MEXICO: MXNJPY Slides Below 7.00, Near Two-Year Lows
Apr-09 09:51
- USDMXN is trading 0.2% lower on the session amid the broad dollar weakness on Wednesday, however, price action overnight shows how emerging market currencies remain vulnerable to the latest developments for US assets and global market sentiment.
- USDMXN rose to 20.9482 overnight, substantially narrowing the gap to the March highs at 20.9982. If spot were to break above this level, the focus would turn back to the blowout high on February 03, located at 21.2932.
- Notably, MXNJPY has slipped below 7.00 and has breached the 2024 lows in the process. Below here, medium term targets for a more protracted move lower come in at 6.7911 and 6.5885.
- Lurches higher in the VIX and MOVE indices will have prompted deleveraging, while a potential continued unwind of basis trade positions remains in focus for the bond market. A weak 3-year US auction added pressure yesterday evening, while the confirmation of the U.S. reciprocal tariffs overnight (including a 104% levy on Chinese imports) has kept risk on the defensive.
- The negative US sentiment has become the primary driver for renewed MXN pessimism, and there remains high uncertainty of whether US and Mexican officials can find common ground on trade/security policy. Furthermore, the continued dovish rhetoric from Banxico continues to add an additional MXN headwind.
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STIR: UBS Recommend Receiving April '25 ECB OIS
Mar-10 09:49
Back on Friday UBS wrote that “the ECB emphasised that its monetary policy is becoming meaningfully less restrictive, but real rates will remain elevated in the year ahead so we would receive the April ’25 meeting”.
- They went on to note that “the ECB itself said that risks to economic growth remain tilted to the downside. In addition, the euro area economy will also have to digest the increase of higher sovereign and swap rates. We think that European growth could stagnate or even decelerate in 2025 if tariffs on EU exports to the U.S. materialize in early April. We still think that the market will price a terminal rate below 2% in this cycle”.
EGBS: Supported By Pullback In Risk Appetite, PGBs Underperform
Mar-10 09:38
A pullback in European equity futures has lent support to core EGBs this morning, though Friday’s high in Bund futures at 128.29 remains untested. Bunds are +12 ticks at 127.78 at typing, now off earlier session highs. The recovery from last Thursday’s lows in Bunds has allowed an oversold condition to unwind a little, though a bearish theme remains intact. Initial firm resistance to watch is 129.41, the Jan 14 low.
- We have highlighted several drivers for today’s risk off action: Continued US growth worry, signs of tension within German fiscal negotiated and a possible reignition of tensions between Israel and Hamas.
- German yields are 1.5-2.5bps lower, with the 10-year point underperforming a little.
- German January industrial production was stronger than expected at 2.0% M/M (vs 1.5% cons), but had little net impact. The March Eurozone Sentix investor confidence survey also exceeded forecasts at -2.9 (vs -9.3 cons, -12.7 prior). Survey data was collected between March 6 - March 8, so includes the fallout from last week's German fiscal announcement.
- 10-year EGB spreads to Bunds trade quite resiliently despite the equity selloff. PGBs underperform (10-year spread to Bunds ~1.5bps wider at ~52.5bps) amid signs the Socialists will oppose the minority government’s no-confidence vote tomorrow.
- ECB’s Nagel is scheduled to speak at 1300GMT.
EGB OPTIONS: RXJ5 126.50/125.50 Put Spread Lifted
Mar-10 09:37
RXJ5 126.50/125.50 put spread paper paid 18 on 10K.
