POWER: Germany November Power Rises
Oct-23 07:09
Germany November power is rising, tracking gains in the energy complex, following the Russian sanction announcements. A downward revision in temperature forecasts and lower wind generation from late next week is lifting front-week prices.
- Germany Base Power NOV 25 up 1.7% at 98.8 EUR/MWh
- Germany Power Cal 26 up 0.7% at 87.79 EUR/MWh
- Germany Base Power Week 2 up 5% at 77.5 EUR/MWh
- EUA DEC 25 up 0.5% at 78.83 EUR/MT
- TTF Gas NOV 25 up 1.7% at 32.3 EUR/MWh
- TTF front month follows a rally in oil as US and Europe announce new sanctions on Russia. US restrictions will be imposed against Lukoil and state-run Rosneft, two of the largest producers, aimed at reducing revenues for Russia’s war. The EU adopted another package of sanctions on Russia including a ban on LNG imports from 2027.
- EUAs are trending higher with gains in the wider markets following the sanctions on Russia, while EU ministers are set to discuss the bloc’s NDC and Climate Target on Thursday.
- The latest two-week ECMWF weather forecast for Dusseldorf suggests mean temperatures have been revised down and will drop below normal later this week and early next week before rising back above the average.
- Mean temperatures in Dusseldorf are forecast to decrease to 9.5C on Friday, from 12.8C on Thursday and below the seasonal average of 10.5C.
- German wind output is forecast to rise to 45.81GW during base load on Friday, from 33.39GW on Thursday. Solar PV output is forecast at 7.68GW during peak load on Friday, from 5.25GW on Thursday according to SpotRenewables.
- German wind output is forecast at 11.36GW-45.81GW during base load over 24-30 October.
- Residual load in Germany is forecast at 1.62GWh/h on Friday, from 16.63GWh/h on Thursday and revised down sharply from 6.97GWh/h 24h earlier, Reuters data showed.
- German gas demand for residential and commercial consumers is forecast at 71.9mcm/d on Friday, from 61mcm/d on Thursday, Bloomberg data showed.
- Power demand in Germany is forecast at 57.01GW on Friday, from 57.17GW on Thursday, Bloomberg data showed.
- Germany’s hydro balance forecast has been revised down to end at 171GWh on 6 November from 259GWh previously, Bloomberg data showed.
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GILTS: Firmer On Wider Cues, Supply Provides Litmus Test For Long End Demand
Sep-23 07:09
Gilts a touch higher after Bunds & Tsys firm through early London trade.
- Ongoing weakness in crude oil helps provide support.
- Futures back towards yesterday’s high, topping out at 90.91.
- Initial support and resistance 90.60/91.11.
- Yields 1-2bp lower, curve flatter, last week’s lows in 2s10s and 5s30s remain untouched (closing lows are ~6bp away on both curves).
- UK flash PMI data is due today.
- It is also worth noting that the DMO will come to market with 30-Year gilts. Market participants will be watching the demand metrics closely after last week’s PSNB data revealed ongoing fiscal deterioration.
- On the fiscal front, the Resolution Foundation has suggested that Chancellor Reeves could raise ~GBP6bln by cutting employee national insurance contributions by 2ppt and raising the basic rate of income tax by the same amount. Note that this would only cover around 20% of the fiscal shortfall, but it would be a way of not increasing taxes on "working people" and might avoid some more painful taxes elsewhere that could hit growth harder or increase CPI.
- Elsewhere, BoE chief economist Pill will speak via a fireside chat on “Challenges of Monetary Policy in an Environment of High Fiscal and Geopolitical Uncertainty” (10:00 London).
AUDUSD TECHS: Corrective Cycle In Play
Sep-23 07:08
- RES 4: 0.6793 1.500 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 3: 0.6763 1.382 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 2: 0.6726 1.236 proj of the Jun 23 - Jul 24 - Aug 21 price swing
- RES 1: 0.6660/6707 High Sep 18 / 17
- PRICE: 0.6586 @ 08:07 BST Sep 23
- SUP 1: 0.6575/6547 Low Sep 22 / 50-day EMA
- SUP 2: 0.6527 61.8% retracement of the Aug 21 - Sep 17 bull leg
- SUP 3: 0.6463/6415 Low Aug 27 / Low Aug 21 / 22 and a bear trigger
- SUP 4: 0.6373 Low Jun 23
The AUDUSD uptrend remains intact and the latest pullback is considered corrective - for now. The recent rally plus the breach of 0.6625, the Jul 24 high and bull trigger, confirms a resumption of the uptrend. The climb opens the 0.6726 next, a Fibonacci projection. MA studies are in a bull-mode position highlighting a dominant uptrend. Key support to watch is 0.6415, the Aug 21 / 22 low. Initial firm support to watch is 0.6547, the 50-day EMA.
RIKSBANK: Rate Decision At 0830BST A Very Close Call Between Cut and Hold
Sep-23 07:06
The Riksbank decision is due at 0830BST/0930CET, with consensus split between a 25bp cut to 1.75% and a hold at 2.00%.
- MNI Preview here
- There are credible reasons to motivate either decision.
- We suspect the Board will be equally split (but don’t necessarily think that will be reflected in any formal dissents), with some members advocating for a form of insurance cut given a still-weak labour market and signs that the recent inflation uptick was temporary, and others preferring to wait for more data before determining if another cut is necessary.
- The September decision includes an updated MPR and rate path projection.
