SCANDIS: Fresh Strength For NOK and SEK Since the US Equity Open
Fresh strength seen for Scandi FX since the US cash open, seemingly a function of the broader dollar pullback post-US PPI rather than in response to any fresh domestic catalyst. NOK and SEK outperform the G10 basket on an intraday basis.
- USDNOK (-0.9%) is narrowing the gap to the June 17 low at 9.8615, clearance of which would expose the December 2022 low at 9.6982.
- A reminder that this morning’s August inflation report was stronger-than-expected, driving a 7bp intraday rise in 2-year NOK swap rates and placing heightened focus on tomorrow’s Q3 Regional Network Survey. A Norges Bank hold next week is still possible if that survey is hawkish.
- USDSEK meanwhile has registered a fresh multi-year low, with support seen at 9.2307 (March 2022 low).
- Tomorrow’s Swedish calendar includes the final August inflation report, details of which will be important to judge the likelihood of a September rate cut. With Riksbank Deputy Governor Jansson not coming across as overtly dovish following the lower-than-expected flash release last week, the Executive Board could decide to keep rates steady in September, and save some dry powder for later this year if required.
- Riksbank Governor Thedéen also speaks tomorrow at 1200BST. The topic of the speech is banking sector liquidity.
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STIR: Euribor Futures Inching Lower; ERH6 Support In View
Euribor futures continue to inch lower on weak volumes. Today’s headline and regional data flow has been light, with weakness over the past five sessions seemingly a gradual reassessment of market’s ECB terminal rate expectations. Although the median analyst still sees one more ECB rate cut this year, a solid minority see rates on hold at 2.00% going forward and this view is slowly bleeding into market pricing.
- ERH6 is -1.5 ticks at 98.110. The August 1 low (i.e. pre the US labour market report) at 98.095 provides initial support.
- Weakness in EUR STIRs is in turn dragging Schatz futures to session lows. DUU5 is -2.5 ticks at 107.025, with key support and the bear trigger defined at 107.010, the Jul 25 low.
- Tomorrow’s regional calendar includes the German August ZEW survey. Meanwhile, spillover form the UK labour market report will also be eyed in the morning.
GILTS: Most Of Early Rally Holds
Gilts have been in a bit of a holding pattern since the opening rally, with the dovish details of the KPMG-REC report on jobs limiting pullbacks, even as Bunds trade around/at session lows.
- Futures topped out at 92.37 before settling back around 92.25.
- Initial resistance of note located at the August 5 high (92.84). Bulls look to regain momentum after a close below the 20-day EMA.
- Yields ~4bp lower across the curve.
- 2s and 10s hold in the lower half of the ranges witnessed since early June, 2s last 3.865%, 10s last 4.565%.
- 2s10s and 5s30s continue to trade around 70bp & 140bp, respectively.
- 10s outperform Bunds by 4bp, spread into 187bp.
- SONIA futures flat to +3.5.
- BoE-dated OIS prices 18bp of easing through year-end and 28bp through February. Contracts are 0.5-2.0bp more dovish on the day.
- Domestic focus is squarely on tomorrow’s labour market report.
- With a continually softening labour market a necessity for another BoE cut in November, Tuesday’s report will be keenly watched by the market. Unlike last month’s release there is no obvious smoking gun to watch out for as the revision to the flash payrolls print for June has returned the focus back to the wider report.
- Click for our full preview of the release.
OPTIONS: Expiries for Aug12 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.1500(E1.5bln), $1.1535-50(E1.2bln), $1.1650(E1.1bln)
- USD/JPY: Y147.30-50($1.6bln)
- AUD/USD: $0.6560-75(A$1.5bln)
- USD/CAD: C$1.3785($664mln)
