ENERGY: WSJ's Norman Says E3 Offered One-Off Extension of Snapback Deadline

The state-levels details of jobless claims data suggest recent increases in non-seasonally adjusted initial claims has been driven by increases in a relatively narrow range of states although a lack of improvement ahead would be notable.

• Adding to the above on jobless claims data, the seasonally adjusted initial claims figures have started to push higher with their highest four-week moving average since Aug 2023.
• The non-seasonally adjusted level of initial claims mostly support this, lifting a little in the past two weeks compared to non-pandemic years although as top left chart shows it’s not wildly different to readings from 2023 and 2024 for the same time of year.
• Of the increase that we have seen, with NSA initial claims rising a cumulative 27k in the latest two weeks, 7.5k has come from California (largest state, similar to 2024 but otherwise elevated) whilst more notable increases for their size have come from Minnesota (+5.9k) and Pennsylvania (+7.7k).
• These latter two are somewhat linked to seasonal norms,  but would start to be more notable if they don’t roll over shortly, especially Minnesota.

FOR THE FULL PUBLICATION PLEASE CLICK HERE

EXECUTIVE SUMMARY: 

• The Riksbank cut rates by 25bp to 2.00% as widely expected. The June policy statement noted that “the economic recovery that began last year has lost momentum, and inflation is expected to be somewhat lower than in the previous forecast". As such, the June rate path was revised lower through the policy horizon.
• In the press conference, Governor Thedeen noted that inflation, wages and the krona were not posing upside risks to the rate outlook. As such, it made sense to lend a little more support to economic activity with another rate cut in June, following through on the slight dovish tilt made in May.
• The updated rate path assigns an average policy rate of 1.99% in Q3 and 1.92% in Q4. This is broadly in line with some of the analyst estimates we had seen ahead of the decision, and is consistent with a ~50% probability of one more 25bp cut in H2 2025. In the press conference, Governor Thedeen sought to play down the dovish signal from the front-end of the path, noting that is the “best assessment” of the outlook ahead and not a promise.
• However, the back-end of the rate path was also revised lower, a more dovish development relative to expectations. The “terminal” point of the rate path in Q1 2028 was 2.01%, well below the 2.25% level that had anchored long-end projections since the September 2024 decision. 

• Volumes along the Euribor strip are still below averages and are limited, the strip is still leaning on the Flatter side, with similar moves seen in Core Govie curves.
• Latest notable flow in the strip is seen in ERZ5, just bought in over 5k.