ISRAEL: Haredi Parties Key To Possible Gov't Ouster; US Spker To Address Knesset
Tzvi Joffre at Unpacked posts on X: "Several meetings are ongoing now in an attempt to prevent the Haredim from voting in favor of dissolving the Knesset and sparking elections. Reportedly, the efforts now are focused on trying to put together a list of principles for a draft law that would satisfy the Haredim and also get approval from the AG and courts. Considering the Haredim have said they'll only accept a law that can't be enforced[...], it seems unlikely an agreement can actually be reached unless the Haredim drop their demands almost entirely."
- The Haredim parties, Shas and United Torah Judaism, both sit as part of PM Benjamin Netanyahu's right-wing coalition. Each holding seven seats, alone their votes would not be enough to pass bill dissolving the Knesset, but if both backed the legislation it would be enough to pass.
- As noted earlier (see 'ISRAEL: Opposition Parties To Table Motion To Dissolve Knesset', 09:19BST) the opposition parties have stated their intention to seek the removal of the gov't and snap elections.
- Finance Minister and leader of the far-right Religious Zionism, Bezalel Smotrich, has claimed that bringing down the gov't during the ongoing conflict in Gaza would prove an “existential danger” to the state of Israel.
- The latest opinion polling shows that, should former PM Naftali Bennett be able to run at the head of his own party in any election, the opposition bloc would be likely to emerge with a comfortable majority over the 61-seat threshold (see chart below).
- Speaker of the US House of Representatives Mike Johnson (R-LA) has been invited to address the Knesset on 22 June. It remains to be seen how and dissolution of parliament could impact on such a high-profile political event.
Chart 1. Opinion Polling, Seat Projections (with Bennett 2026)
Source: Lazar, Magar Mochot, Midgam, MNI. N.b. Likud, OY, Shas and UTJ = Government bloc. Yesh Atid, National Unity, Yisrael Beiteinu, Bennett 2026, Ra'am and Democrats = Oppositon Bloc. Hadash-Ta'al = non-aligned.
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BOE: Greene "came into this round torn about whether to hold or cut by 25bp"
Greene asked if she would have voted for a cut without the trade news.
- "Came into this round quite torn about whether to hold or cut by 25 basis points, in part over the concerns around constrained supply that I mentioned, and also concerns around inflation expectations and whether those might feed through into second round effects, decided to cut in part because of trade. Would I change it all now, given this morning's news on a trade deal? No I wouldn't. I think in terms of kind of the risks around our assumptions on trade, I guess I'm worried that trade diversion might be more disinflationary than we have in our central forecast, and I think that's still the case, even if Chinese and US tariffs are lower for 90 days, and then who knows what? I also think it's worth pointing out that China is a big piece of the picture, obviously, in the global economy, but the EU is the UK's biggest trade partner, And so what happens with tariffs, between the US and the EU also matters and we don't have much clarity on that."
EGBS: Japanese Investors Continued To Shun OATs As Of March
Japanese investors continued to shun OATs as of March 2025, with balance of payments data (released overnight) pointing to a net JPY377bln of French sovereign bond selling. Japanese investors have sold a cumulative net JPY4trln of OATs since the start of 2024, spurred by the political and fiscal uncertainty stemming from President Macron’s snap general election announcement in June.
- The April BoP data will reveal whether Japanese investors re-allocated into French sovereign debt following the US “Liberation Day” announcement and associated market fallout, given the good liquidity the OAT market offers.
- However, political and risk risks remain present in France. Although a gradual consolidation of public finances is intact, officials have still highlighted the need to find E40bln of savings to meet the 4.6% 2026 budget deficit target. Meanwhile, our Political Risk team wrote last month that PM Bayrou is under significant political pressure amid an ongoing domestic scandal (see here).
- These risks are important to monitor, because President Macron is legally able to call another general election in July 2025 if desired (new elections cannot be held within 12-months of the last round). Such an announcement would see French political uncertainty ratchet higher once again, and drag on OAT performance versus peers.
- In March, Japanese investors were net buyers of JPY217bln of German sovereign debt and JPY109bln of Italian debt. The German figure may represent investor dip-buying, after yields rose notably in reaction to Merz’s defence/infrastructure spending announcement at the start of the month.
USDJPY TECHS: Impulsive Rally Extends
- RES 4: 151.21 High Mar 28 and a key resistance
- RES 3: 150.49 High Apr 2
- RES 2: 149.28 High Apr 3
- RES 1: 148.54/59 76.4% of Mar 28 - Apr 22 bear leg / Intraday high
- PRICE: 148.36 @ 11:57 BST May 12
- SUP 1: 146.19/144.26 50- and 20-day EMA
- SUP 2: 142.36 Low May 6
- SUP 3: 141.97 Low Apr 29
- SUP 4: 139.89 Low Apr 22 and a bear trigger
The primary trend condition in USDJPY is bearish and gains since Apr 22 appear corrective. However, resistance at the 50-day EMA, at 146.19, has been cleared today. The breach highlights a stronger reversal and has exposed 148.54, a Fibonacci retracement (pierced). On the downside, a reversal lower would expose 142.36, the May 6 low. Clearance of this level is required to signal the end of the correction.
