COMMODITIES: Crude Pares Gains Amid Iran Talk Hopes, Gold Unchanged
- Oil has pared gains after the White House said that President Trump believes there is a substantial chance of negotiations with Iran, and that he would make a decision on a military strike within two weeks.
- This supports previous reporting that he has not yet made a decision on military action, and leaves the door open for diplomacy and negotiations.
- WTI Jul 25 is up by 0.1% at $75.1/bbl, having traded as high as high as $77.6 earlier in the session.
- For WTI futures, price action is likely to remain volatile near-term, and from a technical standpoint, the trend is in an extreme overbought position.
- A continuation higher would expose the $80.00 handle, while a firm support is noted $67.11, the Jun 13 low.
- Elsewhere, spot gold has traded in a tight range and remains broadly unchanged around $3,369/oz amid quieter markets with the US on holiday for Juneteenth.
- Analysts at Phillip Nova Pte have said that with gold hovering near record highs, safe-haven flows are being redirected towards platinum and silver.
- From a technical perspective, however, a bullish theme in gold remains intact. Resistance at $3,435.6, the May 7 high, has been pierced, and a clear break of this level would strengthen the uptrend and open $3,500.1, the Apr 22 all-time high.
- Initial key support to monitor is $3,279.1, the 50-day EMA.
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BONDS: EGBs-GILTS CASH CLOSE: Gilts Underperform Post-Pill, Pre-CPI
Yields closed mostly higher across Europe Tuesday, with Gilts underperforming Bunds ahead of UK CPI data.
- The tone for Gilt weakness was set by BoE hawkish dissenter Pill, who sounded less dovish than we had expected in saying that while there should be cuts, a quarterly 25bp pace is too fast, particularly since the first cut was delivered earlier than he would have preferred.
- Strength in European equities and renewed weakness in Treasuries weighed on the European FI space, though the sell-off stalled a couple of hours before the cash close and yields finished off their highs.
- In data, Eurozone flash May consumer confidence was a little stronger-than-expected.
- The German curve twist steepened, with the UK's leaning bear steeper (with 2s underperforming Schatz, in light of Pill's commentary).
- Periphery/semi-core EGB spreads closed mostly tighter, led by BTPs and OATs.
- Wednesday's highlight is UK CPI which could turn out to be the most important UK data release of 2025. MNI's preview is here.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is down 0.1bps at 1.842%, 5-Yr is up 0.2bps at 2.151%, 10-Yr is up 1.8bps at 2.606%, and 30-Yr is up 5bps at 3.088%.
- UK: The 2-Yr yield is up 3.6bps at 4.043%, 5-Yr is up 3.9bps at 4.196%, 10-Yr is up 3.9bps at 4.703%, and 30-Yr is up 3.9bps at 5.458%.
- Italian BTP spread down 1.3bps at 99.6bps / French OAT down 1.3bps at 66.3bps
EURGBP TECHS: Trading At Its Recent Lows
- RES 4: 0.8768 High Nov 20 ‘23
- RES 3: 0.8624/0.8738 High Apr 21/ High Apr 11 and the bull trigger
- RES 2: 0.8541/8557 High May 2 / High Apr 28
- RES 1: 0.8457 50-day EMA
- PRICE: 0.8421 @ 16:37 BST May 20
- SUP 1: 0.8394 Low May 16
- SUP 2: 0.8359 1.236 proj of the Apr 11 - 16 - 21 price swing
- SUP 3: 0.8316 Low Mar 28 and a key support
- SUP 4: 0.8277 1.618 proj of the Apr 11 - 16 - 21 price swing
EURGBP is trading at its recent lows. A bearish theme remains in play. The cross has recently cleared 0.8457, the 50-day EMA, signalling scope for a continuation lower near-term. The 0.8400 handle has been pierced, a continuation lower would open 0.8359, a Fibonacci projection. Key near-term resistance to watch is 0.8541, the May 2 high. A break of this hurdle is required to signal a potential reversal.
US: FED Reverse Repo Operation
RRP usage retreats to $136.033B this afternoon from $180.417B yesterday, total number of counterparties at 32. Usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.
