EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Rise On TTF Gains
Aug-21 11:25
EUAs/UKAs Dec25 are rising, supported by gains in EU gas, with TTF rising on upcoming seasonal maintenance in Norway and ongoing uncertainty over progress towards ceasefire in Ukraine. Meanwhile, EU ad UK equities losses are capping carbon gains, with STOXX declining as energy and industrials were the only sectors in the green today. Eurozone August manufacturing PMI was higher than expected at 50.5 (49.5 exp), while UK manufacturing PMI was a point lower than expected at 47.3 (48.3 exp).
- EUA DEC 25 up 1.12% at 72.09 EUR/t CO2e
- UKA DEC 25 up 0.9% at 51.29 GBP/t CO2e
- TTF Gas SEP 25 up 2.4% at 32.675 EUR/MWh
- NBP Gas SEP 25 up 2.5% at 81.02 GBp/therm
- Estoxx 50 down 0.3% at 5453.97
- FTSE 100 SEP 25 down 0.3% at 9293
- The latest EU ETS CAP3 auction cleared at €71.19/ton CO2e, down 0.25% compared with the previous EU auction at €71.37/ton CO2e according to EEX.
- EUA Auction Calendar Week Ahead (Calendar Week 35) - A total of 11.4mn EUAs will be auctioned next week, with 4 auction sessions will be held. The latest EU ETS auction cleared at €71.19/ton CO2e, up 0.92% w/w, rising above the 10, 50 and 100-day averages.
- EUA Dec25 implied volatility stood at 27.99% as of 20 August, marking a three-week low and falling below the 30-day average. Volatility declined after hitting a record high of 28.70% on 18 Aug, while EUA Dec25 prices edged down by 0.74% and open interest remained at a similar level over the same period.
- TTF front month continues to rally from the low at the start of the week supported by upcoming seasonal maintenance in Norway amid ongoing uncertainty over progress towards is ceasefire in Ukraine.
- EU PMI - Overall, the Eurozone PMI data underscores the ECB's view that policy is in a "good place” but isn't enough to significantly dampen expectations for one more 25bp cut this cycle.
- UK PMI – The UK composite PMI is another release that is marginally higher than expected and therefore not supportive of a near-term cut, following last week's labour market report and yesterday's inflation release.
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FOREX: Bullish Indicators Prevailing for EUR Crosses
Jul-22 11:15
- Similar bullish sentiment is seen in the crosses, with EURJPY and EURNZD recently extending their impressive rallies from the June lows to 6% and 4.5% respectively.
- Trepidation surrounding the Japanese election/fiscal outlook has contributed to the significant EURJPY upswing, and fresh cycle highs last week reinforce current conditions. Sights are on 173.43 (Jul 12 ‘24 high) before a key medium-term resistance level at 175.43, the July 11 ’24 high.
- Lower-than-expected New Zealand CPI on Monday has contributed to NZD underperformance this week, providing a noteworthy tailwind for EURNZD (below), which has risen to a fresh 3-month high above 1.9650 this morning. Moving average studies continue to support the cross well, signalling scope for an extension of the rally towards 1.9755 and 2.0011. Initial support at the 20-day EMA moves up to 1.9458.
- Fresh cycle highs last week maintain the price sequence of higher highs and higher lows for EURGBP, also highlighting a dominant uptrend. A resumption of gains would open key resistance at 0.8738, the 2025 high. Support to watch is 0.8620, the 20-day EMA.
Source: Bloomberg Finance L.P. / MNI
OUTLOOK: Price Signal Summary - Bear Cycle In Gilts Still In Play
Jul-22 11:15
- In the FI space, Bund futures traded higher Monday. The climb resulted in a move through resistance around the 50-day EMA, at 130.22. A clear break of the EMA would undermine the recent bear theme and highlight a possible reversal. This would open 130.76 initially, the Jul 4 high. Clearance of this level would strengthen a bullish theme. A key support and the bear trigger has been defined at 129.08, the Jul 14 low.
- A bear cycle in Gilt futures remains in play and for now, Monday’s strong gains are considered corrective. Recent weakness resulted in a break of support at 91.63, the Jul 2 low. Price has also traded through 91.50, the 61.8% retracement of the May 22 - Jul 1 bull leg. The move down exposes 90.97, the 76.4% retracement point. Clearance of this level would strengthen a bearish theme. Initial firm resistance is at 91.97, the 20-day EMA.
FOREX: Single Currency Optimism Remains as ECB Approaches
Jul-22 11:12
- Largely reflective of the broad greenback weakness on Monday owing to the trans-Atlantic tariff tiff, EURUSD edged back above the 1.17 where spot has since been consolidating on Tuesday. Latest developments keep bullish conditions for the pair firmly intact as we approach this Thursday’s Eurozone flash PMIs and ECB decision/press conference.
- The ECB is expected to hold its policy rate at 2.00%, after President Lagarde emphasised that policy was in a "good place" at the June decision. Economic data since June has generally confirmed the ECB's outlook, but tariff uncertainty has once again ratcheted higher after President Trump's latest threat of a 30% reciprocal rate from August 1.
- EURUSD trend indicators continue to highlight a dominant uptrend, supportive of the numerous sell-side forecasts predicting a move to 1.20 and above over the second half of 2025. A stronger resumption of gains from here would renew the focus on 1.1829, the Jul 1 high and the bull trigger.
- Support to watch lies at the 50day EMA, an average the pair has not closed below since late February. It currently intersects at 1.1525, and a clear break would be required to signal a stronger reversal.
