EU CREDIT HEADLINE: E.On: H125 Results Headlines      

Modest dovish adjustments in GBP STIRs after the dovish comments from BoE Governor Bailey re: the potential for a softer labour market to feed through into BoE action and a weak REC labour market report (both detailed in previous bullets).

• Still, SONIA futures (flat to +3.0) and BoE-dated OIS (53bp of cuts priced through Dec) stick within recent ranges.
• Looking ahead, it's another packed week for the UK with Mansion House speeches, inflation and labour market data all due.
• The Mansion House speeches will see both Chancellor Reeves and Governor Bailey speak. Bailey has spoken a fair amount recently so not much new on monetary policy is expected from him, while Reeves had been expected to outline a consultation on ISA reform (tax free savings accounts) but the latest media reports suggest that this plan has been shelved.
• An early consensus sees both headline and core CPI expected to remain unchanged from May levels at 3.4%Y/Y and 3.5%Y/Y respectively - which would be a little above the BOE's forecast for headline and a little below for core. At a more granular level food prices are expected to remain much stronger than the BOE's forecast - and to offset slightly softer core prices.
• Labour market data will be watched to see whether wage growth slows as much as expected - and HMRC payrolls data will continue to be watched after being mentioned in the June MPC Minutes. These will be the last inflation and labour market readings ahead of the August MPC meeting.

The BBDXY continues to edge higher in early London trade, with the index registering the firmest level of July.

• The USD bid comes in the wake of an equity sell off and U.S. President Trump’s weekend tariff threats against both the EU & Mexico.
• The theme of broad-based USD selling alongside fresh tariff news has abated in recent sessions, with the market already short USD and broader sentiment against the greenback already operating well into negative territory.
• Markets seem to be taking a more balanced view on the odds of tariffs being implemented & subsequent impact global growth risks.
• The greenback outperforms all G10 FX peers outside of the JPY, which Is seemingly drawing support from lower equities and higher long end JPY rates, leaving USD/JPY ~15 pips lower at 147.30.
• EUR/USD threatens a clean break below the 20-day EMA (1.1660), with lows of 1.1651 registered in early Asia trade.
• Note that dovish commentary from BoE Governor Bailey and a soft REC jobs report (detailed earlier) haven’t resulted in meaningful underperformance for sterling on the major GBP crosses.
• Little of note on the broader G10 calendar for Monday, outside of some ECBspeak from Cipollone & Vujcic.
• Tomorrow’s U.S. CPI data provides the data highlight of the week, with UK CPI (Wednesday) & labour market (Thursday) data also eyed.

A 0.01pp downward revision to Swedish headline CPIF inflation to 2.84% in June was enough to bring the rounded print down to 2.8% Y/Y (vs 2.85% flash, 2.26% prior). CPIF ex-energy was 3.28% Y/Y (vs 3.29% flash. 2.47% prior), so still 0.4pp above the Riksbank’s June MPR projection. As expected, the start of the Swedish holiday season pushed inflation on package holidays, airfares and accommodation/restaurant inflation higher. Meanwhile, there was fairly limited disinflation to note elsewhere in services, and core goods inflation also appears a little firmer than expected.

• Overall, the print appears strong even after accounting for the expected volatile factors. It will be worth monitoring these trends in the coming months. SEK appreciation earlier this year and subdued demand is still expected to contain inflationary pressures during the summer/autumn – as suggested by forward-looking indicators.
• Package holidays rose 31.08% M/M, contributing 0.49pp to monthly CPI. On an annual basis, prices still fell 1.10% Y/Y (vs -2.68% prior), implying a 0.40pp contribution to annual CPI due to the higher basket weight in 2025.
• Airfares rose 24.03% M/M, contributing 0.05pp to annual CPI. Annual airfare inflation was -2.08% Y/Y (vs -11.27% prior), but actually pulled annual CPI down by 0.17pp on net. Restaurant and hotels inflation accelerated to 4.62% Y/Y (vs 3.28% prior).
• There was fairly limited disinflation in other major services categories:
  • Personal care was steady at 2.86% Y/Y (vs 2.85% prior), while insurance and financial services were essentially unchanged.
  • Recreation and cultural services rose to 4.08% Y/Y (vs 2.50% prior).
  • However, the communication component eased to -1.34% Y/Y (vs -0.71% prior), and rents also softened to 4.71% Y/Y (vs 4.92% prior).
• Within goods, although summer sales pulled down clothing inflation by 2.20% M/M, on a Y/Y basis clothing  accelerated to 2.76% Y/Y (vs 1.95% prior). Footwear and furniture inflation also ticked higher. Meanwhile, vehicle purchase inflation was 0.39% YY (vs 0.45% prior).
• Food inflation also rose to 4.26% Y/Y (vs 4.09% prior) – still below March/April levels.