STIR: Dovish Move On German Services PMI Miss, 53bp Of ECB Cuts Priced Thru Dec
EUR STIRs look through the French PMIs, before reacting dovishly to the softer-than-expected German services PMI release.
- 23bp of easing is priced for June, 30bp through July, 42bp through September, 47bp through October and 53bp through year-end. ECB-dated OIS contracts are 0.5-3.0bp more dovish on the day.
- Euribor futures are +3.0 to -2.5. Early moves off session lows were aided by an uptick in bonds/weakness in crude oil, extending further on the German data.
- The ECB will be looking at this morning’s flash PMI readings intently.
- While a June cut appears very likely at this stage, year-end implied rates have drifted higher since U.S. President Trump's tariff rollbacks, calling into question some analyst expectations of a 1.50% terminal rate (or below).
- In April, the manufacturing PMIs were a little more resilient than might have been expected given the U.S. Liberation Day fallout and associated uncertainty, with a downside surprise instead seen in the services component.
- Services are weighing again this month.
- Note that the German IFO survey for May is also due this morning, which will provide a more granular breakdown of sentiment in Europe's largest economy (modest upticks are expected in both the expectations and current assessment metrics).
- Comments from ECB’s Vujcic, Nagel, Elderson & de Guindos are also scheduled for today.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Jun-25 | 1.937 | -23.2 |
Jul-25 | 1.866 | -30.3 |
Sep-25 | 1.745 | -42.4 |
Oct-25 | 1.700 | -46.9 |
Dec-25 | 1.641 | -52.8 |
Feb-26 | 1.626 | -54.3 |
Mar-26 | 1.611 | -55.8 |
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GILTS: Twist Steepening Early Today, Dovish BoE Repricing Extends
Dovish repricing in BoE-dated OIS supports the front end of the curve, while weakness in long end Tsys since Thursday’s close weighs on 10+-Year gilts.
- Futures 92.25 last (92.09-40 range).
- Initial support and resistance unchanged at 91.73/92.63.
- Yields are 3bp lower to 3bp higher, curve twist steepens.
- 2s10s ~10bp below cycle closing highs, last 68.2bp.
- 5s30s ~2.5bp below cycle closing highs, last 133.1bp.
- Risks seem titled towards continued steepening given the UK’s economic and fiscal fragility, while the macro environment adds further weight to that view.
- Illiquid market conditions in the long end and spill over from Tsys have provided further sources of pressure in recent weeks.
- BoE-dated OIS now showing 91bp of cuts through year-end vs. 88bp early today.
- Little of note on the UK calendar on Tuesday, which will leave post-holiday adjustments and macro cues at the fore.
- In addition to the Wednesday risk events outlined in our GBP STIR bullet, note that tomorrow will see the release of public sector finance data and the resulting DMO remit revision. We will provide greater colour on this later today.
SILVER TECHS: Holding On To Its Recent Gains
- RES 4: $36.000 - Round number resistance
- RES 3: $34.903 - High Oct 23 ‘24 and the bull trigger
- RES 2: $34.590 - High Mar 28
- RES 1: $33.117 - 76.4% retracement of the Mar 28 - Apr 7 bear leg
- PRICE: $32.476 @ 08:23 BST Apr 22
- SUP 1: $30.577/28.351 - Low Apr 10 / 7 and the bear trigger
- SUP 2: $27.686 - Low Sep 6 ‘24
- SUP 3: $27.180 - Low Aug 14 ‘24
- SUP 4: $26.451 - Low Aug 8 ‘24 and a key support
Silver is holding on to the bulk of its recent gains. The latest recovery undermines a bearish theme. Price has traded through an important resistance around the 50-day EMA - at $32.269. The break higher signals scope for a test of $33.117, a Fibonacci retracement. Clearance of this level would strengthen a bullish condition. On the downside, initial firm support to watch lies at $30.577, the Apr 10 low.
GILT TECHS: (M5) Corrective Gains
- RES 4: 94.50 High Apr 7 and key resistance
- RES 3: 93.44 76.4% retracement of the Apr 7-9 sell-off
- RES 2: 93.00 Round number resistance
- RES 1: 92.63 High Apr 8
- PRICE: 92.28 @ 08:01 BST Apr 22
- SUP 1: 91.73/91.43 Low Apr 17 / 15
- SUP 2: 90.47/89.99 Low Apr 11 / 9
- SUP 3: 89.68 Low Jan 15 (cont)
- SUP 4: 88.96 Low Jan 13 and a key support (con)
A sharp sell-off in Gilt futures between Apr 7 - 9 continues to highlight a bearish threat and recent gains are considered corrective - for now. The contract has recently breached 90.55, the Mar 27 low. Clearance of this level confirms a full reversal of the Mar 27 - Apr 7 rally. Sights are on the 90.00 handle next, briefly pierced on Apr 9. A clear break of it would open key support at 88.96, the Jan 13 low (cont). Initial resistance is 92.63, Apr 8 high.
