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E-MINI S&P (Z1): Tests The 50-Day EMA


EGB Supply For W/C Nov 29, 2021


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  • Once again, much focus on the higher front-end of the UK Gilt curve and money markets bringing forward pricing for the expected beginning of a tightening cycle from the BoE. Money markets now pricing circa 25bps for December this year, with rates seen reaching 1% by November 2022.
  • Despite the move in UK fixed income, GBP is seeing no reprieve, with the currency strictly mid-table against the rest of G10.
  • This isn't a new phenomenon, with sell-side commenting on the divergence between FI / FX, with some speculating higher rates in the near-term will crimp a consumer already exposed to high energy and import prices and a greater tax burden in 2022.
  • Forward-looking GBP/USD 3m risk reversals capture the date of a possible BoE rate hike and remain heavily in favour of puts over calls, reinforcing the narrative that GBP may not benefit from the imminent beginning of higher rates.
  • Chart below shows EUR/GBP failing to keep pace with a widening gap in EZ/UK rate expectations: