EGBS: Bunds Weaken But Support Still Some Way Off, Focus Remains On ECB
Jun-04 09:37
Bund futures have weakened steadily through the European morning, currently -31 ticks at 130.99. German cabinet approval of a E46bln corporate tax cut alongside spillover from USTs appears to have contributed to the weakness intraday. First support remains at 130.39, the May 29 low, but a bullish technical theme remains intact.
- June is still the front contract in Bunds for now, but expect September to take its place by the end of the day as Eurex rolls progress ahead of this week’s risk events (ECB decision Thursday, US NFP Friday).
- German yields are around 1bp higher across the curve.
- The Eurozone May services PMI was revised up to 49.7 (vs 48.9 flash), which added incremental pressure to EGBs. That helped the composite PMI remain just about in expansionary territory for the fifth consecutive month (it has had a range of 50.2-50.9 through this year), consistent with positive, but sluggish growth.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels. The BTP/Bund spread is back at 96.5bps at typing.
- Regional focus remains on tomorrow’s ECB decision.
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BONDS: Initial resistance in Bund Holds, Focus on the US ISM Today
May-05 09:34
- A lighter start for the German Bund and wider EGBs, the UK Markets are closed for their Bank Holiday, and Investors are turning their attention towards the FOMC on Wednesday, and will remain attentive to any Tariffs news.
- The initial small resistance noted at 131.16 Today has held, so far printed a 131.14 high.
- European peripheral spreads are closer to flat on the Margin.
- The Swiss CPI came below consensus earlier but had no impact on Govies, even the Swissy (CHF) now trades at higher level post the Inflation Data.
- There's still some Focus on the Data front for Today, the US services PMI will be final reading, but some attention on the US ISM services and its components.
- ECB Stournaras will speak at Forum in Athens later today.
FOREX: Greenback Edges Lower in Partial Reversal of Friday Rally
May-05 09:27
- The greenback is modestly softer against all others in G10, as markets partially retrace the phase of USD strength posted into the Friday close. EUR/USD is back above the $1.13 handle, which is helping support EUR/GBP above 0.8500. Trade deals and negotiations remain a key focus this week, as reports circulate deals could be announced by Friday. Japan, India and South Korea are seen among the nations with the most advanced negotiations.
- Meanwhile, after an extended period of consolidation, AUD/USD is gaining following the surprisingly strong showing for Anthony Albanese in the weekend's general elections. The price action puts the rate above the 200-dma and a close above would be the first since November last year. 0.6550 is the next key level here, marking the 61.8% retracement of the downleg posted off the late September low.
- JPY is among the strongest currencies in G10, benefiting from the modest pullback for US equity futures as well as firmer regional APAC currencies. The run higher in TWD has seen the central bank respond with a press conference today which, while not disclosing any new measures, saw the central bank talk down speculation that Taiwan would settle for a firmer currency at the request of the US.
- US ISM services data is the scheduled highlight Monday, with central bank speak quiet as the Fed remain inside their pre-meeting media blackout.
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May-05 09:11
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