FRANCE: Three MPs Ousted Over Campaign Spending Issues

• In the FI space, the latest pullback in Bund futures still appears corrective - for now - and the trend condition remains bullish. Moving average studies are in a bull-mode position highlighting a dominant uptrend. A resumption of gains would signal scope for a climb towards 131.85, the Apr 22 high and a key resistance. Key short-term support to watch is 128.97, the May 14 low. First support lies at 130.12, the Jun 5 low.
• Gilt futures traded higher yesterday, resuming their short-term uptrend, strengthening the current bullish theme. This also marks an extension of the breach of resistance at 91.87, the May 20 high. The climb signals scope for a continuation higher and sights are on the 93.00 handle next. Initial firm support to watch lies at 91.56, the Jun 9 low. A clear break of this level is required to signal a possible reversal. For now, short-term weakness is considered corrective.

Modest SOFR & Treasury option volume overnight, SOFR leaning towards downside puts with some decent 5Y Tsy put buying as markets await this morning's key CPI inflation data. Projected rate cut pricing steady to slightly cooler vs. late Tuesday (*) as follows: Jun'25 steady at 0.0bp, Jul'25 steady at -3.6bp, Sep'25 at -16.6bp (-16.9bp), Oct'25 at -28.1bp (-28.6bp), Dec'25 at -43.1bp (-44.2bp).

• SOFR Options:
  • 5,000 SFRU5 95.50 puts, 0.5 ref 95.845
  • 1,700 SFRU5 95.75/95.81 2x1 put spds
  • 2,000 SFRU5 95.81/95.93/96.06 call flys
  • 3,000 SFRN5 95.37/95.62/95.75 broken put flys
  • 2,000 SFRZ5 95.56/95.68/95.81 put flys ref 96.08
  • 3,400 SFRU5 95.75 puts ref 95.85
  • 1,500 SFRQ5 95.81 puts, ref 95.845
• Treasury Options:
  • 2,000 TYN5 113/113.5 call spds ref 110-04.5
  • over 10,000 FVN5 107.5 puts, 14-15 ref 107-20.5
  • near 5,000 FVN5 107.5/108 strangles
  • +3,000 wk2 US 111 puts, 6-7 ref 112-14 to -17
  • Block, 8,000 TYN5 112 calls, 2 ref 110-06.5
  • 2,000 Mon wkly TY 110 puts ref 110-07.5

• Despite the subdued price action for FX markets as we approach the US inflation data, EURJPY has extended its recent rally, rising 0.3% on the session and printing back above 166. A positive close today would represent five consecutive winning sessions. Spot has significantly narrowed the gap to the US election related highs at 166.10 as equity markets remain cautiously optimistic regarding global trade negotiations.
• The hawkish reaction to last week’s ECB will likely be assisting the cross, as markets appear confident on the next leg for the single currency, but remain more wary of the short-term trajectory for the dollar. Above here, 166.69 (Oct 31 high) is a key resistance for EURJPY, before a couple of daily highs around the 168 mark. The prior breakout point at 165.21 becomes initial support.
• Lower-than-expected PPI data in Japan crossed overnight and as a reminder on Tuesday, Governor Ueda struck a dovish tone by telling parliament the central bank is still some distance from its inflation goal.
• Separately, Japan's government left its overall economic assessment unchanged for a third straight month in June but adjusted its view on corporate profits and overseas economies amid the ongoing impact of U.S. trade tariffs, the Cabinet Office said Wednesday.