FOREX: USD Index Tests US Election Levels Below 104
Mar-06 17:54
- The USD index sits lower for a fourth consecutive session as we approach the APAC crossover, although daily ranges have been relatively contained on Thursday compared to the aggressive price action seen earlier in the week. Weak dollar sentiment tipped the DXY below 104.00, for the first time since the November 05 presidential election vote.
- Moderately hawkish tweaks to the ECB’s language and inflation forecasts prompted a brief bout of Euro strength, which saw EURUSD rise to a fresh recovery high of 1.0853, although the pair has slipped back to 1.08 in latest dealings. At its peak, the week’s rally totalled 4.5%, as technical and fundamental drivers continue to underpin the renewed optimism for the pair.
- Elsewhere, a surprisingly weak Challenger job cuts number helped front-end US yield extend their decline, which weighed substantially on USDJPY in early US trade. The pair fell to a session low of 147.32, the lowest level since early October last year. USDJPY had already been trading heavy as markets digest the latest Rengo pay tally data, which was an upside surprise in Japan. Price dynamics keep the trend needle firmly pointing south for USDJPY. Today’s resumption of the downtrend paves the way for an extension towards 146.95, a Fibonacci retracement. Below here, 145.92 is the level of note, the Oct 4 ’24 low.
- Late headlines from US Commerce Secretary Lutnick and then President Trump provided a more sanguine tariff narrative, as all goods tied to the USMCA were granted another month extension to April 02, as dialogue between US, Canada and Mexico officials continues. This boosted the likes of MXN and CAD, while underpinning a recovery in stocks. Although this remained brief and subsequently equities have headed lower, keeping risk sentiment in the spotlight as we approach tomorrow’s US employment report.
- SEK continues a streak of outperformance as a solid set of data outturns drives the currency higher still. Prelim inflation data covering February came in well ahead of expectations, further pinching Riksbank pricing across 2025. As a result, EUR/SEK has broken lower, consolidating comfortably through the 11.00 handle to print the lowest levels since late 2022.
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PIPELINE: Corporate Bond Issuance Update: Foundry JV Guidance Update
Feb-04 17:54
$14.8B corporate issuance has launched so far, to expand once Foundry JV 5pt launch
- Date $MM Issuer (Priced *, Launch #)
- 02/04 $3B *EIB WNG 10Y +60
- 02/04 $2.5B #NextEra Capital Energy $1.5B 30.5NC5.25 6.375%, $1B 30.5NC10.25 6.5%
- 02/04 $2B *L-Bank $1B 2Y SOF+30, $1B 5Y SOFR+47
- 02/04 $1.5B #BNG Bank 3Y SOFR+37
- 02/04 $1.25B #BNY Mellon 6NC5 +62
- 02/04 $1.1B #National Rural Utilities $600M 3Y +52, $500M 5Y +67
- 02/04 $1B #Altria $500M 3Y +67, $500M 10Y +117
- 02/04 $1B #National Fuel Gas $00M 5Y +118, $500M 10Y +147
- 02/04 $800M #GATX $500M 10Y +102, $300M 2054 Tap +113
- 02/04 $650M #Valero Energy 5Y +87
- 02/04 $Benchmark Foundry JV 6Y +120, 8Y +150, 11Y +160, 12Y +170, 14Y +180
- Expected to issue Wednesday:
- 02/05 $1B KFW 4% 2026 TAP SOFR+20
- 02/05 $Benchmark IDA 10Y SOFR+63a
OPTIONS: More Limited Rates Trade After Prior Week's Flurry
Feb-04 17:52
Tuesday's Europe rates/bond options flow included:
- OEH5 118.25c, sold at 15.5 down to 14.5 in 14k
- ERM5 97.50 put, paper pays 1.25 on 16k
- SFIK5 95.75/95.90/96.05/96.20 call condor bought for 7-7.25 in 10k
- SFIM5 95.85/95.65ps 1x2 with SFIU5 96.00/95.70ps 1x2, bought the strip for 5.25 in 2.5k.
FOREX: USD Index Edges Further South, Now Lower on Week
Feb-04 17:50
- Currency market volatility was relatively subdued on Tuesday, in contrast with the sharp swings seen throughout Monday’s session. However, the USD index spent the majority of the session on the backfoot, consistently edging lower and extending session declines from the overnight highs to around 1%.
- Despite the significant greenback surge to start the week, the DXY is now lower on the week with multiple factors weighing throughout the session. Primarily, broader optimism surrounding trade/tariff negotiations has boosted equities, supporting risk sensitive currencies in tandem. Secondly, Trump's hardline approach on Iran has assisted the push lower in the front-end of the US yield curve and, in turn, has pressured the greenback.
- Aside from Scandies which lead G10 FX gains, the Canadian dollar and the Swiss Franc also moderately outperform. Broad dollar weakness however keeps the likes of EUR, AUD and CNH all on the front foot, registering gains of around 0.3% on the session.
- For now, EURUSD gains are considered corrective, however the powerful recovery from yesterday’s cycle lows has seen the pair breach initial resistance at 1.0350, the Jan 31 low and Monday’s high. A stronger recovery would place the focus on 1.0446, the 50-day EMA and then 1.0533, the Jan 27 high and a key resistance.
- There was also a notable turnaround for USDJPY, which after printing a 155.52 high, traded as low as 154.26, keeping a developing bear threat for the pair in play and focus on a cluster of daily lows just below the 154.00 handle.
- New Zealand unemployment headlines the APAC docket on Wednesday, before the focus turns to US ADP employment and ISM Services PMI.
