EM CEEMEA CREDIT: PDLLN: FCF generation unlikely, pressure remains

Norwegian February inflation was much higher-than-expected on the headline and underlying measures. CPI-ATE was 3.4% Y/Y, well above the 2.9% consensus and 2.7% Norges Bank projection (vs 2.8% prior).  Taken alongside a slightly soft set of Swedish monthly activity data metrics, NOKSEK is up 0.37% at typing at 0.9326. 

• The data helps the cross widen the gap with 0.9274 (November 2020 low), which provided support during last week’s selloff. The cross remains below last Friday’s high at typing though, with rallies short of the 20-day EMA at 0.9517 considered corrective.
• Norges Bank has heavily signalled that rates will be cut by 25bp in March. We think this should still be the base case heading into the March 27 decision, but today’s data will contribute to an upward revision to the March MPR rate path.
• In Sweden, the January monthly GDP indicator was -0.5% M/M (vs 0.7% prior). This suggests Q1 GDP got off to a slightly soft start following the stronger-than-expected Q4 reading. However, we don’t put too much stock in the monthly GDP indicator – which is prone to revisions and not generally a good predictor of quarterly outcomes.
• Household consumption fell 0.7% M/M (vs -0.3% prior). Overall, movements in EURSEK and USDSEK have been relatively muted following the data.

• RES 4: 120.39 High Feb 28      
• RES 3: 119.31 Low Mar 4 and a gap high on the daily chart   
• RES 2: 118.56 High Mar 5   
• RES 1: 116.98 High Mar 7       
• PRICE: 116.52 @ Close Mar 7 
• SUP 1: 115.83 Low Mar 6 
• SUP 2: 115.52 2.618 proj of the Feb 7 - 19 - 28 price swing  
• SUP 3: 115.00 Round number support
• SUP 4: 114.81 3.000 proj of the Feb 7 - 19 - 28 price swing   

BTP futures remain in a clear bear-mode condition following last week’s steep sell-off. The move down has resulted in a breach of key support at 116.78, the Jan 14 low. The break strengthens a bearish theme and opens 115.52 next, a Fibonacci projection. The downtrend is in oversold territory, a recovery would allow this set-up to unwind. Initial firm resistance is seen at last Wednesday’s 118.56 high.

Bund futures tested Asia lows ahead of the old futures open, but the contract sticks within Friday’s range, last -34 at 127.32. Cues from e-minis seemed to drive things in Asia.

• Bearish technical theme in the contract intact, although it is in oversold territory.
• Initial support and resistance levels of note at 126.64/128.29.
• No lasting impact from firmer-than-expected German industrial production and a narrower-than-expected trade surplus.
• In German politics, the CDU/CSU and SPD have agreed to deepen coalition talks.
• Meanwhile, Chancellor-in-waiting Merz flagged his openness to broadening definition of defence to allow other ministries to benefit from the tabled debt brake tweaks. The Greens seemed to move further away from a fiscal agreement, underscoring the potential for ongoing headwinds in the time-pressured negotiations.
• ECB Executive Board member Schnabel sounded typically hawkish over the weekend, while Governing Council member Kazaks was non-committal when it came to the Bank’s April decision.
• Comments from ECB’s Nagel and the ECB’s survey of monetary analysts are due today.
• Supply-wise, the EU is scheduled to hold a syndication this week. We see a good chance of a new 2045 line being issued. The EU’s biannual funding plan also highlighting the prospect of a new 3-year bond, but we think that may come later in H1.
• Further out, U.S. CPI data (Wednesday) headlines this week’s macro calendar, with the ECB’s Watchers conference also eyed.