Morning Brew January 10 2025

Good morning,

After the US Holiday yesterday, US yields remain at their high level, near 4.7% and the USD Index is above 109. In the Summer od 2022 we saw the index rise to as high as 114.90, before that the last time the USD was this strong was 2003.

EURUSD is below 1.03 at 1.0285, GBPUSD 1.2275 and USDJPY 158.40. Gold and Silver are little changed at 2675 and 30.25, Bitcoin is at 93500.

At the moment Equity Indexes are slightly in the red, the day will largely depend on US Data released at 14:30 CET. Nonfarm payrolls forecast are expected to have risen 160,000, the Unemployment rate is seen unchanged at 4.2% and the average earnings 4.0% y/y. At 16:00 the University of Michigan Sentiment will be released; the expectation is for 73.8.

Ole Commented on the Commodity sector this morning: 

• The Bloomberg Commodity Index is up 2.4% this month, driven by strong gains across major commodities, including copper, silver, gold, U.S. natural gas, and crude oil. In contrast, losses have been concentrated in the agriculture sector, with setbacks led by cocoa and wheat. Additionally, EU natural gas has declined, retracing elevated levels seen at the end of the previous year. 
• While caution is warranted when interpreting market trends in the early weeks of a new trading year, a notable theme has emerged: despite the headwinds from dollar and Treasury yield strength, investors are turning to tangible assets to hedge against persistent inflation risks and mounting fiscal debt concerns. This trend is further supported by increased hoarding of physical metals by Chinese traders, who are wary of potential further depreciation of the yuan. 

IF the Nonfarm Payroll comes better than expected, the hawkish undertone of the Fed is likely to strengthen and we could see a shift in the rate cut expectations. The December 2025 rate is seen at 40 Basis points below the current level and a shift higher or lower will have impact on the USD and equities. The real move for the year will only crystalize after we understand which part of Trumps “plans” are saber-rattling and which are likely coming true but that is 10 days out.

The Chinese Central Bank has halted its bond purchases, letting 10 year yields rise by 3 basis points.

Looking at politics, the appearance by Elon Musk and Alice Weidel yesterday brought few insights and the fact THAT the event happened was more significant than the content.

Donald Trump will be sentenced in the hush money case today and we can expect a flurry of comments around that today.

• Today: Data: Switzerland Unemployment Rate, Norway & Denmark CPI, US Nonfarm Payroll, University of Michigan Sentiment Preliminary