STIR: 4bps of Implied Cuts Removed From ECB Cycle Today

• Reporter: Do you think that Fed Chair Powell should resign?
• Trump: I think he’s done a bad job but he’s got to be out pretty soon anyway. In 8 months he’ll be out.

[That’s close to the May 2026 end for Powell’s Fed Chair term].

Trump follows with familiar comments, including later on that he wants rates at 1%: “He should have lowered interest rates many times. Europe lowered their rate ten times. We lowered ours none. It’s causing a problem for people wanting to buy a home. Look, our economy is so strong now, We’re blowing through everything. We’re setting records, you know that we see that.”

Trump then reverts to Fed renovation cost rhetoric.

• Alongside the extension of dollar weakness on Tuesday, a strong performance for the Canadian dollar has prompted USDCAD (-0.40%) to trade to fresh two-week lows. The pair flirted above the key 50-day EMA last week, however, the swift reversal and subsequent resumption of weakness keeps a bearish trend intact. Downside momentum appears to have picked up below some daily lows around 1.3650 today.
• Further declines would refocus attention on key support at 1.3540, the Jun 16 low. Clearance of this level would confirm a resumption of the technical downtrend.
• PM Mark Carney kicked off his meeting with Canada's premiers in Huntsville, Ont., on Tuesday promising to battle the Trump administration at the negotiating table to ensure the country gets a good trade deal, while also doing everything he can to strengthen the Canadian economy.
• Consensus looks for the Bank of Canada to remain on hold next week (July 30 decision same day as the Fed). BBVA point out that market pricing for BoC policy reflects a highly prudent stance, which is supportive of the CAD. However, they believe ongoing uncertainty and the threat of potential higher US tariffs will likely temper upward movements in Canada's economy and the CAD until greater clarity emerges after Aug 01.

Treasury continued to up the size of 4- and 8-week bills, rising $5B apiece for Thursday's auctions to $95B and $85B, respectively. The new 4-week level will match the all-time largest auctions seen over the last couple of years, with 8-weeks remaining below the $90B peak. 

• This is the 3rd consecutive weekly increase - they're up from $55B/$45B at the beginning of the month, prior to the lifting of the debt limit. 17-week auction sizes were unchanged at $65B.
• The increase is something of a surprise (Wrightson ICAP this morning wrote "We think the Treasury has completed its current ramp-up of bill offering sizes"), in a possible sign that Treasury is not necessarily going to back-load its rebuild of the Treasury General Account post-debt limit: it said after the debt limit was lifted that it is aiming for a cash balance of $500B by end-July (vs $315B at end-last week) and $850B by end-September.
• Upon settlement next Tuesday, the bills will raise $60B in net cash.
• We expect to hear a little more about cash management plans in next week's Refunding round. For the foreseeable future, bills are going to be the moving part in meeting financing requirements, with coupon auction sizes not expected to be increased for several quarters at least. We'll publish our Refunding preview later this week.