EURGBP TECHS: Retracement Mode

Monday's Europe rates/bond options flow included:

• RXK5 129/130.5/132/133.5 call condor paper paid 0.335/0.345 on 20K.
• RXK5 127/126 ps, bought for 33.5 in 10k.
• RXK5 130c, bought for 49.5 in ~5.6k.
• RXK5 126.50/125.50ps, bought for 33 in 7.75k.
• ERJ5 97.875/98.00 call spread paper paid 2 on 10k
• ERK5 97.62/97.50ps 1x2, bought for 1 in 15k.
• ERM5 97.62/97.50ps bought for 1.75 in 16.5k.

The lack of a coherent plan to counter the Trump administration’s aggressive policy moves is weighing heavily on the Democratic party, according to a new CNN survey.

• CNN notes: “Among the American public overall, the Democratic Party’s favorability rating stands at just 29% – a record low in CNN’s polling dating back to 1992 and a drop of 20 points since January 2021”.
• The party’s standing is likely to fall further after Senate Minority Leader Chuck Schumer (D-NY) bucked the majority of his colleagues by voting in favour of a partisan Republican spending bill to avert a government shutdown.
• CNN notes: “The majority’s desire to fight the GOP marks a significant change in the party’s posture from the start of Trump’s first term. A September 2017 poll found a broad 74% majority of Democrats and Democratic leaners saying their party should work with Republicans in an attempt to advance their own priorities, and just 23% advocating for a more combative approach.”
• The survey data suggests Democrat leadership may be more empowered to take a hardline posture when given leverage in Congress, potentially on a standalone debt ceiling bill or at the government funding deadline in September.

Figure 1: Opinion of Democratic Party Among US Adults

Source: Semafor, CNN

• Firmer risk sentiment on Monday has allowed the higher beta currencies to outperform in the G10 FX space. Added to this, weaker details within the US retail sales report has bolstered the softer dollar theme, allowing AUDUSD and NZDUSD to register gains of 0.93% and 1.22% respectively,
• Topside momentum for NZD has been exacerbated by the earlier breach of the 2025 highs, which has seen NZDUSD rise back above 0.5800 for the first time since mid-December. Furthermore, the solid bounce for equities is underpinning a strong move higher for NZDJPY, likely bolstering the renewed Kiwi optimism. This is the first time the cross has been above its 50-day EMA since January, having built a solid base in the low 83.00s earlier this month.
• The broad dollar offer has also assisted GBPUSD to print a fresh four-month high as the pair edges ever closer to the psychological 1.3000 mark. A close at current levels would be the highest daily close since the US election and should keep attention firmly on the November 06 high of 1.3048.
• In similar vein, EURUSD rose as high as 1.0929 as markets await tomorrow's special session in the Bundestag. Optimism over the German debt deal have been inspiring the optimism for the single currency, and the gap has been narrowing to the recovery highs of 1.0947. This level will need to be cleared before the market turns its focus to pivot resistance at 1.10 and a more notable cluster of medium-term resistance around the 1.12 mark.
• A relatively subdued session for USDJPY still saw an 80 pip range for the pair. Post data action saw an initial dip lower to 148.31 before being swiftly faded as markets latched on to the stronger-than-expected control group reading. Overnight session highs at 149.10 have capped the upside so far, and initial resistance comes in just above at 149.46, the 20-day EMA.
• German ZEW and Canadian CPI highlight Tuesday’s calendar, before the focus turns to major central bank decisions starting Wednesday.