Highlights
- Fixed income markets rally and the US dollar slides as prospects of immediate tariff announcements from the new Trump administration fizzle out.
- A US holiday (Martin Luther King Day) has seen cash markets closed and futures volumes heavily limited.
- in FX space, we expect focus on Tuesday's expiry schedule to pick up into 10am NY time. There is decent optionality building around the $1.04 handle and above in EUR/USD, while a sizeable strike in USD/JPY at Y156 could limit losses.
- Tomorrow's macro docket meanwhile is concentrated around UK labour market data before Canadian CPI.
US TSYS: TY Closes Early After Climb Back Towards Resistance
- TYH5 saw 108-23 (+ 05+) at the early close, close to session highs of 108-24+ seen in sustained momentum originating from the WSJ reporting Trump would stop short of imposing new tariffs on day one.
- The contract has lifted a couple ticks on net since shortly prior to Trump’s address, having at one point dipped to 108-18 before swiftly reversing. There was little by way of details behind “we will tariff and tax foreign countries to enrich our citizens” and his speech contained few surprises.
- Resistance is seen at Friday’s high of 108-27+ before 109-06 (Dec 31 high) but gains are deemed corrective from a technical perspective, against a medium-term bear trend with support at 108-00 (Jan 16 low). It earlier saw a low of 108-08+.
- The MLK Day holiday has heavily depressed volumes despite the inauguration, with cumulative TY volumes tracking at only circa 35% of recent averages.
- Fed Funds futures meanwhile have seen cut expectations build today to 40bp for 2025 (again, all after the WSJ report) vs 38bp at the US crossover and 32bp prior to last week’s CPI report. A next 25bp cut from the FOMC is seen around June/July.
FOREX: USD Weakness Prevails Following Reports of No Imminent Tariffs
- There was a substantial weakening of the US dollar on Monday, as reports from the Wall Street Journal detailed that President Trump was planning to issue a broad memorandum Monday that directs federal agencies to study trade policies, but stopped short of imposing new tariffs on his first day in office. Trump officials later corroborated the reports.
- The greenback was immediately lower on the headlines, and despite being off its worst levels, the USD index remains around 1% lower on the session.
- There has been broad based strength across G10 currencies against the dollar, however, EUR and NZD are outperforming at the margin. EURUSD rose to a session high of 1.0430 on the report as post-election positioning is taken into account and unwound. Initial resistance levels at 1.0338 and 1.0354 have been breached and the pair traded within 7 pips of 1.0437 resistance, the Jan 6 high.
- AUDUSD has risen above initial firm resistance in tandem, breaching the 20-day EMA and recording a high of 0.6287. The 50-day EMA is at 0.6335 and should be the next target barring any reversal of the current tariff rhetoric in place.
- With the strong positive price action for major equity indices, USDJPY is only 0.3% lower on the session at 155.85 as we approach the APAC crossover. Positive risk sentiment is boosting cross/JPY here and may be in focus as the BOJ decision approaches this week.
- Uk labour market data and Canadian CPI highlight the economic calendar on Tuesday.
OPTIONS: Tuesday NY Cut Should Take Focus Given Trump Heads, Return of US
With the US returning in earnest tomorrow for the first full day of the second Trump Presidency, and the sharp USD swings today, we'd expect focus on Tuesday's expiry schedule to pick up into 10am NY time.
Decent optionality building around the $1.04 handle and above in EUR/USD, while a sizeable strike in USD/JPY at Y156 could limit losses:
- EUR/USD: $1.0300(E2.0bln), $1.0325(E3.3bln), $1.0400(E2.2bln), $1.0415-20(E1.3bln), $1.0450(E921mln), $1.0490-00(E1.4bln)
- USD/JPY: Y153.00($1.5bln), Y156.00-05($2.2bln)
- AUD/USD: $0.6200(A$775mln), $0.6245-50(A$939mln)
- USD/CAD: C$1.4285($703mln)
OPTIONS: Larger FX Option Pipeline
- EUR/USD: Jan22 $1.0345-50(E1.6bln), $1.0500(E1.1bln); Jan23 $1.0295-00(E2.7bln), $1.0400(E1.8bln), $1.0435-40(E1.0bln); Jan24 $1.0350(E1.4bln)
- USD/JPY: Jan22 Y155.50($1.2bln); Jan23 Y155.00($1.5bln)
- AUD/USD: Jan22 $0.6210(A$2.1bln)
- USD/CAD: Jan23 C$1.4450($1.1bln); Jan24 C$1.4380($1.4bln)
- USD/CNY: Jan23 Cny7.5000($1.9bln); Jan24 Cny7.4500($1.4bln)
US STOCKS: Further Gains On Tempering Of Immediate Trade War Concerns
- Cash S&P 500 has been closed today for MLK Day but e-mini S&P has seen further solid gains on the prospect of no tariffs arriving on day one of the second Trump administration.
- ESH5 closed early at 6055.25 (+21.75 points) for a 0.4% gain to extend Friday’s +1.0%.
- President Trump’s inauguration address had little net impact, with the contract having already pared an earlier climb to 6078.25 following the aforementioned WSJ report plus also a Bloomberg report pointing specifically at a desire to negotiate with China.
- The day’s moves continue the bull cycle extension, with next resistance seen at 6107.50 (Dec 26 high) after which lies 6163.75 (Dec 16 high). To the downside, support is seen at 5961.75 (Jan 16 low).
- Other e-mini indices have seen similar gains today, with both Nasdaq 100 and Down Jones +0.4%, although the Russell 2000 outperforms (+1.2%) having heavily underperformed Friday.
- Improved risk sentiment has been reflected more broadly as well, including in Europe the SX5E index marking a fresh twenty-year high.
COMMODITIES: Crude Declines As Near-Term Tariff Fears Ease, Copper Falls Further
- Crude has lost ground today amid news that Trump will stop short of imposing tariffs immediately upon taking office, coupled with the implementation of the Gaza ceasefire have added pressure.
- WTI Feb 25 fell by 1.7% to $76.6/bbl.
- In his inauguration address, President Trump said that the US will fill its strategic reserves again and export American energy all over the world.
- The trend structure in WTI futures remains bullish, with attention on $79.48, the Apr 12 ‘24 high. A clear break of this hurdle would strengthen the bullish theme and open $80.63, a Fibonacci projection.
- On the downside, a further decline would expose the 20-day EMA, at $74.80, a key short-term support.
- Meanwhile, spot gold has edged up by 0.2% to $2,709/oz, with the yellow metal trading in a tight range through much of the session.
- Gold continues to hold on to its recent gains and scope is seen for a continuation higher near-term. Eyes remain on $2,726.2, the Dec 12 high and an important resistance.
- On the downside, initial support is at $2,653.4, the 50-day EMA.
- In contrast, copper has fallen by 1.2% to $432/lb today, leaving the red metal 3.5% below Friday’s high.
- Copper futures remain in a bull cycle, despite the latest pullback. Price has traded through the 50-day EMA and last week’s gains resulted in a move through key short-term resistance at $433.50, the Dec 12 high, opening $452.85, the Nov 5 ‘24 high.
ECB/SWAPS: ECB Survey Highlights Deteriorating Market Liquidity In Autumn 2024
The ECB’s December 2024 SESFOD survey (Survey on credit terms and conditions in euro-denominated securities financing and OTC derivatives markets) reports a tightening in credit terms and conditions between September and November 2024 “as general market liquidity deteriorated”.
- “A small net percentage of survey respondents expected overall terms to tighten further across all counterparty types in the three months ahead (i.e. in the period from December 2024 to February 2025)”.
- “A significant net percentage of survey respondents reported that financing rates/spreads had increased for funding secured against all collateral types”.
- “Survey respondents also reported increased demand for funding across all collateral types. Moreover, they reported a slight deterioration in the liquidity and functioning of collateral markets”.
- A reminder that German paper saw a notable cheapening against swaps through the Autumn, with the Bund ASW (vs 3-month Euribor) tightening from over 25bps at the end of September to below 0bps by mid-November (an all-time/cycle low).
- Despite retracing a portion of those moves in the second half of November, long-end spreads have re-approached those record levels this month. Analysts have highlighted increased free-float from ECB balance sheet run-off and heavy sovereign supply as fundamental drivers of swap spread narrowing in 2025.
- Press release: https://www.ecb.europa.eu/press/pr/date/2025/html/ecb.pr250120~9384966317.en.html
MNI UK Labour Market Preview: January 2025 Release
- The importance of UK labour market data may have fallen a little for the MPC, but it is still incredibly important for the market, despite growth concerns having picked up recently and activity and PMI data increasingly watched.
- The scope for further revisions make this month’s print even more unpredictable.
- Rounded to 1dp, the majority (6/8) of analyst forecasts we have seen for private sector regular AWE look for a 5.8%Y/Y print in the 3months to November, up from 5.37%Y/Y in the 3-months to the end of October. The other two forecasts we have seen look for 5.7%.
- In terms of the “headline” whole economy AWE numbers, ex-bonus forecasts are generally 5.5%Y/Y in the 3-months to November (from 5.19%Y/Y in the 3-months to October) while the total (including bonus) whole economy AWE forecasts are split between 5.6-5.7%Y/Y in the 3-months to November (with one analyst looking for 5.5%).
For the full preview including summaries of a dozen sellside views see: UK_Labour_Preview_2025_01_Release.pdf
| Date | GMT/Local | Impact | Country | Event |
| 21/01/2025 | 0700/0700 | *** |  GB | Labour Market Survey |
| 21/01/2025 | 1000/1100 | *** |  DE | ZEW Current Expectations Index |
| 21/01/2025 | - |  EU | ECB's De Guindos in ECOFIN Meeting | |
| 21/01/2025 | 1330/0830 | *** |  CA | CPI |
| 21/01/2025 | 1330/0830 | ** |  US | Philadelphia Fed Nonmanufacturing Index |
| 21/01/2025 | 1445/0945 | *** | US | MNI Chicago Business Barometer Seasonal Adjustment |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 21/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 21/01/2025 | 1800/1300 | * | US | US Treasury Auction Result for Cash Management Bill |
| 21/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 52 Week Bill |
| 22/01/2025 | 2145/1045 | *** |  NZ | CPI inflation quarterly |
| 22/01/2025 | 0001/0001 | * | GB | Brightmine pay deals for whole economy |
| 22/01/2025 | 0700/0700 | *** | GB | Public Sector Finances |
| 22/01/2025 | 0700/1500 | ** |  CN | MNI China Money Market Index (MMI) |
| 22/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 22/01/2025 | 1330/0830 | * | CA | Industrial Product and Raw Material Price Index |
| 22/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 22/01/2025 | 1515/1615 | EU | ECB's Lagarde in dialogue on Unlocking Europes potential | |
| 22/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 22/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 20 Year Bond |
| 23/01/2025 | 2350/0850 | ** |  JP | Trade |
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