EMISSIONS: EU End-Of-Day Carbon Summary: EUAs/UKAs Dip On Selling Pressure
Jun-19 15:40
EUAs/UKAs Dec25 are trending lower today on strong selling pressure, despite no clear shift in fundamentals. EUAs have diverted from TTF while showing a modest tightening in correlation with equities, though the correlation is currently not significant.
- EUA DEC 25 down 2.09% at 73.05 EUR/t CO2e
- UKA DEC 25 down 3.32% at 51.86 GBP/t CO2e
- TTF Gas JUL 25 up 8.2% at 41.88 EUR/MWh
- NBP Gas JUL 25 up 8% at 98.6 GBp/therm
- Estoxx 50 down 1.4% at 5196
- FTSE 100 JUN 25 down 0.6% at 8792
- Correlation between EUA/TTF for 30-day period has weakened to the lowest level since Sept 2023 at 0.38.
- Correlation between EUA/STOXX for 30-day period has tightened to a two-week high at 0.32.
- Correlation between EUA/UKA for 30-day period has tightened slightly on the day to 0.44.
- The latest EU ETS CAP3 auction cleared at €73.48/ton CO2e, down 0.77% compared with the previous EU auction at €74.05/ton CO2e according to EEX.
- A bullish theme in ICE EUA futures remains intact and the latest pullback is considered corrective. The break higher last week signals scope for an extension towards €78.73, a Fibonacci retracement point. Clearance of this level would strengthen a bullish condition. Moving average studies are in a bull-mode position, highlighting a clear uptrend. Initial support to watch lies at €71.72 the 50-day EMA. A clear break of it would undermine the bull theme.
- TTF has surged higher today with focus on the uncertain situation in the Middle East. An Iranian official raised the prospect of closing the Strait of Hormuz in response to aggression, adding to supply risks, while the market waits to see if the US will act directly in the conflict.
- A total of 92.5k of open ICE EUAs June 25 options contracts are currently due to expire on Wed 25 June. Options open interest is 44.5k call contracts and 48k puts, with put/call open interest ratio is at 1.08.
- EUA Auction Calendar Week Ahead (Calendar Week 26) - A total of 13.4mn EUAs will be auctioned next week, with five auction sessions will be held. The latest EU ETS CAP3 auction cleared at €73.48/ton CO2e, up 1.06% w/w, remaining above all 10, 50 and 100-day moving average.
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BOC: Strong Core Inflation Could Keep BOC On Sidelines In June
May-20 15:35
Expectations for a June Bank of Canada cut were pared sharply by the hotter-than-expected April CPI report. In particular while the headline reading was slightly above-expected (1.7% Y/Y v 1.6% survey), the unexpectedly strong rise in the core metrics may keep the BOC holding the overnight rate at 2.75% for a 2nd consecutive decision in June, after it held steady in April for the first time in 8 meetings.
- Meeting-dated OIS is now pricing in a little better than 35% chance of a 25bp June cut, vs closer to 70% pre-CPI.
- The BOC's latest quarterly forecast for Q2 trim/median average inflation was 2.95% (taking the average of the BoC's two trade scenarios), so the 3.15% printed in the first month of the quarter will give impetus for waiting on further developments before easing rates again.
- There are arguably some mitigating factors in the details, for instance a slight downtick in inflation breadth (more on which shortly), but the strong services readings through the report (3.5%, up from 3.1% prior) and durable goods (1.7%, highest since Q2 2023, after 1.1%) as well as on other core metrics (ex 8 most volatile & indirect taxes up to 2.5% from 2.2% prior). On the whole, underlying inflation appears to be reaccelerating if anything.
- Barring unexpected developments, for instance on the trade front, the remaining case for a cut on June 4 would appear to hinge on clearer evidence in the hard data that tariff uncertainty is translating through to activity to a degree that warrants accommodation. In that regard, Q1 GDP (May 30) could play a role, with May job market data (Jun 6) coming too late.
- The BOC's last statement noted that the governing council "will continue to assess the timing and strength of both the downward pressures on inflation from a weaker economy and the upward pressures on inflation from higher costs. Our focus will be on ensuring that Canadians continue to have confidence in price stability through this period of global upheaval. This means we will support economic growth while ensuring that inflation remains well controlled."
US TSY FUTURES: BLOCK: Jun'25 5Y Buy
May-20 15:30
- +5,000 FVM5 107-23.25, post time offer at 1118:38ET, DV01 $210,000.
- The 5Y contract trades 107-23 last (+1.75).
MNI EXCLUSIVE: MNI interviews Wrightson ICAP chief economist
May-20 15:30
MNI interviews Wrightson ICAP chief economist on sidelines of Atlanta Fed conference -- On MNI Policy MainWire now, for more details please contact sales@marketnews.com
