RENEWABLES: German Wind Output Forecast Comparison

The SFIZ5/Z6 spread hovers above year-to-date lows (-21.0 vs. -23.0).

• It seems that the market needs a fresh medium-term dovish catalyst to drive the spread significantly lower.
• The BoE’s current guidance continues to point towards quarterly rate cuts through year-end.
• Our baseline view looks for cuts at both the August and November meetings.
• What could push the SFIZ5/Z6 spread lower?
• While the 6-3 vote split at the most recent MPC decision was dovish when compared to the 7-2 market baseline heading in, Deputy Governor Ramsden’s choice to join the dovish camp was within the list of viable outcomes.
• The market needs to see more before committing to pricing deeper easing.
• The most obvious driver would be a continued deterioration in the labour market, resulting in lower wage growth.
• This could then feed into a more benign inflation backdrop than the BoE currently expects.
• However, there are some risks to this idea, even if the data evolves in that manner.
• A rapid deterioration in the labour market could result in frontloading of rate cuts, making for limited or even hawkish impact on this spread if the cutting cycle comes to an end before the turn of the year (the MaPS survey points to a 3.50% neutral rate vs. the prevailing 4.25%).
• What’s more, geopolitical risks and U.S. tariff policy present notable medium-term externalities at present, providing a limitation when it comes to pricing a deeper cutting cycle in ’26.
• These factors also feed into the broader sense of macro uncertainty, making it hard to form a view beyond the next few months.

• SPX: 6,111.8 (+0.3%).
• DJIA: 43,130 (+0.1%/+41pts).
• NDX: 22,316.5 (+0.6%).

• RES 4: 6249.00 High Feb 21      
• RES 3: 6200.00 1.50 proj of the Apr 7 - 10 - 21 price swing 
• RES 2: 6172.50 High Feb 24
• RES 1: 6157.75 Intraday high    
• PRICE: 6147.00 @ 07:25 BST Jun 25  
• SUP 1: 5959.00/5922.67 Low Jun 23 / 50-day EMA
• SUP 2: 5811.50 Low May 23    
• SUP 3: 5645.75 Low May 7
• SUP 4: 5500.00 Low Apr 30

The trend condition in S&P E-Minis is unchanged, it remains bullish and this week’s fresh cycle high reinforces current conditions. Short-term resistance and a bull trigger at 6128.75, the Jun 11 high, has been breached. The clear break confirms a resumption of the uptrend that started Apr 7. Sights are on the 6200.00 handle, a Fibonacci projection. Key support remains at the 50-day EMA - at 5922.67. A clear break of it would signal a reversal.