FOREX: USD Index Gains for Third Straight Session
Mar-21 18:20
- Early weakness for both European and US stock indices on Friday was enough to boost the greenback, culminating in a 0.22% rise for the USD Index, its third consecutive session of gains. The shaky risk appetite has weighed on the likes of AUD and NZD, while GBP has also suffered, however, it is worth noting that daily adjustments/ranges have remained relatively contained owing to a lack of major news developments.
- For AUDUSD (-0.46%), we have noted that 0.6400 continues to provide important pivot resistance, and the resumption of weakness since Tuesday (four consecutive losing sessions) highlights the medium-term bearish technical outlook. Price action was supported by the weaker-than-expected Australian jobs data earlier in the week, and AUDUSD has today tested the initial support level for the pair at 0.6259, the Mar 11 low. Below here, key short-term support remains at 0.6187.
- Cable’s inability to post a weekly close above the psychological 1.3000 mark may leave the pair vulnerable to a deeper technical correction, a dynamic that may be exacerbated as we approach the Spring statement on March 26. Firm support remains much lower at 1.2705.
- EURUSD continues to trade below its recent highs, consolidating a short-term correction seen during the latter part of this week, currently trading ~1.0820. . Initial key support to watch remains much further down at 1.0609, the 50-day EMA. The uptrend is overbought, and the pullback is allowing this set-up to unwind.
- The Eurozone week ahead is headlined by the March flash PMIs, which will be a key barometer of activity levels ahead of the ECB's April 17 decision. In the UK, CPI data and the Spring Statement are highlights. The Norges Bank decision crosses Thursday.
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STIR: Next Fed Cut Seen In Sept With Minutes & Jefferson To Come
Feb-19 18:18
- Fed Funds implied rates are little changed on the day for meetings out to June but as much as 2bp lower by end-2025.
- The decline came 30mins either side of the cash equity open with no clear drivers from what were mixed data. From a potential disinflationary, Putin quoted Trump as saying Ukraine will take part in peace talks.
- Cumulative cuts from 4.33% effective: 0.5bp Mar, 4bp May, 12.5bp Jun, 18bp Jul, 27bp Sep and 37bp Dec.
- Ahead, the FOMC minutes at 1400ET will be scrutinized for: why the Fed shifted its statement language on inflation; was there any discussion of a rate hike scenario; and was there any further discussion over the potential impact of government policy shifts?
- MNI FOMC Minutes Preview.
- Fed VC Jefferson also talks on the household balance sheet at 1700ET with both text and Q&A. He last spoke Feb 4, noting the need for caution as per many FOMC members: “As long as the economy and labor market remain strong, I see it as appropriate for the Committee to be cautious in making further adjustments… Over the medium term, I continue to see a gradual reduction in the level of monetary policy restraint placed on the economy as we move toward a more neutral stance as the most likely outcome…that said, I do not think we need to be in a hurry to change our stance.”
US TSYS/SUPPLY: Review: 20Y Bond Auction Tails, Weak Bid-Cover
Feb-19 18:10
February's $16B 20Y Bond new issue auction was slightly weak, with a 1bp tail on a 4.830% high yield vs 4.820% when-issued yield.
- Peripheral stats were on the soft side: bid-cover of 2.43x was the lowest in 4 auctions (2.54x 5-auction average), with primary dealers taking down 17.5% of competitives (16.8% 5-auction average). Directs took 19.5% (16.4% 5-auction average) with indirects taking 63.0% (66.8% 5-auction average).
- From another perspective, it was much weaker result than January's unusually strong auction, and the 5th tail in the last 6 auctions.
- Treasury futures edged very slightly lower on the result, with front TYs down 0.5 ticks at 108-24.5.
- The first re-open of this 20Y Bond is tentatively scheduled for March 18 ($13B).
FED: US TSY 20Y BOND AUCTION: HIGH YLD 4.830%; ALLOT 37.10%
Feb-19 18:02
- US TSY 20Y BOND AUCTION: HIGH YLD 4.830%; ALLOT 37.10%
- US TSY 20Y BOND AUCTION: DEALERS TAKE 17.51% OF COMPETITIVES
- US TSY 20Y BOND AUCTION: DIRECTS TAKE 19.51% OF COMPETITIVES
- US TSY 20Y BOND AUCTION: INDIRECTS TAKE 62.99% OF COMPETITIVES
- US TSY 20Y BOND AUCTION: BID/COV 2.43
