FED: New Monetary Policy Statement Ends Flexible Average Inflation Targeting

Bunds have recovered from session lows, with deepening Eurozone growth risks surrounding EU countermeasures against U.S. tariffs and the potential for a further deterioration in trade relations explaining much of the move.

• A downtick in crude oil prices also aided the recovery.
• Bund futures closed the initial opening gap lower after bears were not able to force a test of the July 21 low (129.73) during this morning’s sell off.
• Yields little changed to 3bp higher across the curve, with the lingering impact from JGB price action and a rally in equities felt on the slope of the curve.
• EGB spreads to Bunds hold tighter despite the recovery in German paper, aided by equities rallying, albeit with the latter trading off best levels of the day.
• German swap spreads and ASWs are a touch tighter, once again probably driven by associated readthrough for ECB policy from trade-related growth fears and the risk-on feel to wider price action.

• EUR/USD: $1.1450(E1.6bln), $1.1500-10(E1.4bln), $1.1550(E908mln), $1.1620-30(E4.3bln), $1.1645-60(E2.2bln), $1.1700(E2.0bln), $1.1750-60(E1.7bln), $1.1800(E985mln)
• USD/JPY: Y146.00-05($570mln), Y147.00-10($1.1bln), Y147.50($1.6bln)
• AUD/USD: $0.6600(A$886mln), $0.6625-30(A$596mln)
• USD/CAD: C$1.3785($617mln)

• US EIA: CRUDE OIL STOCKS EX SPR -3.17M TO 419.0M JUL 18 WK
• US EIA: DISTILLATE STOCKS +2.93M TO 109.9M IN JUL 18 WK
• US EIA: GASOLINE STOCKS -1.74M TO 231.1M IN JUL 18 WK
• US EIA: CUSHING STOCKS +0.46M TO 21.9M BARRELS IN JUL 18 WK
• US EIA: SPR -0.2M TO 402.5M BARRELS IN JUL 18 WK
• US EIA: REFINERY UTILIZATION WEEK CHANGE +1.6% TO 95.5% IN JUL 18 WK