FOREX: USD Weakness Stalls Amid Ceasefire Uncertainty
Apr-09 08:42
- Despite Tuesday’s gap lower for the dollar index on the renewed boost to risk sentiment, downside momentum has stalled as market participants grapple with uncertainty surrounding the details of the US/Iran/Israel ceasefire. There has been mixed performance across the G10, with small net adjustments for the major pairs.
- With that said, USDJPY has had the most notable jump this morning, extending the recovery from yesterday’s lows to around 115pips to trade back above 159.00. We flagged yesterday that the JPY had relatively underperformed the move on Wednesday as traders gravitated towards higher-beta plays. Today’s move higher places the pair just 40pips shy of pre-ceasefire levels, with bullish conditions very much intact. The psychological 160.00 mark and cycle highs at 160.46 remain the key resistance points.
- The Australian dollar has exhibited similar price action, falling around 0.25% to 0.7025. This is perhaps the best reflection of the waning risk sentiment, as crude prices rise over 3% and equities see some renewed selling pressure, however, the impact on FX markets remains contained in comparison.
- Conversely, NZD remains 1.5% above pre-ceasefire levels, as the kiwi continues to benefit from yesterday’s hawkish tilt to the April RBNZ meeting. As a reminder, this has prompted several analysts to bring forward their call for rate hikes this year, with September emerging as a popular candidate to begin tightening policy.
- In EM, the likes of ZAR and HUF have reversed around 0.5% of their punchy rallies yesterday, while USDMXN remains close to unchanged on the session at 17.45.
- US final reading of Q4 GDP is scheduled today, alongside PCE, personal income and weekly jobless claims. US CPI on Friday highlights the calendar this week.
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GILTS: Bull Steepening As Energy Prices Ease
Mar-10 08:33
Gilts rally in light of the extension of the pullback in oil prices, with futures trading to the highest level seen since Thursday, last +75 at 91.21.
- Bulls need to retake the 20-day EMA (91.73) to start turning the technical tide back in their favour. Note the recovery from cycle lows is allowing an extreme oversold technical condition to unwind. Initial support is 88.80, with bears remaining in technical control at this stage.
- Yields are 6-13bp lower, curve bull steepens.
- 2s are over 30bp off yesterday’s highs, while 10s are 25bp off yesterday’s top. 2s10s threatens a clean break back above 70bp after trading as low as 61.3bp yesterday.
- Elevated correlation with oil prices remains evident, with ongoing focus on the situation in the Middle East.
- Yesterday’s pullback from highs in oil extended after U.S. President Trump signalled that the war could be over “very soon”, albeit not this week. He is also pointed to a potential easing of sanctions as part of a support package to combat surging energy prices.
- BoE-dated OIS has reverted to pricing rate cuts after nearly fully discounting one 25bp rate hike through year-end at one point yesterday (see pre-gilt open STIR bullet for greater detail).
- Little of note on the UK macro calendar today, which will leave focus on geopolitical matters and wider cross-market inputs.
- On the supply front, we remain on the lookout for the syndication of the 4.625% Mar-37 green gilt, which is due to be this week’s business. We pencil in a transaction size of GBP6.0-6.5bln.
EU-BOND SYNDICATION: 10-year Dec-36 EU-bond: Guidance
Mar-10 08:29
- Guidance: 3.375% Dec-35 EU-Bond + 15bps area
- Size: E9bln WNG (MNI expected E7-9bln)
- Maturity: 12 December 2036
- Coupon: Short first
- Settlement: 17 March 2026 (T+5)
- ISIN: EU000A4ERVC2
- Bookrunners: Barclays, DZ BANK, Morgan Stanley (B&D/DM), Societe Generale and UBS
- Timing: Books open, today's business
From market source with MNI colour
GILT TECHS: (M6) Resistance To Watch Is At The 20-Day EMA
Mar-10 08:19
- RES 4: 92.47 High Mar 3 and a gap low on the daily chart
- RES 3: 92.15 High Mar 5
- RES 2: 91.73 20-day EMA
- RES 1: 91.35 Intraday high
- PRICE: 91.13 @ 08:08 GMT Mar 10
- SUP 1: 98.80 High Mar 9 and a gap high on the daily chart
- SUP 2: 89.43 Low Mar 6
- SUP 3: 88.80 Low Mar 9
- SUP 4: 88.47 1.500 proj of the Feb 27 - Mar 3 - 4 rice swing
The sharp rebound in Gilt futures is for now considered corrective and this is allowing an extreme oversold trend condition to unwind. Initial firm resistance to monitor is at the 20-day EMA, at 91.73. A clear break of this average would signal a stronger short-term reversal and possibly even a trend reversal. For bears a resumption of weakness would refocus attention on 88.80, Monday’s low.
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