EM FX: ZAR Trading at Best Levels of the Week Following Trump-Xi Call
Jan-17 15:24
- Broader USD weakness on the back of the Trump-Xi call – noted above – has helped the likes of ZAR and MXN reach their best levels of the day. The former stands a solid 1.2% in the green versus the Japanese yen as the Jan BoJ approaches, and up over 2% on the week against the greenback.
- PLN remains around 0.2% firmer versus the euro after Glapinski’s press conference, where the Governor said discussions about interest rate cuts must be delayed for “some time.” EURPLN continues to trade just ahead of the key support zone around 4.25 while USD/CE3 pairs have all reversed earlier gains.
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BONDS: Off Lows, Cross-Market Cues & Technicals Eyed
Dec-18 15:19
Some pre-U.S. cash equity open weakness in e-minis, as well as a hold of technical support in Bunds and intraday lows in gilts, allowed core global FI markets to recover from session lows.
- Tsys outperform, narrowing by 2.5bp to Bunds, while the gilt/Bund 10-Year spread is on track to close above 230bp, which would represent a fresh multi-decade high.
- Macro headline flow limited, leaving cross-market cues and technicals at the fore ahead of today’s major risk event, the final FOMC decision of ’24.
- With markets essentially fully discounting a 25bp rate cut, focus should quickly turn to the post decision communique (assuming a cut is delivered).
- The ’25 dot in the SEP will be eyed in the first instance.
- We believe that the dot plot will show 75bp of cuts in 2025 - 25bp less than the 100bp seen in the last edition - with 2026, 2027 and the Longer-Run dot also in line for increases.
- Click for our full preview.
US: SFR Call Condor
Dec-18 15:16
SFRF5 95.87/95.93/96.00/96.06c condor, bought for 1 in 2k.
SCANDIS: O/N NOKSEK Vols Elevated Ahead of Scandi Decisions Tomorrow
Dec-18 15:04
Overnight NOKSEK vols have topped 10 points as tomorrow’s Riksbank and Norges Bank decisions come into view, the highest level since August and above the 7.2 YTD average. Although the rate decisions (25bp Riksbank cut and Norges Bank hold) are widely expected, focus will be on the updated rate path projections and guidance around the outlook for policy rates next year.
- That helps explain the 1-point O/N vol premium compared to the November decisions (which were also on the same day, but did not feature new projections).
- Overall, we view the risks to both decisions as slightly tilted in a hawkish direction, but the proximity of the events (Riksbank at 0830GMT and Norges at 0900GMT) still leaves scope for volatility in NOKSEK.
- An overnight ATM NOKSEK straddle requires a ~40 pip swing from current levels to break-even. On the downside, this would bring yesterday’s low at 0.9732 into view, clearance of which would strengthen a developing bearish threat in the cross. Initial resistance is the 50-day EMA at 0.9810.
- Our Riksbank preview is here and our Norges Bank preview is here
