MEXICO: Volatile Session for MXN, Resilience Prevails Amid Trade Talks
Jun-06 16:36
- The peso has exhibited volatility in the aftermath of the US employment report, with USDMXN posting a 19.0950/19.22 range. Higher US yields and the associated move higher for broad dollar indices prompted a momentary recovery for the pair, however, the most recent trend of a strengthening peso is prevailing as we approach the weekend.
- Optimism surrounding US/China negotiations continues to fuel the impressive rally for major equity benchmarks, sentiment that has been supporting emerging market currencies. The fact that Economy Minister Ebrard are speaking today appears to be providing an additional tailwind, especially after the overnight reports stated that Mexico’s ambassador to the US had a very positive meeting in Washington, citing productive discussions on the issue of a tax on remittances.
- A close at current levels would provide another lowest close for the cycle, bolstering bearish conditions following the significant range breakout in April. Price action has narrowed the gap to the September/October lows between 19.06-11, and comes despite the pessimism surrounding the Mexican growth trajectory and the heightened dovish profile of the central bank.
- Further out, potential is seen for an extension towards 18.7774, the 50.0% retracement of the Apr 9 ‘24 - Feb 3 bull leg, followed by the Aug ’24 lows around the 18.60 mark.
- As noted, May inflation data headlines the economic calendar next week.
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US TSY FUTURES: BLOCK: Jun'25 2Y/10Y Ultra-Bond Flattener
May-07 16:29
More curve crosses: latest 2s/10Y ultra posted at 1220:50ET, DV01 $307,000:
- -8,333 TUM5 103-21.62, post time offer vs.
- +3,500 UXYM5 113-23.5, buy through 113-23 post time offer
BONDS: EGB-GILTS CASH CLOSE: Curves Bull Flatten Ahead Of BOE Tomorrow
May-07 16:22
The German and UK cash curves bull flattened Wednesday, with Bunds lightly outperforming Gilts.
- There was no obvious headline trigger for the bid that began mid-morning, but strength extended through the session as equities and oil/gas benchmarks moved away from highs.
- 10-year Bund yields ended the session down 6.5bps to 2.47%, with Gilts down 5.4bps to 4.46%.
- The space largely brushed aside a Reuters sources article detailing German defence spending plans, with the piece lacking clarity on whether the touted E60bln of additional spending is for 2025 alone or split across the current parliamentary term.
- Today’s LT OAT and 5-year Gilt auctions saw solid results.
- 10-year EGB spreads to Bunds tightened through the morning, but the moves partially unwound in the afternoon alongside continued equity weakness.
- Eurozone data (strong German factory orders, weak Italian retail sales and in-line Eurozone retail sales) were not market movers.
- Tomorrow’s focus is on the BOE decision. An outcome other than a 25bp cut would be surprising but there will be a number of things to watch: any changes to the guidance and the inflation / growth forecast changes, the vote split and the introduction of new scenarios. (MNI preview here).
OPTIONS: Larger FX Option Pipeline
May-07 16:18
- EUR/USD: May09 $1.1300(E1.3bln), $1.1375-85(E954mln), $1.1400-10(E1.1bln); May13 $1.1370-75(E1.7bln)
- USD/JPY: May09 Y141.00($1.3bln), Y145.00($1.9bln); May12 Y142.45-50($1.0bln), Y145.00($1.5bln)
- USD/CAD: May09 C$1.3700($1.2bln), C$1.3750($1.3bln), C$1.4170($1.0bln)
