MEXICO: Banxico's Heath Highlights Challenges To Meeting Inflation Target
Aug-21 15:06
- The Banxico minutes highlight Deputy Governor Heath’s concerns that progress towards meeting the inflation target has stalled and that there are still challenges to consolidating a downward trajectory to that target, warranting a more cautious stance.
- “Progress towards meeting the inflation target, particularly as indicated by the core component, remains stalled. The narrowing of the gap between observed inflation and the 3% target is entirely attributable to adjustments in its noncore component that could easily revert. The gap between observed and previous forecast inflation persists in the core component. This calls for yet another upward revision of core inflation forecasts, thus suggesting that its persistence has been underestimated.”
- "The gap between expected inflation drawn from surveys and that forecasted shows no signs of improving. Private sector analysts maintain expectations that the target will not be attained within the forecast horizon. In sum, there are still challenges to consolidating a clear downward trajectory for inflation. For now, this calls for maintaining the current level of monetary restriction and adopting a more cautious stance until greater progress towards the target is achieved."
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BELGIUM AUCTION PREVIEW: On offer next week
Jul-22 15:04
Belgium will look to sell the following OLOs at its auction next Monday, with the target size set to be announced on Friday:
- the 2.60% Oct-30 OLO
- the 3.10% Jun-35 OLO
- the 3.50% Jun-55 OLO
FOREX: USD Sold Hard into 4pm WMR Fix
Jul-22 15:00
- USD is being sold in recent trade - helping boost EUR/USD through yesterday's highs just a few minutes out from the 4pm WMR fix. The volume impact is evident here: very, very decent size crossing in the past few minutes: almost 10k contracts trade over ~5 minutes for a cash equivalent of ~$1.4bln
BONDS: Gilt Futures Through Resistance, Now Outperforming Bunds
Jul-22 14:57
Gilt futures have pierced initial resistance at the 20-day EMA (91.97), now +35 ticks versus yesterday’s settlement at 92.13 and a more notable +67 ticks up from earlier session lows. A clear break of the 20-day EMA would call into question the current bear cycle, and signal scope for a push towards 92.24 (July 15 high).
- Beta to US Treasuries appears to have been the main driver of this afternoon’s Gilt rally. US Treasury Secretary Bessent continued to suggest that an ousting of Powell as Fed Chair is unlikely in the short-term. This will be helping to assuage immediate concerns around Fed credibility/independence, pulling down US breakeven inflation rates in the process.
- Gilt yields are 2.5 to 4bps lower across the curve, with UST yields down 3.5-4.5bps.
- Bund futures have also been supported this afternoon, currently +28 ticks at 130.73, at fresh session highs and probing initial resistance at 130.76 (Jul 4 high).
- BTP futures underperform Bunds (+17 ticks at 121.37), owing to the 1% intraday fall in European equities.
- The 10-year Gilt/Bund spread is now 1bp tighter today at 198bps, after briefly piercing the 200bps handle this morning after the UK public sector finance data.
