Highlights:
- Bundesrat formally pass fiscal reform, clearing path for more activist German government
- China's central bank reaffirm their intentions to ease policy this year
- Canadian retail sales expected to add to argument for near-term economic weakness
- Treasuries are close to session highs for modest gains amidst mild risk-off flows more broadly (S&P 500 futures -0.4%, WTI futures -0.3%), and with similar gains in EGBs.
- Today sees a thin docket, with likely additional focus on US policy headlines.
- Cash yields are between 1-2bp lower on the day, with the front-end leading declines as it continues to pull back from pre-FOMC recent hawkish extremes.
- TYM5 at 111-08 (+ 02+) is close to session highs but is firmly within recent ranges, on modest cumulative volumes of 280k.
- The technical backdrop points to a bullish theme, with yesterday’s 111-17+ marking a step back closer to resistance at 111-25 (Mar 11 high) after which lies 112-01/02 (Mar 4 high, Fibo projection). To the downside, support at 110-19 (20-day EMA).
- Fedspeak: Goolsbee (0830ET), Williams (0905ET) – see STIR bullet
STIR: Doves To Kickstart Fedspeak
- Fed Funds implied rates consolidate yesterday’s decline, with rates little changed overnight.
- Cumulative cuts from 4.33% effective: 5.5bp May, 20.5bp Jun, 32bp Jul and 69bp Dec.
- There’s no data of note today with focus instead on the first post-FOMC Fedspeak.
- 0830ET – Goolsbee (’25 voter, dove) on CNBC. He said Feb 28 that he was comfortable that the Fed is on a path to 2% inflation whilst being “partly” concerned about slow growth and inflation risks. Before that, on Feb 24, he still supported a wait-and-see approach on Trump policies.
- 0905ET – Williams (perm. voter, dovish leaning) keynote remarks (text + Q&A). He said Feb 11 that mon pol is “modestly” restrictive, a term that has been used by hawks and could be considered less dovish vs his previous commentary in mid-January (“somewhat” restrictive): "Monetary policy is well positioned to achieve maximum employment and price stability. The modestly restrictive stance of policy should support the return to 2% inflation while sustaining solid economic growth and labor market conditions. But it’s important to note that the economic outlook remains highly uncertain, particularly around potential fiscal, trade, immigration, and regulatory policies."
BUNDS: /SWAPS: Bundesrat Passes Fiscal Bill, Reaction In Bunds Limited
Little net reaction in Bund futures as the Bundesrat passes incoming Chancellor Merz’s fiscal package – a move that was widely expected. Bunds are +30 ticks today at 128.48 at typing.
- The bill’s passing appears to have provided some counter to today’s risk-off driven widening in German ASWs (vs. 3-month Euribor) though. Bund ASWs are 1.2bps wider today at -11.2bps, down from a high of -10.8bps.
- Long-end ASWs have gradually pulled away from the cycle lows reached in the immediate aftermath of Merz’s March 4 fiscal announcement. This likely represents some profit taking and an understanding that eventual increases in issuance burdens will take time to materialise (the start of which is expected to be skewed into H2 2025).
- Fundamentals still screen bearish for long end ASWs though, with participants now focused on the size and maturity profile of any such German issuance increases.
TURKEY: Rout on Turkish Stocks Continue, Bank Index Down 9%
Turkish markets remain highly turbulent, with the Borsa Istanbul Index down 7% after triggering another circuit breaker. The Banking Index is 9% lower, bringing losses this week to over 25%. The lira sits 0.5% lower versus the greenback.
- As a reminder, the central bank delivered a 200bp hike to the overnight lending rate yesterday, taking it from 44% to 46%. The bank also said it would suspend lending at its lower, benchmark one-week repo rate of 42.5% for an unspecified period.
- The moves have seemingly helped ease offshore borrowing costs – which have shown at around 90% this morning after a spike to around 175% earlier in the week. According to Goldman Sachs, the CBRT’s measures yesterday were aimed at containing outflows from lira deposits. SocGen strategists say the Turkish central bank is likely to focus on stabilising the lira as much as possible in the coming period.
- SocGen no longer expects the central bank to cut rates in April but says the bar for a policy rate hike also seems high. Goldman Sachs, also see a reduced chance of a cut at the April 17 meeting.
CHINA: PBoC Again Stress Need of Strengthening Rate Policy Implementation
The PBOC state they are to strengthen the coordination of monetary and fiscal policy, and recommend increasing the intensity of monetary policy. They add that they will cut the Reserve Requirement Ratio and rates at an appropriate time.
Nothing too far outside of expectations from the PBOC here (hence no reaction in CNH) - this is their quarterly monetary policy meeting - so not publicised, but not totally unexpected here.
- Expectations continue to build for a RRR cut this year - even in the China Securities Daily overnight there was a piece citing analysts on seeing further rate cuts (potentially RRR, LPR or both) across 2025.
FOREX: Softer Equity Picture Underpins USD
- Equities in European are extending a moderation off recent highs, with core European bourses off 0.5-0.9% as flow-driven profit-taking remains a dominant theme in cross-asset markets. For currencies, this has translated to another push higher for the USD, although Scandi currencies are the outperformers on the day.
- JPY is the weakest in G10. The Rengo union have moderated their pay demand slightly in the final tally - although the demand for an average wage hike of 5.40% remains the largest pay demand for over three decades. USD/JPY has gravitated back toward the Y150.00 handle, however broader trend signals continue to point to a bearish condition, pointing to Y148.35 as key support.
- Of note, the pair will also imminently print a death cross (50-dma < 200-dma) for the first time since September of last year, which may further suggest that the recovery off recent lows has been corrective in nature.
- UK public finances data served as a further reminder of the precarious position of the UK fiscal condition ahead of next week's Spring statement. While this morning's data won't feature in the OBR's forecasting round (cut-off was last month), GBP is among the poorest performers on the day, meaning GBP/USD extended the pullback off the cycle high printed this week to not far off 100 pips.
- Canadian retail sales are the data highlight Friday, with markets expecting sales to have declined 0.4% across January, set to add more evidence to the building argument that the Canadian economy is faltering in the near-term. The FOMC's media blackout period has now concluded, meaning markets look ahead to appearances from Fed's Goolsbee and Williams - both speaking across the US morning.
OPTIONS: EUR/USD Within Range of Sizeable Strike
Larger strikes rolling off today include E1.2bln at $1.0800 in EUR/USD, $1.7bln at Y149.00 and $1.0bln at Y149.58-75 in USD/JPY, E787mln at 0.8350-55 in EUR/GBP and A$700mln at 0.6300-01 in AUD/USD.
Full list here:
Expiries for Mar21 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0785(E764mln), $1.0800(E1.2bln), $1.0900(E1.5bln)
- USD/JPY: Y148.48-50($519mln), Y149.00($1.7bln), Y149.58-75($1.0bln), Y149.85-00($2.0bln)
- EUR/GBP: Gbp0.8350-55(E787mln), Gbp0.8400(E600mln)
- AUD/USD: $0.6300-01(A$697mln)
- USD/CAD: C$1.4280-00($3.8bln)
- USD/CNY: Cny7.2430($600mln)
EQUITIES: E-Mini S&P Trend Bearish, Shallow Recoveries Deemed Corrective
- Eurostoxx 50 futures continue to trade above their recent lows. The medium-term trend direction remains up and the recent pullback is considered corrective. Support to watch is the 50-day EMA, at 5282.03. It has recently been pierced. A clear break of it would highlight a stronger short-term bear threat and suggest scope for a retracement towards 5160.00, the Feb 4 low. The bull trigger is 5516.00, the Mar 3 high.
- The trend condition in S&P E-Minis is bearish and the latest recovery appears corrective. Moving average studies are unchanged and remain in a bear-mode set-up highlighting a dominant downtrend. Sights are on 5483.50, a Fibonacci projection. Note that the short-term trend condition is oversold. Recent gains are allowing this set-up to unwind. Firm resistance to watch is 5937.64, the 50-day EMA. The bear trigger is 5559.75, the Mar 13 low.
COMMODITIES: WTI Futures Close to Week's High, But Shy of Initial Resistance
- A bearish condition in WTI futures remains intact and the latest recovery appears corrective - for now. Recent weakness resulted in a breach of $69.80, the Feb 4 low. This confirmed a resumption of the downtrend that started Jan 15 and has paved the way for an extension towards $63.73 next, the Oct 10 ‘24 low. MA studies are in a bear-mode position, highlighting a dominant downtrend. Key pivot resistance to watch is $69.15, 50-day EMA.
- A clear uptrend in Gold is intact and this week’s resumption of the bull cycle reinforces current conditions. The yellow metal is holding on to the bulk of its recent gains. Thursday’s fresh trend high reinforces the bull theme and sights are on $3079.2 next, a Fibonacci projection. Note that moving average studies are in a bull-mode position, highlighting a dominant uptrend and positive market sentiment. Support is at $2953.5, the 20-day EMA.
| Date | GMT/Local | Impact | Country | Event |
| 21/03/2025 | 1100/1100 | ** |  GB | CBI Industrial Trends |
| 21/03/2025 | 1230/0830 | ** |  CA | Retail Trade |
| 21/03/2025 | 1305/0905 |  US | New York Fed's John Williams | |
| 21/03/2025 | 1500/1600 | ** |  EU | Consumer Confidence Indicator (p) |
| 21/03/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
| 21/03/2025 | 1700/1300 | ** | US | Baker Hughes Rig Count Overview - Weekly |
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