S&P 500, 10-year T-Note, Gold, Crude Oil, and Japanese Yen Futures

This Morning’s Five Futures in Focus

1. S&P 500 e-mini futures (/ES): +0.52%
2. 10-Year T-note futures (/ZN): -0.14%
3. Gold Futures (/GC): +0.37%
4. Crude oil futures (/CL): -0.33%
5. Japanese yen futures (/6J): +0.92%

A weaker U.S. dollar, on the back of strength in two of the beleaguered Asian currencies, the Chinese yuan and Japanese yen, is helping set a more risk seeking tone at the start of the trading week. Better-than-expected Chinese credit data coupled with support for the yuan by the PBOC, and hints from BOJ Governor Ueda that the end of negative interest rate policy could be around the corner, has provoked a meaningful drop by in the USD. Meanwhile, U.S. Treasury Secretary Yellen said over the weekend that she’s feeling more confident in a soft landing. That’s good news for U.S. equity markets and USD-denominated commodities on Monday.

U.S. equity index futures are pointing to a higher cash equity open on Monday, thanks in part to the weaker U.S. dollar. The greenback has been a thorn in the side for markets recently, rising alongside U.S. Treasury yields in what has amounted to a short-term tightening of financial conditions. Led higher by the Nasdaq 100 (/NQZ3), all four major indexes are firmer at the start of the week, but not significantly, as none of the four are seeing gains greater than +1%.

U.S. Treasury bonds are mixed across the curve at the start of the week. It’s long been argued that the Bank of Japan's monetary policy, effectively pegging JGB rates near or below zero, has underpinned stability in global bond markets. Hints of a potential end to the BOJ have helped spark a small move higher in U.S. Treasury yields in the middle of the curve, although two-year notes (/ZTZ3) are flat and ultra bonds (/UBZ3) are firmer on the session.

Gold (GCZ3) and Silver (/SIZ3) are trading higher by $6.20 and $0.19, respectively. Meanwhile, copper (/HGZ3) is up $0.70 per pound after China warned that it would defend the embattled Yuan against speculative one-way moves. Economic data reported by Beijing also showed some positive data on credit for August.

Natural gas prices (/NGV3) are slightly lower this morning despite a +7% surge in the European gas benchmark. While cooler weather trends are helping to contain volatility in the U.S. pricing, ongoing supply risks from Australia may make for volatile trading. Two liquified natural gas (LNG) facilities in Western Australia operated by Chevron remain offline as workers strike. Crude oil (/CLV3) also traded lower this morning despite a receding dollar.

The Japanese Yen (/6JZ3) is firmly in the spotlight following commentary from BOJ Governor Ueda over the weekend. In an interview with Yomiuri Shimbun, the monetary policy chief said that the BOJ may soon have enough data—perhaps by the end of the year—to determine if its negative interest rate policy should end. What effectively amounts to more verbal intervention to stop the flailing currency, this marks the second time in a week that a Japanese official has stepped into markets to prop up the Yen.

Christopher Vecchio, CFA, tastylive’s head of futures and forex, has been trading for nearly 20 years. He has consulted with multinational firms on FX hedging and lectured at Duke Law School on FX derivatives. Vecchio searches for high-convexity opportunities at the crossroads of macroeconomics and global politics. He hosts Futures Power Hour Monday-Friday and Let Me Explain on Tuesdays, and co-hosts Overtime, Monday-Thursday. @cvecchiofx

Thomas Westwater, a tastylive financial writer and analyst, has eight years of markets and trading experience. @fxwestwater

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