CZECHIA: CNB Say Core Inflation In Line With Forecast at 2.8%

• In FX, the trend theme in EURUSD remains bullish. Resistance at 1.1743, the Aug 22 high, has been cleared reinforcing a bull cycle. This signals scope for an extension towards 1.1829, the Jul 01 high and bull trigger. Clearance of this hurdle would confirm a resumption of the primary uptrend. Support to watch is around the 50-day EMA, at 1.1628.
• GBPUSD is holding on to its gains since rallying off the Sep 3 low. The climb has retraced the steep sell-off on Sep 2 and highlights a stronger bullish development. This also suggests the corrective cycle between Aug 14 - Sep 3 is over. Sights are on resistance at 1.3595, the Aug 14 high and a bull trigger. A break would strengthen a bullish condition. Initial support to watch is 1.3465, the 50-day EMA.
• USDJPY continues to trade inside a range. Attention is on key short-term support at 146.21, the Aug 14 low and a bear trigger. A break of this level would signal a stronger bearish threat and highlight a range breakout. This would expose 145.40, 50% of the Apr - Aug upleg. On the upside, clearance of 149.14, the Sep 3 high is required to reinstate a bullish theme.

• MNI: US MBA: MARKET COMPOSITE +9.2% SA THRU SEP 05 WK

Summarising some select EUR STIR views ahead of Thursday’s decision:

• Bank of America maintain their “received Oct ECB €str recommendation (Entry 1.765, target 1.565, current 1.905)". Even though they "see little chance of a rate cut by October given the lack of data between the two meetings, given only 2 bp are priced, we view the trade at this stage as a tail risk hedge”
• RBC believe that if the ECB will remain on hold going forward, it “makes sense to take short volatility positions on near-term Euribor options, for example being short straddles”. They note that “these positions are short gamma and short vega and hold positive carry since the term structure of Euribor option volatility is still upward sloping”.
• Morgan Stanley “find it unlikely that the ECB meeting will result in a hawkish enough outcome to further challenge the easing currently priced in”. They think that “short-dated rates have room to reprice lower” and “continue to favour Oct-Dec flattening given the low implied probability of a 25bp cut for December”.
• Santander instead believe “the risk bias across the EUR curve remains tilted to the upside, though it may take until later in the year for materially higher rates to materialise. Paying fixed in the front end still makes sense, but it will likely take several weeks before the trade pays off clearly.”
• MNI's full ECB preview is here.