MNI US MARKETS ANALYSIS - Greenback Extending Post-Fed Rally

US TSYS SUMMARY: Bull Flattening Bias

• US Treasury curve has flattened as the contracts continue to consolidate the post Fed sell off.
• US curve is once again bull flatter, as Treasuries saw sudden spike higher, during the early European session.
• There were no clear driver given the lack of new news, but desk reported some short cover ahead of the weekend.
• Resistance in TY moves down to 132.14+ (printed a 132.11 high).
• But we are still short of the Wednesday's high at 132.20+.
• Looking ahead, there are no US data on the calendar, while Fed Pres Bullard will be interviewed on CNBC
• 2y yields unch today at 0.211%- 5y yields down -1.6bp today at 0.866%
• 10y yields down -2.1bp today at 1.486%
• 30y yields down -2.3bp today at 2.072%
• 2s10s down -2.1bp today at 127.5bp
• 10s30s down -0.2bp today at 58.6bp

EGB/GILT SUMMARY: Unwinding FOMC Move

European sovereign curves have flattened this morning with the long end unwinding the FOMC move.

• Gilts have traded weaker at the short end while the longer end has firmed. The 2s30s spread is 4bp narrower.
• The bund curve has bull flattened with the 2s30s trading down 2bp.
• OATs have similarly firmed through the morning with long-end yields 1-2bp lower.
• BTPs have mirrored gilts with the short end weaker and the long end firming.
• UK retail sales came in weaker than expected in May (ex auto fuel -2.1% Y/Y vs 1.4% survey), while still chalking about double digit expansion relative to the same period last year.
• The UK's Lib Dems won a local byelection in Chesham and Amersham, eating into the Tory Blue Wall.
• HMRC data show UK food and drink exports to the EU fell by almost a half in the first quarter compared to the same period a year earlier.

EUROPE OPTIONS FLOW SUMMARY

UK:
2LZ1 99.62/99.75cs, bought for 1.5 in 2.5k

FX:
EURUSD (UEAZ1) Dec21 1.1750 put, bought for 0.01040 in 792 lots (160 days to expiry, underlying trades at 1.19635)

FOREX: Greenback Inches Higher as Post-Fed Rally Extends

• The USD is again among the best performing currencies early Friday, with the post-Fed rally extending into a third session. The USD Index swiftly topped the Thursday highs, hitting new multi-month highs and the best levels since mid-April. This puts the index through key resistance at the 61.8% retracement of the April-May downtick, opening the next key level at 92.516.
• GBP is less fortunate, and is among the poorest performers following a set of weaker-than-expected retail sales. Retail sales fell 1.4% on the month, well below the expected gain of 1.5%, raising questions about the UK's post-pandemic recovery, which has been fuelled by solid consumption.
• By-election results in the UK also went against the ruling Conservative party, adding additional pressure to GBP/USD. The pair touched 1.3855 this morning, the lowest level since early May.
• Data and speakers are light for the rest of the Friday session, with no scheduled releases or central bank speakers.

FX OPTIONS: Expiries for Jun18 NY cut 1000ET (Source DTCC)

• EUR/USD: $1.1900-10(E804mln-EUR puts), $1.1940-50(E1.7bln), $1.1970-80(E763mln-EUR puts), $1.2000(E647mln-EUR puts), $1.2065-75(E1.2bln-EUR puts), $1.2100-10(E3.8bln,E3.2bln of EUR puts), $1.2150(E500mln), $1.2170-80(E1.1bln-EUR puts)
• USD/JPY: Y109.25($560mln), Y109.50($625mln), Y110.00($1.35bln-USD puts), Y111.30($1.1bln), Y111.75($1.35bln)
• USD/CHF: Chf0.9200($500mln-USD puts)EUR/CHF: Chf1.0680(E535mln-EUR puts)
• AUD/USD: $0.7700(A$546mln)
• AUD/JPY: Y84.15-20(A$545mln-AUD puts)
• USD/CAD: C$1.2160($1.6bln-USD puts), C$1.2200($1.5bln-USD puts), C$1.2225($1.1bln-USD puts)
• USD/CNY: Cny6.40($565mln), Cny6.41($575mln)

Price Signal Summary - S&P E-Minis Bearish Risk Still Present

• In the equity space, S&P E-minis maintain a bullish tone however the recent pullback suggests the contract has entered and remains in a corrective cycle. A deeper pullback would open 1.4155.50, the Jun 3 low and the 50-day EMA at 4142.51. The EMA represents a key support level.
• In FX, EURUSD remains weak following this sharp sell-off Wednesday and Thursday. Scope is seen for weakness towards 1.1837, 76.4% retracement of the Mar 31 - May 25 rally. GBPUSD weakness this week has resulted in a break of the 50-day EMA. The move through the average strengthens a short-term bearish outlook and opens 1.3801, May 3 low. USDJPY traded higher Wednesday extending the recovery from 109.19, Jun 7 low. The break of 110.33, Jun 4 high exposes 110.97, this year's high on Mar 31. Support to watch is at 109.81, Jun 16 low.
• On the commodity front, Gold has traded sharply lower this week and remains vulnerable. The focus is on $1756.2, low Apr 29. Oil has pulled back from recent highs and a corrective cycle is in play. Support in Brent (Q1) is seen at $71.36, the 20 day EMA. WTI (N1) support to watch lies at $69.00, the 20-day EMA.
• Within FI, Bund futures key directional triggers have been defined at; 171.80, Jun 17 low and 173.16, the Jun 11 high. The pullback in Gilt futures key support lies at 126.70, Jun 3 and a key near-term support.

EQUITIES: Asian and European equities in the red

• Japan's NIKKEI down 54.25 pts or -0.19% at 28964.08 and the TOPIX down 17.01 pts or -0.87% at 1946.56
• China's SHANGHAI closed down 0.507 pts or -0.01% at 3525.097 and the HANG SENG ended 242.68 pts higher or +0.85% at 28801.27
• The German Dax down 42.83 pts or -0.27% at 15686.73, FTSE 100 down 31.64 pts or -0.44% at 7122.07, CAC 40 up 11.62 pts or +0.17% at 6678.03 and Euro Stoxx 50 up 1.37 pts or +0.03% at 4159.78.
• Dow Jones mini up 20 pts or +0.06% at 33825, S&P 500 mini up 0.75 pts or +0.02% at 4223, NASDAQ mini up 28.5 pts or +0.2% at 14194.5.

COMMODITIES: Precious metals up, natgas down

• WTI Crude down $0.20 or -0.28% at $70.87
• Natural Gas down $0.08 or -2.46% at $3.173
• Gold spot up $18.01 or +1.02% at $1792.5
• Copper up $1.85 or +0.44% at $420.5
• Silver up $0.5 or +1.94% at $26.4325
• Platinum up $17.25 or +1.62% at $1084.65