NBP: Central Bank's Chief Analyst Confirms Assuming Q4 Energy Price Rebound
Jul-04 10:52
Jacek Kotłowski, Director of the NBP's Economic Analysis and Research Department, says that inflation will return to the tolerance band in Q3. The NBP assumes a rebound to +3.6% Y/Y in 4Q25 because of the assumed unfreezing of energy prices and a subsequent return to the tolerance band. If prices do not rebound as expected or the freezing mechanism is extended, then inflation will be lower.
- Note that the consensus view is that prices will not rebound significantly, either because of energy market dynamics, or because of further government intervention, or both.
- The NBP did take into account a cut to natural gas tariffs taking effect this month.
- The NBP expects a stronger decline in core inflation in 2026-27 amid softening demand pressure and slowing wage growth.
- Kotłowski also points to a significant longer-term risk from the planned implementation of the EU ETS2 system in 2027, which could add 2pp to inflation and weigh on economic growth. This was not accounted for in the latest projection.
- NBP analysts do not see Germany's fiscal stimulus package as a game-changer, think its perception is exaggerated, possibly because of Germany's earlier fiscal conservatism. Kotłowski says that when its value is divided by 10 years, the magnitude is no longer so impressive, while the German economy faces multiple structural challenges.
- Kotłowski was speaking at a press conference to present the NBP's July Inflation Report, which supported the latest rate decision.
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US TSYS: Modest Twist Flattening, ISM Services Later On
Jun-04 10:48
- Treasuries sit slightly twist flatter on the day, having remained within yesterday’s range across all benchmark tenors overnight.
- The long end appeared to be helped off lows by Reuters reporting the BoJ is considering slowing the pace of tapering in its bond purchases from next fiscal year onward. It’s not a new idea but helped some demand for JGB futures even if they’ve since pared gains.
- Trade discussions: President Trump on Truth Social: "I like President XI of China, always have, and always will, but he is VERY TOUGH, AND EXTREMELY HARD TO MAKE A DEAL WITH!!!"
- Separately, the EC’s Sefcovic said on X that there has been a productive and constructive discussion with USTR Greer. “We're advancing in the right direction at pace - and staying in close contact to maintain the momentum.”
- Today sees primary data focus on ISM Services although with some sensitivity to ADP and final PMIs before the Fed’s Beige Book for an update on what the Fed is hearing in liaison programs ahead of the Jun 17-18 decision.
- Cash yields are 0.6bp higher (3s) to 1.2bp lower (30s).
- 5s30s at 94.6bp (-1.8bp) is back to Friday’s levels.
- TYU5 trades at 110-15 (00+) on very low volumes of just 215k. It has remained within yesterday’s range throughout.
- Resistance continues to be watched at 110-30 (May 30 and Jun 2 highs), having topped out at 110-26+ yesterday, whilst support is seen at 109-26 (May 29 low) after which lies a bear trigger at 109-12+ (May 22 low).
- Data: MBA mortgage apps (0700ET), ADP May (0815ET), S&P Global US serv/comp final PMIs (0945ET), ISM Services May (1000ET)
- Fedspeak: Bostic & Cook moderate Fed Listens event (0830ET) – see STIR bullet – before Beige Book (1400ET)
- Bill issuance: US Tsy $60B 17W bill auction (1130ET)
OUTLOOK: Price Signal Summary - Monitoring Resistance In WTI
Jun-04 10:46
- On the commodity front, a bullish theme in Gold remains intact and this week’s gains reinforce current conditions. Medium-term trend signals are bullish too - moving average studies remain in a bull-mode position, highlighting a dominant uptrend. Sights are on $3435.6 next, the May 7 high. A break of this hurdle would strengthen bullish conditions. On the downside, key support and the bear trigger to watch has been defined at $3121.0, the May 15 low. First support lies at $3302.4, the 20-day EMA.
- In the oil space, WTI futures continue to trade closer to their recent highs. A bear threat remains present and the recovery since Apr 9 still appears corrective. A key resistance area to monitor is $62.51, the 50-day EMA. It has again been pierced. A clear break of it would instead highlight a stronger reversal and open $65.82, the Apr 4 high. For bears a reversal lower would refocus attention on $54.33, the Apr 9 low and bear trigger. First support to watch lies at $59.74, the May 30 low.
EUR: EURJPY and EURGBP Displaying Divergent Trend Signals
Jun-04 10:45
- A bullish theme in EURJPY remains intact. The latest recovery from the May 23 low, signals the end of the corrective pullback between May 13 - 23. If correct, the move higher also marks a resumption of the uptrend. Sights are on a cluster of resistance around the 165.00 mark, which has been of pivotal significance dating back to the BOJ’s intervention back in July last year.
- 165.21, the May 13 high remains the technical bull trigger, of which a breach would target a move towards 166.10 (Nov 6 high) and 167.40, a Fibonacci retracement. Key short-term support lies at 161.09, the May 23 low, where a break is required to highlight a stronger reversal and suggest scope for a deeper correction.
- Conversely, a downtrend in EURGBP remains intact following a false breach of the 50-day EMA. A sustained break of this average is required to highlight a stronger reversal higher. On the downside, support to watch lies at 0.8356, the May 29 low. Clearance of this level would resume the downtrend and open 0.8316, the Mar 28 low and a key support.
