ECB VIEW: Nomura Remove Cuts In April and September, Terminal Now 2.25%
Nomura have also made a hawkish adjustment to their ECB forecast on the back of Tuesday’s German fiscal announcement. They remove 25bp cuts in April and September from their forecast, now expecting only 25bp cuts in March and June for a terminal rate of 2.25%.
- They note that “prior to the fiscal announcements, a rate cut in April was finely balanced”, citing solid underlying services inflation momentum, increasing PMI output price indices and pockets of hawkish ECB speak.
- “A risk to our new view is that the ECB could opt to cut in April and stop the cutting cycle in June once the new forecasts incorporate the fiscal stimulus”.
- “Although we continue to expect punitive tariffs, we believe the positive growth impact from fiscal stimulus will more than outweigh the hit to growth from US tariffs, which means the ECB will likely need to be less concerned about tariffs than previously”.
- Nomura have revised their Euro area growth and inflation forecasts higher following the fiscal news. They expect “the fiscal packages to add nothing to euro area GDP in the first three quarters of this year, +0.1pp by the very end of this year, and +0.2pp by the end of 2026”, while “2026 HICP inflation and core HICP inflation are likely to average 20bp higher than previously; we now forecast both to average 2%”.
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US 10YR FUTURE TECHS: (H5) Trading Below Recent High
- RES 4: 110-25 High Dec 12
- RES 3: 110-19 76.4% retracement of the Dec 6 - Jan 13 bear leg.
- RES 2: 109-31 High Dec 18
- RES 1: 109-10/15+ 50-day EMA / High Feb 3
- PRICE: 108-25+ @ 12:20 GMT Feb 4
- SUP 1: 108-24/21+ 20-day EMA / Low Feb 3
- SUP 2: 108-06/107-06 Low Jan 23 / 13 and the bear trigger
- SUP 3: 107-04 Low Apr 25 ‘24 and a key support
- SUP 4: 106-11 2.00 proj of the Oct 1 - 14 - 16 price swing
Treasury futures continue to trade below their recent highs. A corrective cycle remains in play and the contract is holding on to the bulk of its recent gains. Key resistance at 109-10, the 50-day EMA, has been pierced. A clear break of it would strengthen a bullish theme and open 109-31, the Dec 18 high. The medium-term trend condition remains bearish. The bear trigger is 107-06, the Jan 13 low. Initial firm support is 108-06, the Jan 23 low.
STIR: Mix Of Positioning Swings In SOFR Futures On Monday
Short setting dominated in SFRH5-U5 on Monday, before a mix of net long cover (most contracts between SFRZ5-Z6) and net short cover (SFRH7 through SFRM8) then came to the fore further out the strip.
- Tariff headlines resulted in twist flattening of the SOFR futures strip come settlement time.
| 03-Feb-25 | 31-Jan-25 | Daily OI Change |
| Daily OI Change In Packs |
SFRZ4 | 1,082,060 | 1,089,556 | -7,496 | Whites | +18,110 |
SFRH5 | 1,216,183 | 1,213,351 | +2,832 | Reds | -23,395 |
SFRM5 | 1,093,294 | 1,071,741 | +21,553 | Greens | -47,809 |
SFRU5 | 775,631 | 774,410 | +1,221 | Blues | -12,399 |
SFRZ5 | 943,764 | 957,524 | -13,760 |
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SFRH6 | 671,255 | 682,072 | -10,817 |
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SFRM6 | 640,640 | 635,578 | +5,062 |
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SFRU6 | 590,528 | 594,408 | -3,880 |
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SFRZ6 | 666,655 | 692,356 | -25,701 |
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SFRH7 | 472,402 | 484,831 | -12,429 |
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SFRM7 | 406,431 | 412,852 | -6,421 |
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SFRU7 | 287,142 | 290,400 | -3,258 |
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SFRZ7 | 267,479 | 275,858 | -8,379 |
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SFRH8 | 216,892 | 218,970 | -2,078 |
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SFRM8 | 179,036 | 180,985 | -1,949 |
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SFRU8 | 120,107 | 120,100 | +7 |
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OPTIONS: Larger FX Option Pipeline
- EUR/USD: Feb05 $1.0300-05(E1.2bln) $1.0500(E1.4bln); Feb06 $1.0250(E1.5bln), $1.0315-25(E2.2bln), $1.0400(E1.0bln)
- USD/JPY: Feb05 Y153.15-25($2.0bln); Feb06 Y153.90($1.4bln)
- GBP/USD: Feb06 $1.2455(Gbp1.2bln)
- EUR/GBP: Feb06 Gbp0.8465(E1.1bln)
