MNI EXCLUSIVE: MNI INTERVIEW:Structural Drags On German Growth-ifo's Wohlrabe

2s and 10s have failed to breach late March yield lows. Bulls will be eying potential triggers for a range break.

• Tomorrow’s CPI release provides the next major fundamental input, although we note that there is an unusually wide range of estimates for the core readings and uncertainty surrounding some sub-indices, heightening the need for caution when interpretating the data.
• Also, we believe that a ‘hawkish’ surprise presents the greatest risk to prevailing market positioning, raising the bar for dovish market interpretation of the data.
• More broadly, the recent run of disappointing U.S. labour market and economic activity data leaves the door open to a data-dependent Fed cut in September.
• Fed fund futures price ~20bp of cuts through the Sep FOMC and ~50bp through year end, representing a cut at 2/4 remaining ’24 meetings.
• This seems relatively fair to us at this juncture, so a dovish adjustment to ’25 FOMC pricing may present the most likely avenue for a move lower in yields.
• This could come via a continued moderation in the U.S. economic exceptionalism thesis.
• Zooming out, we caution that the election presents a medium-term source of uncertainty for markets and could limit any moves lower in yields.

Fig. 1: U.S. 2- & 10-Year Tsy Yields (%)

Source: MNI - Market News/Bloomberg

WTI futures are trading lower today as the contract extends the pullback from last week’s high. The move down is likely a correction. Recent gains reinforced bullish conditions, signalling scope for a continuation higher near-term. Moving average studies are in a bull-mode set-up too, highlighting a rising trend. Sights are on $85.27, the Apr 12 high and a bull trigger. Initial firm support to watch is $79.70, the 50-day EMA. Recent gains in Gold resulted in a print above resistance at $2387.8, the Jun 7 high. This undermines a recent bearish theme and a clear break would be viewed as a bullish development and open the key resistance at $2450.1, the May 20 high. Initial support to watch lies at the 50-day EMA, at 2327.8. A clear break of this average would instead confirm a resumption of the reversal from May 20 and expose $2277.4, May 3 low.

• WTI Crude up $0.07 or +0.09% at $81.46
• Natural Gas up $0.03 or +1.11% at $2.371
• Gold spot up $8.76 or +0.37% at $2372.6
• Copper down $2.25 or -0.49% at $455.85
• Silver up $0.17 or +0.55% at $30.9718
• Platinum up $0.43 or +0.04% at $988.85