EMISSIONS: EU Mid-Day Carbon Summary: EUAs/UKAs Rise On TTF Upticks
EUAs/UKAs Dec25 are both trending higher toward one-week highs, supported by a 3% intraday rebound in TTF since the morning low, though uncertainty over US tariffs and downward revisions to temperature forecasts may cap further carbon gains. In response to the US’s proposed 30% tariff, the EC President Ursula von der Leyen stated that the EU prefers a negotiated resolution on trade relations with the US and will extend the suspension of its countermeasures to US tariffs until early August.
- EUA DEC 25 up 0.37% at 70.81 EUR/t CO2e
- UKA DEC 25 up 0.55% at 47.77 GBP/t CO2e
- TTF Gas AUG 25 up 1.7% at 36.175 EUR/MWh
- NBP Gas AUG 25 up 2% at 86.97 GBp/therm
- Estoxx 50 down 0.7% at 5345.86
- FTSE 100 SEP 25 up 0.5% at 8984
- The latest EU ETS CAP3 auction cleared at €70.42/ton CO2e, down 0.03% compared with the previous EU auction at €70.44/ton CO2e according to EEX.
- The EU’s Renewable Energy Directive III (RED III), alongside with national green fuel mandates, may reduce demand for allowances under the upcoming EU ETS 2, according to BNEF.
- UK Chancellor Rachel Reeves sets to announce on 15 July a new pilot finance project aimed at reducing red tape for climate finance and business decarbonisation, according to Reuters.
- Stellantis may be forced to shut down internal combustion engine (ICE) manufacturing plants in Europe unless the EU eases its carbon emissions regulations, according to the comment by its COO Jean-Philippe Imparato reported by The Telegraph.
- EU Climate Commissioner Wopke Hoekstra urged China to stop building new coal-fired power plants and phase out use of the fossil fuel, during climate talks in Beijing on 13 July, according to Reuters.
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US FISCAL: Available Extraordinary Measures Pick Up Ahead Of Tax Date
Treasury had $144B in "extraordinary measures" available to keep the government financed as of June 11 per a release Friday. That is up from $84B a week earlier and the highest since April 28.
- However, TGA cash continues to fall, to $309B latest (lowest since early April) Combined with a pullback in Treasury cash ($376B), keeping the total resources available to avert an "x-date" in the summer at around $450B .
- There will be another uptick in Treasury cash in the coming days, and it's likely Treasury allowed some of the extraordinary measures to be rebuilt (ie not exercised) in anticipation of more cash coming in.
- This is likely to be the last major uplift before the summer at which point x-date speculation will pick up if Congress hasn't passed a debt limit increase by then.
FED: Two Cuts Priced This Year Headed Into FOMC Week
As we head into the June Fed meeting week, market pricing is reflective of the FOMC’s messaging (that we describe in our preview):
- The next cut is only fully priced by the October FOMC meeting, with September seeing a roughly 80% implied probability of bringing the next 25bp reduction.
- Exactly 50bp of cuts are priced through end-2025, implying two Q4 cuts.
- That’s a shift from just after the May meeting, after which the next cut was fully priced by September, and there were closer to three cuts priced for the rest of the year.
- Overall cuts are seen backloaded this year (after 15bp in September, 29bp of cuts priced in Q4 - Oct/Dec combined), but falls off in Q1 (just 21bp cuts priced, 9bp of cuts priced for January and 12bp for March)
FED: Summary Of Economic Projections: Higher 2025 Inflation, Weaker Growth
The MNI Markets Team’s expectations for the updated Economic Projections are below.
- As of the May meeting, the Federal Reserve staff – whose outlook tends to be broadly shared by the median Committee member – revised their forecasts for growth weaker in 2025 and 2026, “as announced trade policies implied a larger drag on real activity relative to the policies that the staff had assumed in their previous forecast. Trade policies were also expected to lead to slower productivity growth and therefore to reduce potential GDP growth over the next few years. With the drag on demand expected to start earlier and to be larger than the supply response, the output gap was projected to widen significantly over the forecast period. The labor market was expected to weaken substantially, with the unemployment rate forecast moving above the staff's estimate of its natural rate by the end of this year and remaining above the natural rate through 2027."
- On inflation, "The staff's inflation projection was higher than the one prepared for the March meeting. Tariffs were expected to boost inflation markedly this year and to provide a smaller boost in 2026; after that, inflation was projected to decline to 2 percent by 2027."
- Our expectations for these changes fall somewhere in between those projections and the March SEP – a slightly higher unemployment rate, substantially higher inflation in 2025 but to a lesser extent in 2026, and weaker GDP growth this year. Longer-run variables should be unchanged.
MNI Markets Team Expectations For June 2025 Summary Of Economic Projections Medians
