MNI US MARKETS ANALYSIS - Any BoE Reaction Could Hinge on Vote Split

US TSYS: Bull Flatter Amidst Strong Volumes, Further Notable Labor Data Ahead

• Cash Treasuries trade bull flatter with major benchmarks 0.2bp to 4bp richer as the front end currently sits within yesterday’s highs but the belly onwards has pushed higher. The flattening sees 2s10s at -23.5bps (-3bps) for levels last seen on Oct 24/25.
• TYZ3 at 107-13 trades at the high end of a relatively narrow overnight range amidst high cumulative volumes of 515k. It marks a 17+ tick increase on yesterday’s settle but much less of an increase from the Globex close. The increases are deemed corrective, with resistance at 107-22+ (Oct 16 high) after which lies 108-02 (50-day EMA).
• Data: Challenger job cuts Oct (0730ET), Weekly jobless claims (0830ET), Nonfarm productivity and ULCs Q3 (0830ET), Factory orders Sep (1000ET)
• Fed: St Louis Fed’s interim president Paese opening remarks (1830ET) but shouldn’t contain any policy relevant topics.
• Bill issuance: US Tsy $95B 4W, $85B 8W bill auctions (1130ET)

STIR FUTURES: Fed Rate Path Holds Circa 90bps Of Cuts In 2024 Post-Powell

• After some mild gyrations overnight, Fed Funds implied rates are back little changed having shifted lower with the FOMC decision and in particular Chair Powell’s presser yesterday.
• There is just 4bp of tightening seen for Dec building to a cumulative 7bp to Jan for a terminal 5.39%.
• It’s followed by a cumulative 31bp of cuts to Jun’24 and 89bp to Dec’24, the latter of yesterday’s 91bp which marked the highest close since Oct 9 and before that mid-September.
• The FOMC remains in its media blackout today so welcoming remarks from St Louis Fed’s interim president Paese shouldn’t contain any policy relevant content.

BOE: Timings, Preview, Market Reaction

The full MNI BOE Preview is available here. The MNI Markets team expects a 6-3 vote for unchanged rates at 5.25% with largely unchanged guidance.

• Timings: 12:00GMT / 8:00ET: BOE policy decision, Minutes, MPR
  Press conference: 12:30GMT / 8:30ET
  Decision Marker Panel: 14:00GMT / 10:00ET
• In terms of market reaction, we think that the main driving factor is likely to be the vote breakdown. If there are less than three hawkish dissenters we could see a small dovish reaction in markets. If Dhingra votes for a cut, we could also see a small dovish reaction. Conversely if there is another 5-4 split this could see a hawkish market outcome (amplified even further if it was someone other than Breeden switching their voting intention).
• The forecasts will also likely be watched for the market reaction, but there are less "clean" ways to trade these today, in our view. Any moves there may take a bit more time to filter through along with the Governor’s messaging in the press conference.

UK: ONS update on labour market statistics

The ONS has released details of its future changes to labour market data as it transitions from Labour Force Survey (LFS) to Transformed Labour Force Survey (TLFS) for headline employment / unemployment statistic:

• In the 14 November publication the ONS will release the experimental data based on PAYE/claimant count as it did in the delayed release on 24 October). Everything also released on 17 October (AWE, vacancies etc.) will also be released as usual. The old headline series for employment, regional data and quarterly datasets will not be released.
• For the 12 December release the ONS plans to incorporate new population figures in the LFS estimates.
• The ONS "aim to replace the LFS as the source for labour market publications with the transformed version of the survey from March 2024, subject to final data quality checks in the new year. We are doing some final fine-tuning to the questionnaire, but early results are promising. Response rates have improved to an average of 39% for wave 1 compared with 30% for the LFS. Representation is also improved, with response rates for the most deprived areas 50% higher."
• A further update on this process will be provided on 12 December.
• More details are available here.

EUROPE ISSUANCE UPDATE:

• E2.4bln of the 3.50% May-29 Bono. Avg yield 3.334% (bid-to-cover 1.87x).
• E1.337bln of the 0.70% Apr-32 Obli. Avg yield 3.582% (bid-to-cover 1.99x).
• E1.666bln of the 1.90% Oct-52 Obli. Avg yield 4.465% (bid-to-cover 1.38x).
• E479mln of the 0.70% Nov-33 Obli-Ei. Avg yield 1.533% (bid-to-cover 1.72x).

• E5.29bln of the 3.50% Nov-33 OAT. Avg yield 3.32% (bid-to-cover 2.02x).
• E2.175bln of the 3.00% May-54 OAT. Avg yield 3.92% (bid-to-cover 2.04x).
• E1.197bln of the 0.50% May-72 OAT. Avg yield 3.36% (bid-to-cover 2.99x).
• E2.335bln of the 0.50% Jun-44 Green OAT. Avg yield 3.77% (bid-to-cover 1.93x).

FOREX: Greenback Carrying Bulk of Post-Fed Weakness

• The greenback is carrying the bulk of the post-Fed losses, and remains weaker against all others in G10 headed through to the NY crossover. The USD Index has shed around 0.75% from the week's highs, however the bearish engulfing candle pattern posted on Oct24 continues to weigh on EUR/USD. The 50-dma resistance for the pair sits ahead at 1.0639, a break above which is needed to ignite any more positive momentum.
• EUR/NOK trades back to flat having reversed a brief post-Norges Bank rate decision (kept rates unchanged at 4.25%, as expected) spike as markets retain the view that a December rate hike is most likely, despite a moderation in language pointing to a potential hold later this year should inflation moderate faster than expected.
• The Bank of England decision takes focus going forward, with the MPC seen keeping rates unchanged, with the main driving factor likely to be the vote breakdown. If there are less than three hawkish dissenters we could see a small dovish reaction in markets. If Dhingra votes for a cut, we could also see a small dovish reaction. Conversely if there is another 5-4 split this could see a hawkish market outcome (amplified even further if it was someone other than Breeden switching their voting intention).
• The weekly US jobless claims data, September factory orders and the final durable goods orders mark the data highlights for the day. BoE's Bailey holds a post-decision press conference, with speeches also scheduled from Fed's Paese and ECB's Schnabel.

FX OPTIONS: Expiries for Nov01 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0585-05(E1.7bln), $1.0665-75(E1.2bln)
• USD/JPY: Y147.00-10($1.1bln), Y147.50-59($924mln), Y148.00-20($1.5bln), Y148.30-50($2.6bln), Y149.80-00($1.6bln), Y150.50-60($1.8bln), Y151.00($686mln), Y151.80-00($759mln)
• EUR/GBP: Gbp0.8675(E500mln)
• USD/CNY: Cny7.3000($1.4bln)

EQUITIES: E-Mini S&P Trades Close to Resistance at 20-Day EMA

• Eurostoxx 50 futures are trading higher as the correction from recent lows extends. Price is through resistance at the 20-day EMA and this signals scope for a test of the 50-day EMA, at 4184.40. The broader trend condition is bearish, however, a break of the 50-day average would signal scope for a stronger bull cycle. This would open 4256.00, the Oct 12 high. On the downside, key support and the bear trigger lies at 4001.0, the Oct 27 low.
• The trend condition in S&P e-minis is bearish and this week’s move higher is considered corrective. The contract traded to a fresh cycle low last week. The recent breach of support at 4235.50, Oct 4 low and bear trigger, confirmed a resumption of the downtrend and maintains the bearish price sequence of lower lows and lower highs. MA studies are in a bear-mode position too. The focus is on 4100.00. Initial firm resistance is at 4276.29, the 20-day EMA.

COMMODITIES: WTI Futures Extend Pullback from Oct 20 High Wednesday

• WTI futures traded lower again Wednesday as the pullback from $89.85, the Oct 20 high, extends. The medium-term trend condition is bullish and the recent move lower still appears to be a correction. A resumption of gains would expose the bull trigger at $92.48, the Sep 28 high. Clearance of this hurdle would confirm a resumption of the medium-term uptrend. For bears, a move through $80.20, the Oct 6 low, would instead highlight a short-term top.
• The Gold trend condition is unchanged - the uptrend remains intact and a short-term pullback is considered corrective. Price has recently breached key resistance at $1953.0, the Sep 1 high, and $1987.5, the Jul 20 high. The continuation higher strengthens a bullish theme and opens $2022.20 next, the May 15 high. Initial firm pivot support lies at $1928.9, the 50-day EMA. Clearance of this level is required to signal a short-term top.