GBP: EURGBP Best Vehicle For Hawkish BOE Reaction (1/2)
Feb-06 11:15
- While no surprises are expected on the BOE rate decision (due 1200GMT), hawkish details will likely spur a swift sterling turnaround given current session weakness. Given the sensitivity of the dollar to ongoing Trump remarks and the notable 1.41bn worth of GBPUSD 1.2455 expiries rolling off at the NY cut, EURGBP may be the best vehicle to take advantage of any reversal in sentiment.
- As a reminder, it’s the Agent’s annual pay settlement survey that is key for the policy going forward. A number at the top end of the 3-4% range and there is a good chance that come March we see a repeat of the December vote with no additional dissenters joining Dhingra, Ramsden and Taylor in looking for front-loaded sequential cuts.
- EURGBP has pulled further away from trendline resistance in recent weeks (drawn from the 2022 highs). Monday’s gap lower resulted in EURGBP breaking back below the 50-day EMA, where spot has consolidated beneath.
- Ongoing Eurozone growth concerns and a hawkish BOE would target a move towards 0.8248, Monday’s low. Below here, the Dec 19 low at 0.8223 stands out before the key 2022 low at 0.8203, the weakest point of a multi-year range.
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EUROPEAN INFLATION: Dutch HICP Accelerates on Energy & Services
Jan-07 11:12
Dutch flash HICP inflation rose to 3.94% in December, up from 3.79% in November, in line with the 3.9% expected but almost rounding up to 4.0%. The sequential reading was 0.34% M/M (0.3% cons; -1.0% prior). However, the headline acceleration was energy-driven, as core HICP eased to 3.58% from 3.66% but the moderation for the latter saw mixed drivers.
- Non-energy industrial goods played a large role in the moderation in core, sliding to -0.03% Y/Y vs 1.30% Nov.
- Services however accelerated for the third consecutive month, to 5.86% in December (vs 5.18% prior) for its highest since Aug and Aug 2023 before that. This series peaked at 7.5% in mid-2023 and mostly averaged between 1-3% pre-pandemic.
- Food, alcohol and tobacco inflation accelerated to 6.61% Y/Y (vs 6.13% prior), a solid acceleration from February's local low of 2.66% but well off highs of over 15% Y/Y seen in 2023.
- Energy inflation accelerated to 1.37% (vs -0.29% Nov) on the back of base effects as the sequential reading was -0.10% M/M.
- The national CPI meanwhile came in above consensus at 4.1% Y/Y (vs 4.0% cons and prior).
- The final Netherlands HICP/CPI inflation release will be on January 14.
- For reference, Netherlands represents 5.7% of the overall 2024 Eurozone HICP basket.
| Dutch HICP Metrics | Dec % Y/Y | Nov % Y/Y |
| Headline | 3.94% | 3.79% |
| Core | 3.58% | 3.66% |
| Services | 5.86% | 5.18% |
| Non-Energy Industrial Goods | -0.03% | 1.30% |
| Food, Alcohol and Tobacco | 6.61% | 6.13% |
| Energy | 1.37% | -0.29% |
FINLAND T-BILL AUCTION RESULTS: 7/10-Month RFTBs
Jan-07 11:11
| Type | 7-month RFTB | 10-month RFTB |
| Maturity | Aug 13, 2025 | Nov 13, 2025 |
| Amount | E801mln | E1.2bln |
| Target | E1-2bln | Shared |
| Previous | E978mln | E1bln |
| Avg yield | 2.515% | 2.478% |
| Previous | 2.950% | 2.825% |
| Bid-to-cover | 2.28x | 1.74x |
| Previous | 1.49x | 1.63x |
| Previous date | Oct 08, 2024 | Oct 08, 2024 |
Source: Bloomberg
JPY: FX Exchange traded Option, Put Seller
Jan-07 11:11
JPYUSD (7th Feb) 58.00p sold at 0.035 in 1k today.
- This was also sold at 0.035 Yesterday in 2.7k, and while it wasn't clear if this was a new position, the rise in OI from 7.8k to 12.4k suggest that it is.
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