US NATGAS: Natural Gas End of Day Summary: Henry Hub Falls

• The Eurozone unemployment rate printed at 6.2% in July as expected, a joint series low, but revisions have again altered recent trends. The data have quite often been revised and June saw a fairly typical 0.1pp upward revision to 6.3%, although the +0.2pp to 6.4% in May was more surprising.
• It leaves a trend of recent improvement but with question marks over the data. What had been seen as three months at joint cycle lows of 6.2% through Apr-Jun, tying with 6.2% in Oct-Nov 2024, Eurostat now estimate a latest pattern of 6.3% in Apr, 6.4% in May, 6.3% in Jun and 6.2% in July, tying with 6.2% only in Nov 2024.
• ECB’s Lagarde has pointed to these at-the-time historically low unemployment rates when citing the health of the labour market in recent meetings. Outright employment growth remains subdued however, with just 0.1% Q/Q and 0.6% Y/Y in Q2.
• As for inflationary pressures stemming from the labour market, Eurozone unit labour costs grew 3.1% Y/Y in Q2, down from 3.3% in Q1 for the seventh consecutive annual deceleration. This was above the ECB's 2.9% projection made in June, seemingly driven by the smaller-than-expected deceleration in total compensation per employee growth (3.9% Y/Y vs 4.0% prior, 3.4% ECB).
• While a declaration in ULC growth has allowed the ECB to deliver 200bps of easing this cycle, the data is too lagged to help determine whether further fine-tuning of the policy stance is necessary. Given the modest upward surprise to compensation per employee growth, it argues in favour of steady rates at 2.00% for now.
• ULC growth may have moderated at a steadier pace than the ECB forecast but its forward looking wage tracker released earlier in the inter-meeting process points to a continued decline in negotiated wage growth. Now with estimates out to 1Q26, it eyes wage growth excluding one-off payments at 2.6% Y/Y in 1Q26 after 3.1% in 4Q25. Overall, the results are consistent with a further softening in services inflation pressures in the coming years, in line with ECB signalling.

• RES 4: 0.8769 High Jul 28 and the bull trigger   
• RES 3: 0.8744 High Aug 7 
• RES 2: 0.8728 76.4% retracement of the Jul 28 - Aug 14 bear leg
• RES 1: 0.8713 High Sep 2  
• PRICE: 0.8653 @ 16:30 BST Sep 10
• SUP 1: 0.8636/8597 50-day EMA / Low Aug 14 and the bear trigger
• SUP 2: 0.8562 50.0% retracement May 29 - Jul 28 upleg 
• SUP 3: 0.8540 Low Jun 30 
• SUP 4: 0.8514 61.8% retracement May 29 - Jul 28 upleg

EURGBP traded lower Tuesday and has breached the 20-day EMA. Short-term weakness is considered corrective - for now - and support to watch lies at 0.8597, the Aug 14 low. Clearance of this level would reinstate a recent bearish threat. A resumption of gains would open 0.8744, the Aug 7 high. Key resistance and the bull trigger is at 0.8769, the Jul 28 high. Note that MA studies are in a bull-mode position highlighting a dominant uptrend.

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