EM CEEMEA CREDIT: MNI EM Credit Market Wrap - CEEMEA (30 Jan)

The Dallas Fed's monthly Texas Service Sector survey showed the diffusion index for general business activity remained fairly steady at 9.6 in December, vs 9.8 in November. 

• That figure was bolstered by stronger revenue and company outlook readings and lower outlook uncertainty, however employment/hours worked and capex weakened even as input and selling prices increased.
• Looking ahead, per the report, "Other future service sector activity indexes such as employment and capital expenditures remained in positive territory, reflecting expectations for sustained growth in the next six months.". Indeed the 6-month ahead reading hovered around November's 36-month high, possibly a byproduct of post-election business optimism but also in line with the broader trend of improvement since mid-2022. For what it's worth, the anecdotal commentary in the Services survey pointed to concerns over shifts in tariff and immigration policy negatively impacting their business/sector/the broader economy.
• The regional Fed services surveys have each shown softer activity vs November, with the Philly Fed's declining 0.1 point to -6.0, and the NY Fed's dropping 4.7 points to -5.2. The month-to-month Fed regional readings don't translate cleanly into the broader national ISM non-manufacturing reading, though the pullback in November to 52.1 (56.0 prior) looks better-supported by the regional evidence than does the S&P Global Services PMI's December flash reading showing an improvement to a multi-year high 58.5 (56.1).
• Overall, though, services appear to me moving in a firming rather than a deteriorating direction. The regional surveys do broadly affirm a continued divergence between manufacturing steady at a slow pace, and services showing some improvement.

• We have seen some constructive price action for the greenback to finish the year, with the USD index shrugging off the early session declines to now trade firmly in the green, up 0.31% and potentially assisted by month/year end dynamics.
• EURUSD has traded with an offered tone throughout the US session, sliding to the worst level of the week below 1.0350, just ahead of key support at 1.0335, the Nov 22 low and a bear trigger.
• USDJPY has also recovered well, rallying over 100 pips from the overnight lows, with spot now rallying back above the 157.00 handle. Officials at the BOJ fear that the real neutral rate of interest could be even lower than the previously-estimated range, MNI understands.
• Aussie and Kiwi are also notable underperformers to end the year, with both AUDUSD and NZDUSD sitting at cycle lows and the lowest levels since October 2022, below 0.62 and 0.56 respectively. For AUDUSD, scope is seen for an extension towards 0.6158 next, a Fibonacci projection.
• The broad dollar bid has also assisted USDMXN to a fresh year-to-date high above 20.84 at typing. The pair had a clean break of 20.40 during yesterday’s session and saw solid follow through amid the breakdown for major equity indices. While price action may have been exacerbated by the lower holiday liquidity, the imminent Trump presidency and Banxico in easing mode are likely weighing on the peso.

• Tsy curves are climbing steeper ahead midday, long end rates leading a modest sell-off in the last half hour: 2s10s +3.862 at 32.745, 5s30s +1.330 at 40.205.
• The Mar'25 10Y futures contract trades down to 108-27 low (-4), with 10Y yield tapping 4.5649% high (+.0323).