ECB: ECB Accounts: Leaving Rates On Hold Was A Robust Approach

• Treasury futures are following German Bund's lead ahead of the NY open, climbing off modest overnight lows, albeit on light volumes ahead flurry of morning data ahead tomorrow's FOMC rate announcement.
• Tsy Sep'25 10Y futures currently +5.5 at 110-30 on volume of 215k (+30k over the last hour). Technical resistance at 111-14+, Jul 22 high. A clear break of it would highlight a stronger reversal and open 111-28, the Jul 3 high.

The European Commission has published a Q&A  sheet on the deal on tariffs and trade announced over the weekend. The deal has been talked up as a compromise that will avoid the worst-case scenario of 30% US tariffs on EU goods and EU retaliation via the 'anti-coercion instrument'. Nevertheless, there remain holes with regard to details of what the deal will cover and how it will be implemented.

• The most important section of the document may indeed come at the end, where it notes, "The political agreement of 27 July 2025 is not legally binding. Beyond taking the immediate actions committed, the EU and the US will further negotiate, in line with their relevant internal procedures, to fully implement the political agreement."
• The document highlights the "single, all-inclusive US tariff ceiling of 15% for EU goods", which includes the most-favoured nation tariff rate. However, it then notes that if the MFN tariff is higher than 15%, only the MFN tariff will apply, not the 15% ceiling (implying that 15% is not in fact an all-inclusive ceiling). The 15% rate will apply to vehicles, and, when they are implemented by the US, on pharmaceuticals.
• As MNI's Policy team noted on 28 July, the US itself has yet to confirm the 15% ceiling, while there are also potential legal pitfalls should the Commission seek to push a deal through without a full ratification process by member states (see 'MNI: EU States Broadly Back EU-U.S. Deal - Officials', 28 July). 

• In the FI space, Bund futures have recovered from last Friday’s 128.84 low. Friday’s activity resulted in a test of the base of a 3.5-month range at the 129.00 handle. This key support remains intact for now. A hammer candle formation on Jul 25 followed by a bullish engulfing candle yesterday signals a potential reversal.Initial resistance to watch is 129.95, the 20-day EMA. A break of the Jul 25 low is required to confirm a resumption of the bear trend.
• Gilt futures continue to trade below the Jul 22 high and the contract remains above its recent lows. A rally early last week resulted in a break of the 20-day EMA. A resumption of gains would signal scope for a climb towards 92.42 next, a 50.0% retracement of the Jul 1 - 18 bear leg. On the downside, key support and the bear trigger has been defined at 91.08, the Jul 18 low. Clearance of this level would resume the bear cycle that started Jul 1.