Highlights:
- Calmer waters for currency markets, but concerns remain over EUR downside
- ISM Manufacturing in focus after particularly soft MNI Chicago PMI
- First Fedspeak of the year due, with Kugler, Daly and Barkin on the tape
- Treasuries running modestly higher after a generally calm overnight session, modest volumes (TYH5 under 185k) with Japan mkts closed for a bank holiday.
- Futures are off early London session highs with the Mar'25 10Y contract trading 108-31 last (+5) vs. 109-01 high - well below initial technical resistance at 110-03.5 (20-day EMA) on modest volume under 185k.
- Projected rate cuts through mid-2025 look steady to slightly higher vs. late Thursday levels (*) as follows: Jan'25 steady at -2.8bp, Mar'25 -14.4bp (-13.5bp), May'25 -19.5bp (-19.0bp), Jun'25 -28.2bp (-28bp).
- Curves are looking a touch flatter (2s10s -.960 at 30.782) after climbing to new high of 33.384 yesterday -- last seen in May 2022. Tsy 2Y yield currently -.0064 at 4.2330%, 10Y yield -.0159 at 4.5430%.
- Economic data (prior, est) at 1000ET: ISM Manufacturing (48.4, 48.2), Prices Paid (50.3, 51.4), New Orders (50.4, --) and Employment (48.1, --).
- Scheduled Fed speakers: Richmond Fed Barkin keynote address to a Maryland bankers assn event (text, Q&A) at 1100ET LINK while SF Fed Daly & Fed Gov Kugler will speak at a mon-pol panel event (no text, Q&A) on Saturday evening at 1730ET.
US TSY FUTURES: Fresh Longs Set In TY Futures On Thursday
Long setting in TY futures (~$2mn DV01) equivalent provided the only real positioning swing of note on Thursday.
- The lower-than-expected round of weekly jobless claims data helped unwind most of the rally seen ahead of the release, making for fairly non-committal trade.
| 02-Jan-25 | 31-Dec-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,271,039 | 4,288,996 | -17,957 | -696,561 |
FV | 6,175,529 | 6,157,077 | +18,452 | +776,779 |
TY | 4,546,355 | 4,514,173 | +32,182 | +2,079,584 |
UXY | 2,166,417 | 2,161,248 | +5,169 | +454,408 |
US | 1,916,508 | 1,913,615 | +2,893 | +363,427 |
WN | 1,764,918 | 1,766,141 | -1,223 | -232,016 |
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| Total | +39,516 | +2,745,622 |
STIR: Positions Built Across Much Of SOFR Strip On Thursday
A mix of long and short setting dominated across much of the SOFR futures strip on Thursday, although net changes in contract prices were fairly limited on the day as the lower-than-expected weekly jobless claims data helped counter an early rally in wider core global FI markets.
- Positioning swings were mixed through SFRH6, before long setting asserted itself further out the strip.
| 02-Jan-25 | 31-Dec-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,123,852 | 1,137,781 | -13,929 | Whites | +6,185 |
SFRH5 | 1,105,412 | 1,090,967 | +14,445 | Reds | +38,433 |
SFRM5 | 1,014,789 | 1,008,228 | +6,561 | Greens | +27,940 |
SFRU5 | 814,883 | 815,775 | -892 | Blues | +7,971 |
SFRZ5 | 893,184 | 880,070 | +13,114 |
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SFRH6 | 574,915 | 566,749 | +8,166 |
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SFRM6 | 641,261 | 637,174 | +4,087 |
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SFRU6 | 632,690 | 619,624 | +13,066 |
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SFRZ6 | 720,463 | 706,563 | +13,900 |
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SFRH7 | 461,114 | 447,638 | +13,476 |
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SFRM7 | 377,628 | 374,280 | +3,348 |
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SFRU7 | 271,879 | 274,663 | -2,784 |
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SFRZ7 | 297,059 | 290,953 | +6,106 |
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SFRH8 | 228,109 | 226,603 | +1,506 |
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SFRM8 | 160,621 | 162,023 | -1,402 |
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SFRU8 | 115,313 | 113,552 | +1,761 |
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RATINGS: No Sovereign Updates Scheduled Today, MNI '25 Calendar Available
There are no sovereign credit rating updates scheduled for today.
- Our consolidated sovereign rating review calendar for ’25 covers the scheduled updates from the five most notable rating agencies
- Click for the full document.
- Note that this schedule is indicative only and ratings can be reviewed on an ad-hoc basis. Rating agencies may also adjust their schedules during the year.
FRANCE: Ministers To Sound Out w/Parl't Groups On Budget 'Sticking Points'
Prime Minister Francois Bayrou's Council of Ministers met for the first time for the traditional New Year's breakfast at the Ministry of the Interior in Place Beauvau. Bayrou claimed "There is a way out" of the ongoing instability that has dogged French politics since the snap parliamentary election in summer 2024 that resulted in a deeply divided National Assembly, unable to reach agreement on passing a budget. Bayrou: "If we are united, we will be able to move a certain number of obstacles in front of us."
- Speaking to RTL earlier, Minister of Labour, Health, Solidarity, and Families Catherine Vautrin said that "we ended 2024 without a Social Security financing bill (PLFSS) and without a finance bill. This means that in financial matters, France is operating at a minimum level. (...) This cannot continue, because quite simply, we cannot make new commitments, whatever the area,"
- Vautrin and Minister Delegate for the Budget and Public Accounts Amélie de Montchalin will begin meetings today with leaders of all parliamentary groups in the National Assembly and the Senate in order to try to determine "sticking points" on the budget.
- Speaking to RMC, Minister for Industry and Energy Marc Ferracci said the planned up to 14% reduction in electricity prices from 1 Feb "will depend on the adoption of the finance law", while the overseas department of Mayotte remains in urgent need of new funding to be agreed following the devastation caused by Cyclone Chido in Dec 2024.
AUSTRIA: Liberal NEOS Leave Coalition Talks Saying 'No Progress Possible"
The liberal NEOS party formally withdrew from coalition talks with Chancellor Karl Nehammer's conservative Austrian People's Party (ÖVP) and the centre-left Social Democrats (SPÖ), citing lack of progress and inflexibility in negotiations. This leaves the ÖVP and SPÖ with the option of seeking to form a gov't with the environmentalist Greens, or forming a two-party 'grand coalition'.
- Reuters reports comments from NEOS chair Beate Meinl-Reisinger claiming "In recent days we have had the impression that in central issues in the coalition talks no more progress could be made." Meinl-Reisinger: "Despite intensive negotiations, no breakthrough could be made in coalition talks with the two other parties, and they often said no to our proposals."
- The ÖVP has governed with the Greens since 2019, but relations have frayed and a poor performance by the latter in the 2024 election was seen as a possible end to their inclusion in gov't. An ÖVP-SPÖ coalition would hold 92 seats in the 183-member National Council, exactly on the majority threshold. Meinl-Reisinger says that the NEOS "assured other parties that in parliament we will support those plans that we have already agreed on".
- The far-right Freedom Party of Austria (FPÖ) won for the first time a plurality in the September federal election. However, it was unable to find willing allies to form a governing coalition. Early opinion polling already indicates a strengthening in support for the FPÖ having been shut out of gov't.
FOREX: Calmer Market Friday, But Concerns Over Single Currency Remain
- A much calmer market early Friday relative to the sharp sell-off suffered by both EUR/USD and GBP/USD yesterday. Post-mortems of the move see most looking to technical breaks of support (we identified 1.2367 in GBP/USD and 1.0335 in EUR/USD), sprawling growth concerns for Europe that could be worsened by Trump's inauguration and political dissatisfaction across mainland Europe and the UK.
- The greenback is modestly lower early Friday - however this was also the case for much of Thursday morning - leaving markets watching for any US hours recovery for the greenback. Activity elsewhere remains thin, with the Japanese market holiday keeping volumes light in overnight trade.
- Focus for the remainder of Friday trade turns to the ISM manufacturing release for December, expected to edge slightly lower to 48.2 from 48.4. Particular attention may be paid to this release given the sharp miss for the December Chicago PMI read - and another miss in today's data could set up a string of poor releases headed into the Fed decision at the end of the month.
- EUR/USD parity again becomes a focus going forward. Options markets now priced an implied probability of 49% for the pair to touch 1.00 in the coming three months (up from 28% a week ago), and a 21% probability (up from 13% a week ago) of the pair closing below parity at end-Q1.
- Given the spot decline, no surprise to see downside interest ratcheting higher in hedging markets: DTCC data shows €2.7bln in puts traded with a strike of 1.00 or below since the turn of the year, with interest noted as low as 0.94 puts.
EQUITIES: Bull Cycle in Eurostoxx 50 Futures Remains Intact
- A bull cycle in the Eurostoxx 50 futures contract remains intact, however, the recent move down highlights a corrective phase. Despite the latest bounce, a short-term bear threat remains present - for now. Key short-term support has been defined at 4829.00, the Dec 20 low. A break of it would confirm a resumption of the bear cycle and open 4800.87, a Fibonacci retracement. Initial firm resistance to watch is at 4939.00, the Dec 19 high.
- A bear threat in the S&P E-Minis contract remains present and the latest move down highlights the end of the recent Dec 20 - 26 corrective bounce. Attention is on 5866.00, the Dec 20 low and a key short-term support. Clearance of this level would strengthen a bearish theme. Initial firm resistance to monitor is 6107.50, the Dec 26 high. A break of this level is required to open key resistance at 6178.75, the Dec 6 high.
COMMODITIES: WTI Futures Breach Initial Resistance, Strenghening Bullish Theme
- WTI futures have traded higher this week as the contract extends recent gains. A stronger reversal to the upside has exposed key short-term resistance at $76.41, the Oct 8 high. Initial firm resistance at $71.97, the Nov 7 high, was breached yesterday, strengthening a bullish theme. On the downside, a reversal lower would expose support at the 20-day EMA, at $70.13. This average is seen as a key short-term support.
- Despite the latest recovery, a bear threat in Gold remains present. The yellow metal traded sharply lower on Dec 18 and the move undermines a recent bull theme. A resumption of weakness would open key support at $2536.9, the Nov 14 low. The first firm support to watch is $2583.6, the Dec 19 low. On the upside, a continuation higher would instead signal scope for a climb towards resistance at $2726.2, the Dec 12 high.
| Date | GMT/Local | Impact | Country | Event |
| 03/01/2025 | - | *** |  US | Domestic-Made Vehicle Sales |
| 03/01/2025 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 03/01/2025 | 1500/1000 | *** | US | ISM Manufacturing Index |
| 03/01/2025 | 1530/1030 | ** | US | Natural Gas Stocks |
| 03/01/2025 | 1600/1100 | US | Richmond Fed's Tom Barkin |