GBPUSD TECHS: Tops 50-day EMA on Hawkish BoE

European yields rose Tuesday, with continued curve steepening.

• Core FI was under pressure from the open, following on from Monday's weak close. There were multiple cause driving weakness, including supply (Netherlands, Austria, EU) along with a 3-week extension of the US's tariff negotiation deadline to Aug 1.
• While there was little immediate market reaction, the release of the UK OBR's Fiscal Risks and Sustainability Report reminded of longer-term fiscal concerns.
• Yields rose steadily all morning before before steadying in afternoon trade. 10Y Gilt yields pushed through the July 2 highs to hit the highest levels in a month.
• 10Y Bund yields hit a fresh 3-month intraday high of 2.707% but ultimately held on to the 2.70% area (mid-May highs).
• The UK and German curves both bear steepened, though short-end Gilts outperformed.
• Periphery/semi-core EGB spreads were mixed, with Greece outperforming.
• Wednesday's calendar includes appearances by ECB's Lane, Guindos and Nagel and the release of the BOE's FSR, though it's a lighter day for data including Greek June inflation. There will also be focus on EU-US trade negotiations, with President Trump saying after the European cash close that a tariff "letter" to Brussels is probably two days away.

Closing Yields / 10-Yr EGB Spreads To Germany

• Germany: The 2-Yr yield is up 3.5bps at 1.872%, 10-Yr is up 4.4bps at 2.687%, and 30-Yr is up 5.4bps at 3.172%.
• UK: The 2-Yr yield is up 0.8bps at 3.872%, 5-Yr is up 3.1bps at 4.042%, 10-Yr is up 4.7bps at 4.633%, and 30-Yr is up 6.3bps at 5.454%.
• Italian BTP spread up 0.2bps at 85bps /Greek down 0.6bps at 68.8bps

RRP usage inches up to $219.415B this afternoon from $218.030B yesterday, total number of counterparties at 37. Usage had fallen to $54.772B on Wednesday, April 16 -- lowest level since April 2021 - compares to yesterday's (July 1) $460.731B highest usage since December 31.

• The greenback is consolidating another positive session on Tuesday, with the USD index extending its latest recovery and rising ~0.3%. Renewed tariff related uncertainty appears to be underpinning the renewed optimism, with the latest rhetoric from President Trump doing little to change the tone.
• In similar vein to Monday’s session, the Japanese yen is one of the poorest performing currencies in G10 amid the specific uncertainty related to a US trade deal with Japan and the Japanese PM stating that comprehensive negotiations will continue in the weeks ahead. USDJPY has also benefitted from the higher core yields backdrop, and rose as high as 146.98, further narrowing the gap to the June 23 spike high of 148.03.
• At the other end of the spectrum, the Australian dollar continues to outperform in G10 following the surprise RBA rate hold, against firm market expectations for a 25bp cut. The pair has settled around the 0.6520 mark and a bullish trend set-up is maintained, with the latest pullback considered technically corrective.
• Standing out on the chart is AUDJPY (+1.10%), which has risen above an important area of resistance around 95.75 which aligns with the March and May highs from earlier in the year. Further upside would target a move towards the February highs at 97.33. Notably, CHFJPY is now trading above 184.00, fresh record highs for the cross. This extends the rally from the June lows to 5.8%.
• China’s CPI/PPI data will precede Wednesday’s calendar highlight of the RBNZ decision, where a majority of analysts expect a rate hold at 3.25%. Later on Wednesday, FOMC minutes are scheduled.