ENGLAND CENTRAL BANK CONSIDERING A SIGNIFICANT CHANGE OF THE MARKETS FOR DEPOSIT GUARANTEE SCHEMES

The post-payrolls trading paradigm, which dominated trade for last week, was still in place on Friday in the (US) bond markets. Prices for US imports and exports came in worse. Retail sales in January were at best inconsistent (headline -1.0%, control group -0.3% M/M). A slight increase in Treasuries and a test to the downside in rates that occurred right after the data reignited selling activity. More or less simultaneously, Fed's Waller said that recent events call for more tightening. Later, a more hawkish stance by the University of Michigan's consumer confidence report. Expectations and actuals both came in greater than anticipated. Inflation forecasts for the next year further increased, going from 3.6% to a “shocking” 4.6%. The Michigan statistics received a muted market response. Yet, US yields rose by the conclusion of the day by between 4.75 bps and 13.6 bps (2-y) (30-y). The 2-y yield “easily” (near to 4.10%) achieved the 4.0% threshold. The 10-y closed just above the 3.50% ceiling. The market once more predicts that the Fed will raise rates at its meeting on May 3. German rates increased between 10.2 (2-y) and 4.5 bps (30-y) as they 'from a distance' followed the US as several ECB governors last week said that a peak policy rate of 3.75% is likely required to contain inflation. US stocks ended the day lower (S&P 500 -0.21%), but above their lows for the day. Finally, the rise in US yields forced USD shorts to withdraw some bets heading into the weekend. DXY recovered from a low point throughout the day of about 100.80 to close at 101.58.

In order to conclude at 1.0994, EUR/USD was unable to increase advances over the 1.1033 prior YTD top. Dollar and euro outperformed sterling, as the EUR/GBP rate extended its bottoming process (close 0.8855). Asian stock markets this morning don't exhibit a distinct trend. The only data series worth mentioning on the calendar today are the US Empire Manufacturing Survey and the NAHB Housing Index, and this will continue for the majority of this week. The most prominent data series is Friday's PMIs. Tomorrow, China will release its Q1 GDP figures. In the days leading up to the policy meetings in early May, ECB and Fed members will be able to provide “final” guidance. Investors will closely monitor the initial company earnings and outlook. In comparison to pre-payrolls, markets are presently more neutral after last week's yield bounce. The US 2-yield and 10-yield each have a first (tough？) resistance at 4.17/25% and 3.64%, respectively. The dollar may struggle to mount a prolonged return if the rise in (US) yields slows. The following topside reference on the charts is EUR/USD 1.1185 (top of March 2022). The first significant support is still at 1.0831 for EUR/USD. This week, the UK markets will receive an in-depth data update (labor market data on Tuesday, inflation data on Wednesday, and retail sales on Friday) as the markets debate whether the BoE should stop its rate hike cycle in early May. News and opinions

Poland and Hungary have temporarily stopped importing Ukrainian grain in an effort to stabilize the country's falling grain prices and safeguard local farmers. During Russia's invasion, the EU removed tariffs and import limits on grain from Ukraine and rerouted some cargoes from Black Sea ports that were blockaded through Poland and Romania. Due to a lack of trucks and trains, the majority of that, which was intended for re-export to the Middle East and Africa, remained in nations close to Ukraine. The EU alone is responsible for trade policy. As a result of the decision, both nations run the risk of deepening ongoing legal challenges as well as creating a new rift with the EU.

The Bank of England is thinking about making significant changes to the deposit guarantee program. The current guarantee threshold of £85 000 only covers two-thirds of corporate deposits. Clients would also need to wait at least a week to access their money again in the case of an SVB-like scenario due to the system's inadequate pre-funding. As a result, the program loses credibility and efficiency. The number of protected deposits may be raised, according to the authorities. In its place, businesses may increase the guarantee sum for certain purposes, such working capital. A bigger pre-funding amount is also being considered in an effort to stop the payout delay.