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On January 9th, RJ Gallo, Deputy Chief Investment Officer of Fixed Income at Federated Hermes, stated in a report that at the start of 2026, both real and implied volatility in the US Treasury market has fallen to a four-year low, returning to levels typically seen before the pandemic. Disruptive factors over the past four years include inflation surging to multi-decade highs; the Federal Reserves rapid tightening of policy to suppress inflation; the Silicon Valley banking crisis; Trumps tariff announcements; and the Feds eventual easing of monetary policy amid slowing job growth. He stated, "So far, recent events have not matched the drivers of these economic uncertainties, which is good news for us."Frances November industrial production figures will be released in ten minutes.January 9th - German industrial output unexpectedly rose for the third consecutive month, further suggesting that Europes largest economy may be on the verge of recovery. Data from the German Federal Statistical Office showed that industrial output rose 0.8% month-on-month in November, exceeding market expectations, with Octobers revised increase at 2%. This growth was primarily driven by Germanys crucial automotive industry, while machinery-related companies also saw growth, helping to offset a decline in energy production. The data also showed an unexpectedly large jump in factory orders, which analysts believe is the beginning of the effects of the fiscal stimulus measures prepared by the Merz government. The slump in traditional growth drivers has led to significant job losses in German manufacturing. Now, the recovery is expected to be driven by domestic demand, and this weeks data seems to confirm this.The chart shows that at 23:00 Beijing time on January 9th, there will be large foreign exchange options contracts for EUR/USD, USD/JPY, etc. There are 3 contracts with strike prices exceeding 1 billion. Please manage your risks.The Ukrainian Foreign Minister stated that Russias repeated claims that Ukraine attacked Putins residence to justify the attack are "absurd."

Prior to the Release of EU/US PMIs, EUR/USD Pares Its Largest Daily Drop in Three Weeks to Approximately 1.0650

Daniel Rogers

Dec 16, 2022 12:04

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Early Friday morning, EUR/USD demonstrates minor gains near 1.0640 as it retests the intraday high. As a result, the primary currency pair consolidates the steepest daily fall in three weeks while reversing the previous day's retreat from the highest levels in six months prior to the release of important European and American economic data.

 

The aggressive rate hike of 0.50% by the European Central Bank (ECB) propelled the EUR/USD pair to a fresh multi-day high of 1.0736 on Thursday evening. However, predictions of a recession bolstered demand for the US Dollar as a safe-haven currency, submerging the quotation.

 

In spite of this, the ECB's announcement of a 50 basis point (bps) rate increase met market expectations. However, President Christine Lagarde's comments bolstered the optimistic outlook, as she noted, "Information indicates 50 basis points at the next meeting, probably also at the next meeting, and thereafter." In addition, the ECB announced its intention to discontinue the Asset Purchase Program (APP) via gradual Quantitative Tightening (QT).

 

It should be noted that the typically hawkish rate announcements from the major central banks coupled fears of rising inflation and the energy crisis to amplify recession concerns, allowing the US Dollar to enjoy its role as a safe-haven currency despite contradictory facts.

 

In November, US Retail Sales came in at -0.6% month-over-month, compared to 0.1% expected and 1.3% prior. In addition, manufacturing survey findings from the Philadelphia Fed and the New York Fed were dismal for the relevant month, while Industrial Production declined in November and Jobless Claims decreased for the week ending December 9.

 

In response, Wall Street benchmarks fell and US Treasury bond yields increased, allowing the US Dollar Index (DXY) to notch its highest daily gains in 10 weeks. As traders await the first readings of December activity statistics for Germany, the Euro Area, and the United States, S&P 500 Futures and US Treasury bond yields have been flat as of late. The final inflation figures for the Eurozone will also be vital to track.


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