EGB OPTIONS: Bund outright call buyer

Eurozone June flash HICP Y/Y inflation came in at 1.97%, 3 hundredths below the rounded consensus of 2.0% (vs 1.90% May). On a monthly basis, Eurozone inflation came in at 0.28% (0.3% cons). 

• Core HICP also printed roughly in line with consensus, at 2.29% Y/Y and 0.36% M/M (2.3% cons; May 2.28% Y/Y, -0.02% M/M).
• Looking at the individual categories:
  • Services inflation printed a little higher than previously at 3.28% (3.23% May) - analysts looked for a 3.3% reading ahead of the national-level data, so that is an in line print for the category.
  • Energy inflation was firmer than before, at -2.72% Y/Y (-3.57% May) - however, that came on the back of base effects as the sequential print was a mere 0.10%.
  • Non-energy industrial goods, as expected, have been broadly stable in June, at 0.50% Y/Y (0.61% May). On a rounded basis, this means we have printed 0.5% or 0.6% Y/Y in every month of 2025.
  • Food, alcohol and tobacco inflation came in roughly in line with recent levels, at 3.11% Y/Y (was 3.19% in May).

• Analysts have been quick to highlight that the latest greenback selling has notably been paired with an adjustment lower for the US curve, which has been pertinent alongside a significant reduction in geopolitical risk premia. With US 10yr yields slipping to a 2-month low below 4.2% this morning, the Japanese yen is comfortably the best performing currency in G10.
• Price action has extended the pullback from last week’s highs to 3.4%, which has likely been assisted by a cleaner positioning profile following last Monday’s spike to 148.03. The shooting star candle formation highlights a reversal of the recent recovery and today’s weakness in particular has been exacerbated on a break of short-term trendline support, drawn from the May lows.
• As noted, the first support comes in at 142.80 (Jun 13 low), however the key short-term support remains at 142.12, the May 27 low.
• Potentially providing an additional yen tailwind, it is worth noting the Q2 Japan Tankan survey painted a resilient picture and improved capex outlook, which we wrote about in more detail here: https://mni.marketnews.com/3TgwKpZ

Source: Bloomberg Finance L.P. / MNI