BOE: VIEW CHANGE: Barclays look for quarterly cuts to 3.50% terminal

• EUR/USD: $1.1400(E1.9bln), $1.1500-10(E1.3bln)
• USD/JPY: Y138.50($560mln), Y141.00-20($808mln)
• AUD/USD: $0.6290-00(A$2.7bln), $0.6350-55(A$1.2bln)
• NZD/USD: $0.5855(N$704mln)
• USD/CAD: C$1.3975($562mln)
• USD/CNY: Cny7.3000($679mln)

SOFR options segued to low delta call plays from puts earlier, underlying futures remain weaker but off lows. Projected rate hike pricing largely steady vs. morning levels (*) as follows: May'25 -2.7bp (-3.4bp), Jun'25 at -18.4bp (-18.3bp), Jul'25 at steady at -41.6bp, Sep'25 -60.4bp (-59.5bp).

• +2,500 SFRU5/SFRV5 95.62 put spds cab
• -2,500 SFRZ6 96.25/97.25 call over risk reversals, 8.0 vs. 96.86/0.75%
• +3,000 SFRU5 95.25/95.75 put spds, 3.0
• +5,000 SFRK5 96.93/97.12/97.31 call flys 2.5 vs. 96.87/0.05%
• +2,500 SFRM6 98.75/99.00/99.75 call trees, 0.5 ref 96.85
• +4,000 SFRM6 99.00/100.00 call spds 4.25 vs. 96.855/0.10%
• +2,500 0QN5 96.75/97.00 call spd vs. 0QU5 97.25/97.75 call spds 0.25 net
• +5,000 0QK5 96.93/97.12/97.31 call flys, 2.5
• -2,500 0QU5 96.87 straddles 70.5
• +1,500 0QM5 96.87 straddles 47.5

The German labour market in the small- and medium enterprise sector is deteriorating, with employment declining 0.7% Y/Y in March according to Datev data seen by newspaper FAZ.

• "This means that job cuts, which began in the SME sector in September last year, have recently accelerated."
• The small- and medium enterprise sector, called Mittelstand, is considered of elevated importance in Germany (it is "account[ing] for around 55 percent of the workforce"), and while a deterioration in hiring perspectives there does not necessarily come unexpected, it underscores the economic turmoil apparent domestically since at least 2022.
• "Turnover in the SME sector has been shrinking for months, while wages and salaries are rising faster than inflation. According to the latest data, turnover in March was 4.5 percent lower than a year ago, while wages in the SME sector rose by 4.6 percent."

The report mirrors broader trends in the country: Latest German labour market data on balance suggested that the ongoing economic weakness in the country continues to filter through to employment metrics, and the IFO employment index suggests there is little relief in sight ('Labour Market Softening Continues' - MNI, Mar 28).