BUNDS: The German 10yr Yield push lower towards 2.50%

The November 2020 low at 0.9274 capped downside in NOKSEK last week, before the stronger-than-expected Norwegian CPI report drove a 1.25% rally in the cross on Monday. Today’s 0.7% increase in NOKSEK has been led by the SEK leg, with USDSEK and EURSEK also extending higher at typing.

• This helps narrow the gap to 0.9500, previously a key multi-year support which was breached on March 3. This level coincides closely with the 20-day EMA at 0.9496, clearance of which will be required to signal a reversal to the upside. Shallower rallies will be considered corrective in nature.
• We haven’t seen an obvious fundamental driver for today’s krona weakness. European equities are up 1.5% at typing (with the OMX30 also up 0.6%), and while this morning’s unemployment claims rate data suggest labour market conditions remain soft, it didn’t point to an accelerating pace of deterioration.
• Given the extent of SEK strength since the start of February, participants may be happy to take krona risk off the table ahead of today’s US CPI data, and next week’s Riksbank decision. 

OEJ5 116.5/116/115.5p fly, bought for 9.5 in 5k.

• Despite some moderate outperformance for the greenback on Wednesday, GBP’s relative strength against G10 peers is standing out as we approach the US data, with cable consolidating close to its recovery highs of 1.2966. This leaves the pair within 50 pips of the psychological 1.3000 mark, and places growing attention on the US election (Nov 06) high at 1.3048, an important technical point on the chart. Moving average studies are highlighting a dominant uptrend.
• Goldman Sachs think GBP-outperformance last week was mainly a function of the currency’s relative resilience to tariff risks, and they think that can continue to support Sterling versus other European currencies as EU tariffs come into reality.
• Separately, Rabobank said the combination of this week’s release of monthly January UK GDP data and political bickering about the welfare budget will serve as a reminder of both the poor growth backdrop and tight fiscal position. They expect EUR/GBP to hold around the 0.84 area in the weeks ahead.
• Aside from the monthly activity print on Friday, we remain unlikely to hear anything from the Bank of England’s MPC (as we have entered the blackout period).