FOREX: Steady Trade into Key US Datapoints
Sep-04 09:35
- Markets are generally quiet headed into the NY crossover, with an early phase of USD buying through the open broadly matching the price patterns we've seen so far this week. Volumes are lighter than average despite the minor move higher in the dollar, with EUR, JPY and GBP futures volumes ~30% below average for this time of day - although the roll into Z5 may be clouding this picture somewhat.
- Bucking the recent trend, GBP is seen firmer. Newsflow and fresh headlines are few and far between, with markets narrowing in on November 26th for the UK Budget announcement, which marks the next major macro event. For now, the bear threat in GBPUSD remains present following Tuesday’s sell-off. The pair has traded through a key support at 1.3391, the Aug 22 low. This signals scope for a deeper retracement and exposes 1.3315 next, a Fibonacci retracement. Clearance of this level would strengthen a bearish threat.
- Headlines suggesting that Japan and the US are in the final stages of talks to implement lower tariffs on Japanese automobile imports provided a moderate boost to the yen, allowing USDJPY to decline around 20 pips off the 148.41 session highs. Overall, the pair is operating within a relatively contained 60 pip range as investors await the plethora of US data this afternoon which includes ADP employment, weekly jobless claims and the ISM Services PMI. While all
important data points, a decisive breakout for USDJPY is unlikely ahead of tomorrow's employment report. - Larger FX options rolling off today include decent interest in and around 1.1629-80 (totalling close to E5bln) in EURUSD, while the interest in USDJPY is seen lower; $1.4bln is set to roll off at the Tuesday lows of Y147.00-15. The most sizeable AUD strike is north of yesterday's highs at 0.6595-00.
- ECB speakers today include Cipollone, who appears in EU Parliament and marks the likely last ECB speaker before the media blackout period into next week's rate decision - so is unlikely to deter markets from their current path at this stage. Fed's Williams is set to follow at the midpoint of the US session, speaking on the economic outlook and monetary policy.
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GERMAN AUCTION RESULTS: 1.90% Sep-27 Schatz
Aug-05 09:32
| 1.90% Sep-27 Schatz | Previous | |
| ISIN | DE000BU22106 | |
| Total sold | E5bln | E5bln |
| Allotted | E3.916bln | E3.899bln |
| Avg yield | 1.90% | 1.87% |
| Bid-to-offer | 1.97x | 1.81x |
| Bid-to-cover | 2.51x | 2.33x |
| Avg Price | 99.995 | 100.064 |
| Low Price | 99.995 | 100.060 |
| Pre-auction mid | 99.983 | |
| Previous date | 15-Jul-25 |
GILTS: Basis Trade
Aug-05 09:29
Gilt Basis trade:
- G U5 ~1.46k at 92.54.
BONDS: 10-year Gilt/Bund Spread Tightens Post Auction
Aug-05 09:25
Solid demand at today’s 10-year Gilt auction helps the Gilt/Bund spread fully unwind early widening. The spread is now 0.5bps tighter on the session at 188bps, after reaching a high of 190bps ahead of the Gilt supply.
- 10-year Gilt yields are currently 4.51%, eyeing another test of the 4.50% level which provided support earlier this morning. The UK curve is lightly twist flatter, with 2-year yields up 0.5bps.
- German yields are up to 1bp higher across the curve, ahead of E5bln 1.90% Sep-27 Schatz supply at 1030BST.
- 10-year EGB spreads to Bunds are within 0.5bps of yesterday’s closing levels. Austria sold 8/10-year RAGBs this morning.
- Gilt and Bund futures are up to 5 ticks above yesterday’s settlement levels, still holding onto most of Friday’s US labour market report-inspired rally. A bullish theme is currently intact in both contracts.
- Today’s regional data calendar has been heavy, but not very market moving. Industrial production was stronger-than-expected in France and Spain, while the Eurozone final July services/composite PMIs saw marginal downward revisions. Eurozone June PPI was 0.8% M/M (vs 0.9% cons, -0.6% prior).
- The UK final July services PMI was revised up to 51.8 (vs 51.2 flash), but labour market details remain weak.
- Broader focus remains on Thursday’s BOE decision. MNI preview here.
