USD: In the red against all the majors

Jul-07 06:47
  • FX remains subdued since the cash Govie open.
  • The best performer is still the AUD, although the AUDUSD cross still trade close to the lowest level since June 2020.
  • The pair has found a base at the June low that was 0.6764 (1st July low), but did print a 0.6762 low on Tuesday and Yesterday, becoming a good support area.
  • USD is in the red against all the majors, besides the Yen, that trades flat.
  • AUDUSD is now at 0.6814.

Historical bullets

USD: Extends gains on the European Govie open

Jun-07 06:39
  • USD continues to trade on the front foot on the European Govies open, given the continued rally in Yields, led by Germany at the end of last week and at the start of this week, with US and UK catching up.
  • Some market colour yesterday in Europe, saw some play of 150bps hike by December for the ECB via Options.
  • ALL EYES are on the ECB this week. Friday will see the US CPI release.
  • The Yen is the worst performer in G10 against the USD, driven by yield, and following Kuroda; "BoJ will continue with the current strong monetary easing."
  • USDJPY tested the 130 figure, but initial resistance is seen at 133.11 High Apr 4 2002
  • Also recall overnight "Monitoring FX With A Sense of Urgency, Japan’s Suzuki Says" (as per Bloomberg)

BUNDS: New multi Year highs overnight for German Yields

Jun-07 06:22
  • German Yields continues to make multi year high overnight, with Bund testing 1.35%, this equated to 148.92 yesterday.
  • Similarly for the 2yr Schatz, yield tested 0.70%, equated to 108.965 yesterday.
  • Bobl need a test towards 123.52 to test the 2013 peak in Yield at 1.123%.Bund is off the low after the big German factory orders miss.
  • There's no tier 1 data left for the session, the UK services PMI will be final reading.
  • SUPPLY: German linkers (won't impact Bund), UK sells £3bn 2025 (Equates to 7.8k Gilt). US sells $44bn of 3yr notes.
  • SYNDICATION: Spain 10yr mandate.
  • SPEAKERS: ECB and Fed are on Blackout, but ECB's Wunsch presents Belgian Financial Stability review.

GERMAN DATA: Factory Orders See Surprise Decline, Outlooks Remain Pessimistic

Jun-07 06:19

GERMANY APR FACTORY ORDERS -2.7% M/M, -6.2% Y/Y; MAR -4.2r%

  • German factory orders came in substantially weaker than forecast in April, dashing the expected recoveries by contracting 2.7% m/m (vs +0.4% expected) and diving to -6.2% y/y (-4.1% expected).
  • The German Statistics Office stated that this third month of contraction is on the back of escalations in the Ukraine war, as demand for capital goods slumped a further 4.3% as economic uncertainty grew. Consumables also saw a decline, of 2.6%.
  • The latest factory orders release foreshadow the closely watched German IP due tomorrow and imply downside surprises to the data set.
  • March readings were upwardly revised by 0.5pp for the month-on-month to -4.2% and by 0.2pp to -2.9% y/y.