FOREX: EURUSD Bounce Considered Technically Corrective

Jan-07 10:37
  • Despite yesterday’s rejection of the WaPo Tariff article by President-Elect Trump, the greenback is under pressure once again Tuesday, with markets taking a more cautious view of the underlying bullish dollar trend.
  • While some analysts believe there may be some truth behind the details of the tariff article, others point to Michael Barr's resignation as the Fed's Vice Chair for Supervision as contributing to the softer greenback, assisted by the initial rally for the US KBW regional banks index in anticipation of less stringent regulations on banks' balance sheets.
  • EURUSD is back above 1.04, with German inflation data on Monday continuing to underpin a more hawkish short-term reaction for the single currency. Monday’s strong gains appear - for now - corrective. The 20-day EMA, at 1.0412, has been pierced and the next resistance to watch is 1.0458, the Dec 30 high. ING suggest that short-term fair value models – based largely on rate spreads – suggest EUR/USD could correct further to 1.05.
  • The Swiss franc is a touch softer on the session following a lower-than-expected core inflation print, with EURCHF closing in on 2-month highs for the cross at 0.9447.

Historical bullets

MNI UST Issuance Deep Dive: Dec 2024 (2/2)

Dec-06 21:53

Throughout November’s policy and market volatility, though, Treasury auctions largely impressed, with 5 of 7 nominal coupon sales trading through.

  • Auction Results: November’s nominal coupon auctions were generally strong, with five out of seven auctions trading-through, of which four saw a positive reading on MNI’s Relative Strength Indicator (RSI). The remaining two auctions; 3 and 20-year auctions tailed. See page 2.
  • Upcoming Supply: Issuance resumes next week with sales of $58B in 3Y Note, $39B in 10Y Note (reopen), and $22B in 30Y Bond (reopen). December is set to see $15B in nominal Treasury coupon sales, in addition to $22B in 5Y TIPS and $28B FRN for a total of $365B – slightly below the Oct and Nov totals of $369B which were joint-highest since Oct 2021.
  • MNI's review includes a calendar of upcoming auctions and buyback operations.

US TSYS/SUPPLY: MNI UST Issuance Deep Dive: Dec 2024 (1/2)

Dec-06 21:51

MNI's latest US Treasury Issuance Deep Dive has just been published (PDF link here):

November proved a dramatic month for Treasuries. Yields were volatile before and after the Nov 5 election - after ending October at 4.28%, 10Y yields peaked at five-and-a-half-month high just above 4.50% mid-month before closing November just below 4.18%, as markets attempted to price in the implications of a Republican “sweep”. 

  • Also buffeting rates was speculation over the would-be successor to Treasury Secretary Yellen. President-elect Trump’s selection of hedge fund manager Scott Bessent was greeted with bull flattening in the curve, implying perhaps that he’s seen as more cautious on fiscal deficits than some of the alternatives (he has expressed support for halving the annual budget shortfall to 3% of GDP).
  • The first quarterly Refunding process of Bessent’s Treasury is in early February, by which point we may start to have a better sense of the incoming administration’s approach to both fiscal policy and to more issuance-specific considerations such as duration management.
  • Bessent for instance has argued that Yellen’s Treasury erred from a risk management perspective by boosting short-duration issuance, and there are suggestions he would be in favor of reversing course, telling Bloomberg in June “When rates are very low, you should extend duration…I think it’s very unfortunate what Secretary Yellen’s doing. She’s financing at the front end, and she’s making a bet on the carry trade, which is not good risk management.”

US LABOR MARKET: MNI US Employment Insight: Soft Enough To Keep Fed Cutting

Dec-06 21:05

Our latest Employment Insight has just been published and emailed to subscribers.