BRAZIL: DI Swaps Curve Shifts Lower, Q4 GDP On Friday
Mar-05 18:10
- DI swap rates have rallied Wednesday, as expected, as the market has reopened following the carnival holiday, with yields down by 15-20bp through much of the curve. The move comes amid a more buoyant risk backdrop today, as hopes rise of a tariff deal between the US, Mexico and Canada and robust PMI data in February, which may reduce pressure on President Lula to announce further measures to support the economy.
- The move only unwinds Friday’s gains, however, and yields remain over 50bp above last week’s lows, as uncertainty continues surrounding a potential cabinet reshuffle and the fiscal outlook ahead of Congress’ vote on the 2025 budget later this month.
- Gleisi Hoffmann’s appointment as institutional relations minister also adds uncertainty to the policy outlook, given her criticism of the central bank and fiscal austerity.
- On the data front, attention now turns to Friday’s Q4 GDP data, which are expected show a deceleration in quarterly growth on the back of a slowdown in consumption and decline in investment, taking full-year growth to 3.5%. In today’s Focus survey, analysts' forecasts still point to a slowdown in GDP growth this year, to around 2%.
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US TSY FUTURES: Heavy Buying on Latest Tariff Headlines
Feb-03 18:08
- Treasury futures see heavy round of buying last couple minutes, over 50,000 TYH5 from 109-02 to -05.5, pushing total volume to 2.2M for the contract, following the latest tariff headlines where Pres Trump said he "had good talk with Trudeau".
- Less positive, Trump follows with "E’RE NOT TREATED WELL BY CANADA WE DON’T NEED CANADIAN CARS, LUMBER, AGRICULTURE WOULDN’T MIND MAKING OUR CARS IN THE UNITED STATES" Rtrs.
- "HAVEN’T AGREED WITH MEXICO ON TARIFFS YET" Bbg after earlier headlines noted delay of tariffs to early May.
- The TYH5 contract trades 109-05 last, off early session high of 109-15.5, through initial technical resistance of 109-10.5 (50-day EMA), next level 109-31 (High Dec 18).
EURUSD TECHS: Fresh Cycle Low
Feb-03 18:00
- RES 4: 1.0533 High Jan 27 and a key resistance
- RES 3: 1.0450 50-day EMA
- RES 2: 1.0350 Low Jan 31 and a gap high on the daily chart
- RES 1: 1.0335 High Feb 3
- PRICE: 1.0304 @ 16:44 GMT Feb 3
- SUP 1: 1.0138 1.764 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 2: 1.0031 2.00 proj of the Sep 25 - Oct 23 - Nov 5 price swing
- SUP 3: 1.0000 Psychological round number
- SUP 4: 0.9947 76.4% of the Sep 28 ‘22 - Jul 18’23 bull leg
EURUSD is trading in a volatile manner. Monday’s gap lower and fresh cycle low, highlights a resumption of the downtrend. Moving average studies are in a bear-mode position and attention is on 1.0138, the 1.764 projection of the Sep 25 - Oct 23 - Nov 5 price swing. Clearance of this level would open 1.0031, the 2.00 projection. Initial resistance is at 1.0335, Monday’s intraday high and a gap low on the daily chart.
CANADA: Intermeeting BoC Cut Prospects Look Unlikely [2/2]
Feb-03 17:54
- i) Any intermeeting cut would likely be larger than 25bp otherwise it’s hard to justify, but such a move when coming as a complete surprise would risk a further slide in the Canadian dollar as investors see the BoC panicking. USDCAD has pulled back to 1.4600 (~100 pips of which came following the Mexico news) after almost touching 1.48 overnight for highs since 2003.
- ii) The Bank has in its words cut a “substantial” 200bp since June which have started to support the economy. It’s taken the overnight rate target to 3% for within the 2.25-3.25% estimated range for neutral (a rate that has a chance of being revised higher again in the April MPR when it’s set for its annual estimation).
- iii) Last week’s 25bp cut was painted as a risk management approach in the face of tariff uncertainty whilst Governor Macklem also pointed to a stepping up of outreach activities with businesses and households to see how they were responding to any potential tariffs in real time (MNI BoC Review from the Wed decision here:).
- iv) Canadian government retaliation keeps an inflation angle at play, pushing for 25% tariffs on C$155bn of US goods (C$30bn effective Tue before the remaining C$125bn in three weeks to allow businesses time to prepare).
