Morning Call For December 5, 2014

Mar 10-year T-notes (ZNH15 -0.06%) this morning are down -2.5 ticks. Mar 10-year T-note futures prices on Thursday rebounded from a 1-week low and closed higher: TYH5 +7.00, FVH5 +3.25. Supportive factors included (1) European economic concerns after the ECB lowered its Eurozone GDP and inflation forecasts for 2014-2016, and (2) increased safe-haven demand for T-notes as stocks retreated.

The dollar index (DXY00 +0.19%) this morning is up +0.176 (+0.20%). EUR/USD (^EURUSD) is down -0.0028 (-0.23%). USD/JPY (^USDJPY) is up +0.87 (+0.73%) at a 7-1/3 year high. The dollar index on Thursday retreated from a 5-1/2 year high and closed lower. Closes: Dollar index -0.252(-0.28%), EUR/USD +0.00679 (+0.55%), USD/JPY unch. The main bearish factor was short-covering in EUR/USD which rebounded from a 2-1/4 year low after ECB President Draghi said policy makers will wait until next quarter to assess whether additional stimulus measures are required. USD/JPY soared to a 7-1/3 year high after the Nikkei and Yomiuri newspapers reported that Prime Minister Abe’s Liberal Democratic Party will boost its majority at the Dec 14 election, which will give Abe a mandate to continue his inflationary and yen-negative fiscal policies.

Jan WTI crude oil (CLF15 -0.72%) this morning is down -66 cents (-0.99%) and Jan gasoline (RBF15 -0.91%) is down -0.0193 (-1.08%). Jan crude and Jan gasoline on Thursday closed lower. Closes: CLF5 -0.57 (-0.85%), RBF5 -0.0112 (-0.68%). Bearish factors included (1) comments from an unnamed person from the Saudi Oil Ministry who said Saudi Arabia has no target for crude prices and will let the market decide at what level oil should trade for now, and (2) the ECB’s cut in its Eurozone 2014 and 2015 GDP forecasts, which signals reduced energy consumption and demand.

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