BONDS: EGBs-GILTS CASH CLOSE: Flatter Curves Amid Heightened Data Flow
Jul-30 17:48
European curves flattened Wednesday.
- Early trade was constructive for EGBs and Gilts, stemming from the prior session's late strength in US Treasuries.
- A solid long-end Gilt tender and potentially some month-end dynamics also assisted. 10Y Gilt yields briefly hit their lowest intraday level since Jul 22; for Bunds Jul 24.
- Above-expected US data including private payrolls and GDP triggered a selloff in Treasuries that weighed across the Atlantic, seeing yields finish off their lows.
- Earlier, a slew of Eurozone data didn't really move the needle for markets: Euro Q2 GDP and July consumer confidence were slightly stronger than expected, while Spanish flash July inflation was slightly above-consensus and Belgian HICP decelerated. The ECB's forward looking wage tracker points to a continued decline in negotiation wage growth in Q1 2026.
- The German curve twist flattened, with the UK's bull flattening. Periphery/semi-core EGB spreads were mixed.
- The Federal Reserve decision will be a focus overnight, with Thursday bringing French, Italian, and German flash July inflation data (MNI's preview is here).
Closing Yields / 10-Yr EGB Spreads To Germany
- Germany: The 2-Yr yield is up 1.2bps at 1.954%, 5-Yr is up 0.3bps at 2.296%, 10-Yr is down 0.2bps at 2.706%, and 30-Yr is unchanged at 3.204%.
- UK: The 2-Yr yield is down 1.8bps at 3.876%, 5-Yr is down 2.6bps at 4.041%, 10-Yr is down 3bps at 4.603%, and 30-Yr is down 2.5bps at 5.416%.
- Italian BTP spread up 0.4bps at 81.4bps / French OAT down 0.3bps at 65.3bps
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US TSY FUTURES: BLOCK: Sep'25 5Y Sale
Jun-30 17:42
- -5,000 FVU 108-31, sell through 108-31.25 post time bid at 1335:00ET, DV01 $220,000.
- The 5Y contract trades 108-31 last (+3.25)
FOREX: USD Downtrend Extends as Trump Steps Up Rhetoric on Fed Rates
Jun-30 17:34
- Amid the renewed focus on rate differentials in FX, the bull flattening move for the US curve has helped the US dollar extend its most recent weakness, with the dollar index falling around 0.5% to fresh cycle lows. The moves come amid President Trump stepping up his criticism of Fed Chair Powell and his ‘entire board’ over the level of US interest rates. Notably, Goldman Sachs have also pulled forward their call for the next Fed cut to September.
- Gains across G10 have been led by the likes of CHF (+0.71%) AUD (+0.72%) and NZD (+0.64%) as the continued resilience for major equity benchmarks underpins the firm sentiment for risk. For AUDUSD, this promotes spot to a fresh cycle high above 0.6570. A clear break of key resistance and the bull trigger, at 0.6552, would confirm a resumption of the trend and initially opening 0.6603, the Nov 11 2024 high.
- USDCHF now tracks around 0.7930 as the move below the psychological 0.80 handle extends. Indeed, CHFJPY has had an impressive bounce of the early morning lows at 180.20 to trade at a fresh record high once more above 181.75.
- EURUSD has also edged to fresh session/cycle highs Monday, continuing to track at the best traded levels since September 2021 above 1.1770. Last week’s gains reinforced the uptrend, emboldened by a breach of the bull trigger at 1.1631, the Jun 12 high. Immediate sights are on 1.1783, a Fibonacci projection, before 1.1821, the Sep 16 2021 high.
- Rates/dollar dynamics may place a greater focus than usual on this week’s US employment report, notably scheduled on Thursday owing to the July 4th holiday. Separately, ISM and JOLTS data are scheduled tomorrow. The global calendar kicks off with the release of Eurozone HICP.
GBPUSD TECHS: Bullish Price Sequence
Jun-30 17:30
- RES 4: 1.3852 1.764 proj of the Feb 28 - Apr 3 - 7 price swing
- RES 3: 1.3835 High Oct 20 2021
- RES 2: 1.3800 Round number resistance
- RES 1: 1.3771 High Jun 26
- PRICE: 1.3720 @ 17:00 BST Jun 30
- SUP 1: 1.3632/3552 High Jun 13 / 20-day EMA
- SUP 2: 1.3414 50-day EMA
- SUP 3: 1.3318 Trendline support drawn from the Jan 13 low
- SUP 4: 1.3140 Low May 12 and key support
The trend needle in GBPUSD continues to point north and last week’s climb reinforces bullish conditions. Fresh cycle peaks maintain the price sequence of higher highs and higher lows. Note too that moving average studies are in a bull-mode position, highlighting a dominant medium-term uptrend. Sights are on 1.3800 next. Initial support to watch lies at 1.3552, the 20-day EMA. A break would signal scope for a corrective pullback.
