OIL: China Imports Disrupted by Sanctions As Crude on Water Rises

Mortgage activity increased last week as mortgage rates continued to ease to now their lowest since Sep 2024 when Fed terminal rate expectations were at cycle lows. New purchase applications have seen relatively limited boost this year from the almost 70bp decline in 30Y mortgage rates over the year to date. 

• MBA composite mortgage applications bounced 7.1% (sa) last week after the unwound of a refi-driven bounce in the first half of September had slowed.
• Refis increased a solid 9.3% after 4.0% the week prior, whilst new purchase applications increased 4.5% to recover from the -5.2% the week prior was its largest weekly decline since late July.
• Levels relative to 2019 average for context: composite 72%, new purchases 63%, refis 76%.
• The modest increase in activity came on the back of a further decline in 30Y mortgage rates, -7bps to 6.30% for a combined 16bp drop over the past four weeks. 6.30% is the lowest since Sep 2024 at around the time of cycle lows for Fed terminal rate expectations.
• Spreads to 10Y swap rates saw a tightening to 277bps for a new ytd low but it’s only a small move vs the ~280bp averaged since mid-September. Recall, this is down from a rough range of 300+/-5bp seen for multiple months after April reciprocal tariff announcements and is back a little below the 285bp averaged in Q1.
• 30Y mortgage rate spreads to Treasury yields meanwhile remain close to lows since Mar 2022 for the 10Y although with downward progress continuing to have broadly plateaued – see chart.

• GBPUSD: Renewed sterling weakness and a slightly stronger dollar have pressured GBPUSD to a fresh 2-month low on Wednesday. Pessimism for GBP continues to reverberate amid increasing signs that UK Chancellor Reeves will have to raise income tax at the November 26 budget to fill a widening fiscal hole. As noted, cable has breached the 1.3249 bear trigger and Oct 14 low, confirming a resumption of the downtrend, placing the focus on the next target of 1.3142, Aug 1 low.
• GBPAUD: While Australian CPI has been the dominant driver for Aussie outperformance, we did highlight yesterday that GBPAUD was threatening a move back below an important pivot at 2.03. Sure enough, a break of the recent cycle lows at 2.0244 has significantly boosted downside momentum, with the cross printing below 2.00 this morning, the lowest level in 8 months. Bearish developments signal scope for a more protracted selloff towards the year’s lows around 1.96, gaining in likelihood given the risks surrounding the upcoming UK budget and the hawkish risks attached to the November RBA decision.
• EURGBP has moved steadily higher following the break of 0.8769 on Tuesday, narrowing the gap to 0.8835, the May 3 2023 high. Above here, 0.8865 provides the next target, the 1.764 projection of the Sep 15 - 25 - Oct 8 price swing.
• GBPCAD has also declined 0.5% today, as we approach today’s BOC decision. Downward momentum picked up on a break of trendline support yesterday, drawn from the January lows. Spot has traded to within 2 pips of the first notable target at 1.8405, the Sep 03 low. 1.8230 is the next obvious chart target for the move.

• RES 4: 115-00+ High Oct 1 ‘24 (cont) 
• RES 3: 114-21+ 1.00 proi of the Aug 18 - Sep 11 - 25 price swing
• RES 2: 114-10   High Apr 7 (cont) and a key resistance 
• RES 1: 113-24/114-02   High Oct 24 / 17 and the bull trigger 
• PRICE:‌‌ 113-13+ @ 10:56 GMT Oct 29
• SUP 1: 113-04   Low Oct 27 
• SUP 2: 112-27   50-day EMA
• SUP 3: 112-16+ Low Oct 10
• SUP 4: 112-06   Low Sep 25 and a reversal trigger

The trend structure in Treasuries remains bullish. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Attention is on 114-02, the Oct 24 high and a bull trigger. A breach of this hurdle would confirm a resumption of the medium-term uptrend, and open 114-10, the Apr 7 high (cont). Support to watch is 112-27, the 50-day EMA. A clear breach of the average would instead highlight scope for a deeper retracement.