ECB: Lane Emphasises That June Projections Conditions On Path w/ One More Cut

Continued: The CRFB estimate highlights the maths problem facing House Speaker Mike Johnson (R-LA) as the budget resolution passed by Congress in April only provides for $4.5 trillion in spending. Ways and Means is expected to release their full tax bill today. If the text doesn’t include offsets, the GOP may be forced to pursue a budget gimmick championed by Thune and Bessent that would cost extending the TCJA at zero dollars. 

• That strategy is untested and has been criticised by Democrats and Republican fiscal hawks for obscuring deficit spending. It is also unclear if the manoeuvre will run afoul of the non-partisan Senate Parliamentarian, who must determine if the package conforms with reconciliation. If Thune overrules the Parliamentarian, it could have long-term consequences for the Senate filibuster.
• Looking ahead, the House Energy and Commerce Committee is scheduled to meet tomorrow for a marathon markup. The panel must find $880 billion in savings from its budget, whilst preserving enough of Medicaid to avoid a moderate revolt.
• E&C Chair Brett Guthrie (R-KY) unveiled a draft bill yesterday that seeks to strike a balance between conservative and moderate priorities, but Politico notes, “it could still lead to millions losing Medicaid coverage”, foregrounding one of the biggest political issues of the Congress.
• The House Agriculture Committee will also meet tomorrow to mark up their bill, looking for $200 billion+ in savings from another safety net programme - SNAP.
• If all goes to plan, the House Budget Committee will assemble the final bill on Friday. 

Treasury Secretary Scott Bessent has urged Congress to increase or suspend the debt limit by mid-July as he believes there is a “reasonable probability” that the government will exhaust extraordinary measures to stave off a default during the Congressional recess in August.

• As Republican leaders intend to address the debt limit as part of their ‘Big Beautiful’ reconciliation bill, the letter puts a hard deadline on the legislation that Senate Majority Leader John Thune (R-SD) hopes to pass by July 4.
• On May 9, House Ways and Means Committee Chair Jason Smith (R-MO) released a draft framework for the tax portion of the package, ahead of a markup tomorrow.
• The draft document does not include text on Trump’s pledges to end federal taxation on tipped earnings and social security payments, or tax credits for auto loans and domestic manufacturing.
• Notably, the 28-page Ways and Means document fails to include language to raise the cap on State and Local Tax (SALT) deductions – a major political issue for blue state Republicans. It also keeps the top rate of tax at 37% rather than 39.6%, appearing to drop a 'millionaire tax' tentatively endorsed by President Donald Trump as a revenue source.
• The Committee for a Responsible Federal Budget noted in a May 10  “preliminary” estimate that the bill “would add $5 trillion to primary deficits through 2034 as written, and over $5.5 trillion to primary deficits if made permanent.”

• USD/JPY got a jolt in the arm early Monday as the US and China trade negotiation teams confirmed an aggressive cut to trade tariffs. While the drop in tariffs is only entering a 90-day pause, markets are taking the step as a strong sign of intent that both sides want to maintain as healthy a trade relationship as possible - helping stimulate strong equity, USD and CNH gains.
• This leaves JPY comfortavly the poorest performing currency in G10 as the US/China headlines on reducing tariffs have significantly boosted risk sentiment across global markets. The yen's negative correlation to moves in equity markets has been in prime focus, with the hawkish repricing in core fixed income providing an additional headwind for the low yielders. Broad US dollar strength has translated into a sharp adjustment higher for USDJPY, exacerbated by a clean break of the 50-day EMA resistance that had capped the price action last week.
• Similarly, EUR is sliding. Having been one of the stronger currencies through trade tumult on relative haven status as well as the EU's perceived library of counter-tariff measures, the EUR is now performing poorly as while countries including the UK, Switzerland and China have taken notable steps toward a cleaner tariff regime, there are few signs of progress with Brussels.
• A BoE watcher conference will be carefully watched today, with appearances from BoE's Greene, Mann and Taylor still set to speak. Fed's Kugler similarly talks on the US economic outlook.