EUROPEAN COUNCIL: EUCO Starts w/Sanctions, Security & Competitiveness On Agenda
Leading straight out of the NATO leaders' summit in The Hague, the European Council summit is underway in Brussels. The main topics of discussion are set to be the next round of sanctions on Russia, efforts to bolster security at the EU level, and EU competitiveness.
- The prospect of an agreement on an 18th package of EU sanctions against Russia being agreed at the summit remains in the balance. Both Hungary and Slovakia have said that they will not back the new sanctions until their conditions are met. Slovakian PM Robert Fico said on arrival at the EUCO summit that he will demand a delay to the vote on new sanctions until his concerns over gas supplies from Russia are resolved.
- On security, discussions are likely to focus on how the new commitments from NATO members on defence spending can translate into a more cohesive and robust EU security apparatus (Austria, Cyprus, Ireland, and Malta are the only non-NATO EU members).
- On competitiveness, there are efforts to deepen single market integration in order to limit the impact of supply or trade shocks on EU industry.
- Ukrainian President Volodymyr Zelenskyy will attend via videolink and hold an exchange of views with leaders at 13:30CET. A post-EUCO presser will take place once the joint statement has been finalised, but there is no set timing for this and could take place well into the early hours of Friday, 27 June.
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FOREX: FX OPTION EXPIRY
Of note:
EURUSD 1.92bn at 1.1400.
AUDUSD 1.55bn at 0.6510 (a little far).
EURUSD 1.3bn at 1.1300 and 1.23bn at 1.1400 (wed).
USDJPY 1.83bn at 14300 (wed).
USDJPY 3.34bn at 143.00 (fri).
- EURUSD: 1.1300 (549mln), 1.1350 (211mln), 1.1380 (383mln), 1.1400 (1.92bn).
- GBPUSD: 1.3545 (345mln), 1.3550 (207mln).
- AUDUSD: 0.6500 (443mln), 0.6510 (1.55bn).
- AUDNZD: 1.0875 (874mln).
FED: Kashkari Prefers Not Looking Through Tariff-Induced Inflation
Minneapolis Fed’s Kashkari (’26 voter) reiterated the need for caution amid uncertainty caused by US government policies, having just yesterday told BBG TV that major shifts in US trade and immigration policy means he’s not sure if the picture will be clear enough to move rates by September. Today’s speech focuses more on his broader logic including the ability or lack thereof to look through tariff-driven inflation.
- “At the Federal Reserve there is a healthy debate among policymakers about whether to “look through” the inflationary effects of the new tariffs. The look-through arguments view tariffs as creating a one-time change in the price level—a transitory inflation shock. This view prioritizes support for economic activity by lowering the policy rate while the economy transitions to its new equilibrium, at which point inflation will have returned to a 2 percent rate, albeit at a higher overall price level.”
- “Arguments against looking through tariff-induced inflation focus on the fact that the trade negotiations are unlikely to be resolved quickly. It may take months or years for negotiations to fully conclude, and there could be tit-for-tat tariff increases as trading partners respond to one other. In addition, some tariffs apply to intermediate goods, and it will take time for the full effects of those price increases to pass through to final prices. In the U.S., inflation has also been running well in excess of our 2 percent target for four years. How many years of elevated inflation can occur before long-run inflation expectations lose their anchor?”
- “These arguments support a stance of maintaining the policy rate, which is likely only modestly restrictive now, until there is more clarity on the path for tariffs and their impact on prices and economic activity. Personally, I find these arguments more compelling given the paramount importance I place on defending long-run inflation expectations.”
DUTCH AUCTION RESULTS: 0% Jul-30 DSL
| 0% Jul-30 DSL* | Previous | |
| ISIN | NL0014555419 | NL0015001DQ7 |
| Amount | E2.275bln | E2.45bln |
| Avg yield | 2.231% | 2.493% |
| Avg Price | 89.30 | 100.03 |
| Pre-auction mid | 89.261 | 99.989 |
| Previous date | 28-Jan-25 |
