BOE: MNI BOE Review / UK Issuance Deep Dive - March 2024
In case you missed it, we published our BOE Review and UK Issuance Deep Dive on Saturday morning:
- Together with the change in the vote shift and looking more closely at the Minutes and Governor Bailey’s accompanying statement, we think that there was a significant dovish shift.
- The MNI Markets team continues to see around a 15% probability of a first cut in May, increase our view of the first cut in June to 35% (up from 30%), maintain our 40% probability view of an August first cut and now see a 10% probability (down from 15%) of the first cut being delayed further.
- We also analyze how analyst expectations have evolved. There has been a slight shift in expectations post-meeting here with 3/22 analysts still expecting a first cut in May, 10/22 June, 9/22 August with none of the analyst reviews we have read looking for a first cut in September.
- In addition, we look at the DMO's issuance alongside the BOE's APF sales calendars for the April to June period.
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USDCAD TECHS: Support Remains Intact
- RES 4: 1.3661 High Nov 27
- RES 3: 1.3623 61.8% retracement of the Nov 1 - Dec 27 bear leg
- RES 2: 1.3608 High Dec 13
- RES 1: 1.3586 High Feb 13
- PRICE: 1.3508 @ 16:39 GMT Feb 23
- SUP 1: 1.3413/3359 Low Feb 09 / Jan 31 and key S/T support
- SUP 2: 1.3343 Low Jan 12
- SUP 3: 1.3288 Low Jan 5
- SUP 4: 1.3229 Low Feb 1
The USDCAD trend structure remains bullish despite the sell-off late last week as well as through the Thursday open - a correction. Tuesday’s softer-than-expected CPI works in favour of further gains. The pair traded higher Tuesday resulting in a break of resistance at 1.3544, the Feb 5 / 6 high and bull trigger. This confirms a resumption of the bull cycle that started Dec 27 and opens 1.3623, 61.8% of the Nov 1 - Dec 27 bear leg. On the downside, key support to watch lies at 1.3359, the Jan 31 low. Initial firm support has been defined at 1.3413, the Feb 9 low.
AUDUSD TECHS: Firmer Close Despite Bearish Trend Signals
- RES 4: 0.6900 High Jun 16 and a key resistance
- RES 3: 0.6871 High Dec 28 and the bull trigger
- RES 2: 0.6729/71 High Jan 12 / 3
- RES 1: 0.6625 High Jan 30 and key resistance
- PRICE: 0.6561 @ 16:38 GMT Feb 23
- SUP 1: 0.6443 Low Feb 13
- SUP 2: 0.6412 76.4% Fibonacci retracement for Oct - Dec upleg
- SUP 3: 0.6360 Low Nov 14
- SUP 4: 0.6339 Low Nov 10
AUD/USD rallies were sold into the Thursday close, with prices returning negative despite printing a new multi-week high at 0.6595. Further losses would see the bearish trend resume, confirming the latest bounce as corrective. Last Tuesday’s initial break lower reinforced the bearish theme. To the downside, sights rest on 0.6412, a Fibonacci retracement. Moving average studies are in a bear-mode set-up, highlighting a clear, albeit weaker, downtrend. Key resistance to watch is 0.6625, the Jan 30 high. Initial resistance is at 0.6546, the 20-day EMA and a level pierced this week.
US TSYS: Markets Roundup: Tsys Off Lows, Risk Unwinds Into Weekend
- Not much of a change since midday where Treasury futures climbed to session highs after a weaker open where Mar'24 10Y futures tapped the lowest level since late November '23.
- Treasury curves bull flattened (2s10s -4.271 at -43.590 -- Jan 3 low) on the bounce, no obvious headline driver, though trading desks widely citied a (modest) reversal in equities off contract highs as trading accounts took profits ahead the weekend.
- Mar'24 10Y futures had tested Thursday lows overnight (109-09) neared the 110 handle in late trade, climbing to 109-31 (+15), 10Y yield -.0629 at 4.25789%. Heavy volumes (TYH4>3.8M) tied to the roll to Jun'24 contract continues. Technical resistance above at 110-15.5 (20-day EMA).
- Projected rate cut pricing holds steady for the next couple meetings while June is off this morning's lows: March 2024 chance of 25bp rate cut currently -2.0% w/ cumulative of -0.5bp at 5.324%; May 2024 at -21.2% w/ cumulative -5.8bp at 5.271%; June 2024 -62.6% vs. -55.4% earlier w/ cumulative cut -21.4bp at 5.132%. Fed terminal at 5.33% in Feb'24.
- Look ahead: Next Monday sees New Home Sales (680k est vs 664k prior), MoM (2.4% est vs. 8.0% prior) at 1000ET, followed by Dallas Fed Mfg Activity Index at 1030ET. Flurry of Treasury auctions start Monday due to the short month: $63B 2Y note and $70B 26W bills at 1130ET, followed by $79B 13W bills and $64B 5Y Note auctions.
