EMISSIONS: EU Mid-Day Carbon Summary: EUAs Rise, UKAs Fall
Nov-27 12:31
{EUEUAs Dec25 are edging up on steady late-morning momentum amid unchanged fundamentals. EU equities have also trended higher since the intraday low around 10:00 GMT, providing technical support to carbon. Meanwhile, UKAs Dec25 are trending downward.
- EUA DEC 25 up 0.27% at 81.9 EUR/t CO2e
- UKA DEC 25 down 0.71% at 57.39 GBP/t CO2e
- TTF Gas DEC 25 down 1.4% at 28.95 EUR/MWh
- NBP Gas DEC 25 down 1.6% at 75.34 GBp/therm
- Estoxx 50 up 0% at 5657.05
- FTSE 100 DEC 25 down 0.2% at 9699.5
- Intraday correlation between EUA/TTF near noon at 0.18
- Intraday correlation between EUA/UKA near noon at 0.42
- The latest EU ETS CAP3 auction cleared at €81.07/ton CO2e, down 0.15% compared with the previous EU auction at €81.19/ton CO2e according to EEX.
- The EU Commission has proposed to double allowance injections through 2029 the Market Stability Reserve (MSR) if the EU ETS 2 price exceeds €45/t, potentially releasing up to 80mn allowances annually.
- The UK ETS will phase out free allocation over a nine-year period starting in 2027, and will adopt EU benchmark values for the free allocation calculation for 2028-2030, according to a government document.
- TTF front month remains under bearish pressure, falling to its lowest since early May 2024 as mild weather and healthy supplies weigh on prices as markets react to progress and doubts regarding a Ukraine peace deal.
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SOFR OPTIONS: Morning Option trades
Oct-28 12:28
- SFRZ5 96.56/96.68cs, traded for 0.75 in 2.5k.
- SFRZ5 96.50/96.62cs, traded for 1 in 10k.
- SFRZ5 96.43/96.50/96.56c fly, traded for 0.25 in 5k.
- 0QX5 97.25/97.375 cs traded for 1 in 2.5k (block trade).
- 0QH6 97.00/96.62ps 1x2, traded for 8 in 1k.
FOREX: EURGBP Approaching Key Resistance at 0.8769
Oct-28 12:27
- Renewed pessimism for GBP has been on show Tuesday, amid increasing signs that UK Chancellor Reeves will have to raise income tax at the November 26 budget to fill a widening fiscal hole. Associated upward pressure on EURGBP (+0.31%) has prompted the cross to trade within 4 pips of key resistance and the bull trigger, located at 0.8769.
- Furthermore, the FT reported yesterday evening that the OBR is expected to cut its trend productivity forecast by 0.3pp, larger than the 0.1-0.2pp that had been expected by most analysts/independent forecasters and providing an additional sterling headwind.
- Moving average studies remain in a bull-mode position for EURGBP, highlighting a dominant technical uptrend. A break of 0.8769 would bolster bullish conditions, paving the way for a move towards 0.8835, the May 3 2023 high. The first support to monitor lies at 0.8685, the 50-day EMA.
- There is no tier 1 UK data this week which puts us at the mercy of external events and domestic fiscal headlines to some extent. In our latest Gilt Week Ahead, we round up the most relevant fiscal headlines, their impacts and their potential costs: https://mni.marketnews.com/3J8GNMl
OUTLOOK: Price Signal Summary - Fresh Cycle High In Gilts
Oct-28 12:15
- In the FI space, Bund futures are trading closer to their recent lows. The bear phase that started on Oct 17 is considered corrective and is allowing an overbought trend condition to unwind. Initial key support at 129.45, the 20-day EMA, has been breached. This exposes the 50-day EMA, currently at 129.08. For bulls, a reversal would refocus attention on the key resistance at 130.59, the Oct 17 high.
- A bull cycle in Gilt futures remains intact. The recent clearance of 93.17, the Oct 17 high, and a fresh cycle high high today, confirms a resumption of the uptrend and signals scope for an extension towards the 94.00 handle next and 94.24, a 1.618 projection of the Sep 3 - 11 - 26 price swing. Moving average studies are in a bull-mode position, highlighting a dominant uptrend. Note that the contract is overbought, a pullback would allow this condition to unwind. Firm support to watch lies at 92.27, the 20-day EMA.
