TARIFFS: Current State Of EU, Mexico, Canada Tariffs Left Unclear
Is the EU part of the 10% / 90 day pause club? There is a lot of ambiguity in the announcement and Tsy Sec Bessent failed to clarify this (and also added to the confusion with MX and CA, see below). Having announced retaliation vs the US today, the EU could be considered excluded - however unlike China's retaliatory moves which are in place, the EU's retaliatory tariffs only go into effect April 15.
- And it seems that the main thrust of the announcement is to isolate China.
- So at the moment we (and the markets) are operating under the assumption that the EU is in the 10% / 90 day negotiation window though we await an official announcement.
- Re Mexico and Canada, per BBG's Canada reporter on X.com, @btaplatt: "It's going to take a bit to get clarity on whether any of this affects Canada. In theory it shouldn't, as Canada wasn't included in the reciprocal tariff order. Scott Bessent said yes when asked if Canada/Mexico are at 10% but, uh...we'll have to see whether he misspoke."
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EURUSD: Bulls Remain In The Driver’s Seat
- RES 4: 1.1040 High Oct 4 2024
- RES 3: 1.0961 76.4% retracement of the Sep 25 ‘24 - Feb 3 bear leg
- RES 2: 1.0937 High Nov 5 / 6 2024
- RES 1: 1.0889 High Mar 7
- PRICE: 1.0836 @ 16:11 GMT Mar 10
- SUP 1: 1.0766/1.0544 Low Mar 6 / 20-day EMA
- SUP 2: 1.0473 50-day EMA and a short-term pivot level
- SUP 3: 1.0360 Low Feb 28 and a key support
- SUP 4: 1.0317 Low Feb 12
EURUSD bulls remain in the driver’s seat. Last week’s gains mark a continuation of the reversal on Feb 3. The pair is trading at recent highs and note that moving average studies have crossed and are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.0937, the Nov 5 / 6 2024 high. Initial key support to watch lies at 1.0487, the 50-day EMA. The uptrend is overbought, a pullback would allow this set-up to unwind.
OPTIONS: Two-Way Plays In German Bonds Monday
Monday's Europe rates/bond options flow included:
- OEK5 116/114 1x1.5 put spread paper paid 26-26.5 on 5K
- RXJ5 126.50/125.50 put spread paper paid 18 on 10K
- RXJ5 130/131 call spread paper paid 11 on 4K
- RXK5 126.5/125/123.5 put fly paper paid 16.5 on 5K
- RXM5 126/125/124 put fly paper paid 7.5 on 5K
- ERM5 97.9375/98.0625 call spread bought for 2-2.25 in 20k
- SFIZ5 96.20/96.30 call spread v 95.75/95.65 put spread, bought the call spread for 1.25 in 4k
- 0NM5 96.30/96.50 call spread bought for 6.5 in 10k
US TSYS/OVERNIGHT REPO: ON RRP Takeup Remains Close To 2025 Average
Takeup of the Fed's Overnight Reverse Repo facility fell $7.3B to $129.1B Monday, slightly more than reversing Friday's $7B rise.
- This leaves the level at 5-session lows, but at fairly typical levels for the year so far (average: $132B in 2025).
- ON RRP takeup could rise Tuesday in line with the Treasury bill paydowns that we flagged in our earlier SOFR note.
