HUF: PLNHUF Falls for 7th Consecutive Session Amid Thinned Holiday Liquidity
May-01 11:13
HUF moves lack conviction this morning, with liquidity thinned by widespread holiday closures across Europe, offering markets an opportunity to digest the earlier data releases and Tuesday's central bank decision. Lower-than-expected growth figures support the case for a dovish shift in monetary policy, though the central bank’s mantra remains one of caution. See former Governor Simor’s view on the economy’s outlook here.
- This stance, combined with expectations of cooling inflation, has increased the attractiveness of HUF from a carry perspective, which has been a primary driver behind the fall in PLNHUF to a new YTD low. The cross is trading lower today for a seventh consecutive session and nearing support at 93.85, a retracement level.
- Data in Hungary yesterday showed 1Q25 GDP surprised significantly to the downside, but Goldman Sachs downplay the significance of early GDP prints in any individual quarter given the volatility of post-pandemic GDP growth around the potential for large future revisions. They say Hungarian growth has been restrained by weak demand this year, reflecting tepid Euro area activity on the external side while domestic demand has been held back by declining investments and muted household consumption.
- At the same time, while inflation is expected to cool further in the coming months – on the back of both favourable base effects and government measures to tame food and services prices – the NBH pointed to high levels of price expectations in its policy statement, adding to stagflationary concerns. US tariff policy and financial market uncertainty also pose pro-inflationary risks, warranting the Bank’s “careful and patient” approach for now.
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STIR: Hawkish Reaction To BBG Sources Reversed As “Liberation Day” Approaches
Apr-01 11:08
ECB Governing Council member Rehn told POLITICO “if the data verify the baseline and indicate that to reach our goal of 2% symmetric inflation target over the medium term, the right reaction in monetary policy should be to cut in April, we should indeed do so”.
- Ultimately, Rehn didn’t stray from a data-dependent stance, suggesting that rates could also be left unchanged if the data warranted.
- We have previously suggested that the bar to Rehn not voting for an April cut was set quite high.
- We view Rehn as an important barometer of the median Governing Council view, often striking a centrist/dovish leaning tone.
- This morning’s inflation and manufacturing PMI data do not present any meaningful hurdles to further easing.
- Rehn’s GC colleague Escriva has since noted that recent price data confirm the disinflationary trajectory, albeit alongside highlighting uncertainty centred on the U.S. tariffs.
- Demand for wider core global FI ahead of “Liberation Day” has filtered through into the EUR short end, driving a dovish move through Tuesday morning trade.
- The ECB comments flagged above haven’t had much, if any, tangible impact.
- ECB-dated OIS show 19.5bp of cuts for this month, 37bp through June, 44bp through July and 63bp through December.
- Euribor futures +4.0-9.0.
- The hawkish moves following yesterday’s BBG ECB sources report have been reversed.
AUD: SocGen Believe AUD Should Not Be Underperforming Against Current Backdrop
Apr-01 10:56
- In contrast to the earlier bearish views on AUD, SocGen highlight that AUDUSD is almost exactly where it was on January 6, despite a 40bp narrowing in the 5-year yield differential.
- With recent Chinese data improving, and with China accounting for 9 times as much of Australia’s exports as the US does, SG believe the AUD should not be one of the worst-performing currencies against the current backdrop.
US TSYS: Steady Gains See TYA Take Another Step Closer To Bull Trigger
Apr-01 10:56
- Treasuries have slowly extended gains through both Asia and European hours and continue to probe recent highs.
- Modest gains over the past hour were helped by the Washington Post reporting around White House aides drafting a proposal for tariffs of around 20%.
- Cash yields are 2-4bp lower on the day, with 2s lagging declines ahead of some notable data releases including ISM manufacturing and JOLTS reports at 1000ET.
- 2Y yields at 3.865% for now remain above yesterday’s stabilization either side of the 3.85% level. 10Y yields meanwhile at 4.165% have easily pushed through yesterday’s 4.18-4.20%, with ytd lows seen at 4.104% on Mar 4.
- TYM5 trades close to a recent session high of 110-24+ ( + 17+) on solid overnight volumes of 455k.
- It has cleared tentative resistance at yesterday’s 111-22+ for another step closer to a bull trigger at 112-01 (Mar 4 high) after which lies 112-13 (Fibo projections).
- Data: S&P Global US mfg PMI Mar final (0945ET), ISM mfg Mar (1000ET), JOLTS Feb (1000ET), Construction spending Feb (1000ET), Dallas Fed services Mar (1030ET)
- Fedspeak: Barkin on policy and economic outlook (0900ET, text tbd)
- Bill issuance: US Tsy $70B 6W bill & $50B 14D CMB auctions (1130ET)
