ZAR: USDZAR Extends Bounce from Sept Lows to Over 3%
Oct-09 15:10
Ongoing commodity weakness and sustained greenback strength continues to keep the pressure on the rand, which is the weakest performing currency in the EMEA region again today. A further slip in China equities during Asia trade (CSI 300: -7.05%) and general sense of pessimism over the prospects for additional stimulus announcements will be acting as an additional headwind for the rand given that China is the largest importer of South African commodities.
- USDZAR is now over 3% higher compared to levels seen at the end of last month, and is looking to test resistance at the 50-day EMA, at 17.7198, for the first time since August. For now, gains for the pair are considered corrective, but a break of the aforementioned average would signal scope for a stronger reversal - potentially to 18.0138, the Sep 12 high.
- Given the relatively thin local data slate (with just manufacturing production figures for August on the docket), focus will be on the September FOMC minutes due this evening ahead of US CPI tomorrow.
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US DATA: Unchanged To Higher Consumer Inflation Expectations In August
Sep-09 15:08
- The NY Fed’s consumer surveys saw unchanged to higher inflation expectations (full release here).
- The 1Y was essentially unchanged for its third month at 3.0% (inched up from 2.97% to 3.00%) and the 5Y was unchanged at 2.8% for a third month.
- The 3Y meanwhile lifted two tenths to 2.54% after a particularly sharp 0.6pt drop in July, leaving it still relatively low historically.
- The stickier 5Y value has better captured recent trends in the U.Mich equivalent for 5-10Y expectations - see chart.
- Considering the focus on labor indicators at the moment, the survey also noted: "Labor market expectations came in mixed, but largely stable, with median one-year-ahead expected earnings growth increasing to 2.9 percent from 2.7 percent, just above a twelve-month trailing average of 2.8 percent."
- "The mean probability that the U.S. unemployment rate will be higher one year from now increased to 37.7 percent from 36.6 percent in July; however, the mean perceived probability of losing one’s job in the next twelve months decreased by 1.0 percentage point to 13.3 percent, falling below the twelve-month trailing average of 13.7 percent."
US TSY FUTURES: BLOCK, Dec'24 5Y Sale
Sep-09 15:00
- -5,000 FVZ4 110-11, post time bid at 1053:21ET, DV01 $223,000, contract trades 110-11.5 last (-1.5).
STIR: BLOCK: Nov'24 SOFR Call Spread, 1% Rate Cut Insurance
Sep-09 14:50
- +15,500 SFRX4 96.12/96.25 call spds, 2.75 at 1022:23ET ref 95.90 -- an interesting rate cut hedge with several facets: Underlying futures are currently pricing between 25-50bps rate cut next week and near fully pricing another 50bp in November.
- Today's call spread (expiring after the Presidential election on November 5 as well as the FOMC policy announcement on November 7) is hedging two 50bp cuts before the final Fed meeting on December 18.
