EURUSD TECHS: Finds Support

• US Data/Speaker Calendar (prior, estimate)
• 30-Apr 0700 MBA Mortgage Applications (-12.7%, --)
• 30-Apr 0815 ADP Employment Change (155k, 115k) 
• 30-Apr 0830 US Tsy quarterly refunding annc
• 30-Apr 0830 Personal Consumption (4.0%, 1.2%)
• 30-Apr 0830 GDP Price Index (2.3%, 3.1%)
• 30-Apr 0830 GDP Annualized QoQ (2.4%, 0.3%)
• 30-Apr 0830 Core PCE Price Index QoQ (2.6%, 3.2%)
• 30-Apr 0830 Employment Cost Index (0.9%, 0.9%)
• 30-Apr 0945 MNI Chicago PMI (47.6, 45.9)
• 30-Apr 1000 Personal Income (0.8%, 0.4%); Spending (0.4%, 0.6%)
• 30-Apr 1000 PCE Price Index MoM (0.3%, 0.0%), YoY (2.5%, 2.2%)
• 30-Apr 1000 Core PCE Price Index MoM (0.4%, 0.1%), YoY (2.8%, 2.6%)
• 30-Apr 1000 Pending Home Sales MoM (2.0%, 1.0%), YoY (-7.2%, -5.6%)
• 30-Apr 1130 US Tsy $60B 17W bill auction

Tuesday's Europe rates/bond options flow included:

• ERU5 98.56c, bought for 3.25 in 6k
• ERU5 98.50/98.625cs vs 97.9375/97.8125ps, bought the cs for 0.75 in 5k
• ERH6 98.5625/98.1875ps 1x2, bought for 5.5 in 5k
• SFIZ5 96.80/97.10cs vs 2NZ5 96.90/97.20cs, bought the front for 0.25 in 9k

Today’s ECB consumer survey for March saw a marked increase in 1Y and less so 3Y inflation expectations, although it continues to lag the surge seen in US measures and a milder increase in the UK. 

• ECB 1Y inflation expectations: 2.9% in March (cons 2.5) after 2.6% in Feb, pushing above the 2.8% in Dec for its highest since Apr 2024.
• ECB 3Y inflation expectations: 2.5% in March (cons 2.3) after 2.4% in Feb, nudging up to its highest since Mar 2024.
• The below charts show the stark comparison to the multi-decade highs in the US U.Mich consumer survey, where 1Y inflation expectations have surged to 6.5% (matched by the subset of those who don’t have political allegiance) in preliminary April data and 4.4% for 5-10Y out (independents also 4.4%).
• In the UK, the now stale BoE/TNS public survey saw 1Y inflation expectations rise to four tenths to 3.4% in the quarterly survey back in Feb (highest since Aug 2023) whilst 5Y expectations increased two tenths to 3.6% (highest since Nov 2019). 

• Market-based inflation expectations tell a somewhat different story though. Whilst there has been a growing and now sizeable divergence between US and EUR 1Y inflation swaps since the US presidential election in November (including EUR swaps at some of their lowest readings since 2021), 5Y5Y inflation swaps are well-anchored.
• In EUR 5Y5Y swaps specifically, the boost from EU and German defence spending/infra plans in early March has been fully reversed, in large part with the growth negative aspects of US trade policy.