US DATA: Philly Fed Manufacturing Underperforms In December

The Director of the nonpartisan Congressional Budget Office, Phillip Swagel, is shortly due to provide testimony to the House Budget Committee. LIVESTREAM

• Politico notes, “The oversight hearing will be the first chance GOP lawmakers have to air their grievances over the agency’s analysis of their party’s megabill [the so-called One Big Beautiful Bill] since the legislation was enacted in July.”
• The Associated Press reported in September that “Trump’s sweeping tariffs plan has posed challenges to the CBO’s standard models for assessing trade. So far, the CBO estimates the tariffs could reduce the national deficit by $4 trillion over the next decade, helping to offset the deficit increases it projects will result from the Republicans’ big bill passed this year. “It’s a huge impact,” Swagel said.”
• Rep. Lloyd Smucker (R-PA), who is hoping to succeed retiring Rep. Jodey Arrington (R-TX) as Budget chair, told Politico: “There’s a lot of models or algorithms that go into how they come up with the numbers. And I think the more that can be open and transparent to everyone, the better we can understand how they're reaching their conclusions.”

• Treasuries extend highs after the latest round of data. Currently, the Dec'25 10Y contract trades +12.5 at 113-01 vs. session high of 113-02, 10Y yield 4.0883% (-.0503), curves mildly steeper (2s10s +1.04 at 53.675; 5s30s +4.25 at 104.905).
• Treasuries continue to trade below resistance at the 113-02 level, an area of congestion since Nov 5. A clear breach of this hurdle would be a bullish signal and suggest scope for a climb towards 113-18+, the Oct 28 high. A break would also cancel a short-term bearish theme. For bears, attention is on 112-10+, the 100-DMA and 112-06, the Sep 25 low. Trendline support also lies at 112-06.
• Next up: Sep TIC flows (1600ET) and Fed speakers: Fed Gov. Barr on bank supervision (1030ET), Richmond Fed Barkin on economic outlook (1100ET), Dallas Fed Logan closing remarks (1955ET)

• Renewed pressure on the US benchmarks since the cash open, and fresh session lows for Nasdaq, having little impact on currency markets, with USDJPY remaining above the 155.00 mark. The USD index remains in modest negative territory following the weak ADP data, although a ~20 pip range for the DXY indicates the lack of interest as we approach more important data later in the week.
• The Canadian dollar is a moderate outperformer Tuesday, allowing USDCAD to edge back towards the 1.40 mark. Price action follows PM Mark Carney securing passage of the first federal budget of his tenure. It is worth noting that this was by a two-vote margin, and only thanks to the backing/abstention of opposition MPs, however it does ensure the survival of his minority government.
• The short-term outlook for USDCAD remains bearish, as the pair continues to trade inside a bull channel drawn from the Jul 23 low. The top of the channel - currently at 1.4170 - provided a firm resistance on Nov 11. The subsequent move south highlights scope for a bear extension towards the base of the channel at 1.3893, with initial key support intersecting at 1.3968, the 50-day EMA.
• Canada’s data calendar is relatively light this week, with September retail sales due on Friday.