HUNGARY: Interest Rate Cap to Be Maintained Until Key Rate Falls Below 10%
May-11 10:01
- The government will extend a cap on household and corporate loans of small- and medium-sized companies beyond its June 30 expiry, Cabinet Minister Gergely Gulyas told reporters in a briefing of the most recent government meeting.
- The cap will be maintained until the central bank’s key interest rate drops below 10%, Gulyas said (note the O/N deposit rate currently stands at 18%).
- In addition, Gulyas told reporters that the government is currently drafting its 2024 budget, which will target “around 4%” economic growth, a 2.9% GDP shortfall and 6% inflation. Cabinet will file the budget draft to parliament on May 30.
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UK: Telegraph-PM Plans Oct/Nov 2024 For Next Election In Hope Of Shock Win
Apr-11 09:58
The Telegraph is reporting that Downing St. has penciled-in October or November of 2024 for the next UK general election. This is in the hope that by that point the economy will be on more of a solid footing and the 'small boats' migrant crisis will be under control, which could enable PM Rishi Sunak's centre-right Conservative Party to pull off a shock win.
- Opinion polling in April so far has shown the Conservatives between 11% and 21% behind the main opposition centre-left Labour Party. This compares to a 16%-to-32% gap between the two parties in late Oct 2022 following Sunak becoming PM. While the current numbers would still result in a Labour majority if replicated in a GE, the narrowing of the gap will give some confidence to the Conservatives.
- The poor media and public reception to a number of attack ads released by Labour in the past days targeting PM Sunak could damage Labour leader Sir Keir Starmer's efforts to portray his party as 'above' the usual 'gutter politics' of election campaigns. This in turn could see support drift away from the party.
- Political betting markets continue to show a Labour majority as the most likely outcome of the election. Data from Smarkets gives a 54.1% implied probability of a Labour majority, compared to 33.8% for a hung parliament (where not part has a majority) and a 10.6% implied probability of the Conservatives retaining their majority.
Chart 1. Betting Market Implied Probability of Next GE Outcome, %
Source: Smarkets
BONDS: Off the lows but EGBs/gilts play catch up with USTs on the open
Apr-11 09:52
- Core fixed income hit its low point of the day shortly after the European/UK opens as local markets reacted to Friday's US employment print after being closed for the long Easter weekend. The German curve bear flattened while the gilt curve saw more of a parallel move.
- Some of the early move has since been retraced as SONIA/Euribor futures have also moved off their lows of the day, while Treasuries are also higher on the day.
- Markets already have one eye on tomorrow's US March CPI data.
- TY1 futures are up 0-6 today at 115-22+ with 10y UST yields down -2.8bp at 3.392% and 2y yields down -2.6bp at 3.986%.
- Bund futures are down -0.79 since Thursday at 136.51 with 10y Bund yields up 6.3bp at 2.244% and Schatz yields up 10.4bp at 2.650%.
- Gilt futures are down -0.73 since Thursday at 103.59 with 10y yields up 7.0bp at 3.498% and 2y yields up 7.2bp at 3.425%.
OUTLOOK: Price Signal Summary - EURUSD Bull Cycle Remains In Play
Apr-11 09:51
- In FX, EURUSD a bullish tone despite the recent pullback. Price has breached resistance at 1.0930, the Mar 23 high. This level marked a key short-term hurdle for bulls and the clear break reinstates the recent bull theme and signals scope for 1.1033, the Feb 2 high. On the downside, initial support to watch lies at 1.0825, the 20-day EMA.
- GBPUSD maintains a bullish tone and the recent move lower is considered corrective. The pair has breached 1.2448, Jan 23 high and the top of a broad range that started Dec 14 2022. This marks an important medium-term development signalling the next stage of the uptrend that started Sep 26 last year. The focus is on 1.2599, the Jun 7 2022 high. The bull trigger is 1.2525, Apr 4 high. Support is at 1.2314, 20-day EMA.
- The trend direction in USDJPY remains down and recent short-term gains are considered corrective, despite Monday’s strong rally. However, attention is on resistance at 133.87, yesterday’s high. A break of this level would strengthen a short-term bullish theme and highlight a clear breach of the 50-day EMA. This would open 134.75, 61.8% of the Mar 8 - 24 bear leg. On the downside, a reversal lower would signal scope for a return to 130.64, the Apr 5 low.
