MNI US MARKETS ANALYSIS - USD Index Eases Off Multi-month High

US TSYS SUMMARY: Weaker But Bracing For Weak Feb Income/Spending Data

Tsys are touching session lows, with 10-Yrs underperforming on the curve amid bear steepening.

• Jun 10-Yr futures (TY) down 13/32 at 131-23.5 (L: 131-23.5 / H: 132-04), giving up Weds and Thurs's gains. 2-Yr yield is down 0.2bps at 0.1348%, 5-Yr is up 1.8bps at 0.8524%, 10-Yr is up 3.6bps at 1.6689%, and 30-Yr is up 2.9bps at 2.386%.
• Risk appetite has been positive overnight, with core FI weakening - upbeat vaccine news from Thurs (EU not banning exports, Pres Biden doubling vaccination targets) seen driving. Stock futures higher but off session's best levels; conversely USD weaker but off lows.
• Feb personal income/spending data at 0830ET is the calendar highlight, including the PCE price deflator reading. A sharp decline in both income and spending is expected, with consensus reflecting the fact that Feb was between months with stimulus checks (in Jan and Mar).
• This comes alongside trade balance and retail inventories at the same time. UMich sentiment at 1000ET is final reading.
• Philadelphia Fed Pres Harker appears on Bloomberg TV at 0830ET.
• Other than that, neither supply nor NY Fed operational purchases.

EGB/GILT SUMMARY: Still No Resolution To Vaccine Supply Issues

Markets have shifted to a risk-on position this morning following several days of sovereign bonds trading firmer and equities selling off.

• Gilts have sold off and the curve has bear steepened. Cash yields are 2-5bp higher and the curve 3bp steeper.
• Bunds traded weaker from the open with the long end of the curve similarly underperforming. The 2s30s spread is 5bp wider on the day.
• It is a similar story for OATs where long end yields have pushed up around 5bp.
• Yesterday's EU summit to tackle the bloc's sluggish vaccine roll out failed to establish a clear strategy for accelerating vaccinations. The EC's most contentious proposal - banning exports of doses to certain countries - received mixed support.
• The German IFO survey for March surprised to the upside with the expectations component reading 100.4 vs 95.0 consensus.
• Supply this morning came from Italy (BOTs, EUR6bn).

EUROPE OPTION FLOW SUMMARY

Eurozone:
3RM1 100.7/100.50/100.62c fly, sold at 3 in 5k

UK:
2LU1 99.00p, bought for 4 in 12.5k

FOREX: Risk Bounces, Dragging USD Index Off Multi-Month High

• JPY is weaker early Friday as the recent risk-off theme unwinds somewhat. Equities are firmer headed into the final trading session of the week, with futures indicating a positive open later today.
• The bounce in risk sentiment is helping support antipodean currencies so far Friday, which bounce off the week's underperformance. AUD/USD is clear of the Thursday highs, opening 0.7636 for direction.
• The USD index is off the week's multi-month high printed yesterday (highest since November) but remains above the 200-dma at 92.605 which should keep the outlook positive.
• US data takes focus going forward, with US personal income/spending and PCE numbers for February crossing at 1230GMT/0830ET. Speeches from BoE's Saunders & Tenreyro also cross.

FX OPTIONS: Expiries for Mar26 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1800(E487mln-EUR puts), $1.1900(E749mln)
• USD/JPY: Y108.75-80($680mln)
• EUR/GBP: Gbp0.8600(E416mln-EUR puts)
• AUD/USD: $0.7500(A$539mln), $0.7765(A$1.7bln)
• USD/CAD: C$1.2900($520mln)
• USD/CNY: Cny6.40($1.1bln)

TECHS: Price Signal Summary - USDJPY At Fresh 2021 Highs

• In the equity space, S&P E-minis found support yesterday at 3843.25, yesterday's low. The recovery means the 50-day EMA at 3842.85 remains intact. A breach of the average is required to suggest scope for a deeper pullback. Initial resistance to watch is 3944.50, Mar 22 high.
• In the FX space, EURUSD maintains a weaker tone and yesterday cleared the 1.1800 handle. This reinforces current bearish conditions with the focus on 1.1752 next, 1.236 projection of the Jan 6 - Feb 5 - Feb 25 price swing. The GBPUSD outlook remains bearish. The pair has this week cleared 1.3779, Mar 5 low and a bear trigger. Note this has also confirmed a breach of the 50-day EMA and a bull channel base drawn off the Nov 2 low. The focus is on 1.3641, 38.2% of the Sep 23 - Feb 24 bull cycle. Short-term gains are considered corrective. USDJPY is firmer and has traded to a fresh 2021 high. The pair is approaching 109.56, 76.4% of the Mar 2020 - Jan downleg and an important pivot resistance. A clear break would open 109.70/85, Jun 8 and 5 , 2020 highs respectively.
• On the commodity front, Gold is consolidating with support at $1719.3, Mar 18 low. A break above $1755.50 is needed to trigger a fresh round of gains. This would open the 50-day EMA at $1775.6. Recent weakness in Brent (K1) opens $58.56, 38.2% of the Nov 2 - Mar 8 rally. Resistance is at $65.12, Mar 22 high. In WTI (K1), scope is for a move to $55.65, also 38.2% of the Nov 2 - Mar 8 rally. Resistance is at $62.04, Mar 22 high.
• In the FI space:
  • Bunds (M1) are lower this morning however recent gains suggest scope for an extension higher. The next resistance is at 172.78, 0.764 projection of the Feb 25 - Mar 11 - Mar 18 price swing.
  • Gilts (M1) have this week cleared resistance at 128.33, Mar 16 high, suggesting scope for an extension higher. The next key resistance is at 129.27, Mar 2 high.
  • Treasuries (M1) remain in a downtrend and gains are considered corrective. Resistance is at 132-09+, Mar 25 high.

EQUITIES: Higher equities across the board as EU export ban fears fade

• Japan's NIKKEI up 446.82 pts or +1.56% at 29176.7 and the TOPIX up 28.61 pts or +1.46% at 1984.16
• China's SHANGHAI closed up 54.735 pts or +1.63% at 3418.327 and the HANG SENG ended 436.82 pts higher or +1.57% at 28336.43
• German Dax up 116.28 pts or +0.8% at 14730.47, FTSE 100 up 40.72 pts or +0.61% at 6715.07, CAC 40 up 21.35 pts or +0.36% at 5973.13 and Euro Stoxx 50 up 19.94 pts or +0.52% at 3851.74.
• Dow Jones mini up 82 pts or +0.25% at 32589, S&P 500 mini up 10.75 pts or +0.28% at 3910.75, NASDAQ mini up 31.25 pts or +0.24% at 12797.25.

COMMODITIES: Oil and copper lead the moves higher

• WTI Crude up $1.1 or +1.88% at $59.48
• Natural Gas up $0.01 or +0.23% at $2.578
• Gold spot up $0.04 or +0% at $1727.58
• Copper up $7.45 or +1.87% at $404.25
• Silver up $0.07 or +0.28% at $25.1594
• Platinum up $4.88 or +0.42% at $1158.32