SPAIN: Gov't Shelves F-35 Jet Purchases, Risks Further Strain On US Relations

"EXCLUSIVE - CHINA'S CENTRAL BANK SURVEYED SOME FINANCIAL INSTITUTIONS ABOUT THEIR VIEWS ON RECENT U.S. DOLLAR WEAKNESS, SOURCES SAY" - Reuters

Piece writes that a survey was conducted last week, in which the PBOC asked questions related to the U.S. dollar's movements and the causes of its recent weakness and outlook for the Chinese yuan exchange rate, the sources said.

• One of the sources said he interpreted it as a sign authorities are concerned about a sharp appreciation of the yuan against the weakening dollar.
• Another source directly involved in the survey said it seemed to be an assessment of the dollar's outlook as trade negotiations with the U.S. progress.

Cross-asset cues dominate, with gilts sticking to tight ranges after the recovery from Wednesday’s low through the latter half of last week.

• Oil has recovered from session lows, limiting any rallies.
• Futures last +11 at 92.49.
• Initial support and resistance (92.12 & 92.79) untouched.
• Yields 1-2bp lower, modest steepening of the curve. Cycle highs in 2s10s and 5s30s untouched.
• Macro focus centred on President Trump’s tariff letters, which will be sent to countries today (12:00 NY).
• Domestically, focus remains on the fragile fiscal situation with last week’s events underscoring the difficulty of enacting meaningful public spending cuts and increasing the odds of tax hikes in the Autumn (a negative for GDP growth).
• There are increasing odds that Reeves will have to hike at least one of the big three taxes (national insurance, income tax & VAT).
• Front end pricing little changed on the day, 21bp cuts priced for August, 28bp through September, 46bp through November and 54bp through year-end.
• We continue to look for cuts in August and November at this stage, with risks skewed dovishly.
• Further softening in the labour market presents the most likely dovish catalyst, with fresh developments on that front likely needed to promote the pricing of a more aggressive easing cycle through year-end.
• Monthly economic activity data (Friday) headlines this week’s local data calendar, while BoEspeak will come via Breeden on Thursday.