STIR: EUR Rates Consolidate Yesterday's Selloff Following US NFP Data
Jun-06 15:16
Yesterday’s low has contained price action in ERZ5 intraday, with the contract fully reversing the early rally following the US labour market report and US/China trade talk news. Little impact from the latest headlines around a US/China rare earth agreement for some automakers. The Z5 contract is little changed on the session at 98.190, off earlier highs of 98.220. That essentially sees yesterday’s ECB press conference-inspired hawkish repricing consolidated.
- ECB-dated OIS price 24bps of easing through year-end, little changed from yesterday’s close. The implied probability of another 25bp cut by the September meeting, which appears to be the median sell-side view, is around 60%, with 14.5bps of cumulative easing priced.
- Next week’s Eurozone calendar is fairly limited, with most interest probably in Wednesday’s ECB wage tracker release. At the June press conference, President Lagarde said that "the ECB’s wage tracker points to a further easing of negotiated wage growth in 2025, while the staff projections see wage growth falling to below 3 per cent in 2026 and 2027". The April vintage saw negotiated wages excluding one-off payments falling to 3.024% by Q4 2024.
- April trade and IP data is due next Friday, alongside final May inflation reads from Germany, France and Spain. The IP/trade data will be assessed for any post-Liberation day impacts, while the inflation data will determine how much of May's services disinflation was due to Easter-sensitive components.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Cut Adjusted Effective ESTR Rate (bp) |
| Jul-25 | 1.893 | -3.1 |
| Sep-25 | 1.779 | -14.6 |
| Oct-25 | 1.748 | -17.6 |
| Dec-25 | 1.685 | -23.9 |
| Feb-26 | 1.670 | -25.4 |
| Mar-26 | 1.665 | -25.9 |
| Apr-26 | 1.671 | -25.3 |
| Source: MNI/Bloomberg. | ||
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US: House Ways And Means Ctte Could Mark Up Tax Portion Of GOP Megabill On Tues
May-07 15:16
Caitlin Reilly at Roll Call reporting on X that the House Ways and Means Committee is tentatively scheduled to mark up the tax portion of the 'Big Beautiful' Republican reconciliation bill on Tuesday, May 13.
- Reilly: "Hearing from multiple sources Ways and Means is tentatively planning for next Tuesday to mark up its portion of the budget reconciliation bill. It hasn't been formally announced and with so much uncertainty around the rest of the package, this of course could change."
- Politico noted similarly, after a series of House Republican meetings yesterday: “Ways and Means Republicans are at least sounding more optimistic that the panel can hold a vote on the GOP tax package in a matter of “days.”"
- More information may be forthcoming after a 15:00 ET 20:00 BST meeting at the Treasury Department of the so-called budget ‘Big Six’ – Treasury Secretary Scott Bessent, White House National Economic Council Director Kevin Hassett, House Speaker Mike Johnson (R-LA), Senate Majority Leader John Thune (R-SD), House Ways and Means Chair Jason Smith (R-MO), and Senate Finance Committee Chair Mike Crapo (R-ID).
- Meanwhile, Republican moderates and conservatives are struggling to resolve differences over cutting USD$880 billion from the purview of the House Energy and Commerce Committee - the most consequential item in the Republican tax and spending package.
- Punchbowl reports that "after a nearly two-hour meeting between the GOP moderates and Speaker Mike Johnson [yesterday], it’s clear that the moderates are winning" on issue of cutting Medicaid.
FED: US TSY 17W AUCTION: NON-COMP BIDS $645 MLN FROM $60.000 BLN TOTAL
May-07 15:15
- US TSY 17W AUCTION: NON-COMP BIDS $645 MLN FROM $60.000 BLN TOTAL
FOREX: USDCHF Pierces Initial Support, Schlegel to Temper Franc Optimism
May-07 15:12
- In contrast to yesterday’s price action, the Swiss Franc is among the strongest performing currencies across G10 Wednesday, highlighted by a 0.79% reversal higher for CHFJPY. Price action has also seen USDCHF extend intra-day declines in recent trade, likely helped by the most recent weakness for major equity benchmarks.
- We have noted that recovery highs for USDCHF matched perfectly with the prior breakdown point of 0.8333. the 2023 low, likely helping the resumption of weakness in recent sessions. Furthermore, the pair briefly dipped below a couple of daily lows from late April around the 0.8200 mark, keeping bearish conditions firmly intact for now. Cycle lows remain much further out, at 0.8040.
- As a reminder, SNB President Schlegel strengthened his tone on the Swiss Franc yesterday, stating it has appreciated 'really a lot'. Schlegel is usually not known for such pronounced commentary on Franc valuations and while the bullish CHF case remains in play, the risk reward for further swift Franc gains may be diminishing at this juncture.
- CIBC note Schlegel’s warning was more forceful and believe that because Switzerland is a highly open economy, this period of CHF strength could be especially painful, with uncertainties around the global trade outlook. CIBC remain short CHF/JPY with a target of 166.
