US: MNI POLITICAL RISK - Trump Dials Down Iran Tensions

Marginal hawkish readthrough from the uptick in the weekly ADP employment reading (+16,250 employed), with proximity to the NFP report (due at 08:30 NY/13:30 London) limiting reaction.

• 6bp of easing priced into FOMC-dated OIS for January, little changed vs. pre-ADP levels. 55bp of cuts priced for the totality of ’26 vs. 56.5bp pre-ADP.
• SOFR futures last -1.0 to +1.0 vs. -1.0 to +2.0 heading into ADP. Implied terminal rate pricing 3.135%, flat vs. pre-ADP levels.
• A reminder that it will be an unusual payrolls release this month, with two months of data for the establishment survey (payrolls, hours worked and wages) for October and November plus a single report for the household survey (unemployment and participation rates) in November.
• The BLS wasn’t able to conduct a household survey for October under the government shutdown and will have had to run the November survey shortly after the government re-opened.
• Nonfarm payrolls growth is seen at 50k in November after slipping circa -25k in October, with the latter coming from a wide range of expectations for the impact of DOGE deferred resignations.
• The unemployment rate has been a better gauge of underlying labor market health than payrolls growth but Fed Chair Powell has warned of potentially “very technical” factors at play in this household survey.
• Expect continued sensitivity to any surprises here with the labor market at the forefront of policymaker concerns, although the December report due Jan 9 could be more influential for January FOMC views.

• Treasury futures dipped/rebound - still hold overnight range after ADP NER Pulse weekly employ +16,250 vs. +4,750 prior
• Currently, TYH6 trades 112-11.5 (+2.5) vs. 112-09 low / 112-14 high.
• Curves mildly flatter: 2s10s -.598 at 66.071, 5s30s -.780 at 111.273.
• Bbg US$ index near lows: BBDXY at 1203.90 -2.14.

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Executive summary:

• Vice President JD Vance delivers remarks in Alburtis, PA, at 10:00 ET 15:00 GMT on the topic of ‘making America affordable again’.
• Efforts to extend tax credits under the Affordable Care Act continue in both the House and the Senate apace, even though, given the short deadlines, these subsidies will expire at year’s end before any deal will be in place.
• Secretary of War/Defense Pete Hegseth, Secretary of State Marco Rubio and Chair of the Joint Chiefs of Staff Gen. Dan Caine are due to deliver classified briefings to the Senate and the House regarding the ongoing military actions in the Caribbean and the eastern Pacific.
• Two days of talks in Berlin between Ukrainian officials and a US delegation led by presidential envoy Steve Witkoff and President Trump’s son-in-law Jared Kushner concluded on 15 December.  Post-meeting comments from European, US and Ukrainian politicians and officials, at least at first glance, appeared positive towards progress on a peace deal framework.
• Poll of the Day: Economic issues and splits in base push GOP supporters back towards 'traditional Republican' stances.