OPTIONS: FX Vols on Front Foot, With Risk Proxies Seeing a Particular Focus
Mar-10 11:35
- The bout of risk-off stemming from the SVB contagion concerns is making waves across FX vol markets, with the 3m - 1y section of the G10 vol curve notched higher. Gains are led by risk proxy currencies and most notably AUD: AUD/USD 1m implieds have been marked higher to 13.5 points and the highest level since mid-January, potentially capturing any more of the extended fallout from the global banking sector as well as the Mar22 Fed decision.
- The price action is mimicked in other risk-sensitive currencies, with USD/MXN vols clearing the early December highs to touch the highest levels since late September.
- At the extreme short-end, AUD/USD, USD/ZAR and USD/CAD overnight vols have built the largest vol premium ahead of the NFP release later today, suggesting these currency pairs could be a focus in any market reaction to the jobs report.
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OUTLOOK: Price Signal Summary - Bear Threat In Gold Remains Present
Feb-08 11:32
- On the commodity front, the trend condition in Gold is bearish for now and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Thursday and Friday last week and sights are on the 50-day EMA, at $1854.4. This average represents a key support and if breached, would strengthen a bearish case and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, has been defined at $1959.7, the Feb 2 high.
- In the Oil space, a sharp sell-off last Friday in WTI futures reinforced bearish conditions. The move lower Monday resulted in a print below $72.74, the Jan 5 low and a key support. A clear break of it would strengthen the bearish theme and expose $70.56, Dec 9 low and a bear trigger. Prices have recovered this week but gains are considered corrective. Initial firm resistance to watch is at $78.34, the 50-day EMA. It has been pierced, a clear break would ease bearish pressure.
US OUTLOOK/OPINION: Rabobank Lift Terminal 50bps, Don’t Rule Out Higher
Feb-08 11:28
- A few analysts including JPM and UBS chalked Powell’s remarks down to further data dependency.
- However, on top of MS adding a May hike to be more in line with market pricing (but keeping a 25bp cut in Dec before 200bps of cuts through end-2024), Rabobank have revised up their terminal 50bps higher.
- They see a terminal range now at 5.25-5 held through 2023 and don’t rule out a top end reaching 6% given wage-price dynamic concerns, although would need to see more data before making that their baseline.
STIR FUTURES: Little Change Post Powell, Three ‘New’ Speakers Ahead
Feb-08 11:23
- Fed Funds implied hikes little changed from levels before and ultimately after Powell yesterday.
- 25.5bp for Mar (-0.5bp on the day), cumulative 45bp for May (-0.5bp), 55bps to terminal 5.14% Jul (-1.5bp) and 33bp of cuts to 4.80% Dec (-2.5bp).
- Fedspeak: Six speakers lined up with first post-FOMC/payrolls appearances from voters Williams, Cook and Waller (latter with text).
