BOE: Data unlikely to push back cut expectations substantially

Sovereign rating reviews of note from after hours on Friday include: 

• Fitch affirmed Canada at AA+; Outlook Stable
• Moody's affirmed the Czech Republic at Aa3, outlook stable
• Morningstar DBRS confirmed the European Financial Stability Facility (EFSF) at AAA, Stable Trend
• Morningstar DBRS confirmed the European Stability Mechanism (ESM) at AAA, Stable Trend
• Morningstar DBRS confirmed Portugal at A (high), Stable Trend
• Morningstar DBRS confirmed Switzerland at AAA, Stable Trend
• Scope Ratings affirmed the European Financial Stability Facility (EFSF) at AA+; Outlook Stable
• Scope Ratings affirmed the European Stability Mechanism (ESM) at AAA: Outlook Stable
• Scope Ratings affirmed Spain A; Outlook Stable

• RES 4: $85.00 - Round number resistance 
• RES 3: $81.99 - 2.764 proj of the Apr 9 - 23 - May 5 price swing
• RES 2: $80.72 - 2.618 proj of the Apr 9 - 23 - May 5 price swing
• RES 1: $72.66/79.40 - 50.0% of the Jun 23-30 range / High Jun 23
• PRICE: $69.51 @ 07:09 BST Jul 21
• SUP 1: $65.92 - Low Jun 30 
• SUP 2: $61.39 - Low May 30
• SUP 3: $58.00 - Low May 5
• SUP 4: $57.70 - Low Apr 9 and a key support   

A bearish theme in Brent futures remains present and this month's recovery is considered corrective. The sell-off on Jun 23 continues to highlight a bearish threat. Recent weakness has resulted in a print below the 50-day EMA and note too that $66.17, 61.8% of the May 5 - Jun 23 bull leg, has been pierced. A resumption of the downtrend would expose $61.39, the May 30 low. Initial resistance to watch is $72.66, a Fibonacci retracement point.

Bund futures have extended higher over the last 20 minutes, after trading in a contained 13 tick range overnight with volumes limited by a public holiday in Japan. Now +52 ticks at 130.07, Bunds have pierced resistance at the 20-day EMA (129.92). However, a clear breach of the 50-day EMA at 130.21 is required to highlight a possible reversal of the current bearish theme. Initial support remains the July 14 low at 129.08.

• The early rally also sees OAT futures up 53 ticks and BTPs up 58 ticks from Friday’s settlement levels.
• Progress on an EU-US trade deal remains limited. Bloomberg reported that EU officials are formulating a retaliation plan for a no-deal scenario. This comes after the FT reported on Friday that President Trump was pushing for a minimum tariff of 15-20% on EU goods.
• No EGB supply scheduled today, with Germany set to come to the market tomorrow and Wednesday, and Italy to sell bonds on Thursday.
• A group of German companies and investors (the “Made for Germany” initiative) says it plans E631bln in investments in the country by 2028.
• This week’s regional calendar includes the ECB’s Q2 BLS, July flash PMIs and ECB decision. Our full ECB preview will be released later this week.
• Japan’s ruling coalition lost its majority in the Upper House following yesterday’s election (broadly in line with expectations), but PM Ishiba has said he will stay in office for now. The JGB market has been closed today, muddying the market’s interpretation of the results.
• Cash Treasuries were also closed overnight. Yields have opened up to 1.5bp lower across the curve, lightly bull flattening (see above for more).