BONDS: EGBs-GILTS CASH CLOSE: Core Curves Bull Flatten For The Week
Oct-03 17:14
Gilts outperformed Bunds Friday.
- With the US government shutdown postponing the September nonfarms payrolls report, core FI saw little clear direction and lighter-than-usual volumes.
- The session low in core yields (and wides in OAT/Bund) was made just after noon London time, on news that the French Socialist leader had pushed back on PM Lecornu's fiscal proposals. From there, yields drifted back toward the middle of the morning's range into the week's close.
- In data, Eurozone August PPI was a little weaker than expected, while Italian and Spanish Services PMIs were solid.
- The German curve twist flattened, with the UK curve down in parallel through the 10Y segment and outperforming Bunds throughout. For the week, curves bull flattened in both the UK (2Y yield -4.9bp, 10Y -5.6bp) and Germany (2Y -1.1.bp, 10Y -4.8bp).
- Periphery EGB spreads closed a little tighter.
- Ratings reviews after the close include Moody's on the EU. Next week's data schedule is relatively light, with German factory orders the Eurozone highlight. Multiple central bank speakers include ECB's Lagarde at EU Parliament, and BOE's Pill, Mann, and Bailey.
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 0.9bps at 2.019%, 5-Yr is up 0.5bps at 2.302%, 10-Yr is down 0.1bps at 2.698%, and 30-Yr is down 0.7bps at 3.267%.
- UK: The 2-Yr yield is down 1.8bps at 3.966%, 5-Yr is down 1.9bps at 4.118%, 10-Yr is down 2bps at 4.69%, and 30-Yr is down 1.6bps at 5.501%.
- Italian BTP spread down 0.7bps at 81.3bps / French OAT spread down 0.9bps at 81.3bps
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EURUSD TECHS: Pullback Appears Corrective
Sep-03 17:00
- RES 4: 1.1851 High Sep 10 2021
- RES 3: 1.1829 High Jul 01 and the bull trigger
- RES 2: 1.1789 High Jul 24
- RES 1: 1.1743 High Aug 22
- PRICE: 1.1679 @ 16:35 BST Sep 3
- SUP 1: 1.1574/1.1528 Low Aug 27 / Low Aug 5
- SUP 2: 1.1392 Low Aug 1 and bear trigger
- SUP 3: 1.1373 Low Jun 10
- SUP 4: 1.1313 Low May 30
Despite Tuesday’s sell-off in EURUSD, the trend set-up remains bullish and the pullback appears corrective. Note that the pair has recently pierced key support around the 50-day EMA, currently at 1.1612. A clear break of the average would signal scope for a deeper retracement and potentially expose key medium-term support at 1.1392, the Aug 1 low. Initial resistance to watch is 1.1743, the Aug 22 high. A break of it would be a bullish development.
FOREX: USD Reverts Lower Following Soft JOLTS Jobs Report
Sep-03 16:56
- It was a tale of two halves for G10 currency markets on Wednesday, as initial greenback strength reversed and subsequently extended lower following a softer-than-expected US JOLTS jobs report, stoking the softening labour market narrative as we approach Friday’s release of non-farm payrolls.
- The USD index is roughly 0.3% lower on the session as we approach the APAC crossover, with GBP and AUD marginally outperforming while the likes of CAD and CHF remain closer to unchanged on the day.
- Initial sterling weakness saw GBPUSD print a near one month low of 1.3333, however, greater stability for risk and the associated reversal lower for UK Gilt yields helped underpin a solid GBP recovery. Cable rose around 120 pips to 1.3450 amid these dynamics erasing a solid portion of the steep declines from Tuesday’s session.
- For AUD, there was a more resilient tone across the entire session following Australian Q2 GDP coming in stronger than both the RBA and consensus expected. Additional hawkish comments from RBA’s Bullock helped underpin the Aussie rally, which has seen AUDUSD close within close proximity of 0.6569 resistance. Clearance of this level would expose key resistance and the bull trigger at 0.6625, the Jul 24 high.
- Additionally, AUDNZD strength continues to stand out, reaching fresh cycle highs today above 1.1140. A breach of the key 1.1180 mark would place the cross at the highest level since late 2022. Above here, 1.1250 marks a significant 76.4% retracement point of the 2022 selloff.
- USDJPY nicely respected Fibonacci resistance at 149.12, printing a high of 149.14 during early European trade. Following that, waning dollar momentum and the subsequent price action following the US data helped USDJPY eventually back below the 148 handle. Heightened political uncertainty in Japan allows USDJPY to hold onto its 100 pip advance this week.
- Swiss CPI kick starts tomorrow’s calendar before US ADP, jobless claims and ISM Services PMI are released.
OPTIONS: All Call Spread Buying In Rates
Sep-03 16:52
Wednesday's Europe rates/bond options flow included:
- ERU5 97.9375/98.00cs, bought for 2 in 20k
- SFIZ5 96.20/96.25cs, bought for 1.75 in 2k
- SFIM6 96.70/96.85cs, bought for 2.75 in 6k
