EUROPEAN INFLATION: Small Upside Surprise To French April Flash HICP
French flash April HICP was firmer-than-expected at 0.8% Y/Y (vs 0.7% cons, 0.9% prior). This follows an upside surprise in Spain yesterday, keeping focus on the German and Italian data later this morning. On a monthly basis, HICP was 0.6% M/M (vs 0.4% cons, 0.2% prior).
- Services inflation was steady at 2.3% Y/Y, with non-energy industrial goods unchanged at -0.2% Y/Y.
- Food inflation rebounded to 1.2% Y/Y, the highest since May 2024. This was driven by a small rise in unprocessed foods to 4.0% Y/Y (vs 3.8% prior) and a larger uptick in processed foods to 0.9% Y/Y (vs 0.2% prior).
- Energy inflation fell to -7.9% Y/Y (vs -6.6% prior).
- No sub-component details are available in the flash release.
- Domestic CPI inflation was also higher than expected at 0.8% Y/Y (vs 0.7% cons, 0.8% prior) and 0.5% M/M (vs 0.4% cons, 0.2% prior).
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UK DMO UPDATE: DMO consultation today - we set out our issuance exp for 25/26
- We set out our expectations for gilt issuance across FY25/26 in our UK Issuance Deep Dive publication, published yesterday and available here.
- The DMO will hold its consultations regarding FQ1 (April to June) issuance at 15:30BST (investors) and 17:00BST (GEMMs) today.
- There are two syndications pencilled in for the quarter - one long and one linker. We pencil in a new 30-year conventional gilt (potentially with a Jul-55 maturity) but have less conviction surrounding the linker on offer.
- 5 further short auctions: 4.375% Mar-28 gilt (twice), 4.375% Mar-30 (up to twice more plus 9 April - MNI expect three in total), 4.00% Oct-31 gilt (at least once - MNI expects just the one).
- 4 further medium auctions: 4.50% Mar-35 (plus 15 April), 4.375% Jan-40 gilt (plus 3 April), 0.875% Jul-33 Green gilt (once). There is no guidance as to the third gilt - we would assume either the 4.50% Mar-35 or 4.375% Jan-40 gilt are options here. We favour the former despite the Green reopening.
- 2 further long auctions: 4.75% Oct-43 gilt (once), 4.00% Oct-63 gilt (once) (plus the already announced 4.375% Jul-54 gilt on 8 April).
- There are also two short programmatic tenders, one short or long programmatic tender and one linker tender in the quarter. We are not sure how much discussion there will be regarding these, given that the gilts on offer will only be announced 2 days before.
- The auction calendar for the remainder of the quarter is due for release on Friday at 7:30BST.
STIR: Nearly 90% Odds Of April ECB Cut Priced
The tariff worry/risk-off price action detailed elsewhere also filters into the EUR front end, as we move towards “Liberation Day” on Wednesday.
- ECB-dated OIS 1-4bp more dovish across ’25 meetings, with 22bp of cuts now priced for next month, 40bp showing through June and 64.5bp priced through year-end.
- Euribor futures 3.0-7.5 higher.
- Markets continue to believe that the ECB will be more reactive to growth shocks stemming from U.S. tariffs than any inflationary impact, which seems a fair assumption based on the Bank's rhetoric to data/historical norms.
- Goldman Sachs have added an extra 25bp cut to their forecast profile and now look for a terminal rate of 1.75%.
- German regional and national CPI data are due today, ahead of tomorrow’s Eurozone reading. Friday’s French & Spanish CPI data skewed risks to the Eurozone reading lower.
- Italian CPI will also cross.
- ECBspeak from Panetta (dove) & Villeroy (centrist, dovish leanings recently) is due today.
ECB Meeting | €STR ECB-Dated OIS (%) | Difference Vs. Current Effective €STR Rate (bp) |
Apr-25 | 2.197 | -22.0 |
Jun-25 | 2.014 | -40.3 |
Jul-25 | 1.949 | -46.9 |
Sep-25 | 1.854 | -56.3 |
Oct-25 | 1.822 | -59.5 |
Dec-25 | 1.773 | -64.4 |
USDJPY TECHS: Resistance At The 50-Day EMA Remains Intact
- RES 4: 152.70 50.0% retracement of the Jan 10 - Mar 11 bear leg
- RES 3: 151.30 High Mar 3
- RES 2: 150.90/151.21 50-day EMA / High Mar 28
- RES 1: 149.84 Intraday high
- PRICE: 148.85 @ 07:36 BST Mar 31
- SUP 1: 148.59 Low Mar 21
- SUP 2: 148.18 Low Mar 20 and a key short-term support
- SUP 3: 147.42 Low Mar 13
- SUP 4: 146.54 Low Mar 11 nad the bear trigger
USDJPY is trading lower today. The primary trend direction is unchanged, it remains down and the latest recovery is considered corrective. A key short-term resistance at the 50-day EMA - at 150.90 - is intact. A clear break of this EMA would undermine the bearish theme and signal scope for a stronger rally towards 152.70, a Fibonacci retracement. For bears, the first key support to watch is 148.18, the Mar 20 low. A breach would be bearish.
