RIKSBANK: Not Enough Of A Dovish Tilt To Prompt Repricing Of Cut Expectations
Limited reaction in SEK crosses to the slight dovish tilt in the Riksbank policy statement, with the overall tone still very non-committal and heavily caveated at this stage.
- Overall, there isn’t enough of a signal from the Riksbank to prompt a meaningful repricing in Riksbank rate cut expectations, even if the March MPR rate path was flat at 2.25% throughout the policy horizon.
- We continue to view a June cut as in play, but will need to be supported by the hard data between now and the June 18 decision.
- The key line in the statement is “even though uncertainty is significant, the Executive Board assesses that it is somewhat more probable that inflation will be lower than that it will be higher than in the March forecast. This could suggest a slight easing of monetary policy going forward”.
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BONDS: European futures are extending higher
Couple of Block trade in Gilt, suggested buyer:
- G M5 1.22k at 92.21.
- G M5 976 at 92.25.
The Italian BTP and French OAT futures are still leading to the upside in Europe.
CROSS ASSET: Initial resistance in Bund holds
- A pick up in Volumes in EGBs, but markets remain quite volatile, latest flow sees, Bund and Bobl lifted in good size (5k each), Bund made an attempt at the small initial resistance noted at 130.36, printed a 130.34 high so far in early trade.
- US Tnotes saw similar flow, but still short of the Overnight printed high of 112.07.
- USDJPY is eyeing a break back below 147.00, paring some of Yesterday's gains, 147.05 is Today's low for now.
GILT TECHS: (M5) Key Support Remains Exposed
- RES 4: 94.75 76.4% retracement of the Dec 3 - Jan 13 bear leg (cont)
- RES 3: 94.50 High Apr 7 and key resistance
- RES 2: 93.38 61.8% retracement of the Apr 7 high-low range
- RES 1: 92.70 38.2% retracement of the Apr 7 high-low range
- PRICE: 92.01 @ 08:12 BST Apr 8
- SUP 1: 91.58 Low Apr 7
- SUP 2: 91.03 Low Mar 28
- SUP 3: 90.55 Low MAr 27 and key support
- SUP 4: 9.00 Psychological round number
A sharp sell-off in the Gilt futures contract Monday highlights a strong reversal of the recent bull cycle between Mar 27 - Apr 7. A continuation down would expose the next key support located at 90.55, the Mar 27 low. Clearance of this level would confirm a full reversal of the Mar 27 - Apr 7 rally. On the upside, a resumption of gains would initially open 92.70 and 93.38, Fibonacci retracement points of Monday’s high-low range.
