US: Platner Scrambles Schumer's Plan, Trump Holds Off 'America First' Challenge

Of note:

USDCAD 5bn at 1.3650/1.3660 (could act as magnet).

EURUSD 4.74bn at 1.1750/1.1800.

EURUSD 2.71bn at 1.1745/1.1750 (tue).

USDJPY 1.46bn at 157.00 (wed).

AUDUSD 1.69bn at 0.7350 (thu).

• EURUSD: 1.1725 (964mln), 1.1750 (2.1bn), 1.1755 (428mln), 1.1760 (581mln), 1.1770 (436mln), 1.1800 (929mln).
• GBPUSD: 1.3670 (470mln).
• USDJPY: 157.00 (353mln), 157.50 (570mln), 158.00 (546mln).
• USDCAD: 1.3650 (3.92bn), 1.3660 (1.08bn).
• AUDUSD: 0.7200 (690mln), 0.7300 (642mln).
• AUDNZD: 1.2150 (674mln).
• USDCNY: 6.9450 (900mln).

PM Sir Keir Starmer is due to deliver a party political speech at around 10:00BST (05:00ET, 11:00CET) as he looks to revive his flagging premiership following poor election results for his centre-left Labour party across England, Scotland, and Wales last week. In the speech, Sir Keir is expected to say he will work "to meet the challenges that our country faces, incremental change won't cut it", while adding his gov't "will be defined by rebuilding our relationship" with the EU. 

• A number of leadership challengers, including former Deputy PM Angela Rayner, Health Secretary Wes Streeting, and Mayor of Greater Manchester Andy Burnham, are believed to be considering launching formal efforts to remove the PM or at least throw their hat into the ring if Starmer's gov't collapses.
• Over the weekend, MP for Hornsey and Friern Barnet, Catherine West, announced that she believed Starmer should stand down, and that if his speech today did not convince her otherwise, she would begin the process of seeking the 80 signatures from Labour MPs required to launch her own leadership challenge.
• West's campaign is not viewed as a serious one, but instead as a 'stalking horse' challenge, which would test the waters of whether there is requisite support among Labour MPs for a more central political figure to oust Starmer formally. Around 40 Labour MPs have now called for Sir Keir to announce a date to stand down.

ECB-dated OIS price 67.5bps of hikes through year-end and 70bps through June 2027, up to 3bps more hawkish than Friday’s close. Front-end rates remain closely correlated with Brent crude futures, and this looks set to continue given this week’s light regional data calendar.

• Signals from ECB speakers suggest a “measured adjustment” response to the energy price shock remains a plausible base case. We believe this would represent between 1x and 3x 25bp hikes over the next 12 months, meaning terminal rate pricing would only become an attractive fade when over 75bps of hikes are priced.
• While there has been little pushback to a June hike so far, a more difficult decision is whether a follow-up hike (if at all) would come quickly (i.e. July) or after the Summer break (i.e. at the September projection decision).
• OIS flies indicate a clear bias towards moving at quarterly projection meetings, but we are cognizant that ahead of the July decision the Governing Council will have received another set of SAFE and Corporate Telephone Survey results. If these are unfavourable, a hike cannot be ruled out.
• Clearly though, ceasefire developments and the status of Strait of Hormuz flows will be imperative to the Governing Council’s thinking.