ILS: Shekel Pulls Back From Cycle Highs

ERH6 98.50/98.25/97.75p fly bought for 2.75 in 3k.

• EUR/USD: Jun12 $1.1350(E1.9bln), $1.1395-00(E1.3bln), $1.1425-35(E1.4bln), $1.1440-50(E2.6bln), $1.1500(E2.2bln); Jun13 $1.1400-05(E1.7bln), $1.1485-00(E1.9bln); Jun16 $1.1400(E1.2bln)
• USD/JPY: Jun12 Y143.00($1.3bln), Y143.85-00($1.0bln); Jun13 Y144.00($1.2bln); Jun16 Y145.00($4.4bln)
• AUD/USD: Jun12 $0.6475-85(A$1.1bln)

Relevant highlights from ECB Chief Economist Lane's speech at the 2025 Government Borrowers Forum in Dublin:

• "The June projections were conditioned on a rate path that included a quarter-point reduction of the DFR in June: model-based optimal policy simulations and an array of monetary policy feedback rules indicated a cut was appropriate under the baseline and also constituted a robust decision, remaining appropriate across a range of alternative future paths for inflation and the economy".
• " By supporting the pricing pressure needed to generate target-consistent inflation in the medium-term, this cut helps ensure that the projected negative inflation deviation over the next eighteen months remains temporary and does not convert into a longer-term deviation of inflation from the target. This cut also guards against any uncertainty about our reaction function by demonstrating that we are determined to make sure that inflation returns to target in the medium term".
• " A cut is also indicated by a broad range of monetary policy feedback rules. By contrast, leaving the DFR on hold at 2.25 per cent could have triggered an adverse repricing of the forward curve and a revision in inflation expectations that would risk generating a more pronounced and longer-lasting undershoot of the inflation target. In turn, if this risk materialised, a stronger monetary reaction would ultimately be required".
• "The stability of the euro bond market reflects a high conviction that euro area inflation is strongly anchored at the two per cent target and that the euro area business cycle should be relatively stable, such that the likely scale of cyclical interest rate movements is contained. It also reflects growing confidence that the scope for the materialisation of national or area-wide fiscal risks is quite contained, in view of the shared commitment to fiscal stability among the member countries and the demonstrated capacity to react jointly to fiscal tail events".
• "Structural changes in the design of the euro area bond market would foster stronger global demand for euro-denominated safe assets. A comprehensive strategy to expand the international role of the euro and underpin a European savings and investment union should include making progress on this front".