FOREX: US CPI Prompts Short-Term Volatility, Daily Adjustments Contained
Mar-12 18:10
- Lower-than-expected US inflation data prints prompted an initial bout of US dollar weakness on Wednesday, with the USD index registering session lows in the immediate aftermath. However, this proved to be short-lived, as feedthrough to the Fed’s preferred PCE reading was seemingly less dovish than the headline readings, and the DXY took little time to fully reverse to the day’s strongest levels.
- A subsequent third swing lower for the greenback leaves the DXY close to unchanged levels as we approach the APAC crossover, with a lot of the action remaining in the equity space as the e-mini S&P 500 future posts a punchy 2.2% daily range.
- The main FX action was in USDJPY, which exhibited a 100 pip range within the short post-data timeframe, initially falling to 148.20 before surging to a high of 149.19, briefly extending the bounce from yesterday’s lows to 1.8%. Technically, a bear cycle remains in play for USDJPY, and that latest recovery appears corrective in nature. Spot has subsequently turned lower, and key short-term resistance remains unchanged further out at 151.30, Mar 3 high.
- A much more contained session for EURUSD, with the pair failing to punch above yesterday’s peak of 1.0947. It is worth noting the pair has completed its recovery to the US election related highs at 1.0937, with the bounce from last week’s lows totalling 5.55%. Given the severity of the moves and technicals now indicating an overbought condition, the potential for a pullback may be growing.
- The Canadian dollar is among the best performers in G10, following the Bank of Canada’s well forecast 25bp cut. The BOC said dangers from a U.S. trade war led it to cut borrowing costs for a seventh consecutive meeting, and expressed caution about further moves as the immediate hit to growth may be followed by unwelcome inflation. USDCAD is down 0.35% at 1.4380 and support to watch lies at 1.4242, the Mar 6 low.
- US PPI and jobless claims headline the economic calendar on Thursday.
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US TSY FUTURES: March'25/June'25 5Y Roll Surge
Feb-10 18:04
Tsy quarterly futures roll from March'25 to June'25 gets underway today with decent volume in 5s. Percentage complete remains low, less than 2% across the curve ahead the "First Notice" date on February 28. Current roll details:
- TUH5/TUM5 appr 2,000 from -6.0 to -5.5, -5.75 last
- FVH5/FVM5 appr 84,700 from -3.25 to -2.75, -2.75 last
- TYH5/TYM5 appr 6,700 from -0.25 to +0.25, +0.0 last
- UXYH5/UXYM5 less than 300 from 4.5 to 4.75, 4.75 last
- USH5/USM5 appr 500 from 4.75 to 5.75, 5.25 last
- WNH5/WNM5 less than 100 from 3.5 to 4.5, 4.25 last
- Reminder, March futures won't expire until next month: 10s, 30s and Ultras on March 20, 2s and 5s on March 31. March Tsy options expire February 21.
OPTIONS: Call Condor Buying In Decent Size Monday
Feb-10 17:52
Monday's Europe rates/bond options flow included:
- OEH5 117.25/118.25 RR, bought the call for 4.5 in 4k.
- RK5/ERM5 98.0625/98.3125cs spread, bought for 0.25 in 4k.
- ERK5/ERM5 98.0625c calendar, bought for 0.75 in 10k.
- ERK5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 4k
- ERM5 97.875/97.9375/98.00/98.0625c condor, bought for 1.5 in 2.5k.
- ERM5 97.9375/98.00/98.0625c fly vs 97.50p, bought the fly for flat in 10k.
- SFIM5 95.95/96.05/96.15/96.25c condor, bought for 2.5 and 2.75 in 28k total.
US TSY OPTIONS: April'25 10Y Vol Sale
Feb-10 17:51
- -6,000 TYJ5 108/111 strangles, 39, appr implied vol 5.94%
