STIR: Tomorrow's Flash PMIs Remain The Primary Risk For ECB Pricing
The primary risk event for ECB pricing this week remains tomorrow’s February flash PMIs, with ECB-dated OIS currently assigning a 55% implied probability of a 25bp cut in April. The PMIs are unlikely to deter expectations for a 25bp cut in March though, which is still essentially fully priced.
- Flash February Eurozone consumer confidence headlines today’s regional calendar. The increasing trend since September 2022 has stalled somewhat in recent months, and consensus (-14.0) expects only a slight improvement from January’s -14.2 reading. ECBspeak is scheduled from Makhlouf and Nagel.
- Euribor futures were dragged higher by SOFR counterparts following the FOMC minutes, but have since moved away from session highs. Futures are flat to -1.0 ticks through the blues versus yesterday’s settlement levels at typing.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Mar-25 | 2.426 | -23.9 |
| Apr-25 | 2.288 | -37.7 |
| Jun-25 | 2.123 | -54.2 |
| Jul-25 | 2.070 | -59.5 |
| Sep-25 | 1.999 | -66.6 |
| Oct-25 | 1.978 | -68.7 |
| Dec-25 | 1.943 | -72.2 |
| Feb-26 | 1.941 | -72.4 |
| Source: MNI/Bloomberg. | ||
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UK DMO UPDATE: Consultation Findings
The DMO has released the minutes of yesterday's consultations with gilt market participants. The findings surrounding issuance preferences are outlined below:
- There was GEMM support for "a reduction in the duration of conventional gilt issuance in 2025-26 relative to the current year [...] some attendees cited declining structural demand for gilts from the UK pension sector as a factor in their recommendation to reduce long issuance."
- "Mixed views were expressed about the number and sizes of syndications that could be scheduled in 2025-26, although most participants were supportive of their continued use next year. There were also isolated calls for auctions to be scheduled less frequently but in larger sizes than in 2024-25."
- "A number of attendees suggested that the proportion of index-linked gilt issuance could again be set at a reduced level in 2025-26 relative to previous years"
- "Attendees noted the importance of maintaining some flexibility in the delivery of the remit [...] calls for more regular use of gilt tenders as a means to deliver financing in response to demand and market conditions."
- "Continued issuance of green gilts next year was supported by attendees"
- "Some participants recommended that the average sizes of gilt auctions could be increased in 2025-26 relative to the current year, with a few suggestions that individual gilt lines could also be built to larger sizes."
- "A number of attendees suggested that issuance of Treasury bills should make a positive net contribution to financing in 2025-26"
- "The DMO's financing remit for 2025-26 will be published alongside the Spring forecast on 26 March 2025, following an updated OBR EFO"
USDCAD TECHS: Breaches Support
- RES 4: 1.4669 2.0% 10-dma envelope
- RES 3: 1.4564 3.500 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 2: 1.4539 3.382 proj of the Oct 17 - Nov 1 - 6 price swing
- RES 1: 1.4516 Intraday high
- PRICE: 1.4439@ 08:16 GMT Jan 21
- SUP 1: 1.4261 Low Jan 20
- SUP 2: 1.4230 50-day EMA
- SUP 3: 1.4120 Low Dec 11
- SUP 4: 1.4011 Low Dec 5
USDCAD price action is volatile this week. A sharp sell-off yesterday resulted in a print below support at 1.4280, the 20-day EMA. Price has also traded through the 20-day EMA, at 1.4359. The pullback was short-lived and today’s reversal higher has delivered a fresh trend high of 1.4516. This highlights the fact that the uptrend remains intact and a continuation higher would open 1.4539, a Fibonacci projection. 1.4230, the 50-day EMA, marks key support.
AUDUSD TECHS: Gains Considered Corrective
- RES 4: 0.6429 High Dec 12
- RES 3: 0.6384 High Dec 13
- RES 2: 0.6333 50-day EMA
- RES 1: 0.6302 High Jan 6
- PRICE: 0.6233 @ 08:09 GMT Jan 21
- SUP 1: 0.6131 Low Jan 13 and the bear trigger
- SUP 3: 0.6100 Round number support
- SUP 3: 0.6045 1.500 proj of the Sep 30 - Nov 6 - 7 price swing
- SUP 4: 0.5994 1.618proj of the Sep 30 - Nov 6 - 7 price swing
A bearish trend condition in AUDUSD remains intact and the latest recovery appears corrective. The pair has recently breached 0.6179, Dec 31 low, maintaining the price sequence of lower lows and lower highs. Moving average studies are in a bear-mode position too. Scope is seen for a move towards 0.6100. Resistance at 0.6233, the 20-day EMA, has been pierced. The next resistance to watch is 0.6333, the 50-day EMA.
