STIR: Markets Mostly Look Through Noisy Claims Data

Dovish reaction in the USD front end on the softer-than-expected weekly ADP employment data. 

• Fed Funds price 17bp of easing for December, 27.5bp through January, 38bp through March, 44.5bp through April and 58.5bp through June, 1.0-2.5bp more dovish vs. pre-data levels.
• SOFR futures now 0.25-4.5 higher on the day, but off initial post-data highs.
• SOFR-implied terminal rate pricing at 3.075% vs. ~3.10% into the release. This level is in the line with the norms witnessed month-to-date and compares to the multi week range of ~2.80-3.20%.
• ADP noted that “not only is the pace of employment growth shifting lower, it’s doing so in a jagged path across occupations, industries, and geographies. Going forward, instead of being a stable constant, the break-even rate more likely will be constantly moving”.
• Volatility in such norms can increase market reaction to labour market data and makes the Fed’s assessment of underlying conditions much more difficult.

• The ADP release weighing on the USD in recent trade, allowing the USD index to plumb new pullback lows below 99.40. Most notable has been the moved for USDJPY, which extends its most recent selloff to around 40 pips.
• Downside momentum picked up on a break of the overnight lows, below 154.00, with momentum exacerbated as broader coverage of the ADP release gained traction. We have pointed out that USDJPY continues encounter some resistance above the 154.00 handle, potentially registering an eighth daily high between 154.14-154.49, bolstering the short-term significance of this resistance cluster. First important support to watch lies at 152.70, the 20-day EMA.
• Topside momentum for EURUSD sees the pair break above Friday’s high and print a 1.1600 high. The 50-day EMA intersects at 1.1627, and a breach would alter the short-term bearish theme.
• It’s worth noting that GBPUSD has now full reversed the UK labour market data inspired move, however, sterling weakness remains evident through the cross, with EURGBP maintaining its position back above 0.88 for now.

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• President Donald Trump will participate in a Veterans Day ceremony at 11:00 ET 16:00 GMT.
• Secretary of State Marco Rubio will join a G7 meeting in Canada today, becoming the most prominent US official to visit the country since Trump terminated trade talks last month.
• The Senate passed a funding package to end the longest federal government shutdown in US history. The House of Representatives could pass the package as soon as tomorrow.
• China took another step towards fulfilling the terms of the US-China trade deal, adding thirteen fentanyl precursors to a list of controlled exports.
• The US is nearing trade deals with India and Switzerland.
• A nonpartisan budget watchdog found Trump's tariff cheques would cost far more than tariffs are projected to bring in.
• A federal judge in Utah ruled in favour of a 2026 Congressional map that is likely to net Democrats an additional House seat.
• The White House was 'blindsided' by Trump's 50-year mortgage proposal.
• Electricity supply is struggling to keep up with AI data centre demand.
• The Senate Agriculture Committee released a draft of its crypto market structure bill.
• The US military carried out two more lethal strikes on alleged drug boats.
• The first phase of the Gaza peace deal nears its end without clarity on progressing to the next phase of the agreement.
• The Trump administration paused sanctions on Syria after a landmark White House meeting.
• Poll of the Day: Americans are increasingly convinced the economy is moving in the wrong direction.

Full Article: US DAILY BRIEF