GBP: GBPJPY is seeing good upside momentum

Better Treasury call option trade reported overnight, SOFR options look a little more mixed ahead the NY open. April kicks off with underlying futures unwinding yesterday's month/quarter end selling (TYM5 taps 111-27.5, highest since Mar 4). Added support on WaPo report White House aides drafting tariff proposal of appr 20% ahead tomorrow's "Liberation Day" annc (1500ET). Projected rate cuts through mid-2025 rebound from late Monday levels (*) as follows: May'25 at -4.7bp, Jun'25 at -22.3bp (-20.1bp), Jul'25 at -38.6bp (-35.1bp), Sep'25 -56.1bp (-51.4bp).

• Treasury Options:
  • 5,200 USM5 119 calls vs. wk1 US 119.5/121 call spds ref 118-18
  • 1,000 USK5 120/123/126 call flys ref 118-16
  • 8,000 TYK5 112/112.5/113/113.5 call condors ref 111-24.5
  • 7,000 Wed wkly TY 111.5/wk1 TY 111.75 call spds
  • over 10,200 TYK5 113 calls, 21 last
  • 10,000 TYM5 113.5/115.5 call spds ref 111-24
  • over 6,700 each: TYK5 111.5 and 112 calls
  • over 6,200 TYK5 114 calls 8 last ref 111-22
  • 2,000 FVK5 108.75/109 call spds ref 108-11.25
  • 8,000 TYK5 113.5/115 call spds ref 111-17.5
• SOFR Options:
  • 4,000 SFRQ5 95.50/95.68/95.87 put flys ref 96.225
  • 2,100 SFRM5 95.37/95.62 put spds vs. 96.37/96.62 call spds
  • 3,200 SFRM5 95.75/95.87/95.93 put trees
  • 3,000 SFRU5 96.25/96.50 call spds
  • 1,500 SFRU5 95.25/95.50/95.75/96.00 put condors ref 96.22
  • 10,000 SFRM5 96.06/96.18 call spds vs. 2QM5 96.75/96.87 call spds
  • 2,000 SFRM5 95.62/95.68 put spds ref 95.925
  • Block/screen, 6,000 SFRM5 96.12/96.50 call spds, 3.5 ref 95.915
  • 2,000 0QM5 97.00 calls vs. 2,500 97.50 calls ref 96.595
  • 1,500 2QJ5 96.75 calls ref 96.58

• Looking at today’s labour data more closely, they continue to point to some healthy developments ahead of likely adverse effects from US tariffs.
• As noted earlier, the unemployment rate surprisingly pushed a tenth lower to a new series low of 6.1% in February. Whilst the rounded data can make it hard to get a sense of the scope of the latest improvement, we note that it came with a solid 70k monthly decline in the seasonally adjusted level of unemployment.
• This follows two less promising months, after a modest 30k decline in January and a rare 49k increase in December at what was its largest increase since Jan 2024.
• The limited details available in this monthly release show the latest drop in unemployment came from those >25 years old, down 82k for the largest monthly decline since Aug 2024.
• That kept the >25yrs unemployment rate unchanged on a rounded basis at 5.3%, a joint series low where it’s been in three of the latest four months of data, having averaged 6.75% in 2019 for comparison.
• This is against a backdrop of a stabilisation in participation rates in 2024 according to quarterly data to Q4 after strong increases compared to pre-pandemic levels.  That stabilisation in participation rates has come as employment and labour growth moderated to 1% Y/Y and below, with the stronger pace of employment continuing to see the employment-to-population rate trend higher into Q4. 

USD strength pervades well into the NY crossover, helping pressure EUR/USD through yesterday's lows at 1.0784, aided lower by renewed weakness for stocks. The e-mini S&P is through the overnight low and has shed 35 points since the publication of the Washington Post piece pointing at the potential for 20% tariffs.

• JPY gains are outpacing the USD rally given the phase of risk-off, and spot weakness through Y149.00 here would open Y148.70 support and the lowest levels since March 21st.
• We noted yesterday the very healthy currency futures volumes for a Monday - it's more mixed Tuesday, with activity lighter than average for JPY futures, but more active in GBP and EUR markets.