COMMODITIES: Crude Climbs, Copper Extends Gains Amid Tariff Threat

• Overall, the smooth passage of the German election results has allowed currency markets to trade with a sense of calm on Monday, with the victory for Merz' CDU/CSU and the likely formation of a coalition with the SPD steering markets clear of any abrupt U-turns on policy - leaving the EUR to very modestly outperform on Monday.
• An initial rally to 1.0528 fell just shy of the January highs for EURUSD, which have capped the topside for now. Spot did edge lower across the US session and a brief bout of dollar strength helped EURUSD to bridge the gap to Friday’s close, briefly printing a session low of 1.0453.
• The aforementioned greenback strength was a result of a sharp selloff for major equity benchmarks, where notably the S&P 500 fell around 1.1% following the cash open. Coinciding with a bump lower for US yields, the Japanese Yen was boosted and AUDJPY fell quickly to a fresh session low in tandem.
• Equities have since recovered, leaving the USD index in very moderate negative territory on Monday. EURUSD has risen back to 1.0480 ahead of the APAC crossover and stands 0.25% higher on the session, with the Swiss Franc exhibiting similar strength vs the dollar. Elsewhere in G10, adjustments have been more moderate as markets continue to digest headlines from President Trump regarding the latest developments regarding a deal to end the Russia/Ukraine conflict.
• The Polish Zloty outperforms in the emerging market space, with recent fresh cycle lows in EURPLN (-0.51%) confirming a resumption of the downtrend. Sights are on the 2018 low of 4.1293, of which a break would place the cross at its lowest level since 2015.
• Upcoming - FOMC’s Goolsbee and Logan may speak and German final GDP will cross early Tuesday.

Core European curves closed mixed Monday, with divergent short-end performances in EGBs and Gilts.

• Political headlines were prevalent with the German election not delivering major surprises with conservative Merz potentially forming a "grand coalition", while there was continued uncertainty over US-Ukraine-Russia negotiations.
• Equity weakness spilling over from Friday's weak US stock close helped buoy core FI. Data was not particularly impactful (Eurozone final January inflation in-line, German IFO mixed).
• 2025 ECB OIS-implied rate cut pricing deepened by 2bp to 81bp, most since Feb 13; BOE pricing was static at 53bp of cuts.
• Consequently, German short-end outperformed its UK counterpart, conversely Gilts outperformed Bunds across the rest of the curve.
• Periphery/semi-core EGBs were mixed too, with Spain underperforming on supply (15Y syndication mandate).
• BOE's Dhingra (who earlier in the day was reappointed to the MPC through Aug 2028) speaks after the cash close (MNI's Gilt Week Ahead is here).
• Tuesday's schedule includes final German GDP and UK CBI sales, with the data highlight likely to be the ECB's negotiated wages indicator. We also hear from ECB's Centeno and Schnabel, and BOE's Pill.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.7bps at 2.088%, 5-Yr is down 0.5bps at 2.236%, 10-Yr is up 0.7bps at 2.477%, and 30-Yr is up 3.2bps at 2.753%.
• UK: The 2-Yr yield is up 0.1bps at 4.228%, 5-Yr is down 0.8bps at 4.245%, 10-Yr is down 0.7bps at 4.564%, and 30-Yr is down 0.5bps at 5.16%.
• Italian BTP spread flat at 114.2bps / Spanish up 0.9bps at 63.5bps

• RES 4: 1.2811 High Dec 6 ‘24 
• RES 3: 1.2805 2.0% 10-dma envelope
• RES 2: 1.2767 50.0% retracement of the Sep 26 ‘24 - Jan 13 bear leg 
• RES 1: 1.2691 High Feb 24
• PRICE: 1.2620 @ 15:51 GMT Feb 24
• SUP 1: 1.2563 Low Feb 19     
• SUP 2: 1.2518 50-day EMA
• SUP 3: 1.2440 Low Feb 13  
• SUP 4: 1.2333 Low Feb 11 and a key support    

A bull cycle in GBPUSD remains in play and the pair again traded to a fresh cycle high on Monday - although faded into the close. Fresh gains confirm a resumption of the uptrend and maintain the current sequence of higher highs and higher lows. An extension would strengthen the bullish condition and open 1.2767, the 50.0% retracement of the Sep 26 ‘24 - Jan 13 bear leg. Initial firm support to watch is 1.2518, the 50-day EMA.