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Greenback Favoured for Second Session

FOREX
  • The USD is favoured in early Monday trade, with the greenback firmer for a second session after Friday's solid payrolls release. An appearance from Fed chair Powell on 60 Minutes has added to the hawkish market reaction, within which the host suggested markets may have to wait until a few months before the Presidential election in November for the first Fed rate cut.
  • Currency markets are generally busy, with volumes sitting ahead of average for this time of day. Desks suggest that Asia-Pac interbank FX volume was 40-50% above the recent norms, with adjustments in Fed pricing front and centre when it came to discussions, although Tsy yields are back from their Asia highs (which went beyond Friday’s post-NFP extremes across the curve).
  • EUR/GBP is slightly firmer for a third consecutive session, with the cross seemingly finding a base at 0.8513. JPY trades well, firmer against most others in G10 on the back of a surge in front-end repo rates in local markets, which prompted a BoJ bond-buying response to contain the move.
  • Focus for the Monday session turns to the January ISM services release and the latest SLOOS release from the US. Central bank speak includes Fed's Bostic and Goolsbee, although the latter has spoken relatively recently. BoE's Huw Pill is also set to speak, however he already made an appearance on Friday, after last week's unchanged BoE rate decision.
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