EU CONSUMER CYCLICALS: Edenred & Pluxee: French 2026 Budget Proposals (x2)

JP Morgan believe the underlying drivers of bullish EURUSD views remain in play, which improves the backdrop for further strength and suggests “a test of our 1.22 target is still reasonable”.

• They write that “even though the market-observed EUR/USD level has been range-bound, its fair value based on real yields and other drivers has steadily risen to 1.14, from 1.09 two months ago”. Breaking down the key drivers of EURUSD strength: “The EU/ German fiscal impact on EUR/USD remains unchanged but is already in the price; US moderation should be worth more, as should concerns around Fed independence. The Ukraine / Russia ceasefire should still provide a boost of ~2.5% if realised, but the bar for delivery is high”.
• JP Morgan note that “beyond the euro, the macro landscape remains conducive to USD weakness as it is characterised by declining US real yields, US growth catch-down, asymmetric risks around Fed easing, concerns about Fed independence and improving growth momentum ex-US”.
• Prior to yesterday’s US CPI report, Bank of America also recommended EURUSD longs, targeting 1.20 (spot ref 1.1612, stop 1.1392). They noted that “mixed US data over the past few months has injected two-way risk, but we view the more recent July data (NFP and ISM Svc in particular) as reigniting stagflationary concerns; something we view as USD negative”. On the EUR leg, they believe “the bar for positive European surprises on the policy/economic front is low (and even lower than before)”.

Treasury Secretary Bessent, interviewed on Bloomberg TV: "I think we could be heading into a series of rate cuts here, and could start with 50bps in September"

• "One of the most politicized governors [Kugler] just left the board"
• If data had been accurate, it's possible Fed cuts earlier, we should be 150, 175bps lower on rates by now.
• "We'll see" on how quickly Miran can be confirmed as Fed nominee. Is "hopeful" for September meeting
• "There is no accountability" at the Fed, in reference to renovations project
• Trump is concerned over the foundations at the Fed
• Would not expect Miran to stay on beyond the remainder of Kugler's term

When asked on whether BLS could suspend NFP releases on quality concerns - seems to talk down comments of BLS nominee as being made outside of office, akin to when Bessent called for a Shadow Fed chair.

• We're concerned on integrity of data, what we want is "good" data. Antoni is "well qualified" as BLS chief, and was there through the interview process.

2s10s bull steepens by ~1bp after Tsy Secretary Bessent reaffirms his idea of a 50bp catch-up rate cut in September, while suggesting that could represent the start of a “series of rate cuts”. 

• FOMC-dated OIS fairly stable around 62bp of cuts through year-end, while SFRZ6 rallies by 1.5bp.