EUROPEAN INFLATION: German Inflation Breadth Materially Unchanged in June [2/2]
MNI’s inflation breadth tracker (see chart below) shows disinflation continuing to stall in Germany in June: Looking at the low-inflation categories, the percentage of ECOICOP (European classification of individual consumption according to purpose, a standardized category split) items printing at or below 1% remained broadly unchanged at 40.3%, while the high-inflation categories also showed no material change, with the percentage of categories above 5% at 15.3% in June.
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DUTCH AUCTION RESULTS: 2.50% Jul-35 DSL
| 2.50% Jul-35 DSL | Previous | |
| ISIN | NL0015002F72 | |
| Amount | E2.45bln | E1.99bln |
| Avg yield | 2.749% | 3.011% |
| Avg Price | 97.83 | 95.54 |
| Pre-auction mid | 97.755 | 95.509 |
| Previous date | 25-Mar-25 |
GBP: Corrective Phase Lower Hinges on BoE Pricing, DXY Downtrend
GBP/USD's post-data sell-off is holding, but the sustainability of a corrective phase lower will hinge on conviction in BoE pricing and a nascent downtrendline in the USD Index.
- Weakness in GBP came in two phases this morning, first on the soft payrolls data, and then again on the SONIA open, with GBPUSD nearing 1.3462, its 20-day EMA. A clear break of this average would suggest potential for a deeper correction and expose the 50-day EMA for direction, at 1.3299. EURGBP meanwhile has cleared 0.8440, its 50-day EMA and key resistance, exposing 0.8541, the May 2 high.
- The sustainability of the move hinges in the short-term on BoE pricing: we note that OIS markets are returning closer to a further 2 x 25bps rate cuts this year: 46bp of cuts priced through December, with the next 25bp step almost fully priced at the September MPC.
- Should this pricing stick (or extend), the USD Index will come into sharper focus, with today's USD relief rally prompting the DXY to narrow the gap with a key downtrendline drawn off the early February highs - today at 99.575, a level across which markets were rangebound in the aftermath of Trump's Liberation Day announcement. This level could prove key into the US CPI print tomorrow.
Figure 1: Sustainability of GBP/USD Dip Could Hinge on USD Index Downtrendline
Source: Bloomberg Finance L.P. / MNI
GILT SYNDICATION: New 1.75% Sep-38 I/L gilt: Books open
- Guidance: 1.125% Nov-37 I/L gilt +11.75/+12.25bps
- Size: GBP Benchmark (MNI expected GBP3.5-5.0bln nominal with risks skewed to smaller)
- Maturity: 22-Sep-38
- Exp. Settlement: 11-Jun-25 (T+1)
- Coupon: 1.75% SA, ACT/ACT, short first to 22-Sep-25
- ISIN: GB00BMY62Z61
- Joint Leads: Barclays (B&D/DM), Citi, Nomura, RBC
- Timing: Books open, today’s business
