ECB: Weekly ECB Speak Wrap (Mar 11 – Mar 17)
In the following publication, we provide a summary of ECB-speak between March 11 and March 17: 250317 - Weekly ECB Speak Wrap.pdf
In our view, the most notable Governing Council commentary since March 11 has come from Vice President De Guindos, following dovish leaning interviews with The Sunday Times Ireland and Onda Cero on 16/17 March. De Guindos continued to express conference in the inflation outlook, as “all indicators for services and underlying inflation are moving in the right direction”. Meanwhile, he noted that US tariffs would “have a much worse impact on growth than on inflation” and that current evidence suggests “consumption is not picking up”.
- While no explicit policy signals were provided by de Guindos, his comments suggest he will still support several more cuts even amid the current prospects for increased German/EU defence spending. We consider de Guindos to be a dovish leaning centrist, so his stance is likely to be mirrored by several other Governing Council members.
- In that vein, Simkus on March 12 suggested the direction of travel for rates is still “clear”, while Villeroy said on March 14 that victory against inflation will be assured “very very soon in Europe”.
- In an interview with Der Platow, the hawkish Holzmann provided his first comments since abstaining at the March meeting. He noted that the abstention was “primarily due to the accompanying communication” in the policy statement, as he views ECB policy to already be at neutral levels. Meanwhile, he noted that he is in favour of a “possible interest rate pause in April”.
- Speaking to the BBC on March 13, Bundesbank President Nagel seemingly pushed back his timeline for the sustainably return to the 2% target. He noted that the Eurozone will be “back to our target at the end of this year”, later than the mid-2025 timeframe he had previously been signalling for.
- ECB President Lagarde speaks at an EU Parliamentary hearing on Thursday, but a more detailed discussion of current policy may be provided at tomorrow’s MNI Connect event with Bank of Finland Governor Rehn – sign up here:
- ECB-dated OIS price 47bps of easing through year-end, with 31bps of cuts priced through June. With Germany’s fiscal package seeming likely to be passed this week, regional focus turns to the flash PMI and inflation data due over the next few weeks, alongside any tariff-related developments.
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US TSYS: Yields Pull Back Again With Consumer Growth Story In Question
Treasuries outperformed global counterparts Friday, fully completing a reversal from a midweek selloff.
- A large miss in January retail sales (-0.9% M/M vs 0.7% prior, -0.2% consensus) represented the biggest sequential drop in 22 months, with a similarly weak "control group" figure leading to a 0.5pp downgrade to the Atlanta Fed's GDP nowcast (to 2.3% GDP growth in Q1, i.e. no acceleration from Q4).
- That was enough to see the 10Y Treasury yield drop 7bp in the subsequent half hour, continuing the downtrend seen beginning in the immediate aftermath of Wednesday's hot CPI release. 10Y yields dropped over 21bp from the Wednesday high to Thursday's low, ultimately ending a tumultuous week 1.5bp lower.
- Yields ticked a little higher in afternoon trade Friday but the curve leaned bull steeper on the day, with the belly outperforming: 2-Yr yield is down 4.6bps at 4.261%, 5-Yr is down 5.7bps at 4.3328%, 10-Yr is down 5.1bps at 4.4782%, and 30-Yr is down 3.9bps at 4.6982%.
- In futures: Mar 10-Yr futures (TY) up 9/32 at 109-08 (L: 108-26 / H: 109-15.5).
- Other data (industrial production mixed, import prices soft) had little lasting impact.
- The coming week’s data schedule is relatively light, due in part to Monday’s Presidents Day holiday (SIFMA recommends bond cash close, equities closed), with initial jobless claims, February prelim PMIs, and regional Fed manufacturing surveys among the highlights. Supply includes 20Y Bond and 30Y TIPS auctions.
- We also get plenty of Fed communications including the January meeting minutes, and speaking appearances by both doves (Gov Waller) and hawks (St Louis Pres Musalem).
USDCAD TECHS: Bear Cycle Extends
- RES 4: 1.4948 High Mar 2003
- RES 3: 1.4814 High Apr 2003
- RES 2: 1.4503/1.4793 High Fb 4 / 3 and key resistance
- RES 1: 1.4380 High Feb 10
- PRICE: 1.4175 @ 16:54 GMT Feb 14
- SUP 1: 1.4107 50.0% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 2: 1.4011 Low Dec 5 ‘24
- SUP 3: 1.3944 61.8% retracement of the Sep 25 ‘24 - Feb 3 bull cycle
- SUP 4: 1.3894 Low Nov 11 ‘24
USDCAD broke lower Thursday, breaking out of a tight trading range this week and remains soft. A key support at 1.4261, the Jan 20 low, has been cleared and this signals scope for an extension of the current bear cycle - a correction. Scope is seen for a move towards 1.4107, a Fibonacci retracement. Initial firm resistance to watch is 1.4380, the Feb 10 high. A break would highlight an early bullish reversal signal.
OPTIONS: Mixed SOFR Rates Trade To Cap Week
Friday's US rates/bond options flow included:
- SFRH5 95.62p, traded half in 2k.
- SFRH5 96.93c, traded 0.25 in 4k.
- SFRH5 95.75/95.62ps 1x2, Traded 3.75 in 3k.
- SFRK5 97.00c, traded for 0.75 and 1 in 3k.
- SFRU5 95.93/95.81/95.68p fly, traded 1 in 1.5k
- SFRU5 96.50c, traded for 6.5 in 1.5k.
- SFRU5 95.87^, traded for 36 in 5k.
- SFRJ5 95.87/95.75/95.68p fly 1x3x2 with SFRK5 95.81/95.68/95.62p ladder 1x3x2, bought for 10 in 2k.
- SFRM5 95.68p, sold at 2.5 in 10k.
- 0QH5 96.00c, bought for 13 in 3k.
- TYH5 107p, bought for 11 in 15k
- TYJ5 107p, bought for 11 in 17k total.
- TYJ5 107/106ps, bought for 7 in 15k total.
