EM CEEMEA CREDIT: Halkbank: Mandates banks to sell AT1 bonds

We noted yesterday that GBP/USD has struggled to maintain gains above the 1.34 handle on several occasions already this year, as well as in 2024, 2019 and 2020. Spot gains today saw a brief print at 1.3469, but markets have already reversed ~60 pips off the high to contain the overall bullish breakout. The keeps focus on the bearish tweezer candle formation printed on April 28/29, which could mark a near-term top. 1.3342 undercuts as first support, ahead of the more meaningful 50-day EMA at 1.3137. A move through here would challenge the near-term bullish trend narrative.

• Today's inflation print is yet to challenge that dynamic, with spot now back below pre-inflation levels and signalling that today’s CPI print may not be a near-term game changer for the current bull trend.
• HSBC write that until services CPI and wage growth fall consistently back towards target levels, the BoE is likely to remain in cautious easing mode, supporting GBP against both EUR and USD.
• ING see reasons for the BoE to look through the print, however see a cautious BoE keeping the EUR/GBP rate differential wide and think a break below 0.8400 remains a tangible possibility.
• Deutsche Bank see the MPC as finding solace in “almost everything else” outside of easter impacts and tax changes to the transport basket. As such, they do not see this as the end of the quarterly cutting cycle, leaving August as a likely rate cut, in their view.

UBS suggest that Dutch pension funds may have “around €250mln/bp of duration hedges to unwind over the transition, mostly in long end, and there will likely be some desire to pay curve on top of that. First mover advantage for pensions seems clear and we may start to see some smaller schemes reducing their post-transition risk later this year”.

• As a result, they expect “continued disinversion of the curve at the long end, responding to heavier supply and a major source of structural receiving reversing some of its historical demand”. 

President Marcelo Rebelo de Sousa will continue meetings with party leaders today as he looks to glean information on how the most stable gov't can be put together following the 18 May legislative elections. The President of the Republic met with the leaders of the centre-right AD-PSD/CDS Coalition, centre-left Socialist Party (PS) and right-wing Chega on 20 May. Today, he will hold talks with the libertarian Liberal Initiative (IL) at 1130CET and the environmentalist LIVRE at 1700CET. 

• PM Luis Montenegro, leader of the AD, is all but guaranteed to remain in office after his alliance won a plurality with 89 seats, up from 80 previously. Still well short of the 116 required for an overall majority in the Assembly of the Republic, he will require backing from other parties to progress his legislative agenda.
• Chega leader Andre Ventura will meet with the president again on 28 May, when final results of the election will be published. The four seats representing Portuguese Overseas (two for Europe, two for rest of the world) are yet to be confirmed. CNN Portugal reports that "everything points" towards victory for Chega in enough of these seats to break the current deadlock with the PS (currently in joint second place on 58 seats each). This would mean that for the first time ever, Chega would sit as the official opposition in the Assembly of the Republic, providing the party with its largest parliamentary platform to challenge the Montenegro gov't.
• It remains to be seen what composition the gov't has, whether a minority AD administration propped up on a bill-by-bill basis, the PS supporting in a confidence and supply agreement, or even a right-wing alliance with Chega are all potential options.