MNI US MARKETS ANALYSIS - GBP Fragility Evident

Highlights:

• GBP looks fragile as risk-off pervades in first session of the year
• Spot gold narrows in on resistance
• Weekly jobless claims and PMIs a calendar highlight, but no Fedspeak until tomorrow

US TSYS: Tsys Kicking Off 2025 with Lower Yields, Curves Near Highs

• Treasuries unwinding New Years Eve weakness, futures contracts kicking off 2025 near late overnight highs: the Mar'25 10Y contract +10.5 at 109-02.5 vs. 109-04 high. Curves mixed: 2s10s -1.531 at 30.998, 5s30s +.515 at 40.266; 2Y yield -.0269 at 4.2147, 10Y yield -.0382 at 4.5308%.
• Treasury futures remains bearish despite the intraday rally into the Monday close w/ short-term gains considered corrective below the 110-03+ 20-day EMA. The 10Y contract has traded through key short-term support and the bear trigger at 109-02+, the Nov 15 low. The breach confirms a resumption of the downtrend and opens 108+12+, a Fibonacci projection.
• Data ahead (prior, est): MBA Mortgage Applications (-0.7%, --) at 0700ET, Initial Jobless (219k, 221k) & Continuing Claims (1.910M, 1.890M) at 0830ET, S&P Global US Manufacturing PMI (48.3, 48.3) at 0945ET, Construction Spending MoM (0.4%, 0.3%) at 1000ET.
• US Treasury bill supply: $85B 4- & $80B 8W bill auctions at 1130ET, $64B 17W bill auction at 1300ET.

EGB FUNDING UPDATE: Ireland Q1 issuance schedule

The NTMA has announced that it looks to hold one syndication and one auction (on 20 March) during Q1-25.

• There is already a May-35 IGB outstanding (that was originally issued as a 15-year bond), so we see around a 50% probability that this year's new issue is not a 10-year with 15-year and 30-year both possibilities.

FOREX: Markets Await First Major Directional Cue

• Currency markets are starting 2025 by buying AUD and NZD, while selling CAD, GBP and the USD. Headlines remain few and far between here, as markets await the first true price action signals of the year.
• GBP/USD's run below 1.2500 on relatively little news or cross market flow should be seen as a sign of fragility - particularly as it exposes the bear trigger at 1.2476. Weakness through here puts the rate at the lowest level since May and would resume the downtrend posted off the September high.
• JPY had traded as the firmest performer in G10, possibly on the withdrawal of Russian gas transit through Ukraine, however the only muted response in energy prices across Europe has tempered any broader reaction.
• Outside of President-Elect Trump's inauguration in 3 weeks time, the first priority for markets looks to be a possible BoJ rate hike on January 24th - for which market pricing is steady at a 40% chance for a 25bps rate rise.
• Year-ahead Vols remain very firm. EUR/USD one-year implied volatility finished 2024 north of 7.8 points for the highest year-end reading since 2022 and continues to trend higher for the most persistent rally since Russia invaded Ukraine that year.
• Weekly US jobless claims numbers and the final PMI releases across the US, Canada and Europe mark the highlights - there are no central bank speakers of note, for which markets will have to wait until Friday for Fed's Barkin, ECB's Lane.

GBP/USD's Show Below 1.25 is Sign of Fragility

• GBP/USD's run below 1.2500 on relatively little news or cross market flow should be seen as a sign of fragility - particularly as it exposes the bear trigger at 1.2476. Weakness through here puts the rate at the lowest level since May and would resume the downtrend posted off the September high.
• Having started the European session pretty flat, GBP is now the poorest performer in G10, keeping the rate within range of today's larger options interest at 1.2500 (£200mln) and $1.2510 (£398mln) which could draw focus following the weekly jobless claims.
• GBP vols firmed into year-end and remain at well-elevated levels. 3m vol north of 8 points has been supported by the contract capturing Trump's inauguration in just over two weeks time, as well as the next two BoE decisions - across which markets price ~80% likelihood of the MPC resuming the easing cycle.
• Any firming of rate cut pricing could follow a weak turn out from the Jan15 Dec CPI print - and would call into question the sustainability of the Q4 weakness for EUR/GBP. Price remains below the 50-dma of 0.8315 but a break and hold above here would be bullish reversal signal.

EQUITIES: Bear Threat in E-Mini S&P Remains Present

A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the recent move down highlights a corrective phase. Despite the latest bounce, a short-term bear threat remains present - for now. Key short-term support has been defined at 4829.00, the Dec 20 low. A break of it would confirm a resumption of the bear cycle and open 4800.87, a Fibonacci retracement. Initial firm resistance is at 4939.00, the Dec 19 high. A bear threat in the S&P E-Minis contract remains present and the latest move down highlights the end of the recent Dec 20 - 26 corrective bounce. An extension lower would expose 5866.00, the Dec 20 low and a key short-term support. Clearance of this level would strengthen a bearish theme. Initial firm resistance to monitor is 6107.50, the Dec 26 high. A break of this level is required to open key resistance at 6178.75, the Dec 6 high.

• Elsewhere, in China the SHANGHAI closed lower by 89.202 pts or -2.66% at 3262.561 and the HANG SENG ended 436.63 pts lower or -2.18% at 19623.32.
• Across Europe, Germany's DAX trades higher by 31.1 pts or +0.16% at 19941.42, FTSE 100 higher by 4.26 pts or +0.05% at 8176.74, CAC 40 down 48.63 pts or -0.66% at 7332.73 and Euro Stoxx 50 down 21.84 pts or -0.45% at 4874.38.
• Dow Jones mini up 146 pts or +0.34% at 43033, S&P 500 mini up 28.5 pts or +0.48% at 5965.75, NASDAQ mini up 145.25 pts or +0.68% at 21380.75.

COMMODITIES: Extension Higher in WTI Futures Turns Attention to Key Resistance

WTI futures are trading higher today as the contract extends recent gains. A stronger reversal to the upside would refocus attention on key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance at $71.97, the Nov 7 high, has been pierced. A clear breach of this level would be a positive price development. On the downside, a resumption of the bear cycle would open $65.57, the Oct 1 low, and $63.73, the Sep 10 low and key support. A bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low. MA studies are in a bull mode position highlighting a medium-term uptrend and this suggests that the latest sell-off is likely a correction. Initial pivot resistance is $2636.8, the 50-day EMA. A breach of this EMA would be positive for bulls.

• WTI Crude up $0.55 or +0.77% at $72.26
• Natural Gas up $0.03 or +0.74% at $3.664
• Gold spot up $12.88 or +0.49% at $2637.54
• Copper down $1.4 or -0.35% at $401.2
• Silver up $0.4 or +1.39% at $29.3135
• Platinum up $6.03 or +0.66% at $914.25

OIL: Brent Hits Highest Since Early November

Our commodities team notes that Brent crude oil futures have hit the highest level since early November.

• Geopolitical risks seem to be driving the rally, with a focus on uncertainty of the impact of the Trump presidency on U.S. and Iranian oil output, as well as heightened tariff risks.
• They also note that some analysts expect further delays to the return of OPEC+ supplies during 2025 with increases in non-OPEC supply enough to cover soft global demand growth.

Date	GMT/Local	Impact	Country	Event
02/01/2025	1200/0700	**	US	MBA Weekly Applications Index
02/01/2025	1330/0830	***	US	Jobless Claims
02/01/2025	1330/0830	**	US	WASDE Weekly Import/Export
02/01/2025	1445/0945	***	US	S&P Global Manufacturing Index (final)
02/01/2025	1500/1000	*	US	Construction Spending
02/01/2025	1530/1030	**	US	Natural Gas Stocks
02/01/2025	1600/1100	**	US	DOE Weekly Crude Oil Stocks