Highlights:
- Universal tariff talk reignites inflationary argument and supports dollar
- Stocks recovering DeepSeek losses, Nvidia expected to recoup 4.6% in lost market cap after record-setting sell-off
- Fed, ECB policy in focus as FOMC and Governing Council inside pre-meeting media blackout
- Treasuries are lower across the curve in an extension of yesterday’s paring of early gains seen on DeepSeek-inspired risk-off.
- The FT has reported Tsy Sec Bessent is pushing for new universal tariffs on US imports to start at 2.5% and rise gradually, according to four people familiar with the matter, whilst Trump told reporters aboard Air Force One he wants universal tariffs “much bigger” than 2.5%.
- Today sees focus on durable goods and the Conf. Board consumer survey before some attention on 7Y supply after yesterday’s dual 2Y and 5Y auctions. These are all of course ahead of Wednesday’s FOMC decision (MNI Fed Preview).
- Cash yields are 2-3bp higher, with 2s10s at 34.7bps (+0.8bp) within recent ranges.
- TYH5 has pulled back to 108-28+ (-08+) on solid cumulative volumes of 395k at typing, remaining firmly within yesterday’s range with its high of 109-12.
- Yesterday’s push higher stopped just short of resistance at 109-12+ (50-day EMA), with clearance required to strengthen a bullish theme working against a medium-term bearish trend condition. Support meanwhile is seen at 108-00 (Jan 16 low).
- Fed Funds implied rates meanwhile still see a next cut in June although it’s closer now with 27bp priced vs as much as 32bp yesterday, building to a cumulative 48bp of cuts for 2025.
- Data: Durable goods Dec prelim (0830ET), FHFA and S&P CoreLogic house prices Nov (0900ET), Conf. Board consumer survey Jan (1000ET), Richmond Fed mfg Jan (1000ET), Dallas Fed services Jan (1030ET)
- Coupon issuance: US Tsy 44B 7Y note auction - 91282CMK4 (1300ET)
- Bill issuance: US Tsy $30B 2Y FRN, $85B 42D CMB auctions (1130ET)
FED: MNI Fed Preview - Jan 2025: Analyst Outlook
Note to readers: This update of our Jan 24 preview includes analyst expectations for the January FOMC meeting and beyond (Starting Page 20)
FOR THE FULL PUBLICATION PLEASE USE THE FOLLOWING LINK:
FedPrevJan2025 - With Analysts.pdf
ECB: MNI ECB Preview, Jan'25: An 'Easy' Step Nearer Neutral
- We have published and e-mailed to subscribers the MNI ECB Preview, including MNI analysis plus analyst views on what to expect at this month's meeting.
- Please find the full report here: https://media.marketnews.com/ECB_Preview_Jan2025_fa0c9e0123.pdf
US TSY FUTURES: Net Long Setting Dominated Again On Monday
OI data points to another round of meaningful net long setting on Monday, as markets reacted to DeepSeek’s AI advances.
- Net long setting was seen in FV, TY, US & WN futures, with modest net short cover seen in both TU and UXY futures.
- The curve-wide net long setting wasn’t quite as pronounced as what was seen on Friday, totaling ~$5.2mln in DV01 equivalent terms vs. the ~$8.0mln seen on Friday.
- Over $3.0mln DV01 equivalent of fresh net longs were added in TY futures.
| 27-Jan-25 | 24-Jan-25 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,198,793 | 4,218,276 | -19,483 | -732,950 |
FV | 6,274,716 | 6,252,332 | +22,384 | +930,055 |
TY | 4,866,435 | 4,818,730 | +47,705 | +3,055,982 |
UXY | 2,273,537 | 2,281,049 | -7,512 | -655,873 |
US | 1,962,582 | 1,951,182 | +11,400 | +1,426,026 |
WN | 1,789,168 | 1,782,665 | +6,503 | +1,224,840 |
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| Total | +60,997 | +5,248,080 |
STIR: Net Short Cover Seen In Most SOFR Futures On Monday
OI data points to net short cover in most SOFR futures on Monday, as markets reacted to DeepSeek’s AI advances.
- Net long setting was only seemingly seen in a handful of contracts through the blues.
| 27-Jan-25 | 24-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,050,808 | 1,057,493 | -6,685 | Whites | -31,512 |
SFRH5 | 1,210,779 | 1,198,189 | +12,590 | Reds | -74,073 |
SFRM5 | 1,035,081 | 1,038,150 | -3,069 | Greens | -14,444 |
SFRU5 | 751,938 | 786,286 | -34,348 | Blues | -13,974 |
SFRZ5 | 998,779 | 1,027,153 | -28,374 |
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SFRH6 | 691,236 | 689,049 | +2,187 |
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SFRM6 | 645,904 | 672,660 | -26,756 |
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SFRU6 | 603,134 | 624,264 | -21,130 |
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SFRZ6 | 712,849 | 720,952 | -8,103 |
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SFRH7 | 481,562 | 486,186 | -4,624 |
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SFRM7 | 401,422 | 399,895 | +1,527 |
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SFRU7 | 289,288 | 292,532 | -3,244 |
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SFRZ7 | 265,401 | 277,016 | -11,615 |
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SFRH8 | 212,543 | 213,396 | -853 |
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SFRM8 | 181,731 | 183,807 | -2,076 |
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SFRU8 | 116,741 | 116,171 | +570 |
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INR: Local Stocks, Bonds Rally on RBI Liquidity Measures, INR Sits Weaker
Broader risk aversion following a selloff across the major equity benchmarks inspired by DeepSeek on Monday and renewed concerns over Trump’s tariff policies hit Asia FX overnight, while Indian markets will continue to digest the implications of the RBI’s latest liquidity steps.
- The announcement of those new measures – which will amount to around $18bln – has fuelled expectations of a rate cut at the February MPC meeting, leading to a rally across local stocks and bonds. As a reminder, the RBI announced plans to inject INR600bln via bond purchases, and INR 500bln via the swaps market on Jan 30 to ease a liquidity squeeze. A further INR 500bln will be injected via reverse repo.
- The Nifty and Sensex indices rallied on the announcements, with both over 1% higher after hitting 7-month lows yesterday. Yields on 10-year sovereign bonds fell as much as 6bps though much of the decline has since been pared.
- Meanwhile, renewed concerns over the implementation of US tariffs pressured Asian currencies during Tuesday trade, prompting losses for the rupee alongside its regional peers. The FT reported that US Treasury Secretary Scott Bessent has been pushing for new universal tariffs on imports starting at 2.5% and rising gradually by the same amount each month. In response, Trump said that he wishes to enact tariffs that are much bigger than 2.5%.
FOREX: Universal Tariff Talk Puts USD Index Back Above 50-dma
- The greenback is clawing back a small part of the recent lost ground, aiding the USD Index back above the 50-dma (107.648). As a result, markets are back above the 23.6% retracement for the year-to-date range in the currency, which helps add to the argument for a near-term bounce off lows for the dollar. It's the Fed decision ahead, and in particular any observations on the neutral rate, that should trigger short-term conviction here.
- Having been the best performer across G10 on Monday, the JPY is weaker against most others into Tuesday's NY crossover. Equity sentiment remains a key driver here, and the bounce off lows for the e-mini S&P has been instructive in the pullback for the JPY today.
- Trump tariff threats have further worked in favour of the greenback, as they re-demonstrate the concerns around a further inflationary impulse. Both the President and his Treasury Secretary talked up the benefits of universal import tariffs overnight, with Bessent eyeing 2.5% tariffs as a starting point, but Trump claiming he wants "much bigger" levies.
- Preliminary durable goods orders and the Conference Board's consumer confidence stats for January are next to cross, but are unlikely to shake up markets given the proximity to the Fed on Wednesday. The central bank speaker schedule remains very contained, with both the FOMC and ECB's Governing Council inside their pre-meeting media blackout periods.
OPTIONS: Expiries for Jan28 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0400(E1.0bln), $1.0460($697mln), $1.0500(E1.4bln), $1.0520-30(E929mln), $1.0550(E792mln)
- AUD/USD: $0.6300-10(A$2.0bln)
COMMODITIES: WTI Futures Through Initial Support at 20-Day EMA
- Monday’s move lower in WTI futures marks an extension of the current corrective cycle. The 20-day EMA has been breached and attention turns to support around the 50-day EMA, at $72.16. A clear break of the 50-day average would suggest scope for a deeper retracement. On the upside, a reversal higher would focus attention on $79.48, the Apr 12 ‘24 high and a key resistance.
- Despite yesterday’s pullback, Gold is trading closer to its recent highs. A bull cycle is in play and the breach of resistance at 2726.2, the Dec 12 high, reinforces current conditions. Sights are on $2790.1, the Oct 31 all-time high. A break of this hurdle would confirm a resumption of the primary uptrend. On the downside, the first key support to watch is $2671.6, the 50-day EMA. A reversal lower and a breach of this average would reinstate a bearish threat.
EQUITIES: E-Mini S&P Back Above Key Short-Term Support
- A bull cycle in the Eurostoxx 50 futures contract remains intact and the move lower from last Friday’s high, is considered corrective. A deeper retracement would allow an overbought trend condition to unwind. Moving average studies remain in a bull-mode set-up highlighting a dominant uptrend. The first important support to watch is 5097.39, the 20-day EMA. A resumption of the uptrend would open 5298.50, a Fibonacci projection.
- The S&P E-Minis contract initially traded lower Monday extending the pullback from last Friday’s high. Key short-term support to watch lies at 5961.75, the Jan 16 low (pierced). For now, the move down appears corrective, however, a clear breach of 5961.75 would strengthen a bearish threat and signal scope for a deeper retracement, towards 5943.94, a Fibonacci retracement. Key resistance is 6178.75, the Dec 6 high.
| Date | GMT/Local | Impact | Country | Event |
| 28/01/2025 | 1330/0830 | ** |  US | Durable Goods New Orders |
| 28/01/2025 | 1355/0855 | ** | US | Redbook Retail Sales Index |
| 28/01/2025 | 1400/0900 | ** | US | S&P Case-Shiller Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1400/0900 | ** | US | FHFA Home Price Index |
| 28/01/2025 | 1430/1530 |  EU | ECB's Cipollone in panel on future of markets | |
| 28/01/2025 | 1500/1000 | *** | US | Conference Board Consumer Confidence |
| 28/01/2025 | 1500/1000 | ** | US | Richmond Fed Survey |
| 28/01/2025 | 1530/1030 | ** | US | Dallas Fed Services Survey |
| 28/01/2025 | 1630/1130 | ** | US | US Treasury Auction Result for 2 Year Floating Rate Note |
| 28/01/2025 | 1630/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 28/01/2025 | 1700/1800 | EU | ECB's Lagarde to mee t with Ursula von der Leyen | |
| 28/01/2025 | 1800/1300 | ** | US | US Treasury Auction Result for 7 Year Note |
| 29/01/2025 | 0030/1130 | *** |  AU | CPI Inflation Monthly |
| 29/01/2025 | 0030/1130 | *** | AU | CPI inflation |
| 29/01/2025 | 0700/0800 | * |  DE | GFK Consumer Climate |
| 29/01/2025 | 0700/0800 | ** |  SE | Private Sector Production m/m |
| 29/01/2025 | 0700/0800 | SE | Flash Quarterly GDP Indicator | |
| 29/01/2025 | 0800/0900 | *** |  ES | GDP (p) |
| 29/01/2025 | 0830/0930 | *** | SE | Riksbank Interest Rate Decison |
| 29/01/2025 | 0900/1000 | ** | EU | M3 |
| 29/01/2025 | 0900/1000 | ** |  IT | ISTAT Consumer Confidence |
| 29/01/2025 | 0900/1000 | ** | IT | ISTAT Business Confidence |
| 29/01/2025 | 1200/0700 | ** | US | MBA Weekly Applications Index |
| 29/01/2025 | 1330/0830 | ** | US | Advance Trade, Advance Business Inventories |
| 29/01/2025 | 1415/1415 |  GB | BOE's Bailey at Treasury Select Committee | |
| 29/01/2025 | 1445/0945 | *** |  CA | Bank of Canada Policy Decision |
| 29/01/2025 | 1530/1030 | ** | US | DOE Weekly Crude Oil Stocks |
| 29/01/2025 | 1900/1400 | *** | US | FOMC Statement |