EU: European Parliament To Vote On European Commission No Confidence

Overnight reverse repo takeup fell $180B Monday, the biggest drop since the start of the year ($233B on Jan 2) and more than reversing Friday's $150B jump.

• The latest level of $135.8B represents an 11-session low.
• A sharp drop-off in takeup was expected due to month-end dynamics reversing. Indeed the latest level is within the roughly $125-175B range seen in most of late April through the start of last week.

• RES 4: 1.3913 High Sep 14 2021
• RES 3: 1.3681 1.500 proj of the Feb 28 - Apr 3 - 7 price swing
• RES 2: 1.3605 1.382 proj of the Feb 28 - Apr 3 - 7 price swing
• RES 1: 1.3593 High May 26 and a bull trigger  
• PRICE: 1.3548 @ 16:33 BST Jun 2
• SUP 1: 1.3394 20-day EMA
• SUP 2: 1.3335/3232 Low May 20 / 50-day EMA
• SUP 3: 1.3140 Low May 12 and key support
• SUP 4: 1.3041 Low Apr 14

The trend condition in GBPUSD remains bullish and the latest shallow retracement is considered corrective. First key support lies at 1.3394, the 20-day EMA. A clear break of this average would suggest potential for a deeper correction and expose the 50-day EMA, at 1.3232. For bulls, a  resumption of gains would refocus attention on 1.3593, the May 26 high and bull trigger. Clearance of this level would resume the uptrend.    

European curves lightly bear steepened to open the week.

• Core FI opened the week on the back foot, hitting the session's highs in mid-morning trade as weekend news was digested including Ukranian attacks on Russian military equipment and the US's announcement that it would raise tariffs on aluminium and steel to 50%.
• Also adding to the early bearish tone were EU bond suppply and Spanish manufacturing PMI coming in above expected.
• But yields would pare their rises over most of the rest of the session, as equities stabilized and US desks came in.
• In futures, rolling activity was heavy, with most Eurex contracts now around 40% through the Jun/Sep roll.
• Gilts mildly outperformed Bunds; periphery/semi-core EGB spreads traded mixed, closing off the early session wides.
• Tuesday brings Eurozone flash inflation and BOE appearances at the Parliamentary Treasury Committee, with the week's focus remaining on Thursday's ECB decision.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.3bps at 1.789%, 5-Yr is up 1.9bps at 2.083%, 10-Yr is up 2.4bps at 2.524%, and 30-Yr is up 3.2bps at 3.012%.
• UK: The 2-Yr yield is up 0.6bps at 4.029%, 5-Yr is up 1.9bps at 4.163%, 10-Yr is up 2bps at 4.667%, and 30-Yr is up 3.8bps at 5.41%.
• Italian BTP spread down 0.4bps at 97.6bps  / French OAT unchanged at 66.4bps