EURIBOR: Flat To A Touch Firmer

Oct-13 06:29

The recovery from late Thursday lows in core global FI helps bias Euribor futures a little firmer in the main, with contracts through the greens running 0.5-1.5bp richer.

  • ECB Governing Council hawk Knot once again pushed back against the idea of rate cuts come the middle of next year (see earlier bullets for more colour there), but that had nothing in the way of a tangible impact on markets given his historical bias.
  • ECB speak from Lagarde & Nagel will cross ahead of the weekend.

Historical bullets

USDCAD TECHS: Corrective Cycle Still In Play

Sep-13 06:29
  • RES 4: 1.3805 High Mar 24
  • RES 3: 1.3731 1.0% 10-dma envelope
  • RES 2: 1.3718 Trendline resistance drawn from the Oct 13 2022 high
  • RES 1: 1.3639/95 High Sep 11 / 7
  • PRICE: 1.3569 @ 07:27 BST Sep 13
  • SUP 1: 1.3544/3490 Low Sep 12 / 1
  • SUP 2: 1.3468 50-day EMA
  • SUP 3: 1.3352 Low Aug 7
  • SUP 4: 1.3266 Low Aug 2

The uptrend in USDCAD remains intact and the pullback from last week’s high is considered corrective. Moving average studies are in a bull-mode position and resistance at 1.3655, the May 26 high, has been cleared. A resumption of gains would expose 1.3718, a trendline resistance drawn from the Oct 13 2022 high and the next key resistance. Key support has been defined at 1.3490, the Sep 1 low. A break would signal a short-term top.

UK DATA: Downside GDP surprise increases the probability of a post-September pause

Sep-13 06:25
  • A decent downside surprise to July GDP with a 0.3ppt miss to bring the data in at -0.5%M/M. There are no revisions to prior data published today following the Blue Book release.
  • The services sector drove the miss, with a 0.4ppt downside surprise at -0.5%M/M while IP and construction were in line with expectations.
  • The ONS notes that the biggest downward drag on services output was from the health sector with the NHS strike action dragging the series down -2.1%M/M. Teachers strikes also contributed to the fall in output.
  • Information and communication also contributed to the downside.
  • GBPUSD fell from 1.2487 on the release and at the time of writing is around 40 pips lower trading around 1.2450.
  • This data in some ways may have more impact on the upcoming MPC decisions than yesterday's labour market data which showed more deterioration of the labour market but with wage growth still uncomfortably high.
  • Next week's inflation data is still of great importance and overall we still see a September hike, but today's data increases the probability of a pause in future meetings.

EURIBOR: Big notable volumes overnight

Sep-13 06:12
  • Early focus is on the Euribor, as Europe comes in.
  • Clear notable volumes in the front two contracts, traded nearly four times the Bund's volume overnight.
  • A decent gap lower from 96.10 to 96.07 for ERU3, and similar price action in the December (ERZ3), albeit off their lows.
  • ERU3 trades at its lowest level since the 27th July, while ERU3/ERZ3 spread has been sold down to 4 and explains some of the elevated volumes, since it has traded in 11.2k outright.
  • The volumes are mostly outright sell off though.