EMISSIONS: EU Mid-Day Carbon Summary: EUAs Rise On Inflation Slow Down
EUAs Dec25 are trending upward following the latest EU CPI data showing that inflation in May has fallen below the ECB target for the first time in eight months, thus backing the case for an ECB rate cut on Thursday. Meanwhile, UKAs are inching up and trading sideways since open, loosening tie with other commodities on the day as the market yet to find a clear direction.
- EUA DEC 25 up 2.17% at 72.45 EUR/t CO2e
- UKA DEC 25 up 0.3% at 50.26 GBP/t CO2e
- TTF Gas JUL 25 up 0.7% at 35.265 EUR/MWh
- NBP Gas JUL 25 up 0.8% at 82.16 GBp/therm
- Estoxx 50 down 0.4% at 5343
- FTSE 100 JUN 25 unchanged at 8794
- The latest EU ETS CAP3 auction cleared at €70.61/ton CO2e, up 0.04% compared with the previous EU auction at €70.58/ton CO2e according to EEX.
- Eurozone May flash HICP Y/Y inflation came in at 1.92%, 8 hundredths below the rounded consensus of 2.0% (vs 2.17% April) but inline with MNI's tracking estimate. On a monthly basis, Eurozone inflation came in at -0.03% (0.0% cons, 0.57% April). Services inflation stands out, seeing its lowest Y/Y rate since March 2022.
- The European Central Bank is set to lower its deposit rate by 25 basis points to 2% on Thursday, cutting for seventh consecutive meeting to a level once seen as a landing zone as rising global uncertainty increases the risk of further easing.
- Rabobank is keeping its EUA price forecast unchanged for this year and next year until there is more clarity regarding the EU’s 2040 climate targets, the inclusion of carbon removals and the possible relinking to the UK’s carbon market, it said in a note.
- ICIS remained bullish toward EUAs for rest of 2025 and until 2027 amid market deficit projection. It’s also bullish toward UKAs as it expected UKAs to track EUAs development due to the EU-UK ETS link deal, while remaining sceptical about a price convergence in the near-term.
- UK exporters said that the EU-UK ETS alignment will likely not happen within a year and urged for temporary EU CBAM exemptions, they said.
- EU climate investments needed to reach the bloc’s 2030 climate targets are seen to fall short by €344bn/yr according to the Institute for Climate Economics.
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Historical bullets
USDCAD TECHS: Hits Bear Trigger, New Cycle Low
- RES 4: 1.4415 High Apr 1
- RES 3: 1.4296 High Apr 7
- RES 2: 1.4087 50-day EMA
- RES 1: 1.3906/3935 High Apr 17 / 20-day EMA
- PRICE: 1.3793 @ 17:00 BST May 2
- SUP 1: 1.3760 Low Apr 21 and the bear trigger
- SUP 2: 1.3744 76.4% retracement of Sep 25 ‘24 - Feb 3 bull run
- SUP 3: 1.3696 Low Oct 10 2024
- SUP 4: 1.3643 Low Oct 9 ‘24
The trend set-up in USDCAD deteriorated further Friday, with prices slipping through the bear trigger to narrow the gap with next support. The fresh cycle low reinforces the bear cycle and signals scope for a continuation near-term. Potential is seen for a move towards 1.3744, a Fibonacci retracement. Moving average studies are in a bear mode position, highlighting a dominant downtrend. First resistance to watch is 1.3943, the 20-day EMA.
AUDUSD TECHS: Consolidation Phase
- RES 4: 0.6550 61.8% retracement of the Sep 30 ‘24 - Apr 9 bear leg
- RES 3: 0.6528 High Nov 29 ‘24
- RES 2: 0.6471 High Dec 9 ‘24
- RES 1: 0.6470 High May 2
- PRICE: 0.6445 @ 16:59 BST May 2
- SUP 1: 0.6344/6316 Low Apr 24 / 50-day EMA
- SUP 2: 0.6181 Low Apr 11
- SUP 3: 0.6116 Low Apr 10
- SUP 4: 0.5915 Low Apr 9 and key support
AUDUSD remains inside a consolidation phase, having traded either side of the 0.6400 level for 10 consecutive sessions. The underlying trend remains bullish and the pair is trading close to recent highs. Price has recently breached a key resistance at 0.6409, the Dec 9 ‘24 high. This breach reinforces bullish conditions and signals scope for a continuation higher near-term. Sights are on 0.6471 next, the Dec 9 2024 high. Initial key support to monitor is 0.6316, the 50-day EMA. A clear break of this EMA would be a concern for bulls.
US TSYS: Rates Retreat, Sentiment Improved Though Trade Risk Remains
- Treasuries look to finish near late Friday session lows after trading firmer on the open, higher than expected Nonfarm payrolls at 177k (sa, cons 138k) of which private contributed 167k (sa, cons 125k) triggered the early reversal.
- However, two-month revisions of -58k offset the 39k beat for nonfarm payrolls, with a similar story for private (a 42k surprise vs -48k two-month revision).
- Stocks are back near four week highs - pre-"Liberation Day" levels as hopes of some trade deal being made improved sentiment.
- The Wall Street Journal reports that "Beijing is considering ways to address the Trump administration’s gripes over China’s role in the fentanyl trade... potentially offering an off-ramp from hostilities to allow for trade talks to start." The Journal notes that "discussions remain fluid" and China "would like to see some softening of stance from President Trump".
- Currently, the Jun'25 10Y contract trades -20 at 111-07.5 vs 111-02 low -- initial technical support (50-dma) followed by 110-16.5/109-08 (Low Apr 22 / 11 and the bear trigger). Curves bear flattened, 2s10s -3.480 at 48.002, 5s30s -4.911 at 86.807.
