EUROZONE ISSUANCE: EGB Supply - W/C 19 May, 2025 (2/2)

• Beyond tariff-induced risk aversion and broad USD weakness, Barclays see further upside risks to the JPY as US-Japan negotiations commence with a wide range of potential outcomes. Beyond the discussions on goods trade, currency negotiations may form part of a potential Trump Administration strategy to reshape the global monetary order, the so-called 'Mar-a-Lago Accord.'
• A potential currency agreement could range from an outright accord on USD-selling interventions on one extreme, to a mere verbal communication of a desire for a weaker USD or regarding concern over JPY weakness. Another indirect agreement could come in the form of a commitment to maintain Japan's positive growth dynamics on wages, thereby ensuring continued BoJ rate hikes and hence tightening yield differentials.
• Barclays continue to see upside risk to the JPY beyond their 142 forecast. While Japan may agree to some yen strength, USDJPY below 130 could raise concerns, according to the bank.
• While details on official discussions are likely to dominate the headlines, it is worth noting that on Thursday, a speech by BoJ Board Member Nakagawa is also scheduled.

• 8,500 TYM5 112.5 calls 31 vs. 110-31/0.28% at 1058:27ET

(MNI) London - The Chinese Embassy in the UK has pushed back against UK criticism of Chinese firm Jingye, which owns British Steel. Over the weekend, the UK gov't stepped in with emergency legislation that stopped just short of nationalising British Steel after Jingye said the blast furnaces at Scunthorpe would be turned off. The embassy spox accused some British politicians of rhetoric that is "absurd, reflecting their arrogance, ignorance and twisted mindset.". 

• The Guardian reports comments from UK Secretary of State for Business and Trade Jonathan Reynolds saying "the UK had “got it wrong in the past” about allowing Chinese investment in strategically important industries such as steel, and highlighted the influence of the Chinese government on private companies. “I wouldn’t personally bring a Chinese company into our steel sector,”.
• Embassy spox: "Any words or deeds that politicise or maliciously hype up business issues will undermine the confidence of Chinese business investors in the UK and damage China-UK economic and trade cooperation"
• This comes as Bloomberg publishes an article claiming that UK officials have raised concerns about Chinese-made drones taking high-res pictures of strategic UK infrastructure. BBG: "One British official said the drones issue is challenging as the government tries to balance its public pursuit of closer economic ties with Beijing with its private frustrations that companies working in sensitive areas are not taking seriously the potential security threat posed by China."