EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Track Weekly Gains

• General dollar weakness has been extending ahead of the NY crossover Wednesday, prompting the DXY to print fresh pullback lows below 99.00 in recent trade. This extends the two week move to just shy of 1.5%, with the index stalling at touted 100.48 resistance in November. As noted, the more optimistic risk backdrop as well as the Hasset Fed expectation rates angle continues to weigh on the greenback.
• Importantly, the DXY is threatening a close below the 50-day exponential moving average, the first daily close below this average since early October, threatening some bullish signals across a number of other G10 currencies. While the currency optimism is being led by GBP and Scandinavian FX so far, it’s worth highlighting that USDCAD is approaching an important support, the base of the bull channel drawn from the July 23 low. The support intersects today at 1.3935.
• A clear break of the channel base would highlight a stronger bear cycle. Downside targets would include 1.3888, the Oct 29 low and a key support, followed by 1.3833, the Sep 24 low.
• A wide set of US data is scheduled for today, highlighted by the ISM Services PMI. For Canada, the November composite PMI is scheduled, although focus will be very much on this Friday’s employment report.

New purchase mortgage applications extended their recent push higher in contrast to a further rolling over in refi activity, offering scope that recent cautious optimism for existing home sales might have continued in the near-term. 

• MBA composite applications fell -1.4% (sa) last week after 0.2%, essentially two weeks of little change for the volatile series, but new purchases again outperformed refis in another update where the details are more interesting than the headline suggests.
• New purchase applications increased 2.5% last week after 7.6% the week prior, maintaining their highest level since Feb 2023 after what is now an 18% increase since mid-Oct.
• In contrast, refi applications fell -4.4% after -5.7% and are down a cumulative 14% over the same period since mid-Oct for their lowest level since early September.
• Putting these moves into context, composite applications are at 65% of 2019 levels, new purchases still only at 72% and refis at 60%.
• The refi drop was a little more surprising in light of an 8bp decline in the 30Y mortgage rate in a move that mostly offset a 10bp increase over the previous four weeks.
• Mortgage swap spreads were little changed on the week having recently widened slightly but still at low levels by recent standards. The spread to 10Y swap rates held at 273bp having recently troughed at 267bp for its lowest since Apr 2022, but is still below the average 285bp in Q1 and a rough range of 300 +/-5bp for some months after reciprocal tariff announcements in April prompted more cautious lending standards.

• Treasury futures extend the top end of the overnight range, no particular headline driver as markets await ADP private employment data (monthly) at 0815ET.
• Currently, TYH6 trades 113-03 high (+6.5), initial technical resistance above at 113-11/22+ High Dec 1 / High Nov 25, key resistance and bull trigger at 113-29+, the Oct 17 high.
• Curves mildly mixed: 2s10s -.473 at 56.968, 5s30s +.679 at 109.546.