POWER: "*GERMAN POWER FOR MAY 9 SETTLES AT EU 81.11 /MWH: EPEX AUCTION"- EPEX

SONIA outperformance on the back of dovish ex-BOE official commentary sees the Z5 implied yield spread to Euribor narrow 10.0bps to 185.5bps. A close at current levels would be the tightest since March 19, and allow the spread to have fully retraced the widening seen following the March BOE decision (where the vote split was more hawkish than expected).

• The March 11 close at 178.0bps presents the next level of interest on the downside.
• This morning's Guardian report saw ex-MPC members Bean and Blanchflower argue for large imminent cuts. It is important to put the views of these former policymakers into context, however, with both having a dovish leaning.
• With UK confidence suffering we think a cut does look likely in May at least. And there is likely to be at least Dhingra voting for 50bp. We will be watching closely any further MPC comments to see if there is any change in view elsewhere.
• Today’s ECB speakers haven’t done much to shift ECB market pricing. Simkus said that he now supports a 25bp cut in April (on March 12, he was undecided between a cut and a hold), but this is already the prevailing view amongst market participants.
• SocGen are the latest to update their ECB call in light of the US tariffs. They now expect cuts in June and July, in addition to their previous call for a final cut in April.
• In addition, SocGen “do not rule out a 50bp cut to more clearly exit the restrictive stance”, but continue to expect a hike in late-2026 as “fiscal policy turns supportive, labour supply remains tight and uncertainty eases”.
• There was a light dovish reaction in front-end Euribor futures following the call change, but much smaller than the response to last week’s dovish MNI source report.

• Fed Funds implied rates sit at the high end of yesterday’s extremely wide range, although have still seen a 9bp range for the Dec 2025 meeting overnight.
• Cumulative cuts from an assumed 4.33% effective: 11.5bp May, 32bp Jun, 55bp Jul and 99bp Dec.
• Relative to yesterday’s close, the June meeting is 2bp higher whilst the Dec meeting is 3bp lower.
• Odds of an inter-meeting cut hold yesterday’s intraday pullback, with the FFJ5 (April) showing ~2bp of cuts (again from an assumed effective rate of 4.33%).
• The SOFR implied terminal yield at 3.115% (SFRU6) sits 2.5bp lower on the day for 28bp lower since Liberation Day.
• Ahead, SF Fed’s Daly (non-voter) speaks in a moderated discussion on the economic outlook at 1400ET (Q&A only). She hasn’t spoken since Apr 2 tariff announcements but told Reuters on Mar 28 that she still saw two rate cuts this year with the Fed able to take its time to assess the impact of tariffs. She followed up after the interview with she’s not comfortable starting rate path declines and that the Fed is 100% focused on inflation.

• On the commodity front, the trend condition in Gold remains bullish and the latest pull back appears corrective. Moving average studies are in a bull-mode position highlighting a dominant uptrend and positive market sentiment. Price has traded through the 20-day EMA. The next key support to watch lies at 2945.3, the 50-day EMA. A resumption of gains would refocus attention on $3196.2, a 3.236 projection of the Nov 14 - Dec 12 - 19 price swing. The bull trigger is 3167.8, the Apr 3 high.
• In the oil space, a bearish theme in WTI futures remains intact following the recent impulsive sell-off. The move down has resulted in the breach of a number of important support levels. The break reinforces a bearish threat and, despite the trend being in oversold territory, signals scope for a continuation of the bear leg. Sights are on $57.79 next, a 2.236 proectionj of the Jan 15 - Feb 4 - 11 price swing. Initial resistance is seen at $64.85, the Mar 5 low and a recent breakout level.