ECB: Well Advised To Remain Cautious - Nagel

RRP usage inches up to $38.240B this afternoon from $33.757B Friday, total number of counterparties at 19. Compares to last Thursday's lowest usage of the year at $28.818B on Wednesday, April 16 -- in turn the lowest level since April 2021.

Gilts underperformed global peers to start the week.

• After strengthening in preliminary trade, in a partial reversal of Friday's sell-off, EGB and Gilt yields bottomed around 9am London time and moved steadily higher for most of the rest of the session.
• The Gilt sell-off in late afternoon stood out. While there was no particular identifiable trigger, a Guardian report that the government was considering adjustments to property taxes served as a reminder of UK fiscal woes which will be increasingly focused upon ahead of the Autumn budget.
• Additionally, anticipation of Wednesday's UK CPI report may have dampened sentiment.
• 10Y Gilt yields hit the highest levels since May, with futures piercing support at Friday's lows.
• The UK curve bear steepened, in contrast to the rally across the German curve. Periphery / semi-core EGB spreads closed little changed.
• Tuesday's fairly thin schedule includes Eurozone current account data. There will also be attention paid to a video conference of EU member state leaders (1300CET) to discuss the US-Ukraine situation.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is down 1.4bps at 1.959%, 5-Yr is down 2.1bps at 2.319%, 10-Yr is down 2.5bps at 2.763%, and 30-Yr is down 1.2bps at 3.338%.
• UK: The 2-Yr yield is up 3.2bps at 3.965%, 5-Yr is up 3.3bps at 4.123%, 10-Yr is up 4.2bps at 4.738%, and 30-Yr is up 4.7bps at 5.611%.
• Italian BTP spread down 0.8bps at 79.3bps  / French OAT up 0.3bps at 68.4bps  

• RES 4: 1.3753 High High Jul 2   
• RES 3: 1.3681 High Jul 4 
• RES 2: 1.3636 76.4% retracement of the Jul 1 - Aug1 downleg
• RES 1: 1.3595 High Aug 14
• PRICE: 1.3519 @ 16:33 BST Aug 18
• SUP 1: 1.3493 Low Aug 13  
• SUP 2: 1.3445 50-day EMA 
• SUP 3: 1.3400 Low Aug 11  
• SUP 4: 1.3346 Low Aug 7     

GBPUSD traded higher last week and the pair is holding on to its latest gains. The move higher resulted in a breach of resistance at 1.3589, the Jul 24 high. Sights are on 1.3636, the 76.4% retracement of the bear leg between Jul 1 and Aug 1. A break of this retracement would strengthen the short-term bull theme. Initial firm support to watch lies at 1.3445, the 50-day EMA. A clear break would signal a possible reversal.