EURGBP TECHS: Trading Closer To Its Recent High

• +7,000 TUU5 103-20.25, buy through 103-20.12 post time offer at 1349:15ET, DV01 $274,000
• The 2Y contract trades 103-20.38 last (+1.75)

• US Data/Speaker Calendar (prior, estimate)
• 18-Jun 0700 MBA Mortgage Applications (12.5%, --)
• 18-Jun 0830 Housing Starts (1.361M, 1.350M), MoM (1.6%, -0.8%)
• 18-Jun 0830 Building Permits (1.422M, 1.425M), MoM (-4.0%, 0.2%)
• 18-Jun 0830 Initial Jobless Claims (248k, 245k)
• 18-Jun 0830 Continuing Claims (1.956M, 1.940M)
• 18-Jun 1130 US Tsy 4W, 8W & 17W bill auctions
• 18-Jun 1400 FOMC rate annc 
• 18-Jun 1600 Net Long-term TIC Flows ($161.8B, --)
• 18-Jun 1600 Total Net TIC Flows ($254.3B, --)
• Source: Bloomberg Finance L.P. / MNI
• Note: Cash Treasury and stock exchanges are closed Thursday for Juneteenth holiday, along with open outcry pits in Chicago but equity and debt futures will be open for an abbreviated trading session.

The deliberations of the BOC's Governing Council at the June meeting (link) were unsurprisingly cautious, with particular concern paid to recent inflation developments and the need to keep price pressures under control amid significant tariff uncertainty. Unsurprisingly, members "discussed two options: maintaining the policy interest rate at 2.75% or reducing it by 25 basis points", but ultimately decided to hold. There was no discernable market reaction to the release, with the next cut still only fully priced by December (4 meetings away). Some key comments from the deliberations:

• Summing up the economic discussion: "While economic activity was showing some resilience in the face of trade uncertainty, members recognized that a period of weaker economic growth lay ahead. At the same time, they noted that inflation was somewhat stronger than expected. The increase in core inflation may suggest underlying inflation was firmer than they had previously thought. They agreed they would need to continue to carefully assess the timing and strength of both the downward pressure on inflation from a weaker economy and the upward pressure on inflation from higher costs."
• On the 4 key indicators being watched for how the economy would react to the impact of tariffs ("How much higher tariffs reduce demand for Canadian exports" / "How much lower demand for exports spills over into business investment, employment and household spending" / "How much and how quickly cost increases are passed on to consumer prices" / "How inflation expectations evolve"), there were not yet any conclusions reached with it being seen as "too early" to gauge.
• On inflation: "Members spent considerable time discussing recent inflation data...Members agreed that cost increases from trade disruptions may be playing a role in inflation in goods prices, but the direct impact from retaliatory tariffs was not yet evident. They acknowledged that the pass-through of higher input costs to consumer prices would be difficult to track going forward. Some members expressed concern about the increase in the breadth of CPI components growing above 3% in recent months, particularly for services...Members noted that measures of underlying inflation had come in higher than they expected since the beginning of the year. They agreed they would need to watch developments in inflation across CPI components carefully to gauge how inflationary pressures are evolving."
• On tariffs: "members agreed that US tariffs had increased substantially since the start of the year, US trade policy remained unpredictable, and uncertainty was high"
• On economic activity: "Overall, members agreed that the economy showed more resilience than expected. Members expected the boost in export growth to dissipate quickly as tariffs and uncertainty continued, and because the pull-forward of exports had borrowed strength from the future. With domestic demand likely subdued, they expected the second quarter to be much weaker."
• On the labour market: "Governing Council members expressed concerns about the softer labour market" with employment growth slowing and weakness in trade-related sectors not offset by strength in other sectors. There was a slowdown in hiring intentions and "most measures indicated that wage growth continued to ease."