POWER: Nordic Curve Falls on Wetter Outlook, Revised Temps and TTF
The Nordic forward curve is descending, weighed down by European gas and emissions costs—dropping prices in neighbouring EU markets. A stronger outlook for Norway’s and Sweden’s hydro balance coupled with revised temps are also weighing. At the same time, the full return of the 1.17GW Forsmark 3 on 11 February is easing supply risks. March has fallen to its lowest this week.
- Nordic Base Power MAR 25 down 2% at 45.95 EUR/MWh
- France Base Power MAR 25 down 3% at 91.85 EUR/MWh
- Germany Base Power MAR 25 down 2% at 108.04 EUR/MWh
- EUA DEC 25 down 0.8% at 81.91 EUR/MT
- TTF Gas MAR 25 down 1.3% at 56.99 EUR/MWh
- Sweden’s Forsmark 3 is running at around 1.2GW of capacity at the time of writing, data from Vattenfall show.
- Norway’s hydrological balance was slightly revised higher over 13-26 Feb by around 26-450GWh and is expected to end at just +3.21TWh on 26 Feb from +2.76TWh in the previous forecast for the same day. It is important to note that the balance is +6.70TWh on 12 February.
- Sweden’s balance is also expected to be higher on the day and is now anticipated at +4.53TWh on 26 Feb from +4.50TWh previously estimated for the same day.
- Average temperatures in the Nordics are now expected to begin warming up from 20 February and flip above the seasonal average on 26 February. Temperatures were mostly revised up over 12-17 February by as much as 1.4C.
- However, precipitation in the region will see below-normal rainfall throughout the 6–10-day ECMWF forecasts – which could continue to weigh on hydro stocks.
- Closer in, Nordic nuclear reactors were operating at 100% capacity on Wednesday morning, up from 98% on Tuesday, with 11 of 11 units still online, according to Bloomberg.
- Norwegian wind is anticipated at 0.676GW on 13 Feb from the 0.809GW anticipated today – which could support power prices from the previous session
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Historical bullets
GILTS: Remain Under Pressure
Gilts follow global peers lower.
- Futures breach initial support at last week’s low (89.00), basing at 88.96, before a bounce to 89.25.
- Yields 2-4bp higher across the curve.
- 10s as high as 4.901% this morning vs. last week’s high of 4.921%.
- 30s near last week’s multi-decade high (5.473%).
- 2s10s within 2.5bp of last year’s high, last 30.3bp vs. ’24 peak of 32.8bp.
- Gilt/Bunds ~1bp wider at 225bp.
- Fibonacci supports located below worst levels, 88.87 and 88.53 eyed.
- Goldman Sachs’ base case remains that “slowing growth momentum and a broader disinflationary trend will allow the BoE to cut more than markets are expecting, which will help the market digest elevated duration supply.”
- They also believe that the rise of fiscal risk premia suggests “the skew of risks is towards further budgetary restraint, which should ultimately reduce worries about the inflationary effect of the budget.”
- On that front, the weekend saw Chancellor Reeves stress that the fiscal rules in are "non-negotiable", with growth remaining the government's top priority.
- GBP750mln of short-dated APF sales from the BoE due this afternoon.
- See our pre-gilt open STIR bullet for greater colour on this week’s UK data & BoE speakers.
EGB OPTIONS: Bund Put Spread seller
RXG5 130/129ps, sold at 20 in 4k.
USDCAD TECHS: Trend Structure Remains Bullish
- RES 4: 1.4674 2.0% 10-dma envelope
- RES 3: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4508 3.236 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4467 High Dec 19
- PRICE: 1.4424 @ 08:14 GMT Jan 13
- SUP 1: 1.4345/4280 20-day EMA / Low Jan 6
- SUP 2: 1.4232 Low Dec 17
- SUP 3: 1.4190 50-day EMA
- SUP 4: 1.4011 Low Dec 5
The trend set-up in USDCAD remains bullish and the recent move down is considered corrective. The latest pause in the uptrend appears to be a flag formation - a bullish continuation signal. Note too that MA studies are in a bull-mode position, highlighting a dominant uptrend. Sights are on 1.4508 next, a Fibonacci projection level. 1.4345, the 20-day EMA, has recently been pierced. A clear break of the average would open 1.4190, the 50-day EMA.
