EM FX: ZAR, MXN Under Renewed Pressure Amid Firm USD Bid
Jan-08 11:48
The spike higher in the greenback on the CNN report above has placed renewed pressure on emerging market currencies, with the likes of ZAR and MXN notable underperformers given their acute sensitivity to Trump’s proposed tariff policies.
- USDMXN is 0.6% higher on the session but still some way below the week’s best levels owing to the sharp pullback on Monday. Meanwhile, gains for USDZAR briefly extended above 1%, and the pair has now fully reversed the entirety of the year’s prior losses.
- Moves across CE3 remain slightly more subdued overall, though USDPLN has now recovered over 2% compared to its weekly low while USDHUF reapproaches last week’s two-year high.
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EQUITIES: S&P 500 & NASDAQ 100 E-minis Tick Lower As China Probes Nvidia
Dec-09 11:47
Fresh session lows for S&P 500 & NASDAQ 100 e-minis following news that Nvidia is being probed by the Chinese authorities on anti-monopoly grounds.
- The tech giant is now indicated 2.1% lower pre-market.
- E-mini moves are relatively limited at this stage.
- Contracts had already traded away from session highs as optimism surrounding the dovish tweak in the Chinese monetary policy stance proved short-lived.
- Marginal outperformance in the DJIA e-mini since the headlines, given relative sensitivity to tech.
BOE: Changes to money market tools including ILTR
Dec-09 11:44
The BOE has released two statements on the BOE's money market tools ILTR (PRA statement here) and a discussion paper on the transition to a repo-led operating framework (available here). As part of this, the Bank has opened a consultation - with a deadline for feedback of 31 January 2025.
- From Q2 (proposed date) the reserves available in each auction ILTR will increase from GBP25bln to GBP30bln. The Bank notes that this would mean an increase in the maximum ILTR stock available to GBP720bln.
- "The Bank will improve predictability of allocation for SMF participants during the early stages of transition by increasing the quantity supplied at minimum spreads by 40%–100%, to £7 billion–£10 billion per auction. This is up from £5 billion today. This would increase the stock of reserves available at minimum spreads from £120 billion today to £168 billion–£240 billion."
- "The Bank is still reviewing how the total quantity of reserves supplied in the ILTR is allocated to different collateral sets."
- "Further changes to the ILTR to ensure it is appropriately calibrated to supply a larger stock of reserves for the transition to a repo-led framework will take effect in 2025. Further details on these changes will be announced by the Bank in due course once responses to the Discussion Paper have been taken into consideration."
- Note that Deputy Governor Ramsden is speaking at 13:00GMT today on the BOE's toolkit - so he is likely to elaborate on today's announcements.
- There should be no immediate market impact from these operations - but they increase the Bank's role in a demand-led framework going forward and should help to cushion any small liquidity bumps in the market.
STIR: Fed Rate Path Consolidates Payrolls Dovish Tilt
Dec-09 11:40
- Fed Funds implied rates broadly consolidate Friday’s dovish tilt after the nonfarm payrolls report saw the unemployment rate surprise higher along with arguably underwhelming revisions to the prior two months.
- Cumulative cuts from 4.58% effective: 22bp Dec, 29bp Jan, 46bp Mar and 67bp Jun.
- SOFR terminal yields at 3.58% (looking out to end-2027) are only 3.5bp lower since the payrolls report but have added an entire 25bp cut since the high seen in the week after the presidential election.
- Today sees a quiet macro docket, with data limited to the October wholesale release and NY Fed inflation expectations whilst the FOMC is now in blackout.
- See our recap of Friday’s payrolls report here and a broader review of last week’s data and notable Fedspeak here.
- Wednesday’s US CPI report remains in focus – see our earlier summary table of analyst unrounded core CPI estimates ahead of the full MNI US CPI preview that will be published later today.
