MNI US MARKETS ANALYSIS - USD/JPY Intervention Risk Low
Highlights:
- Core goods CPI to be a key focus for inflation ahead
- USD/JPY crests at new recovery high, but intervention risk light
- Trump team assembles, market ponders implications
- Treasury futures are looking mixed at the moment, see-sawing off overnight lows as markets await this morning's October CPI data at 0830ET (as well as Real Avg Hourly/Weekly Earnings). Curves are scaling back from Tuesday's steepening (2s10s -1.990 at 6.329; 5s30s -.781 at 24.420).
- Dec'24 10Y futures see modest bid at the moment, TYZ4 +2.5 at 109-16 vs. 109-09 low - near initial technical support of 109-07 (Nov 6 low and bear trigger), average volumes (TYZ4 >320k), 10Y yield -.0157 at 4.4118%.
- Analyst forecasts for October's CPI report show a central expectation that sequential inflation will come in relatively steady compared with September. The MNI consensus for core CPI is 0.30% M/M (median) / 0.29% (mean) unrounded, vs 0.31% prior, while headline is seen at 0.20% M/M (median) / 0.21% (mean), vs 0.18% in September. These are in line with BBG consensus medians, and as suggested by the means, there is a slight downside bias to core.
- Scheduled Fed speakers include: MN Fed Kashkari on Bbg TV at 0830ET, NY Fed Williams welcome remarks teacher academy at 0930ET, Dallas Fed Logan gives open remarks energy conf (text, no Q&A) at 0945ET, StL Fed Musalem on economy/mon-pol (text, Q&A) at 1300ET while KC Fed Schmid keynote remarks energy conf (text) at 1330ET.
- Data wraps up with Monthly Budget Statement at 1400ET.
- Cross market roundup: crude making modest gains (WTI +0.26 at 68.38, Gold up 11.09 at 2,609.48, USD mildly higher.
US TSY FUTURES: Short Setting & Long Cover Largely Offset On Tuesday
OI data points to a mix of net long cover and short setting across the curve on Tuesday, which essentially offset in DV01 equivalent terms.
| 12-Nov-24 | 11-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,577,878 | 4,527,766 | +50,112 | +1,796,066 |
FV | 6,336,775 | 6,343,778 | -7,003 | -289,812 |
TY | 4,533,955 | 4,565,873 | -31,918 | -2,026,660 |
UXY | 2,205,619 | 2,214,668 | -9,049 | -783,975 |
US | 1,859,005 | 1,844,508 | +14,497 | +1,843,157 |
WN | 1,754,296 | 1,755,433 | -1,137 | -227,291 |
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| Total | +15,502 | +311,486 |
STIR: Short Setting Dominated In SOFR Futures Tuesday
OI data points to short setting in 14 of the front 16 SOFR futures during yesterday’s sell off, as the inflationary impact of Trump’s policy preferences and his cabinet appointments kept pressure on the strip.
- Only very modest rounds of net long cover broke the wider theme.
| 12-Nov-24 | 11-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,274,237 | 1,268,974 | +5,263 | Whites | +44,799 |
SFRZ4 | 1,232,344 | 1,201,894 | +30,450 | Reds | +62,379 |
SFRH5 | 1,072,887 | 1,068,906 | +3,981 | Greens | +37,062 |
SFRM5 | 957,623 | 952,518 | +5,105 | Blues | +4,431 |
SFRU5 | 724,088 | 718,067 | +6,021 |
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SFRZ5 | 968,971 | 944,516 | +24,455 |
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SFRH6 | 656,334 | 629,882 | +26,452 |
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SFRM6 | 610,079 | 604,628 | +5,451 |
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SFRU6 | 549,048 | 538,502 | +10,546 |
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SFRZ6 | 639,994 | 622,137 | +17,857 |
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SFRH7 | 399,408 | 392,102 | +7,306 |
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SFRM7 | 328,020 | 326,667 | +1,353 |
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SFRU7 | 267,219 | 267,693 | -474 |
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SFRZ7 | 266,617 | 267,175 | -558 |
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SFRH8 | 206,412 | 204,389 | +2,023 |
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SFRM8 | 157,038 | 153,598 | +3,440 |
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EUROPE ISSUANCE UPDATE:
UK auction results
- GBP4bln of the 4.375% Mar-28 Gilt*. Avg yield 4.499% (bid-to-cover 3.12x, tail 1bp).
Italy auction results
- E4bln of the 2.70% Oct-27 BTP. Avg yield 2.73% (bid-to-cover 1.49x).
- E1.5bln of the 3.50% Feb-31 BTP. Avg yield 3.23% (bid-to-cover 1.88x).
- E1.5bln of the 2.50% Dec-32 BTP. Avg yield 3.37% (bid-to-cover 1.92x).
- E1.25bln of the 4.15% Oct-39 BTP. Avg yield 3.93% (bid-to-cover 2.15x).
Germany auction results
- E4bln (E3.346bln allotted) of the 2.60% Aug-34 Bund. Avg yield 2.38% (bid-to-offer 1.89x; bid-to-cover 2.26x).
Portugal auction results
- E577mln of the 2.875% Oct-34 OT. Avg yield 2.851% (bid-to-cover 2.03x).
- E432mln of the 4.10% Feb-45 OT. Avg yield 3.304% (bid-to-cover 2.16x).
MNI UK Labour Market Insight: November 2024
Wage data came in very marginally stronger than expected, quantities data a bit weaker, but overall this shouldn't really change any MPC member’s voting intentions so there was very little market reaction to the release: https://media.marketnews.com/MNI_UK_Labour_Insight_November_2024_Release_d7bd31e8b1.pdf
FOREX: JPY Weaker Against All Others, But Intervention Risk Minimal For Now
- JPY is weaker against all others in G10, triggered by the break of the weekly high in USD/JPY, for a show above Y155.00. US rates markets remain the key trigger here, with the 2yr US yield well within range of 4.4076%, the 200-dma.
- BoJ policy and the FX approach of the Japanese authorities becomes key here, with markets re-entering levels at which the Japanese authorities intervened in currency markets via JPY buying, however given the sharp gyrations in short-end US rates markets, it's unlikely recent price action meets the criteria for intervention.
- CHF trades similarly poorly, however ranges remain contained in EUR/CHF which, given the single currency's acute weakness in recent weeks, may suggest markets view the Swiss economy as facing similar growth risks relative to the Eurozone in the years ahead.
- Focus for the session ahead turns to US inflation, with markets looking to gauge inflation momentum headed into the inauguration of President-Elect Trump in January. With Trump's government likely to adopt a pro-inflationary policy mix, Fed pricing remains a key focus - particularly as ECB-Fed implied policy rate differentials continue to blow wider.
- Outside of the US CPI print, appearances from Fed's Kashkari, Williams, Logan, Musalem and Schmid are due, which should keep US monetary policy a key focus Wednesday.
OPTIONS: Markets Isolate JPY, CAD, MXN, HUF as Most Sensitive into CPI
- Hedging markets have isolated JPY and CAD as carrying the most risk premia across today's US CPI print, with overnight implied posting the most sizeable vol gains for these two currencies among their G10 peers.
- Vol gains for CAD come as USD/CAD looks more comfortable above the early August highs and within just 10 pips of the key longer-term resistance at 1.3977, clearance above which puts the pair at the highest since 2020, proximity to which will be keeping vols elevated, and the currency sensitive.
- Similarly for USD/JPY, BoJ policy and the FX approach of the Japanese authorities becomes key, with markets re-entering levels at which the Japanese authorities intervened in FX, particularly in light of the upgrade to FX language last week: adding the word "extremely" to the phrasing "We are watching developments [...] with an extremely high sense of urgency".
- Across EMFX, HUF and MXN vols capture the largest overnight vol premium, suggesting continued volatility across USD/MXN and USD/HUF as they remain close to cycle highs. Full table here:
OPTIONS: Expiries for Nov13 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0600-05(E1.8bln), $1.0625-30(E1.1bln), $1.0650(E1.2bln), $1.0700-20(E1.2bln), $1.1000-16(E2.0bln)
- USD/JPY: Y153.00($740mln), Y155.40-50($703mln)
- EUR/GBP: Gbp0.8300-05(E892mln)
- AUD/USD: $0.6525-40(A$502mln)
- USD/CNY: Cny7.1000($1.0bln), Cny7.2000($931mln)
EQUITIES: E-Mini S&P Holding Onto Bulk of Recent Gains, Trend Conditions Bullish
- A bearish condition in Eurostoxx 50 futures remains intact and Tuesday’s extension down reinforces current conditions. The sell-off confirms a resumption of the downtrend that started Sep 30. Price has breached 4746.94, the 61.8% retracement of the Aug 5 - Sep 30 bull cycle. This exposes 4662.12, the 76.4% retracement point. Initial firm resistance has been defined at 4961.00, Nov high, where a break would highlight a reversal.
- The trend condition in S&P E-Minis remains bullish and the contract is holding on to the bulk of its recent gains. A key short-term support has been defined at 5724.25, the Nov 4 low. The latest rally resulted in a breach of the bull trigger at 5927.25, Oct 17 high, confirming a resumption of the primary uptrend. The 6000.0 psychological handle has been pierced. Sights are on 6070.16, a Fibonacci projection. Initial support is at 5927.25, the Oct 17 high.
COMMODITIES: Recent Move Lower Reinforces Bearish Outlook for WTI Futures
- A bearish theme in WTI futures remains intact and the move lower from the Nov 7 high, reinforces current conditions. An extension lower would expose $65.99, the Oct 1 low, and $64.16, the Sep 10 low and key support. For bulls, a clear reversal to the upside would instead refocus attention on the key short-term resistance at $77.70, the Oct 8 high. Clearance of this level would resume the recent uptrend. Initial resistance is $72.88, the Nov 7 high.
- The trend condition in Gold is unchanged, it remains bullish and the latest pullback appears corrective. However, recent weakness has resulted in a breach of the 20-day EMA, and Tuesday’s sell-off delivered a print below the 50-day EMA, at $2644.4. The breach signals scope for a deeper retracement towards $2547.0 the Sep 18 low. Firm resistance is seen at $2689.5, the 20-day EMA. Clearance of this average is required to signal a reversal.
Date | GMT/Local | Impact | Country | Event |
13/11/2024 | 1200/0700 | ** | US | MBA Weekly Applications Index |
13/11/2024 | 1330/0830 | *** | US | CPI |
13/11/2024 | 1445/0945 | US | Dallas Fed's Lorie Logan | |
13/11/2024 | 1800/1300 | US | St. Louis Fed's Alberto Musalem | |
13/11/2024 | 1830/1330 | US | Kansas City Fed's Jeffrey Schmid | |
13/11/2024 | 1900/1400 | ** | US | Treasury Budget |
14/11/2024 | 0030/1130 | *** | AU | Labor Force Survey |
14/11/2024 | 0700/0800 | *** | SE | Inflation Report |
14/11/2024 | 0800/0900 | *** | ES | HICP (f) |
14/11/2024 | 0830/0930 | EU | ECB's De Guindos remarks at event organised by ABC and Deloitte | |
14/11/2024 | 1000/1100 | *** | EU | GDP (p) |
14/11/2024 | 1000/1100 | ** | EU | Industrial Production |
14/11/2024 | 1200/0700 | US | Fed Governor Adriana Kugler | |
14/11/2024 | 1230/1330 | EU | Publication of the ECB MonPol meeting account | |
14/11/2024 | - | GB | Rachel Reeves’ debut Mansion House dinner speech as chancellor | |
14/11/2024 | 1300/1300 | GB | BOE's Mann at Revitalising the global economy event | |
14/11/2024 | 1330/0830 | *** | US | Jobless Claims |
14/11/2024 | 1330/0830 | *** | US | PPI |
14/11/2024 | 1415/0915 | US | Richmond Fed's Tom Barkin | |
14/11/2024 | 1530/1030 | ** | US | Natural Gas Stocks |
14/11/2024 | 1600/1100 | ** | US | DOE Weekly Crude Oil Stocks |
14/11/2024 | 1630/1130 | * | US | US Bill 08 Week Treasury Auction Result |
14/11/2024 | 1630/1130 | ** | US | US Bill 04 Week Treasury Auction Result |
14/11/2024 | 1830/1930 | EU | ECB's Schnabel in panel on "Reassessing policy tools" | |
14/11/2024 | 1900/1400 | *** | MX | Mexico Interest Rate |
14/11/2024 | 2000/1500 | US | Fed Chair Jerome Powell | |
14/11/2024 | 2100/2100 | GB | BOE's Bailey speech at Mansion House | |
14/11/2024 | 2115/1615 | US | New York Fed's John Williams | |
15/11/2024 | 2350/0850 | *** | JP | Japan GDP 1st Estimate |