11:25 am - DXY Failing In Early Attempts To Regain 80: The Dollar Index has been unable to hold the 80.00 level despite numerous overnight tests. Yesterday, the DXY slipped into the 79 area for the first time since October 31. The DXY has not been under heavy selling pressure since dipping below the key psych support level, but it has been unable to use that support to push back higher. So we have the DXY trading in a tight range straddling the 80.00 level. The move comes on the heels of a budget announcement that should ease some concerns on the fiscal side. The deal still needs to be approved by both the House and Senate, but early indications are it should pass with bipartisan support.
- The euro has started to probe the 1.3800 level as it takes advantage of the dollar weakness. Economic data from the region was generally weak as a French nonfarm payroll showed a continued decline while Greece's unemployment rate ticked up to 27.4% from 27.3%. Germany had no revision to its CPI number and Portugal's inflation rate showed the second straight 0.2% decline. An Irish industrial production number showed a 7.6% MoM decline, but the weak numbers have had little impact on the single currency.
- The pound has given up some of its recent gains. The move was sparked by comments from Bank of England member Martin Weale, who noted that inflation has seen a 'sharp and unexpected' decline since the summer. Sterling has dipped back to the 1.6350 area, but is seeing some signs of holding that level.
- The yen is seeing bids after hitting a six month low yesterday. The yen was seen as a safe-haven today as Asian equities saw selling pressure. Economic data from the region continues to underwhelm as core machinery orders missed expectations while CGPI inflation numbers were in-line with expectations.
9:58 am - Treasuries Press to Session Lows:
- Treasuries have slipped to their worst levels of the session even as equity markets see a heavy open.
- Early action saw yields hold key support levels, and the bias to the upside appears to be in play as data remains absent.
- The 5y held the 1.450% area early on, and is now +2bps @ 1.469%.
- Modest selling of 10s has the benchmark yield +2.5bps @ 2.822%. The 10y was unable to penetrate the key 2.800% area.
- At the long end, the 30y is +2.7bps @ 3.856%.
- Selling has swung the yield curve steeper as the 2-10-yr spread trades 253bps.
- This afternoon's $21 bln 10y reopening be closely watched.
7:23 am - Dollar Hovers Flat: The Dollar Index trades flat near 79.95 amid an uneventful trade despite Congress reaching a two-year budget deal. Action has spent the entire overnight session trapped in a 15 cent range with most of the trade occurring within a couple cents of the breakeven line.
- EURUSD is +5 pips @ 1.3765 as trade edges up for a seventh straight session. A lack of meaningful data and news flow from the region has made for a lackluster session with the only noteworthy headline being an uptick in Greek unemployment (27.4% actual v. 27.3% previous). The 1.3800 area continues to act as a lid while a breakout would produce the best print since November 2011.
- GBPUSD is -70 pips @ 1.6375 as trade presses session lows. Sterling saw an early test of the 1.6450 level, but steady selling has persisted throughout the session. The 1.6325/1.6350 area is home to minor support with a breakdown setting up a test of the more important 1.6200 region.
- USDCHF is flat @ .8875 as trade lingers at its lowest levels since November 2011. The flat trade provides some hope to bulls who have endured six straight days of selling.
- USDJPY is -30 pips @ 102.55 as sellers remain in control for a second session. The selling comes despite the closely watched core machinery orders (0.6% MoM actual v. 0.9% MoM expected) missing estimates and becoming the latest data to disappoint. The run of soft data has ignited chatter the Bank of Japan will look to announce further easing. A breakdown of the 101.50 area sets up a potential retest of parity.
- AUDUSD is -35 pips @ .9115 as trade continues to struggle at .9150 resistance. The weakness in the hard currency comes after Westpac Consumer Sentiment disappointed with -4.8% print (1.9% previous) with trade largely ignoring the surge in Chinese new loans (CNY625 bln actual v. CNY585 bln expected). USDCNY edged up to 6.0717.
- USDCAD is -10 pips @ 1.0590 as sellers remain in control for a fifth session. Minor support in the 1.0580 area is being watched closely as a breakdown sets up a likely move into the 1.0500 region.
6:57 am - Treasuries Hover Little Changed:
- A quiet overnight trade has Treasuries hovering little changed ahead of the U.S. open.
- Little reaction can be seen to headlines indicating Congress has reached a budget deal that would fund the government for two years. However, it must still pass both the House and Senate.
- The lackluster overnight session saw low volume and just 3bp ranges.
- Buyers look to remain in charge for a third straight session, and have been in control since the initial selloff following Friday's jobs report.
- The 5y is steady near 1.450% as trade tests the area that had served as a lid on action for much of the past three months until last week's breakout.
- A similar story is playing out in the 10y where action probes the important 2.800% level.
- At the long end, the 30y is +1bp @ 3.841%. The 3.750/3.800% area is home to some meaningful support.
- A slightly steeper curve is in the works as the 2-10-yr spread is wider @ 251bps.
- Precious metals trade mixed with gold -$4 @ $1257 and silver +$0.02 @ $20.34.
- Data: MBA Mortgage Index (7) and the Treasury budget (14).
- Auction: Treasury will hold a $21 bln 10y note reopening.
- Treasury Secretary Lew will testify on the IMF before the House Financial Services Committee (10).