CURRENCIES
US economic data has been minimally positive with the trade generally embracing the idea of a positive US employment trend. Therefore, seeing European data continue to erode and following very dovish ECB central bank President comments (predicting multiple cuts ahead) yesterday dollar strength is likely to continue. However, like the equity markets, the dollar trade has become sluggish with the March dollar index balking at prices above 106.87 and then quickly finding support on dips. Clearly, chatter regarding a looming “hawkish US rate cut” separates the US monetary bias stance from almost all other major economy currencies. A prime example of the bearish fundamentals for non-dollar currencies is Chinese plans to post a record budget deficit of 4% of GDP and indications they intend to use special bonds next year to stimulate local economic activity. As in the dollar index, the euro is also showing a propensity to chop sideways despite data and market chatter capable of producing another downside breakout. Short-term technical indicators like stochastics remain in a sell mode with consolidation low support today pegged at 1.0507 and an obvious breakdown seen with a trade below 1.0496. While the Japanese economy and hawkish central bank prospects should single out the yen as a challenger of Dollar supremacy, the trade doubts the central bank will be able to hike rates as projected. In fact, the trade sees a 90% probability that the Bank of Japan will hold rates steady this week while 95% still expect target rates in Japan to rise over the coming three months. In the end, the bias in the yen is down with a failure of close support at 65.50 potentially creating a spike down buying opportunity.
OVERNIGHT
Global equity markets overnight favored the downside but surprisingly the German and French markets managed to carve out minor gains in the face of additional economic slowing evidence in the form of shrinking German business sentiment. Critical developments overnight included a fresh poll indicating 90% of traders surveyed believe the Bank of Japan will leave rates unchanged directly ahead, talk the treasury trade is bracing for a “hawkish rate cut”, softer than expected German IFO business climate and expectations for December, softer than expected German ZEW current situation readings for December and a better than expected overall euro zone ZEW economic sentiment reading for December. The North American session will bring November Canadian consumer price index readings which are expected to be “0%” versus 0.4% last month, Canadian new house price index readings for November are scheduled for release today which are expected to recover minimally, US retail sales for November which are expected to be up by 0.5%, US capacity utilization is expected to tick higher, US industrial production is also expected to rebound from a contraction of 0.3% last week to a gain of 0.3% this week. Also, due in today’s action are US business inventories for October which are expected to be unchanged, a NAHB housing market index reading for December which is expected to improve by one tick and finally a 20 year US treasury bond auction.
STOCK INDEX FUTURES
With the equity markets flatlining since the December 6th, top it is clear the bull camp has lost bullish buzz. Furthermore, the pharmacy benefits sector took a blow yesterday after president elect Trump threatened to take out the middleman in the healthcare swamp. Obviously, rising interest rates and a lack of “hope” for US cuts beyond the widely anticipated cut this week has tempered forward expectations. Furthermore, with US treasury yields nearing the highest levels of 2024 investors are likely beginning to consider interest rate investments. However, the yield curve is steepening and three-month CD rates at only 4.4% are not high enough to spark notable investment rotation. In fact, when treasury bond yields were much lower last month, three-month CD rates reached above 5%. Yet another issue sapping investment interest is an unending avalanche of regulatory, legal and trade barrier issues impacting nearly all big tech companies. Fortunately for the bull camp, the eight day sideways consolidation reduces the “buy the rumor sell the fact” reaction to the likely US interest rate cut this week. In conclusion, the market has lost its mojo and its fear of missing out.
INTEREST RATES
With yet another lower low for the move and the lowest trade since November 18th, March bonds continue to “price in” a higher and more normal interest rate regime ahead. From classic data analysis, the slide in treasuries should be nearing overdone status as our unbiased view of inflation does not appear to justify the markets’ distinct hawkishness. On the other hand, a portion of the trade thinks the widespread implementation of US tariffs will rekindle inflation which is possible if the Trump administration fires first and waits for a response from our trading partners. In the end, overnight headlines seem to confirm the markets are factoring a “hawkish rate cut”.
Interested in more futures markets? Explore our Market Dashboards here.
Risk Warning: Investments in Equities, Contracts for Difference (CFDs) in any instrument, Futures, Options, Derivatives and Foreign Exchange can fluctuate in value. Investors should therefore be aware that they may not realise the initial amount invested and may incur additional liabilities. These investments may be subject to above average financial risk of loss. Investors should consider their financial circumstances, investment experience and if it is appropriate to invest. If necessary, seek independent financial advice.
ADM Investor Services International Limited, registered in England No. 2547805, is authorised and regulated by the Financial Conduct Authority [FRN 148474] and is a member of the London Stock Exchange. Registered office: 3rd Floor, The Minster Building, 21 Mincing Lane, London EC3R 7AG.
A subsidiary of Archer Daniels Midland Company.
© 2025 ADM Investor Services International Limited.
Futures and options trading involve significant risk of loss and may not be suitable for everyone. Therefore, carefully consider whether such trading is suitable for you in light of your financial condition. The information and comments contained herein is provided by ADMIS and in no way should be construed to be information provided by ADM. The author of this report did not have a financial interest in any of the contracts discussed in this report at the time the report was prepared. The information provided is designed to assist in your analysis and evaluation of the futures and options markets. However, any decisions you may make to buy, sell or hold a futures or options position on such research are entirely your own and not in any way deemed to be endorsed by or attributed to ADMIS. Copyright ADM Investor Services, Inc.
Latest News & Market Commentary
ADM & Industry News
Happy Holidays From ADM Investor Services!
December 18, 2024
The Ghost in the Machine Q4 2024
November 15, 2024