252.631-28.6
Mar-252.321-59.6
Apr-252.085-83.2
Jun-251.922-99.5
Jul-251.844-107.4
Sep-251.793-112.4
Oct-251.773-114.4
Dec-251.757-116.1
Source: MNI/Bloomberg. 

 

 

EQUITY TECHS: E-MINI S&P: (H5) Bullish Trend Structure

Dec-16 07:34
  • RES 4: 6184.00 1.236 proj of the Aug 5 - Sep 3 - 9 price swing
  • RES 3: 6200.00 Round number resistance   
  • RES 2: 6194.19 1.236 proj of the Aug 5 - Sep 3 - 9 price swing   
  • RES 1: 6178.75 High Dec 6 and the bull trigger       
  • PRICE: 6129.75 @ 07:21 GMT Dec 16
  • SUP 1: 6097.76 20-day EMA      
  • SUP 2: 6043.00/6004.31 Low Nov 26 / 50-day EMA 
  • SUP 3: 5970.25 Low Nov 21  
  • SUP 4: 5921.00 Low Nov 19

The S&P E-Minis contract remains bullish and the latest shallow pullback is considered corrective. Recent gains confirm a resumption of the uptrend and signal scope for a continuation near-term. Note that moving average studies are in a bull-mode set-up, highlighting a dominant uptrend and positive market sentiment. A resumption of the trend would open 6145.26, a Fibonacci projection. Initial support to watch lies at 6097.76 the 20-day EMA.