EMISSIONS: EU End Of Day Carbon Summary: Carbon Pullback On Policies Reform Call
Mar-28 16:01
{EUAs/UKAs Dec25 are tracking weekly losses of nearly 4% and over 3%, respectively, with both contacts seeing their largest single-day loss since early March on this Thursday after EU member states backed the Clean Industrial Deal while France pushed for CBAM reforms and a revaluation of the free allowance phaseout. Meanwhile, EUA Dec25 open interest climbed to its highest since the Dec24 expiry, with OI rising daily since 12 March.
- EUA DEC 25 up 0.29% at 68.74 EUR/t CO2e
- UKA DEC 25 down 0.51% at 44.75 GBP/t CO2e
- TTF Gas APR 25 down 1.7% at 40.52 EUR/MWh
- NBP Gas APR 25 down 0.9% at 98.43 GBp/therm
- Estoxx 50 down 0.4% at 5427.19
- Correlation between EUA/TTF for 30-day period tightened to 0.57 from the 0.55 on the previous day.
- Correlation between EUA/UKA for 30-day period remained high at 0.69.
- The EUA Dec25 premium to the UK equivalent widened to €15.23/t CO2e from the €14.78/t CO2e in the previous day.
- The latest Germany ETS CAP3 auction cleared at €67.36/ton CO2e, down 5.87% compared with the previous Germany auction at €71.56/ton CO2e according to EEX.
- The trend outlook in ICE EUA futures remains bearish and this week’s sell-off reinforces this theme. The break lower exposes key support and the bear trigger at €66.78, the Mar 7 low. Clearance of this level would confirm a resumption of the downtrend that started Jan 30. Moving average studies are in a bear-mode position and this continues to highlight a downtrend. Key short-term resistance has been defined at €74.23, the Mar 19 high.
- EUA Dec25 implied volatility has hit the highest since 10 Jan this week as futures contracts are tracking a nearly 4% weekly losses amid EU gas decline.
- France saw a 1.8% cut in greenhouse gas emissions in 2024, but the reduction fell short of targets and threatens progress toward its 2030 goals, according to Bloomberg.
- The EU appears set to back down from a proposed carbon levy on international shipping, and accept a compromise involving carbon credit trading, according to The Guardian.
- Sweden has announced plans to build the world’s first large-scale carbon capture and storage (CCS) plant, according to The Brussels Times.
- Wells Fargo has been removed from an investigation led by 18 Republican-controlled states after the bank abandoned its 2030 and 2050 emissions targets in early March, according to Bloomberg.
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GBP: GBP/USD Rallies on Likely Month-End Flow, Value Date Fix Incoming
Feb-26 16:00
GBP rallying well into the Wednesday WMR fix - worth recalling today is value-date month-end, so we may well be seeing some month-end rebalancing flow playing out in recent trade.
- Comfortably the best volumes of the session and, in fact, the week on the latest rally - a move that brings the 1.27 handle into play, last crossed in mid-December. This price action affirms the underlying bull cycle that's been in play for the past few weeks - making 1.2767 the next key resistance and the 50% retracement for the bear leg posted off the September high into January's lows.
- No specific newsflow or headlines behind this GBP strength - with a volume surge and month-end flows likely at play here.
GILTS: Underperforming Bunds
Feb-26 15:55
{GB} GILTS: headline flow remaining subdued.
- A recovery from lows in equity markets (with an eye on cross-market cues) applied some pressure to core global FI markets.
- Gilt futures pull back within yesterday’s range, basing at 93.07 for now.
- The bullish theme remains intact in the contract, although it has lost momentum.
- Yields now essentially flat across the curve on the day.
- Spread to Bunds ~1.5bp wider on the day at 206.5bp, year-to-date closing lows (203.8bp) set to remain intact.
- Modest hawkish drift in GBP STIRs alongside the long end downtick, leaving 56bp of cuts priced through year-end.
- SONIA futures flat to -2.0.
- BoE dove Dhingra will speak this evening, although don’t expect a change in tone after she recently reiterated concerns surrounding consumption as a central pillar of her argument for a more activist approach to rate cuts.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Mar-25 | 4.447 | -0.8 |
May-25 | 4.257 | -19.8 |
Jun-25 | 4.194 | -26.1 |
Aug-25 | 4.054 | -40.1 |
Sep-25 | 4.007 | -44.8 |
Nov-25 | 3.919 | -53.6 |
Dec-25 | 3.894 | -56.1 |
OPTIONS: Expiries for Feb27 NY cut 1000ET (Source DTCC)
Feb-26 15:53
- EUR/USD: $1.0400(E527mln), $1.0425-30(E900mln), $1.0440-50(E1.2bln), $1.0470-75(E1.5bln)
- USD/JPY: Y148.00-10($1.4bln), Y150.00($1.9bln), Y151.00-05($1.2bln)
- GBP/USD: $1.2685-00(Gbp619mln)
- AUD/USD: $0.6345-50(A$690mln)
- USD/CAD: C$1.4200-10($1.1bln), C$1.4325-35($733mln), C$1.4350-70($2.7bln)
