FOREX: EURUSD Slides into the Close, 50-Day EMA Remains Key
May-16 16:49
- Late pressure on treasuries saw the US dollar firm into the close, prompting the USD index to rise back above the 101 handle. The DXY looks to close the week roughly 0.75% in the green.
- While USDJPY has had a notable 100 pip bump higher from the overnight lows, it’s EURUSD that has seen a more meaningful adjustment on the session, falling 0.4% to levels around 1.1140 as we approach the close. This leaves the pair within close proximity of its 50-day EMA again, an increasingly significant technical reference of support.
- Recent weakness appears corrective and key trend signals continue to highlight an uptrend. A clean break of the 50-day (intersecting at 1.1094) would undermine the uptrend. In similar vein, GBPUSD has slipped back below 1.33 and will look to 1.3140, the May 12 low, as the next notable support.
- The Swedish krona is the weakest in G10, falling 0.6% against the dollar. As noted, we haven't seen an obvious driver of today's SEK weakness against the broader G10 basket, although major equity benchmarks falling off the best levels may have weighed at the margin. Riksbank Governor Thedeen reaffirmed his cautious stance on current monetary policy in comments this morning.
- On the economic calendar next week, we have China activity data due Monday, before the May RBA decision and Canadian inflation on Tuesday. Later in the week, the focus will turn to flash PMI data from the Eurozone.
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FED: US TSY 19Y-10M BOND AUCTION: NON-COMP BIDS $116 MLN FROM $13.000 BLN TOTAL
Apr-16 16:45
- US TSY 19Y-10M BOND AUCTION: NON-COMP BIDS $116 MLN FROM $13.000 BLN TOTAL
TARIFFS: Meloni To Probe Trump For Solution To Tariff Standoff
Apr-16 16:41
On Thursday, Italian Prime Minister Giorgia Meloni will become the first European leader to sit for a face-to-face meeting with US President Donald Trump since he imposed his 'Liberation Day' tariffs. On Friday, Meloni will return to Rome to host Vice President JD Vance for a state visit.
- Politico notes: “Meloni’s personal engagement with Trump has set nerves jangling in other EU capitals. But as the bloc faces up to a potentially ruinous trade war, even her wariest counterparts are coming round to the idea that she may be the only European leader he is willing to listen to.”
- An Italian official said: “Having Trump’s ear is an asset for the entire European Union,” highlighting Meloni’s “ideological affinities with the world of American conservative right-wing politics.”
- However, as Semafor notes that Italy, “is a laggard on the key issues Trump values: Italy spends far below the European average on defense, and has a hefty trade surplus with the US.”
- Bloomberg writes: “The question for Meloni to ask is: What, if anything, does the US really want? Any hint of an answer would be of huge value to a Europe that remains stumped," noting that European Union Trade Commissioner Maros Sefcovic left a meeting with his US counterparts this week still waiting for the US to “define its position.”
Figure 1: EU Trade Balance In Goods With the United States
Source: Politico
US TSYS/SUPPLY: 20Y Preview: Another Test Of Duration Demand
Apr-16 16:33
- Treasury sells $13bn of the 20Y re-open at 1300ET (912810UJ5), in another test of duration demand although seemingly not as important as last week’s 10Y and 30Y offerings.
- Those auctions saw solid results and helped limit deleveraging pressures, including an all-time high for indirect take-up in the 10Y (assuaging fears of a slide in foreign demand) and a 2.5bp stop through for the 30Y.
- Bloomberg currently shows the WI yield at 4.8075%, off the day’s highs of 4.845% to modestly trim outright concession after the 4.632% high yield in March.
- 5s30s, an area of interest amidst deleveraging pressures of recent weeks, sits at 83bps (+3.4bp) for off last week’s high north of 95bp but holding the bulk of the steepening over the past month.
- 20Y auctions have been a mixed bag in recent months, stopping through by 1.4bp last month (largest since Jun 2024) but with a five-auction average tail of 0.6bp.
- There’s a similar story for bid-to-cover, at 2.78x in March (highest since Apr 2024) vs a five-auction average of 2.56x.
- Indirect take-up is likely again to receive attention. The 68.8% in March and a five-auction average of 66.6% weren't particularly unusual in either direction.
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