PLN: Tariff Risk Remains Key Driver for PLN, NBP Statement Also in Focus
Unsurprisingly there has been very little reaction in EURPLN to the rate decision itself, though we flagged in our preview of the meeting (see here) that the focus this month will be on the way in which the panel and the Governor handle the recent dovish signals in official communications.
- Considering the macroeconomic backdrop, we would not be particularly surprised if one of the members tabled a motion to cut interest rates, but still consider this to be a low-probability scenario. The limelight, as always, will be on the Governor’s press conference tomorrow (14:00BST/15:00CET). Governor Adam Glapiński has been hawkish for some time now and we believe it would be costly to make a sharp U-turn.
- The ’Liberation Day’ tariff announcements remain the key driver for near-term zloty price action, with currency options markets identifying PLN as being one of the most exposed to tariff risk headed into Trump's Rose Garden appearance.
- For EURPLN, fresh cycle lows in February confirmed a resumption of the bear trend and signalled scope for an extension towards 4.1153, the 3.764 projection of the Nov 6 - 7 - 12 ‘24 price swing. An important resistance to watch is 4.1938, the 50-day EMA.
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US TSYS: J.P.Morgan Recommends Short 2s & 10s30s Flatteners
J.P.Morgan have recommended tactical shorts in 2s and 10s30 flatteners (the latter is for those that don’t want outright exposure at these yield levels).
- They note that “clear risk to the downside (for the economy) stemming from weaker business and consumer confidence, as well as trade, but the Treasury market has responded in kind, with 2-Year yields trading at the lowest yield levels since late-October”.
- However, they think the “magnitude of the rally has been exaggerated by technicals, with positions now leaning long, and at least for the near term, this week’s data flow should assuage the market’s worst fears about growth”.
- When it comes to the 10s30s flattener play they suggest that most curves look too steep based on Fed pricing and breakevens.
BUND TECHS: (H5) Sell-Off Exposes The Next Key Support
- RES 4: 134.54 61.8% retracement of the Dec 2 - Jan 14 bear leg
- RES 3: 134.06 High Dec 23 ‘24
- RES 2: 133.46/71 High Feb 28 / 5 and a reversal trigger
- RES 1: 132.94 Intraday high
- PRICE: 131.97 @ 12:47 GMT Mar 3
- SUP 1: 131.83 Low Feb 24
- SUP 2: 131.26 Low Feb 19 and a bear trigger
- SUP 3: 131.00 Low Jan 24 and a key short-term support
- SUP 4: 130.28 Low Jan 15 and the bear trigger
Bund futures have pulled back from their recent highs and the contract is trading sharply lower today. The move down undermines a recent bullish theme. A continuation lower would expose the next important support at 131.26, the Feb 19 low. Clearance of this level would be viewed as an important short-term technical break. Two important resistance points remain intact for now; 133.46, the Feb 28 high, and 133.71, the Feb 5 high
SPAIN AUCTION PREVIEW: On offer this week
Tesoro Publico has announced it will be looking forward to sell a combined E4.5-5.5bln of the following Oblis at its auction this Thursday, March 6:
- the 3.10% Jul-31 Obli (ISIN: ES0000012N43)
- the 3.15% Apr-35 Obli (ISIN: ES0000012O67)
Additionally, Tesoro Publico has announced it will be looking to sell E0.25-0.75bln of the 0.70% Nov-33 Obli-Ei (ISIN: ES0000012C12) at that auction.
Tesoro Publico has also announced it will be looking forward to sell a combined E5.5-6.5bln of the following letras at its auction tomorrow, March 4:
- the 6-month Sep 5, 2025 letras
- the new 12-month Mar 6, 2026 letras
