OPTIONS: More Limited Post-Ceasefire Flow, But Again Leans To Upside
Thursday's Europe rates/bond options flow included:
- ERN6 97.75/97.875 call spread paper paid 1.75 on 7K
- ERU6 97.6875/97.8125/97.9375c fly, bought for half in 10k
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IRAN: MNI POLITICAL RISK-Iran War: Short Campaign Or Long-Term Conflict
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Since the launch of the joint Israeli-US strikes on Iran on 28 February and the subsequent regional conflict, there has been significant market interest in attempting to parse comments from political and military officials from all sides to try to gauge how long the war might last. This comes from the widespread view that a ‘short’ conflict could limit the economic fallout and allow a ‘return to normalcy’. Conversely, a longer war risks sustained constraints in hydrocarbons from the Gulf that risks inflationary spikes, energy supply shortages, and a higher interest rate path.
Identifying the length of the conflict is, of course, impossible. There are, in the words of the late US Secretary of Defense Donald Rumsfeld, too many ‘known unknowns’ and ‘unknown unknowns’. As such, a sensible way of looking at the situation may be examining the factors that could push the conflict towards a short war (weeks, a month), and those that direct it towards a longer conflagration (many months). These factors are by no means an exhaustive assessment of the factors that will influence the conflict, which are both increasingly global in nature, but also down to the capricious views of individual leaders on both sides.
FED: US TSY 3Y AUCTION: NON-COMP BIDS $130 MLN FROM $58.000 BLN TOTAL
- US TSY 3Y AUCTION: NON-COMP BIDS $130 MLN FROM $58.000 BLN TOTAL
AUD: AUDUSD Rally Stalls Just Shy of 2023 Highs
- With crude futures remaining towards the lower end of the most recent range and major equity benchmarks continuing to trade in a resilient manner, the Australian dollar continues to outperform on Tuesday. As a reminder, the initial Aussie boost was provided by a hawkish leaning RBA Hauser and combining this with a softer dollar backdrop, AUDUSD has extended intraday gains to around 1%.
- Fresh cycle highs at 0.7154 fell just 4 pips shy of the key resistance point at the 2023 highs. 0.7208 represents the next notable target, the 61.8% of the Feb 25 ‘21 - Apr 9 ‘25 bear leg, while above here, 0.7283 is the June 2022 high.
- In the crosses, we noted fresh cycle highs for AUDJPY which operates at the highest level since 1990, while AUDNZD has also surpassed the 1.20 mark for the. Downside for EURAUD has also extended on a break of the 2025 lows below 1.6358. The next key level is located at 1.60 which provided excellent support across 2024.
