CANADA DATA: Solid Sectoral Breakdown; Hours Pickup Points To GDP Rebound (2/2)
June's report was roundly solid from a sectoral perspective, which as we noted in our preview was a key consideration given concerns that trade-related weakness would spread. While trade-related job growth is still underperforming, its performance wasn't as bad as feared in June.
- Services-producing jobs rose 73.1k, the most in 28 months. That was led by retail and wholesale employment up 33.6k, defying some expectations that the Hudson's Bay bankruptcy would weigh in this category.
- Only two categories within services (transportation and "other") were negative, which will be taken as an indication that tariff-related employment weakness isn't spreading to the broader economy.
- Goods-producing jobs rose for the first time (10.1k) since January, with construction jobs also up for the first time since then, offset by losses in agriculture, forestry, and utilities. And potentially even more remarkable was the 10.5k gain in manufacturing jobs, given the tariff climate.
- We would also note that hours worked rose 0.5% M/M, a 5-month high (for both the growth rate and the level). That points to a potential pickup in real GDP in June, after an estimated 3rd contraction in 4 months in May.
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EU-UK: Agreement Reached On Gibraltar As EU To Manage Border Checks
European Commissioner for Trade and Economic Security Maros Sefcovic has confirmed the EU, UK and Spain have reached an agreement on the status of the British Overseas Territory of Gibraltar. Reuters reports the UK Foreign Office says that "The UK, alongside the gov't of Gibraltar, reaches a political agreement with the EU to protect British sovereignty, UK military authority, and secure Gibraltar's economic future. The agreement provides a practical solution to avoid the need for 'onerous checks' and long delays at the border."
- The joint statement confirms that "the Parties agreed to establish dual Gibraltar and Schengen border checks at Gibraltar port and airport – to be carried out in full cooperation between the EU and UK/Gibraltar authorities, removing all checks at the crossing point between Gibraltar and La Linea [...]. For the EU, full Schengen checks will be carried out by Spain. For the UK, full Gibraltar checks will continue to be carried out as they are today. " The Daily Telegraph reported earlier the system will mirror that used for the Eurostar train service, with UK border guards checking passports first, then French (or in Gibraltar's case, Spanish) guards checking on British soil to ensure a frictionless exit.
- For the UK, retaining Gibraltar's ability to act as a strategic military base has been of paramount concern. It remains to be seen how Spain effectively policing entry to the British territory affects the operations of the UK armed forces on the rock.
GILTS: Off Lows After U.S. CPI, Short-Term Bullish Theme Intact
Gilts have traded off cues from the U.S. this afternoon.
- The government’s spending review proved to be a non-event for markets, as we suggested would be the case.
- U.S. CPI data had a much more meaningful impact, pulling gilts away from session lows.
- Bears never manged to close yesterday’s opening gap higher in futures (92.00), leaving the recent bearish impulse intact. Initial resistance remains at yesterday’s high (92.87) after a recovery to ~92.60.
- Yields flat to 3bp higher, curve holds steeper.
- BoE-dated OIS shows ~49bp of cuts through year-end, little changed on the day, after printing ~46bp at one stage. Next 25bp cut fully discounted through September.
- SONIA futures now either side of unchanged, -0.25 to +1.5, no major range breaks seen.
- Monthly economic activity data headlines tomorrow’s UK calendar, with inflation expectations due Friday.
BoE Meeting | SONIA BoE-Dated OIS (%) | Difference vs. Current Effective SONIA Rate (bp) |
Jun-25 | 4.208 | -0.5 |
Aug-25 | 4.020 | -19.3 |
Sep-25 | 3.958 | -25.4 |
Nov-25 | 3.804 | -40.9 |
Dec-25 | 3.725 | -48.8 |
Feb-26 | 3.616 | -59.7 |
Mar-26 | 3.588 | -62.5 |
US TSY OPTIONS: Large Sep'25 5Y Put Sale
- -22,500 FVU5 105.5 puts, 6 ref 107-28.5/0.10%
