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FX Blog- TTN - U.S. Market UpdateU.S. Market Update
Dow -90 S&P -7.7 NASDAQ -3.4
- With all eyes focused towards the Feb jobs report the U.S. Federal Reserve grabbed a large chunk of the spotlight when they raised the TAF outstanding to $100B from $60B before the release. Rumors emanating out of the overnight session that that the Fed was likely to announce an intermeeting cut post a weak jobs number helped equity and bond futures firm. The April fed fund future contract was fully pricing in 75 bp worth of cuts and putting better than 30% odds of an additional 25 bp worth of cuts as traders arrived at their desks in the U.S. The TAF announcement displaced the inter-meeting cut rumor but confirmed the sentiment that the jobs data would be poor for the second month in a row. When it was announced that Feb non-farm payrolls contracted by 63K equity futures plunged along with Treasury yields. The 2- year yield moved below 1.50% ahead of the NY open but as equity markets pared losses after the open the intense flight to quality dissipated. Financial stocks bounced hard right from the open led by the investment banks leading all three of the major indices into the green a little more than 1 hour into the session. Equity markets have since come nearly half way back to this morning''s opening levels and it looks as if it will be a struggle to hold any gains. Technology is real bright spot as good earnings from NSM +8% have aided the semis. Treasury futures remain higher but off of their best levels. The 2-year is seeing more selling than the long end with the benchmark spread contracting back below 200 basis points. Fed fund futures contracts are still firmer but off of their best levels with April not quite fully pricing in 75bp and Aug pricing in better than 90% odds of a 1.75% fed funds rate. Commodities initially sold off on growth concerns after the jobs number, but again the profit taking as been minimal even despite a firmer Dollar. April crude has made another all- time high above $106 while gold holds $975.
- The USD staged a formidable rebound in what traders termed a ''technical'' bounce from all- time lows against the Euro and Swiss and 8-year lows against the Japanese yen, this after an expectedly weak Feb US employment report. Renewed rumors of an emergency rate cut circulated throughout the European session and credit market jitters continued to weigh upon overall USD sentiment. The iTraxx Crossover Index highlighted the financial market stress as it traded at 651bps for fresh all time highs overnight. FX dealers braced for the worse ahead of the payroll release after the FED FED announced that it would increase its Term Auction Facilities (TAF) outstanding amount to $100B from $60B prior, and added that it was "In close consultation" with foreign central banks. The Fed will continue TAF auctions for "at least six months" further as well. US Payroll data was weaker then consensus expectations, but the ''better'' unemployment rate of 4.8% v 5.0%e helped the dollar to cap its session losses. The EUR/USD all-time high currently stands at 1.5465 and USD/CHF lifetime lows sit at 1.0132. Fed Staff noted that the aim of TAF is to keep funds rate around target and the announcement was not related to the Feb employment report, but the Fed recognized that market conditions deteriorated in recent days. Fed''s Mishkin noted that currency moves are a problem only when it leads to reallocation of resources. CAD was off its best levels following strong Canadian employment data. Feb employment rose by 43.3K, well above the 3.0K estimates. Dealers note that JPY related flows aided by bring the commodity related currencies off their best levels in the session. European equities rebounded from session lows as traders noted that the FED expansion of acceptable collateral for its terms repos were well received.
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GVI Trading. Potential Price Risk Scale
Tue 17 July 2018
AA: Major, A: High, B: Medium
AA 08:30 GB- Employment
A 13:15 US- Industrial Production
AA 14:00 US-Powell Testimony
Wed 18 July 2018
AA 08:30 GB- CPI
A 12:30 US- Housing Starts/Permits
AA 14:00 US-Powell Testimony
Thu 19 July 2018
AA 1:30 AU- Employment
AA 08:30 GB- Retail Sales
A 14:30 US- EIA Crude
A 12:30 US- Weekly Jobless
Fri 20 Jun 2018
A 12:30 CA- CPI/Retail Sales
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