MNI US MARKETS ANALYSIS - EUR Recovers Early Weakness on French Logjam
MNI (LONDON) - Highlights:
- EUR recovers early weakness amid French political logjam
- UK Chancellor Reeves sets out pro-growth housing agenda
- Hurricane Beryl set to make landfall in next couple of hours
![](https://media.marketnews.com/image_dc9f8e7332.png)
- Treasuries have on balance pared some of Friday’s nonfarm payrolls-driven gains, with potential profit-taking ahead of a light start to an important week plus mild spillover from markets assessing a complicated French election outcome.
- Cash yields are 2-2.5bp higher, with the broadly parallel shift consolidating Friday’s steepening with 2s10s at -32bps.
- TYU4 at 110-13 (- 07) has retreated from the high of 110-20+ seen around the Asia open which marginally built on the post-payrolls climb to 110-20. Volumes stand at a solid 350k.
- Friday’s gains stopped short of first resistance and a bull trigger at 111-01 (Jun 14 high) with a bear threat remaining present whilst this resistance holds.
- Data: NY Fed inflation expectations Jun (1100ET), Consumer credit May (1500ET)
- Bill issuance: US Tsy $76B 13W, $70B 26W Bill auctions (1130ET)
ENERGY: Beryl Set for Texas Landfall in Next Couple of Hours
“*BERYL EXPECTED TO MAKE LANDFALL ALONG MIDDLE TEXAS COAST WITHIN THE NEXT HOUR OR TWO :NHC” – bbg
- The NHC said via X, “aircraft data indicate Beryl has strengthened and is again a hurricane with maximum sustained winds of 75 mph.”
- See chart for peak storm surge forecast
Source: NHC
STIR: Fed Rate Path Back At Pre-Payrolls Levels, Powell & CPI In Focus
- Fed Funds implied rates have lifted modestly off Friday’s late lows.
- It leaves a rate path similar to before Friday's payrolls report but with the mostly dovish report still limiting increases having added to a string of dovish releases into payrolls.
- Cumulative cuts from 5.33% effective: 1.5bp Jul, 19.5bp Sep, 30bp Nov, 49bp Dec and 65bp Jan.
- Today sees a light docket to start the week with focus firmly on Fed Chair Powell’s Senate testimony tomorrow (prepared remarks released on the day) after he chose to stick to the prior script at last week’s Sintra appearance. Thursday’s June CPI report also looms on the horizon.
STIR: OI Suggests Net Long Setting Dominated In SOFR Futures Following NFPS
Friday’s rally in SOFR futures and preliminary OI data points to net long setting dominating in the wake of the NFP report, although pockets of net short cover were also seen.
- This allowed the net long setting theme in play since Chair Powell’s Tuesday comments to extend further, with the ‘dovish’ elements of the release rounding out a week of relatively soft U.S. data.
- That run of data saw FOMC-dated move from pricing ~44bp of ’24 cuts late on June 28 to ~51bp of cuts late on July 5.
05-Jul-24 | 03-Jul-24 | Daily OI Change | Daily OI Change In Packs | ||
SFRM4 | 1,193,746 | 1,209,132 | -15,386 | Whites | +20,952 |
SFRU4 | 1,117,483 | 1,121,750 | -4,267 | Reds | +26,401 |
SFRZ4 | 1,063,047 | 1,018,614 | +44,433 | Greens | +10,685 |
SFRH5 | 818,797 | 822,625 | -3,828 | Blues | +1,836 |
SFRM5 | 753,878 | 734,132 | +19,746 | ||
SFRU5 | 658,655 | 665,771 | -7,116 | ||
SFRZ5 | 828,779 | 814,781 | +13,998 | ||
SFRH6 | 558,800 | 559,027 | -227 | ||
SFRM6 | 485,182 | 481,606 | +3,576 | ||
SFRU6 | 417,879 | 421,851 | -3,972 | ||
SFRZ6 | 388,908 | 380,859 | +8,049 | ||
SFRH7 | 254,133 | 251,101 | +3,032 | ||
SFRM7 | 245,398 | 241,332 | +4,066 | ||
SFRU7 | 184,598 | 182,841 | +1,757 | ||
SFRZ7 | 174,109 | 177,574 | -3,465 | ||
SFRH8 | 114,558 | 115,080 | -522 |
FRANCE: Macron Asks Attal To Stay On As PM 'For Now' Amid Election Fallout
French President Emmanuel Macron has rejected PM Gabriel Attal's resignation offer, saying that the head of gov't needs to remain in office 'for now' following the legislative eleciton second round that delivered a hung parliament with the leftist New Popular Front (NFP) alliance as the largest group.
- There had been some speculation that the centrist Ensemble alliance could seek to peel off centre-left assembly members in order to avoid the far-left La France Insoumise of Jean-Luc Melenchon from having any influence on gov't. However, this appears - at least for now - to be in vain. Centre-left Socialist Party (PS) leader Olivier Faure has said that the NFP will seek to present a PM candidate to Macron by the end of the week.
- Each of the main blocs (NFP, Ensemble, right-wing nationalist National Rally) are unlikely to be able to work with the others barring major policy concessions. If the NFP insists on a PM candidate from the left it would likely result in a vulnerable minority administration. There is also the prospect of a technocratic administration being appointed should no agreement prove possible among or within the various political blocs.
UK: Chancellor To Announce Budget Date Before End-July
Delivering her first speech as Chancellor, Labour's Rachel Reeves has confirmed that she will confirm the date of the incoming Labour gov'ts first autumn Budget by end-July, before the House of Commons goes on its summer recess. The chancellor did not, however, indicate when in the autumn the Budget would be delivered.
- As incoming chancellors are often wont to do, Reeves set a downbeat tone for the outlook for UK finances, rolling the pitch for the prospect of tighter gov't spending or greater tax hikes in the next budget.
- Reeves: "What I have seen in the past 72 hours has only confirmed that there is no money, [...] over the weekend, I instructed Treasury officials to provide an assessment of the state of our spending inheritance so that I can understand the full scale of the challenge. And I will present this to parliament before the summer recess.This will be separate from a budget that will be held later this year. And I will confirm the date of that budget alongside a forecast from the Office of Budget Responsibility in due course."
EUROPE ISSUANCE UPDATE:
EU-BOND SYNDICATION: Mandate: New Long 5-year and Tap of 30-year EU-bond
"The EU (EUROPEAN UNION), rated AAA (Fitch) / Aaa (Moody's) / AA+ (S&P) / AAA (Scope) has mandated BofA Securities, BNP Paribas, DZ BANK, Morgan Stanley and Nomura as Joint Lead Managers for its upcoming EUR Fixed Rate RegS Bearer dual tranche transaction comprising a new long 5-year benchmark line due 5 October 2029 and an increase of EU 3.375% benchmark due 5 October 2054 (EU000A3K4EY2)"
EUR Recovers Opening Dip as Election Results Digested
- The EUR gapped lower at the open as the second round of French legislative elections showed the right-wing RN falling short of a majority after a more resilient showing than expected from the centrist and left-wing parties. Political paralysis is now the assumption for France's National Assembly out to the 2027 Presidential elections, but the single currency has shrugged off those concerns into the NY crossover, helped by the gradual re-tightening of the Bund/OAT yield spread.
- JPY has resumed its weakening trend, allowing USD/JPY to trade higher for the first session in three. Price is back above the Y161.00 level, with focus remaining on the cycle best printed last week at Y161.95 before any intervention speculation can resume.
- Elsewhere, CHF, CAD trade firmer, but within recent ranges. JPY and NOK are the poorest performers in G10.
- The schedule is typically light for a Monday, with just the NY Fed's one-year inflation expectations data on the docket, as well as an appearance from BoE's Haskel - the first MPC member to speak since last week's UK General Election.
Expiries for Jul08 NY cut 1000ET (Source DTCC)
- EUR/USD: $1.0785(E1.8bln)
- GBP/USD: $1.2500(Gbp1.4bln)
- USD/JPY: Y157.25($1.8bln), Y160.00($624mln), Y161.00-15($755mln)
- EUR/JPY: Y171.85-00(E675mln)
- AUD/USD: $0.6700-20(A$2.4bln), $0.6750-65(A$930mln)
- USD/CAD: C$1.3710($594mln)
- USD/CNY: Cny7.3000($1.1bln)
Short-Term Weakness in WTI Futures Considered Corrective
A bull cycle in WTI futures remains in play and short-term weakness is considered corrective. The recent breach of $80.11, the May 29 high and a key resistance, strengthened a bullish theme. Note too that $82.24, 76.4% of the Apr 12 - Jun 4 bear leg, has been cleared. Furthermore, moving average studies are in a bull-mode set-up. Sights are on $85.27, the Apr 12 high and a bull trigger. Initial firm support to watch is $79.52, the 50-day EMA. Gold traded higher last week and the yellow metal has traded through resistance at $2387.8, the Jun 7 high. This undermines a recent bearish theme and a clear break would be a bullish development and open the key resistance at $2450.1, the May 20 high. Initial support to watch lies at the 50-day EMA, at 2324.9. A clear break of this average would instead confirm a resumption of the reversal from May 20 and expose $2277.4, May 3 low.
- WTI Crude down $0.6 or -0.72% at $82.53
- Natural Gas up $0 or +0.09% at $2.321
- Gold spot down $19.28 or -0.81% at $2372.97
- Copper down $1.9 or -0.41% at $463.25
- Silver down $0.3 or -0.97% at $30.9179
- Platinum down $16.13 or -1.57% at $1014.02
Recent Gains Reinforce Bullish Set Up for E-Mini S&P
Eurostoxx 50 futures traded higher last week. Attention is on resistance at 5039.84, the 61.8% retracement of the May 16 - Jun 14 sell-off. It was pierced Friday, a clear break of it would be a positive development and suggest scope for an extension of the bull cycle that started Jun 14. This would open 5082.32, the 76.4% retracement point. On the downside, a reversal would refocus attention on 4846.00, Apr 19 low and a key support. The trend condition in S&P E-Minis is bullish and Friday’s gains reinforce this set-up. Resistance at 5430.75, the May 23 high and bull trigger, has recently been cleared. This confirmed a resumption of the primary uptrend. The move higher last week confirmed a recent bull flag formation - a continuation signal - on the daily scale, further reinforcing bullish conditions. Sights are on 5668.00, a Fibonacci projection next. Support is at 5516.51, the 20-day EMA.
- Japan's NIKKEI closed lower by 131.67 pts or -0.32% at 40780.7 and the TOPIX ended 16.57 pts lower or -0.57% at 2867.61.
- Elsewhere, in China the SHANGHAI closed lower by 27.483 pts or -0.93% at 2922.45 and the HANG SENG ended 275.55 pts lower or -1.55% at 17524.06.
- Across Europe, Germany's DAX trades higher by 144.71 pts or +0.78% at 18616.84, FTSE 100 higher by 16.75 pts or +0.2% at 8220.59, CAC 40 up 68.74 pts or +0.9% at 7744.54 and Euro Stoxx 50 up 47.68 pts or +0.96% at 5026.79.
- Dow Jones mini up 19 pts or +0.05% at 39713, S&P 500 mini down 2 pts or -0.04% at 5619.5, NASDAQ mini down 14.25 pts or -0.07% at 20606.25.
Date | GMT/Local | Impact | Country | Event |
08/07/2024 | 1530/1130 | * | ![]() | US Treasury Auction Result for 13 Week Bill |
08/07/2024 | 1530/1130 | * | ![]() | US Treasury Auction Result for 26 Week Bill |
08/07/2024 | 1615/1715 | ![]() | BoE Haskel at ESCoE | |
08/07/2024 | 1900/1500 | * | ![]() | Consumer Credit |
09/07/2024 | 2301/0001 | * | ![]() | BRC-KPMG Shop Sales Monitor |
09/07/2024 | 0900/1100 | ![]() | ECB's Cipollone at digital euro events by CB of Cyprus | |
09/07/2024 | 1000/0600 | ** | ![]() | NFIB Small Business Optimism Index |
09/07/2024 | 1255/0855 | ** | ![]() | Redbook Retail Sales Index |
09/07/2024 | 1315/0915 | ![]() | Fed Vice Chair Michael Barr | |
09/07/2024 | 1400/1000 | ![]() | Fed Chair Jerome Powell | |
09/07/2024 | 1530/1130 | * | ![]() | US Treasury Auction Result for Cash Management Bill |
09/07/2024 | 1530/1130 | ** | ![]() | US Treasury Auction Result for 52 Week Bill |
09/07/2024 | 1700/1300 | *** | ![]() | US Note 03 Year Treasury Auction Result |
09/07/2024 | 1730/1330 | ![]() | Fed Governor Michelle Bowman | |
10/07/2024 | 0130/0930 | *** | ![]() | CPI |
10/07/2024 | 0130/0930 | *** | ![]() | Producer Price Index |
10/07/2024 | 0200/1400 | *** | ![]() | RBNZ official cash rate decision |
10/07/2024 | 0600/0800 | *** | ![]() | CPI Norway |
10/07/2024 | 0800/1000 | * | ![]() | Industrial Production |
10/07/2024 | 1100/0700 | ** | ![]() | MBA Weekly Applications Index |
10/07/2024 | - | *** | ![]() | Money Supply |
10/07/2024 | - | *** | ![]() | New Loans |
10/07/2024 | - | *** | ![]() | Social Financing |
10/07/2024 | 1330/1430 | ![]() | BoE Pill At Asia House | |
10/07/2024 | 1400/1000 | ** | ![]() | Wholesale Trade |
10/07/2024 | 1400/1000 | ![]() | Fed Chair Jerome Powell | |
10/07/2024 | 1430/1030 | ** | ![]() | DOE Weekly Crude Oil Stocks |
10/07/2024 | 1530/1630 | ![]() | BOE's Mann Panellist on UK Business investment | |
10/07/2024 | 1700/1300 | ** | ![]() | US Note 10 Year Treasury Auction Result |
10/07/2024 | 1830/1430 | ![]() | Chicago Fed's Austan Goolsbee |