BONDS: EGBs-GILTS CASH CLOSE: Gilts Bear Steepen With EGBs On Holiday
May-01 18:16
Gilt yields rose sharply Thursday, with EGB trade closed for the May 1 European holiday.
- With much of Europe off, market focus was entirely on the UK.
- Gilts traded steadily through the morning session, with the short end outperforming as oil prices receded, and ticking higher on higher-than-expected US jobless claims data,
- But they turned sharply lower two hours before the cash close as the US ISM Manufacturing index was not as bad as feared.The selloff accelerated into the cash close, led by Treasuries.
- UK data included March lending data which showed a burst of mortgage loans (front-running the expiry of a stamp duty cut), while final April manufacturing PMI was slightly upgraded from the preliminary reading but remained contractionary.
- The UK curve bear steepened: The 2-Yr yield is up 1.8bps at 3.821%, 5-Yr is up 2.6bps at 3.943%, 10-Yr is up 4bps at 4.481%, and 30-Yr is up 5.3bps at 5.26%.
- Friday's calendar is highlighted by Eurozone flash April inflation (recall, national data so far suggests upside risks to consensus for core HICP coming into the week).
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STIR FUTURES: BLOCK: Jun'25 SOFR Buy
Apr-01 18:08
- +10,000 SFRM5 95.94, post time offer at 1401:23ET, the contract trades 95.945 last (+.025).
EURGBP TECHS: Monitoring Support
Apr-01 18:00
- RES 4: 0.8494 High Aug 26 ‘24
- RES 3: 0.8474 High Jan 20 and a key resistance
- RES 2: 0.8428/8450 High Mar 18 / 11 and the bull trigger
- RES 1: 0.8395 High Mar 24 and a key near-term resistance
- PRICE: 0.8365 @ 15:58 BST Apr 1
- SUP 1: 0.8316 Low Mar 28 and a key near-term support
- SUP 2: 0.8291 76.4% retracement of the Mar 3 - 11 bull leg
- SUP 3: 0.8251 Low Mar 4
- SUP 4: 0.8241 Low Mar 3 and a bear trigger
The bear leg in EURGBP that started Mar 11 appears corrective and has allowed an overbought condition to unwind. Note that MA studies are in a bull-mode position, highlighting a dominant uptrend. Support to watch is 0.8316, the Mar 28 low. A break of this level is required to signal scope for a deeper retracement that would open 0.8290, a Fibonacci retracement. For bulls, clearance of 0.8395, the Mar 24 high, would be a bullish development.
FOREX: AUD and NZD Recover, DXY Unchanged Ahead of ‘Liberation Day’
Apr-01 17:52
- Global currency markets have lacked momentum on Tuesday, as participants remain wary of entering new positions ahead of the reciprocal tariff announcements, due from President Trump on Wednesday. As such, the USD index remains close to unchanged levels as we approach the APAC crossover.
- AUD and NZD have received a moderate boost from more stable equity markets today, recovering a solid portion of the declines seen Monday. For AUD specifically, price action has been assisted by a cautious sounding RBA. Tariff uncertainty ahead of tomorrow’s deadline remains the key risk for higher beta currencies in G10, as AUDUSD continues to consolidate ~6.5% losses from the US election highs.
- Key AUDUSD support remains untested at 0.6187, the Mar 4 low. Importantly, clearance of this level would reinstate a bearish technical theme for the pair. This may coincide with EURAUD testing 1.7419 (Mar 11 high), a breach of which would place EURAUD at levels not seen since the early onset of the pandemic in 2020.
- USDJPY remains volatile, registering a 116-pip range on the session. Spot is around 0.3% lower on the session, reflective of the lower US yields across the curve following the weaker-than expected ISM manufacturing and JOLTS data. As noted, the lack of conviction in either direction keeps the USDJPY well pinned between the short-term technical parameters of 150.86 (50-day EMA), and the first key support at 148.18, the Mar 20 low.
- All eyes will be on the Rose Garden event tomorrow at the adjusted time of 1600ET, for the latest updates regarding the imminent trajectory of the US administration’s trade policy. Elsewhere, US ADP Non-Farm Employment Change is the data highlight.
