ENERGY: EU Spokesperson Say US Tariff Deal Could Be in Reach

• Today sees a heavy Fedspeak schedule headlined by Fed Chair Powell’s House appearance, with text likely to be released at 0830ET judging by historical precedent before the appearance at 1000ET.
• Coming so soon after Wednesday’s FOMC press conference, we’d expect a repeat of him being far from emphatic about the prospect of rate cuts, all but taking a cut at the July meeting off the table.
• From the July presser: “As long as the economy is solid, as long as we're seeing the kind of labor market that we have and reasonably decent growth, and inflation moving down, we feel like the right thing to do is to be where we are, where our policy stance is, and learn more. And in particular we feel like we're going to learn a great deal more over the summer on tariffs."
• With repeated attacks from President Trump including calls for rates to be materially lower, expect a partisan approach to questions. Trump on Truth Social overnight: “I hope Congress really works this very dumb, hardheaded person, over. We will be paying for his incompetence for many years to come. THE BOARD SHOULD ACTIVATE.”
• Broader Fedspeak will also be important considering the dot plot revealed a particularly divided FOMC with seven pencilling in zero cuts this year through to two looking for three cuts.
• VC for Supervision Bowman (voter) surprised yesterday with an abrupt chance in stance, eyeing a July cut if “inflation pressures remain contained”. That echoed a dovish Waller on Friday kickstarting post-FOMC Fedspeak.
• A July cut isn't universally expected on the FOMC: Bostic (non-voter) told Reuters there is no rush to cut rates and that he still sees a single rate cut last this year; Barkin (non-voter) sees no rush to cut rates, whilst Daly (non-voter) thinks the Fed but can’t wait so long before fundamentals necessitate cuts but is looking more to the fall.
• Today sees more speakers with voting roles for 2025 - Hammack, Williams, Collins and Schmid are all likely to have monetary policy relevant content:
  • 0830ET/1000ET – Powell Semiannual Policy Testimony
  • 0915ET – Cleveland Fed’s Hammack (’26) on monetary policy (text + Q&A)
  • 1230ET – NY Fed’s Williams (voter) keynote remarks (text + Q&A)
  • 1345ET – Minneapolis Fed’s Kashkari (’26) in town hall (Q&A only)
  • 1400ET – Boston Fed’s Collins (’25) on housing (text only)
  • 1600ET – Gov. Barr (voter) welcoming remarks
  • 2015ET – KC Fed’s Schmid (’25) speaks on economic outlook (text + Q&A)

OI data points to relatively meaningful net long setting in curve-wide DV01 terms (~$9mn) during Monday’s rally, with the most meaningful long setting coming in FV & TY futures.

• All contracts were seemingly subjected to net long setting.

• However, a reading in line with or below expectations would keep the door open to a cut amid a pullback in the 3mma annualized rate in trim/median average to 3.1/3.2% from 3.4% prior. A key beneficiary of any follow through Canadian dollar weakness would likely be EURCAD, given the ongoing resilience for the single currency and the close proximity to key medium-term technical parameters for the cross.
• EURCAD's Monday close was the second highest of the year, and puts spot within range of heavy layered resistance between 1.5960 - 1.5990, daily highs dating back to the covid pandemic in 2020. Clearance of this area and the psychological 1.6000 mark would place the cross at levels last seen in 2018 and target 1.6153, the 2018 highs.
• Deutsche Bank have stated that CAD is one of their less preferred currencies – their forecasts for G10 have only the dollar and CHF performing worse, and in Blueprint they recommend long EURCAD.
• Aside from the data, the now-prolonged trade talks with the US remain another key driver, on which Carney stated his government are still focused on after the most recent call with US president Trump. Separately, the EU and Canada signed a security and defense agreement on Monday, meant to be a step in a New EU-Canada Strategic Partnership of the Future.