SONIA: Call Condor buyer

Danske Bank have issued a new tactical trade recommendation to buy EURNOK spot at 11.3880 with a soft target of 11.85 and a hard stop-loss of 11.15.

• They note that the trade is tactical in nature but has strategic potential.
• Danske question the sustainability of the recent NOK rally and note that “NOK is beginning to technically look overbought and the import weighted NOK FX is now stronger than Norges Bank’s forecast, which makes a September rate cut look increasingly likely”.
• “Finally, we are of the view that the combination of elevated wage growth and negative productivity growth in Norway marks a substantial medium-term headwind for the currency”.
• “The biggest risk to the trade is a broad based rally in cyclically sensitive assets, possibly driven by the combination of a more resilient global economy and softer rhetoric from central banks”.

• As we have entered the purdah period there will be no public BOE appearances until after the election (4th July). This week does, however, see the first leaders’ debate on ITV with Sunak and Starmer going head to head. Our Political Risk team notes that it would be unusual to announce policy in a debate – and the manifestos are likely to be launched either late this week or next week. There is also unlikely to be too much market reaction to the debates unless there is a clear and concise victory for Sunak, given the lead that Labour continues to hold in the polls.
• With a dearth of policy comments, the election and the higher-than-expected April CPI, near-term data is likely to be left to impact further out the curve unless we were to see a large downside surprise to the May CPI data. This week’s highlights include the final PMI prints (to which the manufacturing print has seen little revision), the Decision Maker Panel data and BRC retail sales for May. Next week we receive labour market and monthly activity (including April GDP) data while May’s CPI data is due for release on Wednesday 19 June (the day before the MPC decision is released, but the MPC will receive the data on Monday morning).
• STR usage continues to incrementally increase, with another record takeup posted on Thursday, we will continue to monitor this but we still think we are some way from an equilibrium balance sheet.

Roll activity dominates when it comes to German FI futures volume, with the lack of meaningful macro news flow over the past couple of hours and proximity to Thursday’s M4 expiries promoting activity.

• Spread activity accounts for 40-60% of the daily volume in German FI M4 futures contracts, depending on the bond contract you are looking at.
• Spread levels are little changed to a touch lower on the day,