Highlights:
- USD trend extends, prompting EUR/USD to show below 1.05 for first time in a year
- Gaetz, Hegseth & Gabbard Picks Could Spur Move To Recess Appointments
- Powell set to speak on economic outlook
US TSYS: Tsys Rising Ahead PPI, Fed Speak Includes Powell Eco Outlook
- Treasuries are mixed after running mildly lower for most of the overnight session, two-way positioning evident as futures climb back to early overnight highs ahead of this morning's PPI and weekly jobless claims data at 0830ET.
- Treasury curves are retaining holding near highs after twisting steeper following yesterday's in-line CPI inflation data spurred return of dovish policy expectations. Core CPI was exactly as expected at 0.35%, and basically unchanged from September (0.35%). However, supercore (core services ex housing) came in on the soft side at 0.31% vs 0.39% expected, 0.40% prior.
While most of the contributions to PCE come from the CPI report, the bulk of the remainder (including healthcare services, airfares, and portfolio management) will be in this morning's PPI report. - Scheduled Fed speakers: the highlight will be Fed Chairman Powell later today (1500ET) as he speaks about his economic outlook from Dallas Fed (text, Q&A). Others include: Fed Gov Kugler moderated mon-pol discussion from Uruguay at 0700ET, Richmond Fed Barkin fireside chat on economy (no text, Q&A) at 0900ET, NY Fed Williams on markets (text, no Q&A) at 1645ET.
- Currently, Treasury 2s-10s are steady to +/-.25 while Bonds are trading 6-7 higher. TYZ4 trades 109-14 last (+.5) vs. 109-06 low, 10Y yield at 4.4413% (-.0099).
- Initial technical support for TYZ4 is at 109-06/05 (Intraday low / 76.4% of Apr - Sep bull cycle (cont)). In the event of another in-line to soft PPI read, upside technical resistance is at 110-21 (20-day EMA). The 2s10s curve is .588bp steeper at 16.714.
US TSY FUTURES: Modest Short Setting In Long End Seen Wednesday
OI points to a mix of net long setting, short cover, long cover and short setting during Wednesday's twist steepening, with modest net short setting in US & WN futures providing the only real theme of note.
| 13-Nov-24 | 12-Nov-24 | Daily OI Change | OI DV01 Equivalent Change ($) |
TU | 4,553,984 | 4,578,023 | -24,039 | -861,345 |
FV | 6,376,127 | 6,336,980 | +39,147 | +1,619,110 |
TY | 4,532,050 | 4,533,832 | -1,782 | -115,144 |
UXY | 2,193,994 | 2,208,943 | -14,949 | -1,289,518 |
US | 1,863,594 | 1,859,187 | +4,407 | +555,229 |
WN | 1,763,782 | 1,754,267 | +9,515 | +1,866,198 |
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| Total | +12,299 | +1,774,530 |
STIR: Mix Of Long & Short Setting Most Prominent In SOFR Futures Following CPI
OI points to net long setting dominating through SFRZ6 on Wednesday, albeit with pockets of net short cover also seen.
- Net short setting then seemed to dominate further out, with the strip twist steepening in the wake of the CPI data.
| 13-Nov-24 | 12-Nov-24 | Daily OI Change |
| Daily OI Change In Packs |
SFRU4 | 1,269,433 | 1,274,237 | -4,804 | Whites | +3,269 |
SFRZ4 | 1,252,671 | 1,232,730 | +19,941 | Reds | +44,207 |
SFRH5 | 1,070,196 | 1,072,887 | -2,691 | Greens | +95,516 |
SFRM5 | 948,446 | 957,623 | -9,177 | Blues | +4,446 |
SFRU5 | 737,229 | 724,088 | +13,141 |
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SFRZ5 | 987,483 | 969,680 | +17,803 |
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SFRH6 | 654,648 | 656,334 | -1,686 |
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SFRM6 | 625,028 | 610,079 | +14,949 |
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SFRU6 | 602,654 | 549,051 | +53,603 |
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SFRZ6 | 652,146 | 640,305 | +11,841 |
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SFRH7 | 421,717 | 399,408 | +22,309 |
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SFRM7 | 335,783 | 328,020 | +7,763 |
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SFRU7 | 268,198 | 267,219 | +979 |
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SFRZ7 | 263,543 | 266,606 | -3,063 |
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SFRH8 | 209,953 | 206,412 | +3,541 |
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SFRM8 | 160,027 | 157,038 | +2,989 |
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US: Gaetz, Hegseth & Gabbard Picks Could Spur Move To Recess Appointments
President-Elect Donald Trump's picks for the offices of Attorney General, Secretary of Defense, and Director of National Intelligence could spur action in the Senate to enable recess appointments given the controversial nature of each of the candidates.
- AG nominee Matt Gaetz resigned from Congress late on 13 Nov, effectively ending a House Ethics Panel investigation into his conduct amid allegations of illegal drug use and sexual misconduct. Gaetz has been one of the most outspoken House members in recent years and was a key figure in the ouster of former Speaker Kevin McCarthy. As the FT reports "Gaetz’s proposed appointment as attorney-general comes as Trump vows to overhaul the US Department of Justice in retaliation for the criminal investigations and indictments launched against him by federal prosecutors in recent years."
- Former Democrat Rep. Tulsi Gabbard's nomination to sit at the top of the US Intelligence Community has raised some concerns among moderates given her previous comments that Russian President Vladimir Putin's "legitimate security concerns" with regards to Ukraine and NATO should be addressed, and that Syrian President Bashar al-Assad is not an "enemy" of the US.
- Alongside Fox presenter and former soldier Pete Hegseth as Secretary of Defense, all three are seen above all as Trump loyalists who will be more willing to carry out the demands of the incoming president.
- These appointments stand in contrast to Trump's first-term Cabinet picks, where key offices went to candidates perceived to have more relevant experience for the role.
The controversial nature of the AG, Secretary of Defence, and NSI picks would usually raise the prospect of being rejected at their Senate hearings, even with a Republican-controlled chamber. With a 53-47 split in favour of the GOP, it would be easy to assume a simple passage. However, Senators Lisa Murkowski (R-AK) and Susan Collins (R-ME) are long-standing moderates who both would likely vote down these nominees. Former majority leader Mitch McConnell (R-KY), now out of the top spot and potentially entering his final term in office may also be less inclined to back the nominees. This scenario would require just one more Republican to vote against to see the nominee rejected.
- However. Trump has vocally called for 'recess appointments' to get his nominees into office. Recess appointments, as the name suggests, see nominees put into office without a hearing during a period of Senate recess of 10 days or more.
- Newly-elected Senate Republican Conference leader John Thune confirmed ahead of the 13 Nov vote that "all options are on the table," for getting Trump's appointees into office. There are few constitutional bars to recess appointments, but it would likely require a pliant Republican Senate to agree to go on recess at the request of the president.
- The appointments are only supposed to be for a single congressional session or at most one year (although this is unenforceable), and there is the potential that recess appointments may be ineligible to be paid for their roles until confirmed by the Senate according to the Congressional Research Service.
CHINA: Surge in CNH Points Shows Strains on Currency Despite Contained Spot
- Much market focus being paid to the sharp rise in CNH forward points (the 3m forward discount has risen to -290 points from -440 points at the beginning of November, and the 12m discount to -1370 points, a new 18-month high, from -1600). Tighter offshore liquidity and demand for USDCNH upside are the likely drivers here, although Bloomberg do note that a typhoon headed to Hong Kong could also be having an adverse impact.
- We see the PBOC as having restarted the counter-cyclical factor in their daily CNY fix this week, in a likely direct move against recent weakness in the currency - and it remains possible that year-end settlement flows could prop up the CNY into year-end. The Tuesday fix saw a notable widening in the fixing error - the largest since August and a key indicator for a more activist PBOC.
- A more active counter-cyclical force via the PBOC may mean that potential USD/CNY spot gains are capped ahead of 7.30 - however downside pressures will likely continue to show up on the forwards curve, particularly as markets head into the new Trump administration from January next year, and the greater risk of protracted trade war.
FOREX: Trends Extend as USD Index Clears to YTD High
- The USD is making further progress still early Thursday, with the USD Index clearing the mid-April highs to narrow the gap with the '23 high and next key level at 107.348. Market moves here remain largely momentum-driven, as markets continue to get to grips with the incoming Trump administration and, most importantly, the likely cabinet. Reports yesterday suggested that Howard Lutnick is coming closer to the nomination for Treasury Secretary - a more pro-tariff candidate relative to his rival for the position, Scott Bessent.
- Yesterday's inflation print prompted only a minor dip in the USD, potentially providing more attractive levels at which to get long the dollar - with the extension of the trend pushing both EUR/USD and GBP/USD to new pullback lows.
- AUD is finding a more stable footing as local analysts begin to push back forecasts for RBA easing well into 2025 - the jobs data overnight was modestly softer, however the stable unemployment rate keeps inflationary dynamics alive.
- US PPI data is expected to tell a similar story to the CPI print yesterday, with gradually waning inflationary pressures leaving the Fed to progress with a 25bps rate cut in December. Weekly jobless claims will likely take precedence as markets look to gauge jobs market momentum, after last week's number saw continuing claims edge to a new post-COVID high.
EUR/USD Shows Through 1.05 For First Time in a Year
- EUR/USD briefly pierces through the 1.05 handle as the one-way traffic in the greenback adds further pressure here - this marks the first break below the level since early October last year and exposes 1.0448 as the next downside level.
- Moves come amid heavy volumes and decent activity across currency markets - exchange-traded EUR futures are seeing cumulative volumes 20% ahead of average for this time of day, with the break of the handle prompting a decent uptick in trade.
COMMODITIES: Long-Term Trend Condition in Gold Unchanged and Bullish
- A bearish theme in WTI futures remains intact and the move lower from the Nov 7 high, reinforces current conditions. The move down exposes $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 firm resistance is $72.88, the Nov 7 high.
- The long-term 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- and 50-day EMAs, and the metal is trading lower again, today. The breach of the EMAs signals scope for a deeper retracement and sights are on $2547.0 next, the Sep 18 low. Firm resistance is seen at $2678.4, the 20-day EMA.
EQUITIES: Eurostoxx 50 Futures Recover From Wednesday's Lows
- A bearish condition in Eurostoxx 50 futures remains intact and this week’s extension 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 trading just below its recent highs. 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.
| Date | GMT/Local | Impact | Country | Event |
| 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 |
| 15/11/2024 | 0200/1000 | *** |  CN | Fixed-Asset Investment |
| 15/11/2024 | 0200/1000 | *** | CN | Retail Sales |
| 15/11/2024 | 0200/1000 | *** | CN | Industrial Output |
| 15/11/2024 | 0200/1000 | ** | CN | Surveyed Unemployment Rate M/M |
| 15/11/2024 | 0430/1330 | ** | JP | Industrial Production |
| 15/11/2024 | 0700/0800 | ** |  SE | Unemployment |
| 15/11/2024 | 0700/0700 | ** | GB | UK Monthly GDP |
| 15/11/2024 | 0700/0700 | *** | GB | GDP First Estimate |
| 15/11/2024 | 0700/0700 | ** | GB | Index of Services |
| 15/11/2024 | 0700/0700 | *** | GB | Index of Production |
| 15/11/2024 | 0700/0700 | ** | GB | Output in the Construction Industry |
| 15/11/2024 | 0700/0700 | ** | GB | Trade Balance |
| 15/11/2024 | 0730/0730 | GB | DMO to publish FQ4 (Jan-Mar) gilt operations calendar | |
| 15/11/2024 | 0745/0845 | *** |  FR | HICP (f) |
| 15/11/2024 | 0800/0900 | * |  CH | CH Flash GDP |
| 15/11/2024 | 0900/1000 | ** |  IT | Italy Final HICP |
| 15/11/2024 | 1330/0830 | ** | US | Import/Export Price Index |
| 15/11/2024 | 1330/0830 | ** |  CA | Monthly Survey of Manufacturing |
| 15/11/2024 | 1330/0830 | ** | CA | Wholesale Trade |
| 15/11/2024 | 1330/0830 | ** | US | WASDE Weekly Import/Export |
| 15/11/2024 | 1330/0830 | *** | US | Retail Sales |
| 15/11/2024 | 1330/0830 | ** | US | Empire State Manufacturing Survey |
| 15/11/2024 | 1400/0900 | * | CA | CREA Existing Home Sales |
| 15/11/2024 | 1415/0915 | *** | US | Industrial Production |
| 15/11/2024 | 1500/1000 | * | US | Business Inventories |
| 15/11/2024 | 1500/1600 | EU | ECB's Lane at seminar on Fragmenting Trading System | |
| 15/11/2024 | 1515/1615 | EU | ECB's Cipollone in discussion on productivity |
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