Highlights:
- USD regains lost ground ahead of mid-week CPI print
- USD/JPY bounce extends off NFP pullback low
- ECB members inside pre-decision blackout period
US TSYS: No Belated Post-Payrolls Global Risk-Off This Month
- Treasuries have mostly sold off overnight, with equity futures steadily gaining for no sign of global risk-off spillover as was the case after last month’s payrolls report.
- Cash yields are 3.3-4.3bp higher, with increase slightly led by the front-end as they reverse a rally seen into Friday’s close.
- 2s10s at 5.8bps (-0.8bp) broadly holds Friday’s push more firmly into positive territory for highs since mid-2022. The mixed payrolls report and a lack of Fedspeak explicitly calling for a 50bp cut this month trimmed Sept cut odds but still sees a deeper cutting cycle.
- TYZ4 is at 114-22+ (-10) having lifted off a low of 114-20, firmly within Friday’s range on solid cumulative volumes of 360k.
- The contract is seen to have a bullish structure with resistance at 115-13 (Sep 6 high) whilst support is at 113-31+ (20-day EMA).
- Today sees a light docket with macro attention on CPI (Wed) and PPI (Thu) plus potential for greater political risk focus with Tuesday’s Harris-Trump debate.
- Data: Wholesale inventories/sales Jul F/Jul (1000ET), NY Fed inflation expectations Aug (1100ET), Consumer credit Jul (1500ET)
- Fedspeak: None with FOMC now in media blackout
- Bill issuance: US Tsy $76B 13W & $70B 26W bill auctions (1130ET)
STIR: Fed Implied Rates Back Close To Post-NFP/Waller Highs
- Fed Funds implied rates have reversed some declines seen late Friday and shortly after the Asia open to sit back closer to highs seen Friday’s payrolls and Fedspeak.
- Fedspeak plus the mixed nature of the report has seen 50bp cut odds been trimmed with 31.3bp for Sept 18, but with deeper cutting cycle expected with implied rates from December and onwards lower than pre-NFP levels.
- As noted in the MNI US Employment Insight, a clear majority of analysts looks for a 25bp cut this month but Wednesday’s CPI report is likely to be the deciding factor, especially for market pricing.
- Cumulative cuts from 5.33% effective: 31.3bp Sep, 70bp Nov, 112bp Dec, 147bp Jan and 218bp June.
MNI: US Employment Insight, Sep'24: Cooler But Not Sharply So
We have published and e-mailed to subscribers the MNI US Employment Insight.
Please find the full report including MNI analysis and views from 20 analysts here: https://media.marketnews.com/US_Employment_Report_Sep2024_1fa510bb0e.pdf
US TSY FUTURES: OI Points to Mix Of Short Cover & Long Setting On Friday
The combination of Friday’s rally and preliminary OI data points to long setting in the wings of the curve (TU & WN), along with net short cover in FV through US futures.
- The latter dominated in net curve terms.
- A reminder that all Tsy contracts finished off highs.
| 06-Sep-24 | 05-Sep-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,285,446 | 4,261,315 | +24,131 | +960,874 |
FV | 6,369,895 | 6,409,649 | -39,754 | -1,772,015 |
TY | 4,682,164 | 4,751,921 | -69,757 | -4,702,639 |
UXY | 2,094,007 | 2,106,499 | -12,492 | -1,169,788 |
US | 1,705,351 | 1,706,919 | -1,568 | -218,896 |
WN | 1,694,760 | 1,679,074 | +15,686 | +3,477,911 |
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| Total | -83,754 | -3,424,553 |
STIR: OI Points to Aggressive Long Cover In SFRU4 Following NFPs & Fedspeak
Friday’s most meaningful net OI swing came in SFRU4, which saw aggressive trimming of longs following NFP data and Fedspeak from Williams & Waller.
- A reminder that most saw the net impact of those events as pointing towards a 25bp, not 50bp, Fed cut later this month.
- Accordingly, Fed funds futures now price ~31bp of cuts for this month vs. 35bp heading into NFPs and ~40bp during knee-jerk reaction to the release.
- SFRU4 was the only contract to finish lower on the day (through the blues), with OI data pointing to net long setting and short cover elsewhere.
| 06-Sep-24 | 05-Sep-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRM4 | 1,128,574 | 1,130,746 | -2,172 | Whites | -20,803 |
SFRU4 | 1,316,190 | 1,360,141 | -43,951 | Reds | +39,954 |
SFRZ4 | 1,232,034 | 1,220,649 | +11,385 | Greens | +9,472 |
SFRH5 | 944,477 | 930,542 | +13,935 | Blues | -232 |
SFRM5 | 873,586 | 882,403 | -8,817 |
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SFRU5 | 704,573 | 684,157 | +20,416 |
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SFRZ5 | 944,434 | 917,290 | +27,144 |
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SFRH6 | 629,784 | 628,573 | +1,211 |
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SFRM6 | 604,275 | 618,676 | -14,401 |
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SFRU6 | 549,818 | 539,032 | +10,786 |
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SFRZ6 | 527,596 | 521,586 | +6,010 |
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SFRH7 | 309,864 | 302,787 | +7,077 |
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SFRM7 | 289,832 | 289,193 | +639 |
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SFRU7 | 227,332 | 227,106 | +226 |
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SFRZ7 | 222,081 | 225,629 | -3,548 |
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SFRH8 | 170,973 | 168,522 | +2,451 |
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MACRO ANALYSIS: Eurozone Macro Signal – Sep 2024: Pick-Up Yet To Materialize
Eurozone economic activity has been mixed recently across sectors and countries. A pick-up in growth is yet to materialize, being held back by restrained fixed investment and declining fiscal stimulus. Inflation has moderated enough to allow the ECB to continue easing monetary policy at its September meeting, though sticky services prices amid low labour productivity add uncertainty over the pace of cuts going forward.
Full PDF Analysis Here: https://media.marketnews.com/2024_09_Eurozone_Macro_Signal_8850a9bc94.pdf
- Final GDP growth printed slightly soft at +0.2% Q/Q in Q2. Momentum was uneven across the main countries. Manufacturing continues to struggle, retail sales have been weak, and sentiment is subdued. Services appear to remain a bright spot, however.
- The Eurozone labour market has shown some signs of cooling in recent months but remains resilient. Wage pressures moderated significantly in Q2. While unemployment remains at record lows, a pullback in job vacancies implies a reduction of demand-side pressure on the labour market. Productivity growth remains low.
- The ECB still sees considerable uncertainty in its rate path going forward beyond the all-but-certain September cut, with the Governing Council’s future decisions dependent on inflation and wage growth momentum.
- Growth in the Eurozone is projected to pick up in the coming quarters. But the pace of recovery will be subdued, as indicated by weak industry data and mixed sentiment.
FOREX: Equity Bounces Helps USD/JPY Progress Toward Resistance
- The JPY is offered early Monday, helping undo a large part of the correction lower off post-payrolls highs. As a result, USD/JPY is making good progress toward the Friday high of 144.01, and a break above here exposes next resistance of 144.23, the September 5th high.
- Equity futures are mixed, with a soft Asia-Pac session countered by general strength in European shares. The Eurostoxx 50 future is higher by 1.1% at typing, staging the beginnings of a bounce off last week's pullback low. For now, a real recovery in risk is stalling below the 200-dma in the index at 4832.90.
- The weaker JPY is aiding a recovery in the greenback, with the USD Index again above 101.50. The firming USD is evident against most others in G10 with the exception of CAD, as USD/CAD fails on the test of the 200-dma at 1.3587 last week, re-orienting the focus back lower.
- US wholesale inventories and trade sales numbers are next on the schedule, with the NY Fed's 1-year inflation expectations metric also set for release. There are no central bank speakers of note after the late run of Fed members last week, and the ECB remain inside their pre-decision media blackout period.
FOREX: USDJPY Extends Recovery From Key Support, US CPI Ahead
- While an overall bearish technical theme remains intact for USDJPY, reinforced by last week’s move lower, today’s bounce is notable and places the focus on the first resistance point of 144.23, the Sep 5 high. Above here, firm resistance is seen around the 20-day EMA, at 145.78 today, and a clear break of this average would signal scope for a stronger correction.
- Upward pressure on core yields and the broad-based bid for the dollar have provided a solid base for USDJPY to start the week, and as such, the pair has extended its intraday recovery to well over 1% off the overnight lows. The bid for major equity benchmarks underpins the strong price action and as noted, the early August low and key support at 141.70 has helped to cap the most recent Yen sell-off.
- US inflation data on Wednesday and also PPI on Thursday could prove more of a deciding factor for Fed pricing following the mixed payrolls report. Fed Funds have recently been pricing more than 35bp of cuts for the Sep 18 decision, but we expect we’d need to see a sizeable core CPI miss and a return of particularly weak CPI core services ex-housing for the Fed to seriously consider a 50bp cut. Note that the inflation data will land firmly within the Fed’s blackout period ahead of the Sep 17-18 meeting.
OPTIONS: Expiries for Sep09 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0855(E1.3bln), $1.1040-60(E1.8bln), $1.1100(E886mln), $1.1125(E572mln), $1.1150-60(E850mln), $1.1175(E1.7bln), $1.1200(E2.4bln), $1.1225(E614mln)
- USD/JPY: Y142.00($1.1bln), Y142.50-70($3.2bln), Y143.90-00($818mln), Y145.00($1.5bln), Y146.50($2.0bln)
- GBP/USD: $1.3170-75(Gbp611mln)
- USD/CAD: C$1.3500-10($581mln)
COMMODITIES: Last Week's Sell-Off Reinforces Bear Theme in WTI Futures
- WTI futures maintain a softer tone and last week’s impulsive sell-off reinforces the bear theme. The move lower resulted in a breach of key support at $70.88, the Aug 5 low. The clear break of this level confirms a resumption of the downtrend that started Apr 12 and opens $66.66, a Fibonacci projection. MA studies are in a bear-mode position highlighting a clear downtrend. Initial firm resistance is at $73.09, the 20-day EMA.
- The trend condition in Gold is unchanged and the primary direction remains up. Moving average studies are in a bull-mode set-up and this continues to highlight a dominant uptrend. Furthermore, a bullish price sequence of higher highs and higher lows remains intact. Sights are on $2536.4 next, a Fibonacci projection. The 20-day EMA has recently been pierced. The next firm support to watch is $2446.0, the 50-day EMA. S/T weakness is considered corrective.
EQUITIES: E-Mini S&P Remains in Bear-Mode with Scope Seen for Deeper Retracement
- Eurostoxx 50 futures reversed course last week and a bearish tone - a correction - remains intact for now. The move down has resulted in a break of both the 20- and 50-day EMAs. Friday’s sharp sell-off signals scope for an extension lower and sights are on 4686.53, a Fibonacci retracement point. Initial key short-term resistance has been defined at 4998.00, the Sep 3 high. First resistance is at 4880.84, the 50-day EMA.
- Last week’s move lower in S&P E-Minis highlighted the start of a corrective cycle. The contract remains in a bear-mode condition for now and scope is seen for a deeper retracement near-term. An extension lower would open 5330.00, 61.8% retracement of the Aug 5 - Sep 3 bull leg. Key resistance has been defined at 5669.75, the Sep 3 high. Initial firm resistance to watch is 5544.68, the 20-day EMA.
MNI (LONDON)
| Date | GMT/Local | Impact | Country | Event |
| 09/09/2024 | 1400/1000 | ** |  US | Wholesale Trade |
| 09/09/2024 | 1500/1100 | ** | US | NY Fed Survey of Consumer Expectations |
| 09/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 13 Week Bill |
| 09/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for 26 Week Bill |
| 09/09/2024 | 1900/1500 | * | US | Consumer Credit |
| 10/09/2024 | 0600/0800 | *** |  DE | HICP (f) |
| 10/09/2024 | 0600/0700 | *** |  GB | Labour Market Survey |
| 10/09/2024 | 0600/0800 | *** |  NO | CPI Norway |
| 10/09/2024 | 0700/0900 | ** |  ES | Industrial Production |
| 10/09/2024 | 0800/1000 | * |  IT | Industrial Production |
| 10/09/2024 | 0900/1000 | * | GB | Index Linked Gilt Outright Auction Result |
| 10/09/2024 | 1000/0600 | ** | US | NFIB Small Business Optimism Index |
| 10/09/2024 | 1100/1200 | GB | BOE's Breeden remarks from Wharton-IMF Dialogue - Text release | |
| 10/09/2024 | - | *** |  CN | Trade |
| 10/09/2024 | - | *** | CN | Money Supply |
| 10/09/2024 | - | *** | CN | New Loans |
| 10/09/2024 | - | *** | CN | Social Financing |
| 10/09/2024 | 1210/0810 |  CA | BOC Governor Macklem speech in London UK | |
| 10/09/2024 | 1255/0855 | ** | US | Redbook Retail Sales Index |
| 10/09/2024 | 1400/1000 | US | Fed Vice Chair Michael Barr | |
| 10/09/2024 | 1530/1130 | * | US | US Treasury Auction Result for Cash Management Bill |
| 10/09/2024 | 1700/1300 | *** | US | US Note 03 Year Treasury Auction Result |