BONDS: EGBs-GILTS CASH CLOSE: Curves Flatten As Iran De-Escalation Hopes Fade

• The risk selloff gathered pace on Tuesday, as the ongoing conflict in the Middle East has further boosted oil prices and significantly weighed on equities & precious metals. These dynamics have fostered an extension of US dollar strength, prompting the USD index to briefly rise more than 2% to print fresh three-month highs at 99.68.
• While the dollar strength has been broad based, the likes of AUD, NZD and Scandinavian FX have been notable laggards in G10, while the EM FX basket has also suffered considerable losses.
• EURUSD plumbed new lows on the year below 1.1573 and feel to a session low of 1.1530 before stabilising. Moves this week have been exacerbated by a break of trendline support (drawn from the 2025 lows, bolstering the current bear cycle that remains in play for the pair. 1.1573 was considered a key support and so today’s close will be important for a bearish extension below 1.15.
• Despite the impressive intra-day weakness for AUD, the AUDUSD trend structure is unchanged, it remains bullish and for now, with today’s sell-off appearing corrective. Key support to monitor is around the 50-day EMA, at 0.6920. A clear break of the average would alter the picture.
• EM FX weakness remains pronounced on Tuesday, with high-beta currencies coming under pressure amid the stronger USD, surging energy prices, and renewed steepening in global yield curves. As noted earlier, the HUF is on track for its largest single-session decline in percentage terms since 2010, driven primarily by a roughly 25% jump in natural gas prices.
• Elsewhere, precious metals weakness has assisted the over 3% rally for USDZAR today. Today’s gains are also being amplified by the pair’s break above its 50-day EMA (16.2570) – a level it has not traded above since November last year. Positioning dynamics will likely be providing further headwinds for some other EM currencies – notably in LatAm, both MXN and BRL have declined over 2%, while CLP is down 3.2% as we approach the close.
• Australian GDP and China PMIs are scheduled on Wednesday, before Swiss CPI headlines the European calendar. In the US, ADP employment and ISM Services PMI are scheduled. 

US President Donald Trump has delivered wide-ranging remarks on Iran ahead of a bilateral meeting with German Chancellor Friedrich Merz. The Oval Office presser is the first live question-and-answer session Trump has provided since announcing military action against Iran on Saturday. 

• Trump says the Iran operation is “going well,” claiming that Iran’s air force, navy, and air detection have all been “knocked out.” Later adds, “their missile count is going way down.”
• Trump appears to row back on Secretary of State Marco Rubio’s suggestion that an imminent Israeli attack on Iran compelled the US to strike the country. “If anything, I might have forced Israel's hand,” Trump says.
• He says he “felt strongly” that Iran was going to attack first, based on the way indirect nuclear talks were going. “I didn’t want that to happen.”
• Trump says, in reference to Gulf States, “all those countries are now fighting against them.” He says Iran’s response shows they will hit “somewhat friendly” countries too.
• Trump suggests that senior Iranian officials “want to quit or have immunity”. He says “a lot of people are coming forward.” He says, soon they’ll be “laying down their guns.”

Asked his assessment for the worst-case scenario, Trump says if someone takes over that is “no better” than the previous regime. Trump re-visits the idea that Iranian anti-govt protestors could take control of govt institutions: “We’ll see what happens… We’ve said ‘don’t do it yet’ its very dangerous.”

• Trump reiterates that a number of Iranian officials the US had considered for an interim government have been killed in strikes. He notes that he doesn’t believe in the removal of regime officials, “that’s where ISIS came from [in Iraq],” he says. He adds, “first we have to finish off the military.”
• Trump singles out some European allies for criticism. Says Germany has been “great” and NATO Sec Gen Mark Rutte has been “fantastic.” He says Spanish President Pedro Sanchez has been “terrible,” and notes that he has directed Treasury Secretary Scott Bessent to cut off “all dealings” with Spain. He adds, “we’re going to cut off all trade with Spain.”
• USTR Jamieson Greer and Treasury Secretary Scott Bessent note that the administration is moving forward with tariff investigations. They both claim the Supreme Court ruling "reaffirmed [Trump's] ability to implement an embargo."
• Trump adds unprompted that he is “not happy with the UK either,” referencing London’s decision to bar US use of Diego Garcia. Says UK Prime Minister Keir Starmer is “not Winston Churchill.”
• Trump notes, “You could have oil prices for a little while, but as soon as this ends, prices are going to drop, I believe lower than before.”