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of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
Highlights:
- EUR/GBP price action highlights importance of 0.85 support
- US 2y10y consolidates to flattest level in six weeks
- Weekly claims, appearance from BoE's Pill the highlight
US TSYS: 2s10s Consolidates Flattest Levels In Six Weeks
- Treasuries have pared earlier losses, initially helped by stronger than expected German PMIs before some softer service readings elsewhere, most notably the UK. Treasuries outperform EGBs but underperform Gilts against that backdrop.
- Cash yields range from 0.5bp lower (2-3Y) to 0.2bp higher (20-30Y), pivoting beyond 10s.
- 2s10s is near unchanged at -44.3bps, consolidating the flattening over the past two days to its lowest since Apr 10/11 and last sustained for any period of time in mid-March.
- TYM4 at 109-03+ has reversed an earlier decline to 108-29+ but has remained within yesterday’s range throughout, on high volumes approaching 400k.
- Yesterday’s low of 108-28+ tested support at 108-29+ (20-day EMA) after which lies the key 108-15 (May 14 low), but this pullback appears corrective with resistance seen at the bull trigger of 109-31+ (May 16 high).
- Data: Weekly jobless claims (0830ET), Chicago Fed national activity Apr (0830ET), S&P Global US prelim PMIs May (0945ET), New home sales Apr (1000ET), KC Fed mfg May (1100ET)
- Fedspeak: Bostic in moderated Q&A (1500ET)
- Note/bonds issuance: US Tsy $16B 10Y TIPS auction re-open (1300ET)
- Bill issuance: US Tsy $80B each 4W, 8W bill auctions (1130ET)
2s10sSource: Bloomberg
STIR: Data To Trump Bostic’s Sixth Appearance Of The Week
- Fed Funds implied rates are near unchanged on the day, giving up an overnight increase to leave a rate path similar to before yesterday’s FOMC minutes (which were digested with little fanfare at the time).
- Cumulative cuts from 5.33% effective: 0.5bp Jun, 5bp Jul, 17bp Sep, 26bp Nov and 40bp Dec.
- Today sees the sixth appearance of the week for Atlanta Fed’s Bostic (’24 voter) – speaking in a student Q&A – with greater focus on initial jobless claims for a payrolls reference period and preliminary US PMIs.
- Bostic’s prior appearances can be summed up by him still not expecting to cut rates before Q4, noting that rates are restrictive but their efficacy could be weaker.
- Goldman Sachs CEO David Solomon yesterday said he sees zero rate cuts this year.
STIR: OI Suggests Short Setting Dominated Through The SOFR Greens On Wednesday
The combination of yesterday’s downtick in SOFR futures and preliminary OI data points to a mix of net short setting and long cover through the blues.
- Short setting dominated in the whites, reds and greens in net pack OI terms, with pockets or long cover seen in the whites and reds.
- The move came on the back of spill over from firmer-than-expected UK CPI data and digestion of the minutes covering the most recent FOMC decision.
- That leaves ~40bp of ’24 Fed cuts priced at typing.
| 22-May-24 | 21-May-24 | Daily OI Change | Daily OI Change In Packs | ||
| SFRH4 | 937,472 | 936,413 | +1,059 | Whites | +22,630 |
| SFRM4 | 1,229,160 | 1,249,759 | -20,599 | Reds | +17,556 |
| SFRU4 | 1,125,564 | 1,113,251 | +12,313 | Greens | +30,268 |
| SFRZ4 | 1,236,659 | 1,206,802 | +29,857 | Blues | +395 |
| SFRH5 | 804,078 | 794,105 | +9,973 | ||
| SFRM5 | 794,828 | 794,445 | +383 | ||
| SFRU5 | 706,459 | 693,589 | +12,870 | ||
| SFRZ5 | 817,784 | 823,454 | -5,670 | ||
| SFRH6 | 551,702 | 540,874 | +10,828 | ||
| SFRM6 | 536,056 | 525,935 | +10,121 | ||
| SFRU6 | 432,541 | 424,359 | +8,182 | ||
| SFRZ6 | 367,345 | 366,208 | +1,137 | ||
| SFRH7 | 253,607 | 253,653 | -46 | ||
| SFRM7 | 189,681 | 187,240 | +2,441 | ||
| SFRU7 | 173,935 | 175,755 | -1,820 | ||
| SFRZ7 | 161,178 | 161,358 | -180 |
FOREX: EURGBP Highlights Importance of 0.85 Key Support
- GBPUSD slips to session lows in recent trade, breaking out of a narrow overnight range as markets digest a busy Wednesday which included the hotter-than-expected CPI and the surprise announcement of a snap election. In similar vein, EURGBP has had a 25 pip bounce from session lows, assisted by the stronger-than-expected German PMI. Furthermore, participants will be aware of the 0.8500 handle marking an important support over the past 18 months.
- The cross has failed to close below 0.8500 since August 2022, with several tests over the past year being well respected.
- Technically we noted that Wednesday’s move resulted in a break of short-term support at 0.8531, the Apr 30 low, confirming an extension of the reversal that started May 9. Note that the key support and bear trigger lies at 0.8493, and a sustained breach of this point would be required to enhance bearish momentum.
- Despite betting markets expecting a smooth Starmer victory on July 04, both the expectation of an increase in political noise and the prospects of a Labour government for the UK economy could pose downside risks for sterling.
- With that said, if 0.8500 continues to hold in, markets will initially target a recovery towards 0.8566, the 20-day EMA. Above here, the Apr 23 high and bull trigger is at 0.8645.
FOREX: EUR/GBP Decline Slows as UK PMI Underwhelms
- European PMI data has dictated play across Europe, with the services sector edging below expectations while manufacturing was firmer, but off a lower base. UK PMI numbers were a particular point of weakness, and helped slow the recent decline in EUR/GBP, which broke through support after UK CPI data yesterday.
- The leaves GBP among the poorest performers in G10, while JPY trades similarly weak. Asset price volatility has hit new lows, with S&P500 implied vols hitting new multi-year lows today helping markets lean further on carry trades and weigh on funding currencies. The JPY trade-weighted index touched a new post-intervention low as a result, narrowing the gap with the April low to ~1.5%.
- The USD Index has faded off the 50-dma resistance of 104.973, which remains key resistance for the bounce off May lows. The Fed minutes out late yesterday underpinned a minor rally in the greenback, but momentum has not been sustained into the Thursday US open.
- Focus for the session ahead turns to the weekly jobless claims data and preliminary US PMI. Central bank speak is led by BoE's Pill and ECB's Villeroy. Fed's Bostic makes an appearance, but is not expected to speak in depth on monetary policy.
OPTIONS: Expiries for May23 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0755-75(E772mln), $1.0900(E1.5bln)
- GBP/USD: $1.2670-90(Gbp571mln), $1.2735-55(Gbp776mln)
- USD/CAD: C$1.3600($639mln), C$1.3665-75($929mln)
COMMODITIES: Gold Fades Off Recent High
Gold has pulled back from its recent high. The medium-term trend structure remains bullish and short-term weakness is considered corrective. Monday’s initial gains resulted in a print above resistance at $2431.5, the Apr 12 high and bull trigger. WTI futures have pulled back from their most recent highs. A bearish theme remains intact. Price has recently traded below the 50-day EMA, strengthening a bearish set-up that highlights potential for a deeper correction.
EQUITIES: Recent Eurostoxx50 Pullback Appears Corrective
The uptrend in S&P E-Minis remains intact and the contract has traded to a fresh cycle high today. Recent gains have resulted in a break of a key resistance at 5333.50, the Apr 1 high. This confirmed a resumption of the primary uptrend and has signalled scope for a climb to 5372.73. A bullish theme in Eurostoxx 50 futures remains intact and the recent pullback appears to be a correction. The contract has recently cleared key resistance at 5079.00, the Apr 2 high, to confirm a resumption of the uptrend.
| Date | GMT/Local | Impact | Country | Event |
| 23/05/2024 | 1100/0700 | *** |  TR | Turkey Benchmark Rate |
| 23/05/2024 | - |  EU | G7 Finance/CB Meet | |
| 23/05/2024 | 1230/0830 | *** |  US | Jobless Claims |
| 23/05/2024 | 1230/0830 | ** |  US | WASDE Weekly Import/Export |
| 23/05/2024 | 1345/0945 | *** |  US | S&P Global Manufacturing Index (Flash) |
| 23/05/2024 | 1345/0945 | *** |  US | S&P Global Services Index (flash) |
| 23/05/2024 | 1400/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 23/05/2024 | 1400/1000 | *** |  US | New Home Sales |
| 23/05/2024 | 1430/1030 | ** |  US | Natural Gas Stocks |
| 23/05/2024 | 1500/1100 | ** |  US | Kansas City Fed Manufacturing Index |
| 23/05/2024 | 1530/1130 | * |  US | US Bill 08 Week Treasury Auction Result |
| 23/05/2024 | 1530/1130 | ** |  US | US Bill 04 Week Treasury Auction Result |
| 23/05/2024 | 1700/1300 | ** |  US | US Treasury Auction Result for TIPS 10 Year Note |
| 23/05/2024 | 1900/1500 |  US | Atlanta Fed's Raphael Bostic | |
| 24/05/2024 | 2301/0001 | ** |  GB | Gfk Monthly Consumer Confidence |
| 24/05/2024 | 2330/0830 | *** |  JP | CPI |
| 24/05/2024 | 0600/0700 | *** |  GB | Retail Sales |
| 24/05/2024 | 0600/0800 | *** |  DE | GDP (f) |
| 24/05/2024 | 0600/0800 | ** |  SE | PPI |
| 24/05/2024 | 0645/0845 | ** |  FR | Manufacturing Sentiment |
| 24/05/2024 | 0700/0900 | ** |  ES | PPI |
| 24/05/2024 | 0700/0900 |  EU | ECB's Schnabel speech at Germany PhD conference | |
| 24/05/2024 | 1230/0830 | * |  CA | Quarterly financial statistics for enterprises |
| 24/05/2024 | 1230/0830 | ** |  CA | Retail Trade |
| 24/05/2024 | 1230/0830 | ** |  US | Durable Goods New Orders |
| 24/05/2024 | 1335/0935 |  US | Fed Governor Christopher Waller | |
| 24/05/2024 | 1400/1000 | ** |  US | U. Mich. Survey of Consumers |
| 24/05/2024 | 1700/1300 | ** |  US | Baker Hughes Rig Count Overview - Weekly |
Why MNI
MNI is the leading provider
of intelligence and analysis on the Global Fixed Income, Foreign Exchange and Energy markets. We use an innovative combination of real-time analysis, deep fundamental research and journalism to provide unique and actionable insights for traders and investors. Our "All signal, no noise" approach drives an intelligence service that is succinct and timely, which is highly regarded by our time constrained client base.Our Head Office is in London with offices in Chicago, Washington and Beijing, as well as an on the ground presence in other major financial centres across the world.
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