PHILIPPINES: Senators Think VP Duterte Has Numbers To Survive Impeachment Trial

• MNI: EUROZONE FLASH APRIL MANUF PMI 48.7 (FCAST 47.4, MAR 48.6)
• EUROZONE FLASH APRIL SERVICES PMI 49.7 (FCAST 50.5, MAR 51.0)

• Tariff and Fed-independence induced volatility has prompted the potential formation of a hammer in the GBP/USD daily chart which, if confirmed, could see the pair establish a base and resume the short-term uptrend. Strength through 1.3400-24 would be key here - opening the 1.3434 bull trigger (the Sep'24 high).
• The prospects of a UK-US trade deal remain front page news. Today's Times runs that the government is "hopeful" that a deal will allow the UK to avoid the worst of the tariffs - specifically the 25% tariff on steel, aluminium and car imports - however the 10% blanket tariff could be here to stay. Chancellor Reeves is set to meet the US Treasury Secretary on Friday. The Times concludes that ministers hope that they will be able to get a deal over the line by the end of the month.
• JP Morgan write that GBP strength on any US-UK trade deal would present good entry levels to fade over the medium term - with any deal unlikely to undo the key impacts of the last months events on the currency. The UK could also get caught between opposing demands from the US and EU on trade. As a result, they use favourable levels to enter a short GBP position vs NOK, SEK cash basket. They see Sterling’s stagflationary reaction function as remaining on the table as a threat over the rest of the year.

This morning’s DMO remit revision has seen 5s cheapen by ~5bp on the 2s5s10s butterfly.

• The structure failed to break below the June ’24 low (-47.2bp) in recent weeks.
• Any fresh questions surrounding the UK’s fiscal health or the pricing of a deeper BoE easing cycle could result in fresh richening for 5s on the structure.
• However, today’s early focus on the DMO’s remit, aggressive curve flattening and prevailing level compared to the recent range suggests that those looking to express such a view will not be rushing to engage at this stage.

Fig. 1: UK 2-/5-/10-Year Butterfly (bp)

Source: MNI - Market News/Bloomberg