FOREX: Risk Rally Lacks Follow-Through, USD Lower
Apr-10 09:10
- Unsurprisingly, European equities shot higher at the cash equity open Thursday, mimicking the record-setting Wednesday close on Wall Street. Markets have faded off highs, but are still maintaining a considerable rally on Trump's U-turn yesterday. US policy uncertainty remains well-elevated, with the US policy uncertainty index remaining at elevated levels, which continues to undermine the USD.
- The USD's initial rally has all but reversed, leaving EUR/USD at pre-U-turn levels. It is notable that the pair yesterday did not reverse as materially as equities did following the tariff pullback - which may be a strong signal that markets continue to discount the USD vs prior, pre-Liberation Day valuations, and that while tariff policy may have reversed, the implications for inflation and growth in the US this year persist.
- From a technical perspective, the trend condition in EURUSD is unchanged and remains bullish. Sights are on 1.1188 next, a Fibonacci projection. Initial firm support lies at 1.0854, the 20-day EMA.
- US CPI data is a focus going forward - although the risk premia surrounding the event have fallen notably since the tariff relief late yesterday. Markets expect 0.1% M/M, 2.5% Y/Y, but slightly higher prints in the core metrics.
- Several Fed speakers are set to make appearances Thursday: Fed's Logan, Schmid, Goolsbee and Harker are due, while the Senate are due to hold hearings on Bowman's nomination as the Fed's top banking supervisor.
Want to read more?
Find more articles and bullets on these widgets:
Historical bullets
NORWAY: Finance Ministry Revises 2025 Mainland GDP Projection Down To 2.0%
Mar-11 09:04
The Norwegian finance ministry revised its 2025 mainland GDP growth projection down by 0.3pp to 2.0% Y/Y compared to its October forecast round, while the 2026 mainland GDP projection was revised a tenth higher to 2.2%. The softer outlook for 2025 reflects a sharp downward revision to housing investment (-4.7% vs 12.1% in October), which was offset a little by upgrades to consumption and government spending.
- The 2025 GDP forecast (including offshore sectors) was 0.6% Y/Y (vs 2.1% in October), reflecting much lower crude oil and natural gas export expectations (-2.0% Y/Y vs 1.5% in October).
- The registered unemployment projections were revised a tenth lower for 2025 and 2026 to 2.1%.
- Today’s forecast updates come as the Government kicks off work for the 2026 state budget.
- From the press release: “Next year's budget will be characterized by the fact that we live in turbulent times, with the ongoing war in Ukraine, international unrest and the risk of increasing trade conflicts”….“We must strengthen our defense to secure Norway.
- “Next year's budget must be based on the fact that growth is on the rise. The government will pursue a responsible economic policy that facilitates a further decline in price inflation, increased purchasing power for households, and strengthened competitiveness for companies”.
GILT SYNDICATION: 1.875% Sep-49 I/L gilt
Mar-11 09:03
- Guidance: 0.125% Aug-48 linker (GB00BZ13DV40) + 1.0/1.5bps
- Size: GBP benchmark
- Maturity: 22 September 2049
- ISIN: GB00BT7J0134
- Coupon: 1.875%, long first
- Settlement: 12 March 2025 (T+1)
- JLMs: BofA Securities, J.P. Morgan, Lloyds Bank Corporate Markets (B&D/DM), and UBS Investment Bank
- Timing: Books open, pricing later today (MNI expects books to close at 10:00GMT)
From market source
BONDS: 10-Year Gilt/Bund Spread Set For First Sub-180bp Close Since Sep
Mar-11 08:58
The 10-Year gilt/Bund spread is on track for its first sub-180bp close since September, with German fiscal expectations continuing to drive cross-market moves after the Greens raised hopes of an accord being struck this week.
- Next support of note in the spread located at 175bp, which protects the 76.4% retracement of the July ’24 to December ’24 widening (174.5bp).
- The speed of delivery (expected to be skewed into H225), size and maturity mix of any fiscal loosening-driven issuance out of Germany will be key for the spread over a multi-month horizon, as will the evolution of UK fiscal policy, given the erosion of already limited fiscal headroom.
Fig. 1: 10-Year Gilt/Bund Spread (bp)
Source: MNI - Market News/Bloomberg
