BRAZIL: FinMin Haddad Says Tariffs Unsustainable, Local Assets Pare Losses

• 1,700 0QM5/0QN5 96.75 call spds
• +2,500 SFRZ5 95.62/96.00 1.25 over 0QZ5 96.12/96.50 put spds
• Update, +18,000 0QV5 95.87/96.12/96.37 put trees, 4.25-4.5 ref 96.64 to -.62 (adds to appr +25k yesterday from 3.5-4.25)

Eurozone excess liquidity increased by E0.295bln during the w/c June 2, keeping the measure at E2.703trn as of last Friday, June 6. This minor increase shouldn't raise questions around the longer-term of an orderly downtrend. Excess liquidity has declined by 43% from the series high of E4.748trn in November 2022.

• The long-term decline since the peak has mostly been driven by a roll-off of the ECB's TLTROs (with the TLTRO III programme starting in 2019 with three-year maturities and with the final maturity in Dec 2024) as well as of the ECB's Monetary Policy Positions (MPPs), which are standing at a current E4.014tln combined.
• Amongst the MPPs, the ECB envisages a further average monthly roll-off of around E13.6bln of the PEPP through Dec-26 and of around E28.4bln of the APP through Jul-26 (respective f'cast horizons).
• During last Thursday's ECB press conference, President Lagarde was asked if the Governing Council would have to put on hold quantitative tightening if it were to decide for a pause in interest rate cuts - to which Lagarde answered "I think the risk of inconsistency of QT associated with interest rate policy, which is our main tool, is probably less critical in the event [...] of a pause" - meaning that the orderly excess liquidity reduction is set to continue in the Eurozone also if the ECB were to shift into some "wait-and-see" mode on interest rates.

• RES 4: 0.8557 High Apr 28  
• RES 3: 0.8541 High May 2 
• RES 2: 0.8502 38.2% retracement of the Apr 11 - May 29 downleg    
• RES 1: 0.8469 Intraday high  
• PRICE: 0.8456 @ 14:56 BST Jun 10
• SUP 1: 0.8407/8356 Low Jun 4 / Low May 29 and the bear trigger 
• SUP 2: 0.8327 1.382 proj of the Apr 11 - 16 - 21 price swing
• SUP 3: 0.8316 Low Mar 28 and a key support
• SUP 4: 0.8277 1.618 proj of the Apr 11 - 16 - 21 price swing

EURGBP has traded higher today. The recovery has resulted in a break of resistance at 0.8440, the 50-day EMA. This highlights a potentially stronger reversal and exposes 0.8541, the May 2 high. For bears, support to watch lies at 0.8356, the May 29 low. Clearance of this level would resume the downtrend and open 0.8316, the Mar 28 low and a key support. Initial support has been defined at 0.8407, the Jun 4 low.