EUROZONE DATA: Vehicle Prod Remains Weak, But Spain Appears To Be Recovering
Feb-19 11:35
The Eurozone auto sector continues to see production fall as it struggles to keep up with Chinese competitors and emission targets, particularly in France and Germany where their vehicle production index is the lowest since April 2022.
- The seasonally adjusted December data from three of the four largest eurozone members showed declines in vehicle production. France saw the biggest sequential fall of 11.0% M/M, followed by Germany (-10.0% M/M) and Italy (-3.5% M/M). Spain meanwhile increased 1.5% M/M after -0.5% M/M.
- France's significant decline follows production rising 6.4% in November. This is the largest sequential drop in production since May 2021. The index deteriorated further below its pre covid level and is the lowest seen since April 2022.
- Germany saw a fourth consecutive monthly decline for also its lowest since April 2022.
- Italy also printed a decrease in December of 3.5% M/M, after marginally rising 0.7% in November, making the index the lowest since June 2020.
- More broadly, vehicle production remains below pre covid levels for all four main Eurozone members, though Spain appears to be seeing some recovery with the highest levels since April 2024 as it closes the gap to 8% below of pre-pandemic levels.
- France and Italy vehicle production continue to deteriorate by a greater magnitude relative to pre-covid levels than Germany. Though, the deterioration in German vehicle production will have a greater impact on its economy given its weighting.
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FOREX: Potential Tariff Targets See Early Vol Pressure
Jan-20 11:34
- Trump's inauguration schedule kicks off in earnest from 1200ET/1700GMT (full details here: https://media.marketnews.com/MNIPOLRISK_Inauguration_Day_Schedule_07a11994f9.pdf ), raising headline risk around a slew of early executive orders that could define the beginning of the Presidency. WSJ writes that Trump's initial agenda will target "mass deportations, tariffs and slashing the size of the federal government".
- As such, potential tariff target currencies are being isolated by heightened vol so far, countering the view that Monday could be a quiet session due to the MLK Day holidays. The front-end of the USD/CAD vol curve has rallied aggressively: overnight vols cleared 20 points for the first time since the election itself to hit the highest since late '22, while USD/MXN vols are north of 30 points, for comfortably a YTD high.
- The downside risk for CAD is underpinned by the bullish undertones for USD/CAD - for which recent S/T weakness has proved corrective in the formation of a flag formation - a bullish continuation signal. Friday’s gains expose 1.4508 next, a Fibonacci projection level. This level looks well within reach on any early punitive tariffs targeting USMCA nations - and the run higher in vols suggests the intraday move in spot could be considerably larger. USD/CAD rallied ~150 pips on the election results in November (and a further 200 pips in the following week).
US TSY FUTURES: Long Cover In TY Futures Dominated On Friday
Jan-20 11:30
Net long cover in TY futures provided the only real positioning swing of note during Friday trade.
- Net positioning swings were modest elsewhere, as the curve was subjected to some light twist flattening
| 17-Jan-25 | 16-Jan-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,183,844 | 4,209,457 | -25,613 | -972,782 |
FV | 6,181,136 | 6,175,433 | +5,703 | +237,245 |
TY | 4,694,593 | 4,740,842 | -46,249 | -2,957,624 |
UXY | 2,266,718 | 2,257,136 | +9,582 | +833,347 |
US | 1,908,965 | 1,907,549 | +1,416 | +175,230 |
WN | 1,794,375 | 1,796,521 | -2,146 | -399,371 |
|
| Total | -57,307 | -3,083,955 |
OUTLOOK: Price Signal Summary - USDJPY Support Remains Intact
Jan-20 11:29
- In FX, the trend condition in EURUSD is unchanged, it remains bearish and last week’s recovery appears corrective. Recent weakness resulted in a print below 1.0226, the Jan 2 low. The breach confirms a resumption of the downtrend. Sights are on 1.0138 next, a 1.764 projection of the Sep 25 - Oct 23 - Nov 5 price swing. Resistance to watch is 1.0437, the Jan 6 high. Initial resistance is at 1.0338, the 20-day EMA.
- The trend condition in GBPUSD remains down and short-term gains are considered corrective. Recent weakness has confirmed a resumption of the downtrend and marks an extension of the price sequence of lower lows and lower highs. Sights are on 1.2087 next, a 0.764 projection of the Sep 26 - Nov 22 - Dec 6 price swing. Initial firm resistance is at 1.2398, the 20-day EMA.
- The trend condition in USDJPY is unchanged, it remains bullish and last week’s move lower appears corrective - for now. The pair has traded through the 20-day EMA and an extension would signal scope for a deeper retracement. Support to watch is 154.97, the 50-day EMA. A return higher and a breach of 158.87, the Jan 10 high, would confirm a resumption of the uptrend.
