ECB VIEW: Nomura Push Out Final Two ECB Cuts After Hawkish Lagarde
Nomura shift their call from additional cuts in Jul & Sep to Sep & Dec, maintaining a terminal rate of 1.5% that they see on hold through 2026.
- “Mme Lagarde was more hawkish in the press conference than we had expected. Moreover, the ECB’s new HICP inflation forecasts, broadly in line with inflation fixings in the near term, raise the bar for back-to-back rate cuts in July and September.”
- “Consequently, we change our ECB call and now expect the ECB to cut rates by 25bp in September and December. We maintain, however, our terminal depo rate view of 1.50%.”
- “In our view, the central and severe scenarios are optimistic. Even 10% tariffs would be a meaningful hit to euro area GDP growth and weigh on euro area HICP inflation in the medium term. In addition, the ECB’s forecasts explicitly assume there are no disinflationary spillovers in Europe from Chinese goods dumping, which in contrast we think would be very likely.”
- “On top of a continuing softer USD momentum, today’s relatively hawkish stance by Lagarde supports our view of EUR/USD reaching 1.20 by year-end. Trade strategy wise, we like long EUR/CHF targeting 0.9650.”
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US: FED Reverse Repo Operation
RRP usage inches up to $129.858B this afternoon from $124.690B yesterday, total number of counterparties at 34. Usage had fallen to $54.772B last Wednesday, April 16 -- lowest level since April 2021. Conversely, usage had surged to the highest level since December 31, 2024 on Monday, March 31: $399.167B.
EURGBP TECHS: Tests Key Support
- RES 4: 0.8781 2.236 proj of the Mar 3 - 11 - 28 price swing
- RES 3: 0.8768 High Nov 20 ‘23
- RES 2: 0.8624/0.8738 High Apr 21/ High Apr 11 and the bull trigger
- RES 1: 0.8557 High Apr 28
- PRICE: 0.8487 @ 16:52 BST May 6
- SUP 1: 0.8467 50-day EMA
- SUP 2: 0.8462 Low May 1
- SUP 3: 0.8415 76.4% retracement of the Mar 28 - Apr 11 rally
- SUP 4: 0.8316 Low Mar 28 and a key support
EURGBP traded lower again Tuesday and a short-term bear cycle remains in play, for now. The next support has been broken at 0.8477, a Fibonacci retracement point, below which the 50-day EMA at 0.8467 has been tested. It is still possible the move down that started Apr 11, is a correction. A clear reversal would open 0.8738, the Apr 11 high and bull trigger. First key resistance is 0.8624, the Apr 21 high.
PIPELINE: Corporate Bond Update: $5B BoA 3Pt Launched
$24.9B Corporate issuance to price Tuesday
- Date $MM Issuer (Priced *, Launch #)
- 05/06 $5B #Bank of America $2.25B 4NC3 +85, $750M 4NC3 SOFR+111, $2B 11NC10 +115
- 05/06 $2.5B #PNC $1.25B 2NC1 +75, $1B 6NC5 +100
- 05/06 $2B #Grupo Nutresa $1B 5Y 8%, $1B 10Y 9%
- 05/06 $2B #Cummins Inc $300M +50, $700M +5Y +80, $1B 10Y +100
- 05/06 $1.75B #Starbucks $750M 3Y +77, $500M 5Y +90, $500M 10Y+110
- 05/06 $1.75B #Standard Chartered $1B 6NC5 +135, $750M 6NC5 SOFR+168
- 05/06 $1.75B #Biogen $400M +5Y +115, $650M 10Y +145, $700M 30Y +165
- 05/06 $1.75B #UBS 11NC10 +128
- 05/06 $1.5B #Deutsche Bank 6NC5 +140
- 05/06 $1B #Dominion Energy 3Y +87.5
- 05/06 $750B #Gold Fields 7Y +175
- 05/06 $650M #American Homes 4 Rent 5Y +117
- 05/06 $500M #Host Hotels & Resorts 7Y +180
- 05/06 $500M #SURA Asset Mgt 7Y +230
- 05/06 $500M *Shinhan Bank 5Y +72
- 05/06 $500M #LYB Int 10Y +187
- 05/06 $500M #Eaton WNG 5Y +65
