FOREX: USD Index Off Lows as Yield Curve Consolidates Steepening
May-22 09:24
- The USD Index trades higher, with the greenback gaining against most others in G10 as the long-end of the yield curve consolidates after yesterday's upside. The 30y yield hit 5.1% at the high, and holds within range of that level into the NY crossover, as angst over the White House's fiscal plans continues to play out in bond markets. A vote on the Big Beautiful Bill could come imminently as the House pulls an all-nighter, leaving ample headline risk ahead of the Thursday opening bell.
- USD/JPY makes light work of overnight lows following the European PMIs. German and French prelim data held up well for manufacturing, but showed a services sector that remains weaker than forecast. This morning's price action sees spot drift through downtrendline support drawn off the May 14 low on the 15-minute candle chart (trendline last at 142.99), extending the downside scope to include layered support between 141.99 - 142.36.
- The strong co-movement between USD/JPY and longer-end US yields remain the key driver here, a relationship that's firmed since mid-March - and the cemented break above 5% in 30-year yields this week poses further downside risks for USDJPY.
- Prelim US PMI numbers due later today are expected to show US activity broadly inline with April - showing generally few material signs of an economic slowdown as a result of Trump's tariffs. Existing home sales and weekly jobless claims data are also due. The central bank speaker slate is busier, with BoE's Breeden, Dhingra & Pill all set to speak - and comment touching on this week's higher-than-expected UK inflation print will be carefully watched. Fed's Barkin & Williams are also set to make appearances, as well as ECB's Elderson, de Guindos & Nagel.
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AUSTRIA T-BILL AUCTION RESULTS: 3/6-Month RATBs
Apr-22 09:20
| Type | 3-month ATB | 6-month ATB |
| Maturity | Jul 24, 2025 | Oct 30, 2025 |
| Allotted | E780mln | E779mln |
| Previous | E803mln | E822mln |
| Amount | E1bln | E1bln |
| Target | E1bln | E1bln |
| Previous | E1bln | E1bln |
| Avg yield | 2.110% | 1.960% |
| Previous | 2.250% | 2.410% |
| Bid-to-cover | 1.69x | 1.8x |
| Previous | 1.78x | 2.76x |
| Bid-to-offer | 1.32x | 1.4x |
| Previous | 1.43x | 2.27x |
| Previous date | Mar 25, 2025 | Jan 28, 2025 |
BOE: Greene no longer uses "cautious" to describe her forward looking view
Apr-22 09:16
- Perhaps the most significant thing that we heard from Megan Greene in her Bloomberg TV interview today was what she didn't say. She said that over the past eight months she had been more on the "cautious" side of the cutting cycle. But she didn't use either of the recent MPC buzzwords ("careful", "cautious" or "gradual") when describing her view going forward.
- She said that she thought there were risks on both sides but that "the tariffs actually represent more of a dis inflationary risk than an inflationary risk, though, and so we'll have to see how that develops going forward."
- She was very careful not to pre-commit to anything other than noting that investors saw the neutral rate between 3.25-3.50% "I don't think that's totally unreasonable."
- Recall that the MPC had a debate about whether to use "careful" or "cautious" in their February official communication and decided to go with "careful" - implying that "cautious" was too strong and directional at the time. But "cautious" was then used by Greene in March and by Pill in February (both post February MPR) - two of the more hawkish members of the MPC.
- In fact on 5 March, Greene said "While the disinflationary trend is broadly intact, I believe it is appropriate to maintain a cautious and gradual approach to removing monetary restrictiveness."
- Today's comments seem to be a step down - but the market has already repriced since Greene's last comments so are not a huge surprise.
FOREX: EURUSD Consolidates Above 1.1495 Pivot Resistance
Apr-22 09:13
- The significant EURUSD rally was bolstered on Monday following a quick surge through the 1.15 handle. The pair reached fresh cycle highs at 1.1573, the highest print since Nov 2021, extending the recovery off the Feb 03 lows to an impressive 14.1%.
- Spot has recently broken some notable trendlines, and the latest rally has seen a breach of an important pivot resistance level at 1.1495, of which we have spent the majority of Tuesday’s session consolidating above. The break higher maintains the price sequence of higher highs and higher lows and note that moving average studies continue to signal a dominant uptrend. The focus is on 1.1608 next, the Nov 9 2021 high.
- ING acknowledge picking a top in the pair has proven a frustrating exercise. While they still see 1.13 as a more likely quarter-end target, they admit the risks remain markedly skewed to further deviations on the upside. If the Fed caves to Trump’s pressure and cuts rates, the damage to the dollar might be enough to take EURUSD to 1.20. ING would however see that more as the top of the dollar’s confidence crisis rather than a new normal for the pair.
- Eurozone flash PMIs highlight the economic calendar this week, providing the latest growth indications as the tariff-war permeates. The data is particularly pertinent given ECB rhetoric has made clear that downside growth risks have increased, and the probability of a June ECB cut currently stands ~90%.
