FOREX: Yen Unwinds Some Outperformance Amid Higher US Yields, Tariff Focus Later
Jan-31 05:11
Aggregate G10 shifts have been very muted so far in Friday trade. The BBDXY USD index is little changed, holding close to 1304.7, which isn't far off highs that were seen post earlier headlines that US President Trump will impose tariffs on Mexico and Canada tomorrow. Headlines crossed from BBG that Trump will sign executive orders at 3pm ET.
- USD/JPY has seen some modest shifts, the pair pull back to 153.92 before support emerged. We were last 154.35/40, little changed for the session. Earlier data showed stronger Tokyo CPI headline pressures, but core measures were close to expectations.
- US yields have ticked higher, the 10yr up over 2bps to 4.54%, with Trump tariff threats impacting. This has helped stabilize US-JP yield differentials.
- US equity futures are higher, led by Nasdaq futures as markets continue to digest earnings results.
- AUD and NZD have ticked higher, but both currencies are sub pre trump tariff headlines. AUD/USD was last 0.6230, while NZD/USD was near 0.5645. AUD/USD has seen support around the 0.6200 level, while NZD has been supported ahead of 0.5620. Data releases in both economies hasn't impacted sentiment.
- USD/CAD is very steady, last near 1.4480. We got close to 1.4600 late in Thursday trade as tariff headlines crossed. The 1 week risk reversal is very elevated near 2.50, highs back to 2020. Spot USD/MXN sits better within recent ranges, last near 20.68. Its 1 week risk reversal is higher, but within recent extremes.
- Looking ahead, outside of tariff related risks, we have some German regional inflation data. In the US we have the PCE, along with Fed speak from Bowman. The MNI Chicago PMI also prints.
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US TSYS: Tsy Curves Look To Finish 2024 at June'22 Highs
Dec-31 19:18
- Treasuries look to finish the last trading session of 2024 lower after reversing Tuesday morning support. Markets closed Wednesday for New Years day, resume full trade Thursday.
- The Mar'25 10Y contract trades 108-25.5 (-5.5) late in the day, 10Y yield near session high of 4.5871%. Curves bounced off flatter levels, 2s10s climbing to 34.344 -- the highest level since June 2022.
- Short end support, in turn, helped projected rate cuts into early 2025 gain momentum vs. late Monday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.6bp (-13.6bp), May'25 -20.6bp (-19.5bp), Jun'25 -29.8bp (-28.8bp).
- No substantive reaction to this morning's housing and regional Dallas Fed services activity data. Looking ahead to Thursday data (prior, est): Initial Jobless (219k, 221k) and Continuing Claims (1.910M, 1.890M) at 0830ET; S&P Global US Manufacturing PMI (48.3, 48.3) at 0945ET; Construction Spending MoM (0.4%, 0.3%) at 1000ET.
- Treasury supply: $85B 4- & $80B 8W bill auctions at 1130ET, $64B 17W bill auction at 1300ET.
COMMODITIES: WTI Futures, Gold Holding Higher
Dec-31 18:47
WTI futures are trading higher today as the contract extends recent gains. A stronger reversal to the upside would refocus attention on key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance is unchanged at $71.97. A bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low.
- WTI Crude up $0.9 or +1.27% at $71.88
- Natural Gas down $0.32 or -8.13% at $3.618
- Gold spot up $19.24 or +0.74% at $2625.86
- Copper down $6.95 or -1.7% at $402.3
- Silver down $0.1 or -0.34% at $28.8383
- Platinum up $3.96 or +0.44% at $908.02
US STOCKS: Late Equity Roundup: Tech & Interactive Media Sectors Underperforming
Dec-31 18:36
- Stocks are trading near session lows after reversing early session gains. Though off this year's record highs (SPX Eminis 6178.75, DJIA 45,073.63, Nasdaq 20,204.58) major averages will finish the year with double digit gains: SPX Eminis +19.5%, DJIA +13.1%, while the Nasdaq gained 29.9%!
- Currently, the DJIA trades down 92.19 points (-0.22%) at 42474.46, S&P E-Minis down 28 points (-0.47%) at 5929.75, Nasdaq down 147 points (-0.8%) at 19337.13.
- Information Technology and Communication Services shares underperformed continued to underperform late Tuesday, shares of software and semiconductor makers weighing on the tech sector: Nvidia -1.61%, Advanced Micro Devices -1.36%, Crowdstrike Holdings -1.28%.
- Interactive media and entertainment shares weighed on the Communication Services sector: Alphabet -0.9%, Live Nation -0.76%, Netflix -0.60%, Meta -0.41%.
- On the positive side, Energy and Materials sectors outperformed in the second half, oil & gas stocks buoyed the Energy sector as crude prices continued to rise (WTI +1.0 at 71.99): APA Corp +3.59%, Marathon Petroleum +2.46%, Occidental Petroleum +2.15%.
- Meanwhile, shares of chemical & fertilizer makers supported the Materials sector: Mosaic +2.44%, Celanese +1.42%, Dow +1.37%.
- Looking ahead, the next round of quarterly earnings kicks off mid-January with Blackrock, Bank of NY Melon, Wells Fargo, JP Morgan, Goldman Sachs, Citigroup, US Bancorp, M&T Bank and PNC all reporting between January 13-16.
