STIR: Citi Recommended Receiving July ECB-Dated OIS

• Tuesday saw the highest FX derivative volumes on the DTCC since April 22nd, with near $140bln cumulative notional clocked, despite generally quieter EUR and JPY hedging activity.
• Instead, better BRL, GBP, KRW and HKD trade underpinned activity - as the fade off highs for the dollar helped stimulate demand for USD/BRL puts and GBP/USD calls, however markets favoured hedging against further weakness in APAC currencies - evident in the demand for HKD and KRW downside. This stands in contrast with the front-end of the USD/HKD risk reversals curve: 1m was pressed to -1.5 points for the first time in decades as spot tested the strong-side of the HKMA band last week.
• This keeps the front-end of the USD curve under pressure - the MNI-weighted USD 1m Risk Reversal remains 0.5 points in favour of puts over calls, off lows - but in range of the multi-year lows just before Trump's 90-day tariff delay. This contrasts with the rebound in the USD Index, which remains near 3% off pullback lows - but is yet to top the 50-dma.

Figure 1: Synthetic USD Index Risk Reversal still heavily subdued, despite US-China prelim deal

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• President Donald Trump embarks on a Qatar state visit today armed with a $600 billion investment commitment from Saudi Arabia - described by the White House as “transformative” but greeted with scepticism by analysts.
• In a Saudi speech, Trump announced he would lift sanctions on Syria and delivered a rebuke of Iran’s government. Trump then offered an "olive branch" to Tehran, caveated with a threat of a return to "maximum pressure".
• Trump touted yesterday’s CPI print as evidence that the Fed should lower interest rates.
• The US Court of International Trade heard the first oral arguments in a lawsuit challenging the legal basis of Trump’s tariffs.
• India may be emboldened to take a firmer line in US trade talks in light of Trump's deal with China.
• The House Energy and Commerce, Ways and Means, and Agriculture Committees will continue their crucial markups towards the ‘One Big Beautiful’ reconciliation bill. Today may be dominated by pushback from conservatives who have so-far played second-fiddle-disruptors to SALT Republicans.
• The JCT calculated that the tax cuts drafted by Ways and Means will cost less than the $4 trillion authorised by the GOP budget resolution.
• Ukrainian President Volodymyr Zelenskyy urged Trump to attend Turkey peace talks.
• The previous round of US-Iran nuclear talks in Oman “made progress”.
• Poll of the Day: Americans think America's standing in the world has worsened since Trump became president.

Full Article: US DAILY BRIEF

• MNI: CANADIAN MAR BUILDING PERMITS -4.1% MOM
• CANADA RESIDENTIAL BUILDING PERMITS +2.0%; NON-RESIDENTIAL -14.5%