FOREX: Greenback Touches New Multi-Month High as EUR, JPY Still Hindered
Oct-08 15:55
- The US government shutdown continues apace, with very little sign of any near-term breakthrough, raising the risk of missed paycheques for many furloughed workers. The dollar index added to recent gains, putting the greenback to its highest levels since early August - contrasting with more fragile, political risk-tripped, trade in the EUR and JPY.
- A stellar session for FX options volumes, with Tuesday trade also highly active. Tuesday saw over $120bln notional cross the DTCC, rivalling the busiest sessions of September - and today's trade so far looks similar.
- Takaichi's LDP victory has really supported the vol curve - particularly in the front-end and adding to inverting pressures. This reflects growing concerns of a further USDJPY rally - or potentially official intervention to cool the sharp JPY weakness, although we noted earlier today that official language & price action is yet to mirror historical pre-intervention patterns. The scale and pace of the JPY move this week will be triggering speculation of official intervention in FX markets which, if confirmed, would be the first formal intervention since July last year.
- EUR/GBP plumbed a new October low, pressing prices through the 50-dma of 0.8676, which had successfully provided intraday support on three occasions over the past month. The fade in EURGBP runs counter to the consensus view for further upside in the cross. Despite falling expectations for BoE easing for the rest of this
year, most had seen EURGBP as the better expression for fiscal-tripped GBP weakness given US uncertainty and Fed easing, raising focus on any correction toward mid-Sept lows of 0.8633 and 0.8562, the 50% retracement for the May-Jul upleg. - German trade balance stats are the calendar highlight Thursday. Weekly jobless claims data was set to be released, but the ongoing US government shutdown will keep that data under wraps for now. That said, private sector proxies will likely continue to circulate, keeping the focus on alternative market measures for US economic strength.
- The central bank speak schedule remains particularly busy, with Fed's Goolsbee, Bowman, Barr, Kashkari & Powell all set to make various appearances, while ECB's Villeroy & Escriva, RBA's Bullock and BoE's Mann all speak.
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US DATA: NY Fed Consumer Survey: More Evidence Of Low-Hiring Labor Market (2/2)
Sep-08 15:55
On the labor market/household finance side of the NY Fed's Survey of Consumer Expectations, August's findings were relatively steady compared with July, but there were a couple of negative standouts that will add to concerns over the health of the US labor market which still looks best characterized as "low hiring, low firing".
- The main standout was in the category of "Mean probability of finding a job in the next three months if job lost today": this dropped to an all-time survey low 44.9% from 50.7%. The previous low was 46.2%, in 2020. While all demographics (ages, incomes etc) saw a deterioration in August vs July, it was most notable in those educated to high school level or less (plummeting by the most in a single month in survey history, from 51.1% to 36.0%).
- The "macro" question of whether US unemployment will be higher one year from now ticked up (mean probability 39.1% from 37.4%) which is slightly elevated from a historical perspective but below the 44% seen in March/April's tariff uncertainty. Movement various categories were in a slightly softer direction, including: mean probability of leaving job voluntarily, earnings growth expectations, probability of changing primary residence.
- Household income and spending growth expectations and current financial situation metrics were roughly steady on aggregate, though there was an uptick in debt delinquency expectations.
LOOK AHEAD: Tuesday Data Calendar: BLS Survey Revision, 3Y Note Sale
Sep-08 15:44
- US Data/Speaker Calendar (prior, estimate)
- 09/09 0600 NFIB Small Business Optimism (100.3, 100.5)
- 09/09 1000 BLS Prelim Benchmark Revision to Establishment Survey Data
- 09/09 1130 US Tsy $85B 6W bill auction
- 09/09 1300 US Tsy $58B 3Y Note auction (91282CNY3)
ITALY AUCTION PREVIEW: On offer this week
Sep-08 15:42
MEF has announced it will be looking to sell the following at its auction this Thursday, September 11:
- E2.75-3.25bln of the 2.35% Jan-29 BTP (ISIN: IT0005660052)
- E1.25-1.50bln of the 4.00% Nov-30 BTP (ISIN: IT0005561888)
A reminder that "the auctions of 7-year BTPs and BTPs with a maturity longer than 10 years, scheduled for the same day will not be held due to the recent issuance through a syndicate."
