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[MARKET ANALYSIS] USD attracts haven demand as tech sells off; Antipodeans underperform, GBP awaiting further Burnham/Chancellor updates

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Germany sells EUR 3.807bln vs exp. EUR 5bln 2.50% 2028 Schatz: b/c 1.90x (prev. 1.58x), average yield 2.57% (prev. 2.59%), retention 23.86% (prev. 22.80%)

[MARKET ANALYSIS] Fixed benefits from modest energy downside and traditional haven allure. PMI commentary points to a possible peak in price pressures.

[MARKET ANALYSIS] USD attracts haven demand as tech sells off; Antipodeans underperform, GBP awaiting further Burnham/Chancellor updates

The EU is set to issue prelim findings in its Digital Services Act probe into Meta Platforms (META), and escalate its investigation into addictive design that hooks children, Bloomberg reports

Israel reportedly dropped a number of stun grenades targeting the town of Kfar Tebnit in Southern Lebanon, according to an Al Mayadeen correspondent

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  • G10s are entirely lower against the Buck (bar JPY), as USD attracts haven demand in a textbook risk-off market move (stocks/oil down, fixed/havens bid), signalling the market is gradually moving away from geopolitical trade. As you would expect, Antipodeans underperform, Aussie fares the worst as metals suffer from the strong Buck, while JPY is the only currency stronger vs the USD after a sharp 30pip move lower as it sits towards 2024 highs.
  • DXY firmer by 0.2% as it attracts haven demand amid tech weakness in Kospi/NQ (see equities at 09:25 BST for analysis). In terms of domestic newsflow, Fed's Goolsbee said services inflation was “a little disturbing”. The data docket is light but begins to pick up today (ADP weekly + PMIs due) heading into Thursday's GDP revisions and PCE data. DXY surpassed Friday’s high of 101.12, now looks to the May peak just below 102.
  • JPY continues to whipsaw around multi-year lows against the Buck, with USD/JPY towards 161.50-162. Japanese officials continue attempts to bolster the Yen, but continue unsuccessful with the Greenback bid. Overnight, Japanese Finance Minister Katayama confirmed she spoke with US Treasury Secretary Bessent on Monday. Elsewhere, APAC trade saw stronger flash PMI data and mixed results of the latest 5yr JGB auction.
  • GBP is weaker and tracks the firmer Buck with participants awaiting further updates from a likely incoming Burnham premiership. Despite Gilts continuing to outperform peers on optimistic Burnham reporting (Streeting added to Chancellor candidates/Burnham said to announce commitment to Fiscal rules), Miliband still in the picture for Chancellor is viewed by Sterling traders as an unwelcome option. As such, GBP awaits further press reporting and tracks the Buck with Cable remaining at 1.32, EUR/GBP unchanged. ING this morning writes “Regardless of politics, we keep favouring higher EUR/GBP on the back of a dovish view (no hikes) on the Bank of England”. EZ/UK PMIs were mixed (see fixed income for analysis), EUR saw fleeting strength on the French figure, which indicated a cooling of cost pressures; a move which proved fleeting as the German services and composite metric cooled (Some respondents' answers did not eclipse the signing of the US-Iran MoU).

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