The strong demand for the US 30-year bond auction, that followed two other strong 3 and 10 year auctions this week triggered no appetite across the US bonds space yesterday, most probably because the 30-year paper is a long maturity paper and is mostly purchased by insurance and pension funds. But the week has been successful for the US Treasury department which saw a solid demand for its debt this week, and that’s thanks to the expectation that the rates will fall – sometime this year – and that the Treasury will also slow down the pace of purchases moving forward.

Appetite in risk assets remains robust. The S&P500 index shortly traded at the 5000 psychological mark before closing a few points below this level. The rally is not only fueled by rate cut expectations and AI speculation but is also backed – to some extent – by encouraging tech earnings from the stars of the league. Note that Apple, Microsoft, Alphabet, Amazon and Meta generated nearly $140bn cash from their operations last quarter. That was the highest on record.

CPI revisions

The Bureau of Statistics will release the CPI revisions today, which consists of the revised month-over-month CPI figures for the past five years, incorporating some adjustments. What’s important to know is that the non-seasonally adjusted data remains unchanged, hence the year-over-year figures for the entire year will remain the same.

Why do people care? Normally, they don’t, because these changes are small and don’t change the end result. But last year, the markets cared because the revisions were more significant than usual and resulted in lower adjusted m-o-m inflation numbers for the first half and higher revisions for the second half – a hint that the moderation in inflation was not as good as thought in the second half of 2022. The latter boosted the Federal Reserve (Fed) rate hike expectations and fueled the US 2-year yield. Today’s revisions could reveal if the downtrending US inflation numbers hide a more significant slowdown, or a late pick up. If the revisions hint at a slowing momentum in monthly inflation figures, the Fed doves should come back in charge and the dollar should eas. If the monthly revisions warn that inflation may not be slowing as fast as we think, the Fed doves will further retreat, and the dollar should gain. And if there are no major revisions, well all eyes will turn to next Tuesday, regular CPI update. And so goes life.

FX and energy

The US dollar struggles to gain further momentum above the 100-DMA. But the US economy’s positive divergence from the rest of the developed nations, its healthy jobs market, its decent fiscal spending are supporting the idea that the Fed is – maybe – not the best candidate to begin the pivot dance. The European Central Bank (ECB) for example is in a better position to start cutting its interest rates to prop up its depressed economies. That idea keeps the EURUSD offered near its own 100-DMA – which stands near 1.0780. Trend and momentum indicators remain comfortable negative and supportive of a deeper downside move in the EURUSD. Today, the German inflation data is expected to confirm a slowdown below the 3% in January – that should help the bears stay in charge.

Elsewhere, the yen bulls are feeling the heat of a totally unexpected return to nearly 150 level at the start of this year. The USDJPY is now trading above the 149 level, and the BoJ hawks are giving in to the expectation that the Japs won’t move soon or quick enough to make 2024 the year of the yen. The USDJPY’s positive trend becomes increasingly vulnerable to verbal intervention as we approach the 150 level.

In energy, we see a second positive attempt above the $76pb level, despite a 5.5-mio barrel build in the US inventories. The rising geopolitical tensions, strong US growth, and Chinese stimulus remain supportive for another attempt above the 200-DMA – near $77.50pb.

This report has been prepared by Swissquote Bank Ltd and is solely been published for informational purposes and is not to be construed as a solicitation or an offer to buy or sell any currency or any other financial instrument. Views expressed in this report may be subject to change without prior notice and may differ or be contrary to opinions expressed by Swissquote Bank Ltd personnel at any given time. Swissquote Bank Ltd is under no obligation to update or keep current the information herein, the report should not be regarded by recipients as a substitute for the exercise of their own judgment.

Recommended Content


Recommended Content

Editors’ Picks

AUD/USD attracts some sellers to near 0.6300 ahead of Chinese PMI release

AUD/USD attracts some sellers to near 0.6300 ahead of Chinese PMI release

The AUD/USD pair weakens to near 0.6300, snapping the three-day winning streak during the early Asian session on Monday. China’s fresh stimulus measures to promote its development of index investment products fail to boost the China-proxy Australian Dollar.

AUD/USD News
USD/JPY remains depressed amid hawkish BoJ and risk-off mood

USD/JPY remains depressed amid hawkish BoJ and risk-off mood

USD/JPY kicks off the new week on a weaker note, though it manages to hold above the monthly low retested last Friday. US President Donald Trump's decision to impose steep import duties on Colombia revives trade war fears and benefits the safe-haven JPY amid the BoJ's hawkish rate hike.

USD/JPY News
Gold loses ground to near $2,765 on renewed US Dollar demand

Gold loses ground to near $2,765 on renewed US Dollar demand

Gold price edges lower to around $2,765 during the early Asian session on Monday, pressured by the renewed US Dollar demand. However, the potential downside for the precious metal might be limited amid the cautious mood and uncertainty surrounding tariff measures by US President Donald Trump. 

Gold News
Week ahead: Fed, BoC and ECB meet amid Trump tariff threats

Week ahead: Fed, BoC and ECB meet amid Trump tariff threats

Three central bank decisions awaited as tariff reality sets in. Fed set to go on pause, ECB and BoC to likely cut again. But US GDP and PCE inflation could steal the limelight. Australian CPI and China PMIs also on tap.

Read more
ECB and US Fed not yet at finish line

ECB and US Fed not yet at finish line

Capital market participants are expecting a series of interest rate cuts this year in both the Eurozone and the US, with two interest rate cuts of 25 basis points each by the US Federal Reserve and four by the European Central Bank (ECB).

Read more
Trusted Broker Reviews for Smarter Trading

Trusted Broker Reviews for Smarter Trading

VERIFIED Discover in-depth reviews of reliable brokers. Compare features like spreads, leverage, and platforms. Find the perfect fit for your trading style, from CFDs to Forex pairs like EUR/USD and Gold.

Read More

Majors

Cryptocurrencies

Signatures