AUDUSD TECHS: Trading Below The 50-Day EMA

• RES 4: 0.7358 1.764 proj of the Apr 29 - May 1 - 5 price swing 
• RES 3: 0.7343 Top of a bull channel drawn from the Apr 9 ‘25 low
• RES 2: 0.7300 Round number resistance
• RES 1: 0.7278 1.000 proj of the Apr 29 - May 1 - 5 price swing  
• PRICE: 0.7259 @ 16:12 BST May 13
• SUP 1: 0.7175 20-day EMA 
• SUP 2: 0.7097 50-day EMA 
• SUP 3: 0.6986 Low Apr 13 
• SUP 4: 0.6899 Low Apr 7

The trend needle in AUDUSD continues to point north and the pair is trading closer to its recent highs. Note too that moving average studies are in a bull-mode position, highlighting a dominant uptrend. Scope is seen for an extension towards the 0.7300 handle next. Further out, sights are on 0.7343, the top of a bull channel drawn from the Apr 9 ‘25 low. Initial support lies at the 20-day EMA, at 0.7175.  

• Treasuries are looking to finish modestly lower (mostly - as the 2Y contract holds a marginal gain after the bell), well off late morning lows on decent volumes (largely driven by early Jun/Sep roll efforts with nearly 190k in 10s by the close).
• The stalemate between the US and Iran over the Strait of Hormuz continues (though there were reports of 9 China flagged tankers that safely transited earlier), while it could be argued that sentiment improved slightly as Pres Trump travels to China with wires reporting he looks to Pres Xi for help on ending hostilities with Iran.
• Trump arrives in China with a complex slate of bilateral issues to discuss with his counterpart, including AI, tariffs, fentanyl, critical minerals, and investment. Unlike previous US-China summits, there has been a lack of intensive engagement from preliminary teams. While most analysts expect modest deliverables, there is scope for agreement on a new trade mechanism for non-sensitive goods.
• Rates took a hawkish turn after this morning's April PPI reported substantially exceeded expectations, with the details not offering much comfort either. The headline final demand PPI came in at 1.4% M/M, well above the 0.5% consensus and with an upward revision to March (0.7% from 0.5%) meant the Y/Y reading jumped to a post-2022 high 6.0% (4.8% expected).
• Boston Fed President Collins (next votes on the FOMC in 2028) continued to sound very cautious on the inflation outlook in a speech Wednesday, saying that while policy is "well positioned" the Fed can't take currently anchored inflation expectations for granted, and "I believe it will likely be important to maintain the current slightly restrictive monetary policy stance for some time".
• The trajectory of U.S. inflation depends on how long the closure of the Strait of Hormuz lasts, Federal Reserve Bank of Minneapolis President Neel Kashkari said Wednesday, warning it could take months for supply chains to recover after the key Middle East waterway reopens.
• LOOK AHEAD: Thursday Data Calendar: Import/Export, Weekly Claims, Fed Speakers

Gilts outperformed EGBs Wednesday.

• Political intrigue was at the forefront in UK rates, with focus remaining on a potential incoming Labour Party leadership challenge. The lack of an immediate, clear challenger to PM Starmer's position seemingly helped Gilts outperform.
• In data, French Q1 unemployment was higher than expected while the second estimate of Eurozone Q1 GDP confirmed flash estimates of 0.1% Q/Q.
• The German curve was relatively unchanged on the day, with the UK's bull steepening as Gilts easily outperformed EGBs.
• Periphery/semi-core EGB spreads tightened, led by BTPs and GGBs which had underperformed earlier in the week.
• Thursday's calendar includes an appearance by BOE's Pill, UK GDP and monthly activity data, along with final April inflation readings for Spain and the Netherlands.
• A reminder that the presence of Ascension Day will thin out liquidity on Thursday as many Europeans take the day off.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 0.3bps at 2.71%, 5-Yr is up 0.3bps at 2.818%, 10-Yr is down 0.1bps at 3.1%, and 30-Yr is up 0.4bps at 3.627%.
• UK: The 2-Yr yield is down 5.3bps at 4.485%, 5-Yr is down 4bps at 4.604%, 10-Yr is down 3.6bps at 5.065%, and 30-Yr is down 2.7bps at 5.74%.
• Italian BTP spread down 2.2bps at 74.5bps / Greek down 1.9bps at 70.4bps