EQUITIES: EU Cash Opening calls
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STIR: Dovish ECB Repricing After Trump's 30% Tariff Threat, July Cut Unlikely
Dovish repricing in EUR STIRs following US President Trump’s tariff letter to the EU is contributing to this morning’s twist steepening in core EGB curves. ECB-dated OIS are up to 2.5bps more dovish through the next 12 months. Pricing is still consistent with one more 25bp ECB cut this cycle, but a continuation would see markets once again entertain the idea of a terminal rate as low as 1.50%.
- US President Trump announced a 30% reciprocal tariff on EU exports from August 1. To assist with negotiations, the EU has said its E21bln package of retaliatory measures will also be delayed to this date. Meanwhile, Bloomberg sources suggest the EU is preparing to engage more with other nations (e.g. Canada, Japan) to coordinate responses to the US.
- OIS still assign virtually no implied probability of a cut in July. This is likely a combination of (i) previous ECB guidance that policy is in a “good place”, suggesting there is time to wait until the September decision where updated forecasts are presented, and (ii) the risk that Trump’s announcement is just a negotiating tactic and the actual outcome of negotiations will be less onerous than the 30% announced rate.
- Euribor futures are +0.5 to +3.0 ticks through the blues, with the whites/reds outperforming. ERH6 is +3.0 ticks at 98.20, but remains below last Friday’s 98.215 high.
- Today’s regional data calendar is light. ECB speakers include Cipollone and Vujcic.
| Meeting Date | ESTR ECB-Dated OIS (%) | Difference Vs. Current Effective ESTR Rate (bp) |
| Jul-25 | 1.920 | -0.3 |
| Sep-25 | 1.823 | -10.0 |
| Oct-25 | 1.786 | -13.7 |
| Dec-25 | 1.700 | -22.3 |
| Feb-26 | 1.687 | -23.6 |
| Mar-26 | 1.665 | -25.8 |
| Apr-26 | 1.674 | -24.9 |
| Jun-26 | 1.681 | -24.2 |
| Source: MNI/Bloomberg Finance L.P. | ||
STIR: Modest Dovish BoE Pricing Moves After Bailey, 53bp Cuts Priced Through Dec
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.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Aug-25 | 4.003 | -21.4 |
Sep-25 | 3.940 | -27.7 |
Nov-25 | 3.771 | -44.7 |
Dec-25 | 3.686 | -53.1 |
Feb-26 | 3.557 | -66.0 |
Mar-26 | 3.524 | -69.3 |
FOREX: JPY Outperforms, BBDXY Higher
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.
