US TSY FUTURES: Wednesday Rally Consolidated
- TYH5 closed at 110-29 (unch) just a touch off earlier highs of 110-30 having lifted from session lows of 110-23.
- Yesterday’s high of 111-01, seen after an extended move following the strong 7Y auction, marks initial resistance after which lies 111-14 (50-day EMA).
- Gains are considered corrective though, with support seen at 109-20 (Nov 20/21 lows).
- Tomorrow sees cash markets back open again ahead of a 1400ET close whilst Tsy futures see at an early close at 1315ET.
- Unsurprisingly little change in Fed Funds implied rates today, showing 16bp of cuts for Dec before a cumulative 22bp for Jan, 35bp for Mar and 52bp for June.
- SOFR futures echo the little change in the whites before up to 2.5 ticks lower in the reds.
BONDS: EGBs/GILTS: OATs Lead Tightening In Spreads
EGBS saw sizeable tightening in spreads to Bunds today, led by OATs as they continue to oscillate on French fiscal developments.
- The Oat-Bund spread tightened 4bps on the day to 81.6bps, with the bulk of the move coming early in the session when it tightened up to 5bps intraday after FM Armand hinted at potential concessions around electricity taxes in the 2025 budget.
- Barnier is having to risk some of his government's fiscal credibility to try and promote political stability within the republic by placating his major political rivals.
- There was a swift 1.5bp widening later in the session when the National Rally Bardella looked for further concessions but Barnier subsequently saying he will do everything to bring the 2025 deficit to around 5% GDP helped limit the move to maintain the day’s further shift away from Wednesday’s early high of 88.3bps.
- Related to this, the BTP-Bund spread tightened 3bps today to 121.8bps for its lowest close since Nov 19.
- Gilts meanwhile saw a session of two trends, selling off through most of the London morning before fully paring losses to close at 95.74. An earlier high of 95.78 has cleared resistance at 95.73 (1.764 proj of Nov 18-19-20 price swing), potentially exposing 96.03 (2.00 projection of the same move) and pose deeper threat to the bearish trend.
FOREX: G10 FX Ranges Contained Amid Thanksgiving Holiday, USDBRL Record High
- The Ice Dollar Index consolidated very moderate gains on Thursday, and major G10 pairs have operated in narrow ranges owing to the US Thanksgiving holiday. USDJPY remains an outperformer despite pulling back to 151.50, up 0.29% following its steep declines on Wednesday.
- Overall, this week’s move lower in USDJPY marks an extension of the current corrective cycle. The pair has traded through both the 20- and 50-day EMAs. Attention continues to be on a clear break of the 50-day average which would signal scope for a deeper retracement, towards 150.19 next, a Fibonacci retracement. On the topside, the bull trigger is now much higher at 156.75, the Nov 15 high and clearance of this level would be needed to confirm a resumption of the technical uptrend.
- GBPUSD is hovering towards the upper end of the week’s range just below 1.2700, however, EURUSD operates in mid-range at 1.0550.
- The most notable moves in currency markets have been in Latin America, with significant appreciation for the Mexican peso countering record weakness for the Brazilian real.
- For USDMXN, despite a 1% bounce off the lows, spot is consolidating a 1% decline on the session, trading at 20.40 ahead of the APAC crossover. Overnight news of positive discussions between President-Elect Trump and President Sheinbaum have provided the renewed peso optimism, in contrast with the aggressive reaction to tariff rhetoric earlier in the week.
- In Brazil, markets were unimpressed by the Government’s long-awaited fiscal announcement and USDBRL traded to a record high above 6.00 in its aftermath. 6.0257 and 6.1000 are the next resistance levels, both Fibonacci projections.
- Eurozone inflation data and Canada GDP are the highlights on Friday’s economic calendar.
US STOCKS: E-mini S&P Pares Pre-Thanksgiving Losses
- ESZ4 has mostly eked out gains in holiday trade today, at 6029.75 at the early close (+0.25%).
- It recoups some of yesterday’s -0.4% losses that at the time were seen as Nvidia led a broader “Magnificent Seven” drag on equity indices.
- The bull trigger remains exposed at 6053.25 (Nov 11 high) whilst support is seen at 5951.31 (20-day EMA).
- E-minis show Nasdaq 100 modestly outperforming (+0.4%), the Dow Jones on par with the S&P 500 (+0.27%) and a second day of sizeable outperformance for the Russell 2000 (+0.8%).
- Market operating hours over Thanksgiving:
- Cash equities: Thursday Nov 28: Closed, Friday Nov 29: early close at 13:00 NY/12:00 Chicago
- Equity futures: Thursday Nov 28: goes into pre-open (early close, no settlement) at 13:00 NY/12:00 Chicago, Friday Nov 29: Early close at 13:15 NY/12:15 Chicago
COMMODITIES: Crude Regains Ground, Henry Hub Climbs, Gold Consolidates
- WTI has regained ground after a Reuters report that OPEC+ is discussing output return delays for Q1 2025. It would mark the third delay by the group but represent a longer delay than the prior one-month extensions.
- WTI Jan 25 is up by 0.3% at $68.9/bbl.
- Meanwhile, the IDF has confirmed that it struck a Hezbollah-affiliated compound in Southern Lebanon, which appears to violate the terms of the Israel-Hezbollah ceasefire agreed this week.
- For WTI futures, support is seen at $65.74, the Oct 1 low. Initial firm resistance to watch is unchanged at $72.41, the Nov 7 high.
- Henry Hub has edged higher on thin volume due to the US Thanksgiving holiday. It is rebounding some of the steeper losses from yesterday after a small US gas storage draw, as expected, in EIA data.
- US Natgas Jan 25 is up 2.9% at $3.30/mmbtu.
- Spot gold continues to consolidate after the sharp pullback on Monday, with the yellow metal 0.1% higher at $2,638/oz.
- Resistance to watch remains at $2,721.4, Monday’s high, while key support is at $2,536.9, the Nov 14 low.
- Silver is outperforming slightly, currently 0.5% higher at $30.2/oz.
- Initial firm resistance to watch is $31.202, the 50-day EMA.
CANADA: USDCAD Extends Reversal Of Tariffs Jump, GDP Tomorrow
- USDCAD has extended its decline today, tracking close to 1.401 (-0.14%) late in the session as it almost fully reverses the tariff threat jump when it swung from ~1.3985 to a high of 1.4178 on Monday.
- CAD sits top of the G10 FX pack today in Thanksgiving-thinned trading after yesterday’s sizeable underperformance.
- A post-Thanksgiving session sees option expiry kept on the light side tomorrow, with $367m at 1.4000 plus $756m at 1.3900-05.
- That follows GDP data at 0830ET that includes the main Q3 release plus monthly data for the final Sept /advance Oct releases, with BoC-dated OIS showing 32-33bp of cuts vs closer to 30-31bp pre-tariff threats.
- The 0.3% M/M for real GDP in the September advance left Q3 GDP growth tracking at 1.0% annualized in the monthly data. There can be differences with the expenditure-based quarterly GDP data that the BoC forecasts, but nevertheless the Bloomberg consensus shows similar with 0.9% annualized compared to the downward revised 1.5% the BoC forecast for Q3 in its October MPR.
- The October advance will also be important for an idea of momentum heading into Q4, for which the BoC is eyeing 2% annualized GDP growth.
CAD: Vol Markets Still Cognizant of Tariff Risk on CAD
- We noted this morning that USD/CAD spot has erased the run higher to 1.4178 (triggered by Trump's tariff talk), aided off highs by Trudeau's swift contact with Trump and renewed pressure from both sides of the aisle to tighten US-Canadian border security.
- While spot has backtracked, options markets remain acutely sensitive to the prospect of further vol. 2m Implied - capturing inauguration day on January 20th - is still clear of 5.5 points, and the vol skew remains weighted well toward USD/CAD calls - the 3m risk reversal remains at levels not seen for 18 months, dragging the upside risk premium away from subdued levels in September that rivalled the post-COVID lows.
- This underlying theme is also evident in still-elevated butterfly option vol: the 3m contract remains north of 0.5 vol points, ~50% higher than the YTD average. Options markets now price a 1-in-4 chance of USD/CAD touching 1.45 by end-Q1, up from 17.8% pre-election.
- As such, despite the pullback in USD/CAD, the trend outlook remains bullish and clearance of 1.4178 would resume the primary uptrend to target 1.4196, a Fibonacci projection. This poses upside risks to analyst consensus, which currently looks for 1.39 at end-Q1'25.
DATA
GERMANY INFLATION: Inflation Below Consensus - But In Line With MNI Tracking
HICP 2 tenths below consensus for both Y/Y (at 2.4%Y/Y - the same as in October), M/M also 2 tenths below consensus.
- National CPI (non-HICP) 2.2Y/Y (in line with MNI tracking based on state level data), M/M at -0.2% (the higher end of MNI tracking -0.2 to -0.3%).
- Core CPI (non-HICP) 3.0%Y/Y (the upper end of our 2.9-3.0% tracking estimate).
- Services CPI a tenth higher than our tracking estimate at 4.0%Y/Y (tracking 3.9%Y/Y).
GERMANY INFLATION: BUBA Estimates Softer M/M German Core & Services CPI
The Bundesbank’s estimate of seasonally-adjusted German CPI suggests sequential core inflation momentum decelerated in November, driven by lower services.
- Buba calculations show core inflation eased to 0.17% M/M SA (matching MNI's estimate) after 0.43% in Oct, with services inflation at 0.09% M/M (vs 0.22% MNI estimate) after 0.35% in Oct.
- Manufactured goods ex-energy meanwhile also decreased, to 0.26% M/M after accelerating two consecutive times before (vs 0.43% in Oct, no MNI estimate).
- 3M/3M measures were mixed: core 0.75% vs 0.70% prior, services 0.79% vs 0.88% prior for its lowest rate since February, and manufactured goods ex-energy 0.71% vs 0.43% prior.
- Conclusions are twofold:
- Services momentum was quite soft this month. It remains bumpy but some moderating trend can be observed, opening the possibility for a declining yearly rate at the beginning of 2025.
- The recent trend higher in core goods momentum stalled at least for this month.
CANADA DATA: Soft Payrolls And Normalized Vacancies vs Strong Wage Growth
- Payroll employment slid -57k back in September, its largest decline since Nov’23, after +17k in Aug (which StatCan defines as “little changed”) and +40k in Aug.
- The three-month sum of -1k is in firm contrast to the 66k from the more timely labour force data which has since seen a 15k increase in October.
- Declines were seen in 9 sectors and were little changed in the remaining 11 (where many fell but by a non-statistically significant amount). Retail trade saw the heaviest decline at -13.2k in September.
- More notably from the SEPH release, the vacancy rate inched a tenth higher to 3.0% in Sept after the 2.9% in Aug was the lowest since late 2017. This still marks a full normalisation to pre-pandemic trends though, having averaged in 3.2% 2019 and 3.0% in 2017-18 [bottom left chart].
- Whilst jobs growth and vacancies provide dovish reads, payrolled wage growth does however mostly consolidate August’s strong acceleration. Hourly earnings growth only eased from 5.0% to 4.7% Y/Y whilst the fixed weight index that controls for composition changes was 5.2% after 6.0% Y/Y. The SEPH wage data had until recently been much weaker than those from the LFS [bottom right chart].
CANADA DATA: Surprisingly Healthy Current Account, Aided By Large Revisions
- Building from what our policy team wrote, the current account surprised positively for Q3, with a deficit of C$3.2bn (cons C$8.7bn) after a downward revised C$4.7bn (initial C$8.5bn) in Q2.
- Those large revisions extend further back as part of annual revisions back to 2021 but are largest from 2H23 onwards: “Starting with the 2022 reference year, new data sources and methodologies have been introduced to better capture the compensation and expenditures of temporary foreign workers in Canada. Compensation to temporary foreign workers is recorded as a payment abroad in the Balance of Payments framework, while expenditures of temporary foreign workers in Canada are classified as business travel exports.”
- The latest profile sees a current account deficit at an estimated 0.4% GDP in Q3 after 0.6% GDP in Q2 and 0.2% GDP in Q1. That average deficit of 0.4% GDP through 1H24 previously was estimated to have been 0.9% GDP.
- Those sizeable revisions aside, latest quarterly developments saw a smaller services surplus (0.1% GDP after 0.3%) more than offset by a larger investment income surplus (0.6% GDP after 0.2%). The latter was driven by the joint largest direct investment-related surplus as a % GDP since 2Q20 rather than portfolio investment where the deficit remained at cycle highs of 1.6% GDP (last seen larger in 2003).
- It leaves a current account deficit on a far healthier standing than pre-pandemic deficits in the region of 2-3% GDP.
| Date | GMT/Local | Impact | Country | Event |
| 29/11/2024 | 2330/0830 | ** |  JP | Tokyo CPI |
| 29/11/2024 | 2330/0830 | * | JP | Labor Force Survey |
| 29/11/2024 | 2350/0850 | * | JP | Retail Sales (p) |
| 29/11/2024 | 2350/0850 | ** | JP | Industrial Production |
| 29/11/2024 | 0700/0800 | ** |  DE | Retail Sales |
| 29/11/2024 | 0700/0800 | ** | DE | Import/Export Prices |
| 29/11/2024 | 0700/0800 | ** |  SE | Retail Sales |
| 29/11/2024 | 0700/0800 | *** | SE | GDP |
| 29/11/2024 | 0745/0845 | *** |  FR | HICP (p) |
| 29/11/2024 | 0745/0845 | ** | FR | Consumer Spending |
| 29/11/2024 | 0745/0845 | *** | FR | GDP (f) |
| 29/11/2024 | 0745/0845 | ** | FR | PPI |
| 29/11/2024 | 0800/0900 | ** |  CH | KOF Economic Barometer |
| 29/11/2024 | 0800/0900 | *** | CH | GDP |
| 29/11/2024 | 0855/0955 | ** | DE | Unemployment |
| 29/11/2024 | 0900/1000 | ** |  EU | ECB Consumer Expectations Survey |
| 29/11/2024 | 0930/0930 | ** |  GB | BOE M4 |
| 29/11/2024 | 0930/0930 | ** | GB | BOE Lending to Individuals |
| 29/11/2024 | 1000/1100 | *** | EU | HICP (p) |
| 29/11/2024 | 1000/1100 | *** |  IT | HICP (p) |
| 29/11/2024 | 1030/1030 | GB | Financial Policy Summary and Record and Financial Stability Report | |
| 29/11/2024 | 1130/1230 | EU | ECB's de Guindos speaking at the "Encuentro de Economia" in Barcelona | |
| 29/11/2024 | 1330/0830 | *** |  CA | GDP - Canadian Economic Accounts |
| 29/11/2024 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 29/11/2024 | 1330/0830 | *** | CA | CA GDP by Industry and GDP Canadian Economic Accounts Combined |
| 29/11/2024 | 1330/0830 | ** |  US | WASDE Weekly Import/Export |
| 29/11/2024 | 1330/0830 | *** | CA | Gross Domestic Product by Industry |
| 29/11/2024 | 1600/1100 | CA | Finance Dept monthly Fiscal Monitor (expected) |
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