EGB OPTIONS: RXV5 128.50/127.50/125.00 Broken Put Fly Lifted

President Donald Trump has signed an Executive Order imposing an additional 25% tariff on India in response to its continued purchase of Russian oil. Full White House statement here.

• USDINR 1-month NDFs spike higher on the headlines, but remain below the overnight highs for now.

July's Canada Services PMI report was upbeat by recent standards, and one that is suggestive of economic activity having troughed in Q2 in line with expectations and the Bank of Canada's latest Monetary Policy Report projections.

• Weakness persisted in July but was not as acute as it was in the depths of the summer (49.3, below the 50.0 expansionary mark for an 8th consecutive month but the highest since November 2024 and up from 44.3 prior and 41.2 in March).
• Some highlights from the S&P Global report:
• "There were tentative signs of recovery in the Canadian services sector as the second half of the year got underway. Business activity neared stabilisation amid a further slowdown in the pace of contraction in new orders, while business confidence improved. Companies also increased their staffing levels again...Demand also showed tentative signs of improvement, albeit with customers still reluctant to commit to new projects, particularly those in international markets."
• "The impact of US tariffs was again the main factor highlighted by those companies that saw a drop in output over the month. On the other hand, the start of new projects led some firms to record a rise in activity."
• "On the price front, both input costs and output prices rose at slower rates than seen in June."
• Note the Composite PMI index came in at 48.7 (44.0 prior), weighed down by Manufacturing (46.1).

{GB} GILTS: Gilts futures have closed the opening gap lower, with the passage of European supply, move away from session highs in equities and some dovish leaning Fedspeak seemingly contributing over the past few hours.

• Gilt futures register highs of 92.73 before fading back to 92.65.
• Initial support and resistance 92.24 & 92.84, respectively.
• Yields are 2bp lower to flat, curves hold steeper.
• Bulls have not been able to force 10s meaningfully through 4.50% since the break back above in early July (this week’s low at 4.496%, last trading 4.51%).
• Similar price action in 2s around the 3.80% mark.
• UK headline flow remains light since the overnight comments from thinktank NIESR (pointing towards the need for sizeable tax hikes and an in line with market pricing view on BoE raters).
• SONIA futures off lows given the recovery further out the curve, last +1.5 to -1.5.
• Exposure to dovish call structures have dominated in SONIA options markets today.
• BoE-dated OIS once again nears discounting of 50bp through year-end after printing ~47bp earlier today.
• Over 90% odds of a cut remain priced for tomorrow’s BoE decision.
• With markets pricing a cut with near certainty, the delivery of such a move would mean that focus shifts quickly to the vote split, the tone of the press conference, any changes to assumptions in the scenarios and any signalling ahead of September’s QT decision.
• Our full preview of the event can be found here.