MNI US MARKETS ANALYSIS - Riksbank Induce Largest One Day SEK Rally in Years

US TSYS: 30Y Supply In Focus For Otherwise Thin Docket

• Cash Tsys hold slightly richer across the curve in consolidation of yesterday’s rally in the second half of the US session, mirroring a further drift lower in Fed rate hike expectations despite Governor Waller saying Fed Governor Waller said: “We have farther to go. And, it might be a long fight, with interest rates higher for longer than some are currently expecting. But I will not hesitate to do what is needed to get my job done".
• A thin docket with no Fedspeak and only weekly claims for data could see greater emphasis on the upcoming 30Y auction plus the ongoing but dwindling earnings season, with Philip Morris Intl, Paypal and S&P Global still to report today.
• 2YY -0.6bp at 4.415%, 5YY -0.9bp at 3.780%, 10YY -0.6bp at 3.590% and 30YY -0.7bp at 3.664%.
• TYH3 trades 8+ ticks higher at 113-21+ on slightly below average volumes. Resistance is seen at 114-02 (50-day EMA) and support at 113-05+ (Feb 7 low).
• Data: Weekly jobless claims (0830ET)
• Issuance: US Tsy $21B 30Y Bond auction (912810TN8) – 1300ET
• Bill issuance: US Tsy $75B 4W, $60B 8W bill auctions – 1130ET

STIR FUTURES: Fed Rate Path Edges Lower In Search Of New Drivers

• Fed Funds implied hikes have drifted further lower overnight off yesterday’s post-Williams high of 5.18%, back at late Mon/early Tue levels but still ~20bps above pre-payrolls levels.
• 25.5bp for Mar (-0.5bp), cumulative 44bp for May (-0.5bp), 53bp to 5.12% terminal in July (-1bp) before 31bps of cuts to 4.79% in Dec (-1bp).
• Little new drivers for the move although BOE pricing also trending lower on the day, before a thin docket ahead with no Fedspeak scheduled.

EUCO Gets Underway As For. Pol. Chief Promises More Military Aid For Ukraine

The special European Council summit of member state leaders is getting underway in Brussels, with Ukrainian President Volodymyr Zelenskyy set to be in attendance following his visits to London and Paris on 8 Feb. Livestream of leader arrivals and doorstep comments here: https://audiovisual.ec.europa.eu/en/ebs/live/1

• EU High Representative for Foreign Affairs and Security Policy Josep Borrell states that "the EU will deliver more military support for Ukraine". Following the approval from Germany that allows a number of EU states to send tanks to Ukraine, Zelenskyy's main aim now is to get its allies to send fighter jets to counter the Russian invasion.
• The special EUCO summit was originally intended to allow leaders to discuss the controversial issue of migration, which remains a major political flashpoint in a number of EU states. Instead, Ukraine as well as the EU's potential response to the US' Inflation Reduction Act are likely to dominate proceedings.

FOREX: SEK Surges as Riksbank Eye More Tightening

• Having suffered alongside the NOK YTD, SEK has sprung to the top-end of the G10 leaderboard following the Riksbank rate decision, which not only saw a 50bps rate hike, but projected further tightening in the Spring and committed to unwinding their balance sheet from April onwards. This has resulted in the largest one-day downtick for EUR/SEK since March last year, with the cross fast approaching the next medium-term support at 11.1411, the 50-dma. The NOK is the second best performer in G10 in sympathy, putting Scandi currencies above all others.
• The greenback is backtracking, putting the USD Index off any imminent challenge of the 103.525 resistance. This puts the USD at the week's lowest levels ahead of the NY crossover, although the early Feb lows are still a way off for now.
• The EUR is more mixed following the delayed release for German January CPI - which fell short of forecast. EUR/GBP is at the lowest level since February 1st, with EMA supports next up, 0.8846 marks the 20-day EMA, while 0.8796 marks the 50-day EMA.
• Weekly US jobless claims are the data highlights Thursday, with the Banxico rate decision also on the docket. Speakers of not include ECB's Nagel, de Cos and de Guidnos - with no Fed members scheduled until Friday.

FX OPTIONS: Expiries for Feb09 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.0700-06(E719mln), $1.0760-80(E2.2bln), $1.0800(E1.8bln), $1.0840-50(E1.7bln), $1.0885-00(E1.1bln)
• USD/JPY: Y128.00($1.3bln), Y129.00($645mln), Y130.45($500mln), Y131.25-30($727mln), Y131.45-55($821mln), Y133.00($718mln)
• GBP/USD: $1.1950(Gbp581mln), $1.2145-50(Gbp533mln)
• EUR/GBP: Gbp0.8835-50(E599mln), Gbp0.8925-50(E1.4bln)
• EUR/JPY: Y141.00(E519mln)
• AUD/USD: $0.6955(A$581mln), $0.7000($707mln), $0.7025-30(A$643mln)
• NZD/USD: $0.6375-90(N$510mln)
• USD/CAD: C$1.3350($647mln), C$1.3395($711mln)

EQUITIES: Eurostoxx Futures Print Fresh Cycle High at European Open

• The EUROSTOXX 50 futures trend needle is pointing north. Resistance at 4206.00, the Jan 18 high, has been breached. The break confirms a resumption of the current uptrend and paves the way for gains towards 4269.50, a Fibonacci projection. Note that the trend remains overbought. A pullback, if seen, would represent a healthy correction. Key support to watch lies at 4097.00, the Jan 19 low.
• S&P E-Minis are consolidating. The trend condition is bullish. The contract traded higher last week and confirmed a resumption of the bull cycle that started Dec 22. A key resistance and a bull trigger at 4180.00, Dec 13 high, has been pierced. A clear break would confirm a resumption of a broader uptrend and open 4250.00, the Aug 26 2022 high. Initial firm support to watch lies at 4002.94, Jan 31 low. A pullback would be considered corrective.

COMMODITIES: WTI Futures Hold on to Week's Gains, Piercing 50-Day EMA

• WTI futures are holding on to this week’s gains. The contract has pierced resistance at the 50-day EMA - at $78.34. A clear break of this hurdle would strengthen this week’s recovery and open $80.22, a Fibonacci retracement. Clearance of $80.22 would expose the key resistance at $82.66, the Jan 18 high. On the downside, a break of $72.25, the Feb 6 low, would reinstate a bearish theme.
• Trend conditions in Gold are bearish for now, and the yellow metal remains in a corrective cycle. This follows the strong sell-off on Feb 2 / 3 and sights are on the 50-day EMA, at $1855.2. The average represents a key support and if breached, would strengthen a bearish case and suggest scope for a deeper pullback. On the upside, key resistance and the bull trigger, is at $1959.7, the Feb 2 high.