FOREX: GBP Under Significant Pressure as Political Uncertainty Ramps Up
Jul-02 16:12
- Political uncertainty in the UK heavily weighed on sterling Wednesday, as markets speculated that Rachel Reeves’ term as Chancellor of the Exchequer might be coming to an end. Prime Minister Sir Keir Starmer refused to publicly back his Chancellor, in a testing session of PMQs in the House of Commons, heightening the market’s fiscal concerns.
- GBPUSD remains roughly 1% lower on the session as we approach the APAC crossover, having traded as low as 1.3563 amid the tumult, during which the 30-yr gilt yield rose as much as 22bps at its extreme. 20-day EMA support was pierced below 1.3586 and a sustained break of this average would signal scope for a more pronounced corrective pullback. The 50-day, which has supported dips well in recent months, intersects at 1.3439.
- For EURGBP, this week’s gains are reinforcing current bullish conditions. 0.8592, 61.8% of the Apr 11 - May 29 downleg, has been broken, as well as 0.8624, the Apr 21 high. Above here, the next significant targets are 0.8694 and 0.8738, the Apr 14 & 11 highs respectively. GBPJPY is also extending towards an important area, located around 195.00.
- Elsewhere, the dollar index trades on a slightly firmer footing, up around 0.25% on the session as markets await the significant US employment report on Thursday. Two key factors have helped stabilise the greenback: the reversal higher for US yields from dovish extremes and an important technical support holding for the DXY, a trendline drawn across the 2011 and 2021 lows.
- Aside from the GBP weakness, NZD moderately underperforms its G10 peers, down 0.40% and consolidating back below 0.6100. Despite the moderate losses for both Aussie and Kiwi today, the medium-term bullish trends for both AUDUSD and NZDUSD have been bolstered this week ahead of RBA and RNBZ central bank decisions next week. For AUD, sights remain on key resistance at 0.6688, the US election related highs.
- US employment report and ISM services headline a packed US calendar on Thursday.
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US 10YR FUTURE TECHS: (U5) Pierces Key Resistance
Jun-02 15:57
- RES 4: 112-04+ High May 2
- RES 3: 111-25 High May 7
- RES 2: 111-05+ High May 9
- RES 1: 110-30 High May 30 and today’s intraday high
- PRICE: 110-17 @ 16:51 BST Jun 2
- SUP 1: 109-26/12+ Low May 29 / 22 and the bear trigger
- SUP 2: 109-09+ Low Apr 11 and key support
- SUP 3: 109-00 Round number support
- SUP 4: 108-25+ 0.764 proj of the Apr 7 - 11 - May 1 price swing
A bear cycle in Treasury futures remains in play for now, and recent short-term gains still appear corrective. However, the contract has breached an important resistance at 110-23, the May 16 high. A clear break of this level would undermine a bearish theme and highlight a stronger reversal, exposing 111-05+, the May 9 high. On the downside, a reversal lower would refocus attention on the bear trigger at 109-12+.
US OUTLOOK/OPINION: Atlanta Fed GDPNow Rises To 4.6% For Q2
Jun-02 15:49
Despite soft-looking ISM Manufacturing and construction spending data this morning, the Atlanta Fed's GDPNow estimate for Q2 GDP growth picked up to 4.6% vs 3.8% Friday.
- Of the 0.8pp upgrade, about 0.2pp can be attributed to higher equipment investment and another 0.5pp to stronger PCE consumption. "The nowcasts of second-quarter real personal consumption expenditures growth and real gross private domestic investment growth increased from 3.3 percent and -1.4 percent, respectively, to 4.0 percent and 0.5 percent."
- The latest estimate is easily the highest yet for GDPNow this quarter, and would represent a very strong rebound from -0.2% in Q1. Detailed table below:
FED: US TSY 26W BILL AUCTION: HIGH 4.150%(ALLOT 87.95%)
Jun-02 15:33
- US TSY 26W BILL AUCTION: HIGH 4.150%(ALLOT 87.95%)
- US TSY 26W BILL AUCTION: DEALERS TAKE 29.30% OF COMPETITIVES
- US TSY 26W BILL AUCTION: DIRECTS TAKE 11.26% OF COMPETITIVES
- US TSY 26W BILL AUCTION: INDIRECTS TAKE 59.45% OF COMPETITIVES
- US TSY 26W BILL AUCTION: BID/CVR 3.13
