EURGBP TECHS: Monitoring Support Around The 50-Day EMA

EGBs and Gilts traded in mixed fashion Wednesday, with underperformance at the short end of respective curves.

• While Gilt yields remained within this week's ranges throughout the day, 10Y Bund yields touched an intraday post-Aug 7 low in early trade as markets digested overnight news of Poland downing Russian drones in its territory.
• Lower-than-expected inflationary pressures in the US producer price report saw a brief rally across global core instruments, but EGBs and Gilts were content to drift into the cash close ahead of event risk Thursday.
• The German curve twist flattened on the day, with the UK's bear flattening.
• OAT spreads were little changed albeit underperformed periphery/semi-core EGBs more widely, following overnight news that French President Macron had named centrist/ex-defence minister Lecornu as the new Prime Minister.
• While US CPI will garner significant attention, Thursday's European highlight is the ECB decision (MNI preview here in PDF).
• Along with the expected rate-hold along with communications reiterating a data dependent approach, Lagarde's characterisation of economic resilience and/or the extent to which uncertainty has been alleviated by the US-EU trade deal should help shape market reaction.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 1.1bps at 1.952%, 5-Yr is unchanged at 2.225%, 10-Yr is down 0.7bps at 2.652%, and 30-Yr is down 0.7bps at 3.273%.
• UK: The 2-Yr yield is up 2.6bps at 3.94%, 5-Yr is up 1.8bps at 4.055%, 10-Yr is up 1bps at 4.633%, and 30-Yr is up 0.5bps at 5.482%.
• Italian BTP spread down 0.6bps at 81.5bps / French OAT spread down 0.3bps at 80.9bps

• -8,170 TYV5 112.5/113.5/114.5 call flys, 20 vs. 113-15/0.05%

Donald Trump's presidential approval rating stood at 42% in recent days, with the president getting higher marks for his handling of crime and immigration versus the economy, according to a new Reuters/Ipsos survey. 

• Reuters notes: “Trump gets relatively poor marks on his handling of the economy, with 36% of Americans liking his economic stewardship and just 30% backing his handling of the cost of living for U.S. households.”
• Semafor notes: “If elections are a referendum on the economy, President Donald Trump and his GOP allies in Congress have their work cut out for them. Unemployment is rising, tariffs are still biting, and inflation hasn’t yet abated.

Figure 1: % of Americans who Approve of the President’s Handling of the Economy

Source: Reuters/Ipsos