CROSS ASSET: Risk Appetite Up Tariff Headlines, USD Index Near Pre NFP Levels
The risk mood is supportive in early Tuesday dealings, albeit away from best levels for some markets. The catalyst is an earlier BBG story that hit near the NY/Asia cross over around a potential for a gradual tariff hike plan being considered/studied by Trump's economic advisors (see this link). The plan has reportedly not been presented to incoming President Trump yet, but it is showing the sensitivity of markets to tariff related headlines.
- US equity futures have opened up firmer, after a mixed cash session in Monday US trade. Eminis are around 0.30/35% higher, while Nasdaq futures are up by over 0.50%.
- In the FX space, the USD BBDXY index opened up 0.40% weaker, but the index is up from lows, last near 1315.3. This puts us back close to pre US NFP levels from last Friday. Gains are fairly uniform against the USD, although higher beta plays are outperforming at the margin. NZD/USD is up 0.40% to 0.5605/10, while AUD/USD is up 0.30%, last near 0.6195. GBP and EUR are up 0.20-0.25%, while yen has gained less than 0.10%.
- USD/CNH is back under 7.3400, up around 0.10% in CNH terms. MXN is 0.20% firmer, with USD/MXN, back near 20.61, with both pairs up from earlier lows.
- US Tsys futures have opened firmer, with long-end contracts outperforming, the 10yr contract is +07 at 107-14+. Cash trading will return shortly, after being closed in Asia on Monday, the 10yr briefly topped 4.80% overnight following a fresh wave of selling in SOFR futures, the 10yr is on track to open around 4.75%.
- Oil is close to unchanged for WTI, while Gold is up a touch, last near $2669.
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MACRO ANALYSIS: MNI US Macro Weekly: Inflation Data Keep Fed Cut On Track
We have published and e-mailed to subscribers the MNI US Macro Weekly offering succinct MNI analysis across the range of macro developments over the past week. Please find the full report here:
USDCAD TECHS: Fresh Cycle High
- RES 4: 1.4393 2.0% 10-dma envelope
- RES 3: 1.4327 2.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4296 2.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4246 2.00 proj of the Oct 17 - Nov 1 - 6 price swing
- PRICE: 1.4236 @ 16:38 GMT Dec 13
- SUP 1: 1.4069/3944 20- and 50-day EMA values
- SUP 2: 1.3928 Low Nov 25 and a key support
- SUP 3: 1.3822 Low Nov 6
- SUP 4: 1.3747 Low Oct 17
The trend direction in USDCAD remains up and this week’s gains to a fresh cycle high, reinforces the current bullish theme. The pair has cleared 1.4178, the Nov 26 high, to confirm resumption of the uptrend and maintain the price sequence of higher highs and higher lows. Sights are on 1.4246 next, a Fibonacci projection. Key short-term support has been defined at 1.3928, the Nov 25 low. Initial support to watch lies at 1.4069, the 20-day EMA.
US TSYS: Extending Late Session Lows, Curves Bear Steepen Ahead Next Wed's FOMC
- Treasuries traded steadily lower throughout Friday's session, initially mirroring weak action in Bunds and Gilts. By the close, the Mar'25 10Y contract slipped to 109-26 (-18) the lowest level since November 22, 10Y yield rising to 4.4046% high (+.0768).
- Initial technical support at 109-22 (76.4% Nov 15 - Dec 6 Upleg) followed by 109-20 (Low Nov 20/21).
- Curves bear steepened: 2s10s +2.272 at 15.568 as short end rates outperformed ahead of next week's FOMC policy announcement where another 25bp rate cut was expected but not certain amid current macro and political uncertainty. That said, the latest unemployment and inflation data have kept the FOMC on track to cut the federal funds rate by 25bp (to 4.25-4.50%) next Wednesday.
- Projected rate cuts into early 2025 look near steady to lower vs. this morning levels (*) as follows: Dec'24 cumulative -24.3bp (-23.7bp), Jan'25 -28.6bp (-29.6bp), Mar'25 -42.2bp (-43.9bp), May'25 -48.4bp (-50.5bp).
- No reaction to this morning's import/export prices, Monday brings flash S&P Global PMIs, Retail Sales, IP & Cap-U on Tuesday.
