EUROPEAN FISCAL: German Tax Estimates at 14:00 BST, Fiscal Space To Be Used?
May-15 11:21
The German finance ministry is scheduled to publish its biannual update on tax estimates today at 14:00 BST / 15:00 CEST, followed by a press conference with finance minister Klingbeil.
- These estimates will represent a negative "high double-digit Ebln downward revision by 2029 cumulative" according to Handelsblatt sources earlier this week ('German Tax Revenue Estimates To Be Downwardly Revised - HB' - MNI, May 13) following lower GDP forecasts in April ('Government Cuts 2025 GDP Forecast By 0.3pp to 0.0%, As Expected' - MNI, Apr 24).
- For reference, the autumn estimate for total tax revenue across federal, state and municipal level was E5.308tln 2025-29 - so a E100bln downward revision would be 1.9% of that, and, if distributed evenly across the 5 years, mean a E20bln/year shortfall (around 0.5% of GDP).
- Finance minister Klingbeil is also likely to give some additional colour on current budget planning in Germany. The 2025 budget is scheduled to be aligned with the coalition by June 25 and passed in parliament by mid-July.
- Sellside analysts comment on the recent developments:
- Commerzbank: "While the already agreed large-scale fiscal package provides cushion for general expenses, the tax estimate looks set to underscore the fiscal challenges for the coming years.
- JP Morgan: "The debt brake reform only provides fiscal space, whereas the 2025 Budget will be the first document to reveal how much of that space is being used in the near-term [...] baseline forecast assumes an important fiscal support over the next 2-3 years but that German caution will eventually reassert itself. As a result, the peak in German government debt will likely be at around 70% of GDP (versus last year’s 62%), rather than the near-90% that the fiscal space would allow"
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OUTLOOK: Price Signal Summary - Bear Threat In Gilts Still Present
Apr-15 11:19
- In the FI space, Bund futures are trading closer to their recent highs. A bull cycle remains in play and the latest pullback is considered corrective. A fresh short-term cycle high on Apr 7 reinforces a bullish theme. The contract has recently cleared 131.14, 76.4% of the Feb 28 - Mar 11 bear leg. This opens 132.56 next, the Feb 28 high. Initial firm support lies at 128.60, the Apr 9 low. A break below this level would alter the picture. Initial firm support lies at 128.60, the Apr 9 low.
- A sharp sell-off in Gilt futures last week highlights a strong bearish theme. The contract has breached 90.55, the Mar 27 low. Clearance of this level confirms a full reversal of the Mar 27 - Apr 7 rally. Sights are on the 90.00 handle next, briefly pierced on Apr 9. A clear break of this level would signal scope for an extension towards a key support at 88.96, the Jan 13 low on the continuation chart. Initial resistance is at 91.81, the 20-day EMA.
FOREX: EURCHF Approaching Double Bottom at 0.9210
Apr-15 11:17
- Standing out amid the lower US yields this week is the resilience of the Swiss Franc, which remains in close proximity to recent cycle highs. For USDCHF, the pair broke an important support at 0.8333 last week and subsequent weakness saw the pair plumb fresh ten-year lows.
- Last week’s 0.8099 low print matched perfectly with touted support, the 76.4% retracement of the Jan 15 '15 - Dec 15 '16 recovery. This remains the key short-term support and below here, the market’s attention will be on a move towards 0.8028, another projection point.
- Additionally, EURCHF is trading within 30 pips of the major double bottom support around 0.9210. A break of which would target 0.9109, the 0.764 projection of the May 27 '24 - Nov 22 '24 - Mar 14 price swing, levels sure to have the attention of the SNB.
- Import/Export data is due Thursday, in an otherwise limited domestic calendar this week.
EURIBOR OPTIONS: Ratio put spread
Apr-15 11:12
0RM5 98.12/97.87ps 1x2, bought for 3.5 in 4k.
