US-RUSSIA: Trump Positions Two Nuclear Subs in Response to Medvedev Statements

Wednesday's Europe rates/bond options flow included:

• ERQ5 98.125/98.25cs 1x2, bought the 1 for 2 in 5k
• ERQ5 98.125/98.1875/98.25c ladder, bought for 1.25 in 4k
• SFIZ5 96.40/96.50cs, bought for 3.5 in 8k
• SFIZ5 96.60c, bought for 5.5 in 7.5k
• SFIZ5 96.50/96.75/97.00c fly, bought for 3 in 6k

• Treasuries are extending midday lows currently, no obvious headline driver, more flow driven amid robust volumes (TYU5 over 1.2M).
• The Sep'25 10Y contract trades -10 at 111-17.5, session and 1W lows at the moment. First key support to watch is 111.07.5, the 20-day EMA.
• Curves remain steeper but off highs: 2s10s +4.251 at 50.964 (52.814H), 5s30s +3.403 at 96.167 (98.661H).
• Cross asset: Bbg US$ index off midmorning high: 1190.19 (+0.68), stocks mildly firmer (SPX eminis +15.00 at 6263.75, crude firmer (WTI +1.0 at 66.45), Gold firmer at 3345.58.

• Political uncertainty in the UK heavily weighed on sterling Wednesday, as markets speculated that Rachel Reeves’ term as Chancellor of the Exchequer might be coming to an end. Prime Minister Sir Keir Starmer refused to publicly back his Chancellor, in a testing session of PMQs in the House of Commons, heightening the market’s fiscal concerns.
• GBPUSD remains roughly 1% lower on the session as we approach the APAC crossover, having traded as low as 1.3563 amid the tumult, during which the 30-yr gilt yield rose as much as 22bps at its extreme. 20-day EMA support was pierced below 1.3586 and a sustained break of this average would signal scope for a more pronounced corrective pullback. The 50-day, which has supported dips well in recent months, intersects at 1.3439.
• For EURGBP, this week’s gains are reinforcing current bullish conditions. 0.8592, 61.8% of the Apr 11 - May 29 downleg, has been broken, as well as 0.8624, the Apr 21 high. Above here, the next significant targets are 0.8694 and 0.8738, the Apr 14 & 11 highs respectively. GBPJPY is also extending towards an important area, located around 195.00.
• Elsewhere, the dollar index trades on a slightly firmer footing, up around 0.25% on the session as markets await the significant US employment report on Thursday. Two key factors have helped stabilise the greenback: the reversal higher for US yields from dovish extremes and an important technical support holding for the DXY, a trendline drawn across the 2011 and 2021 lows.
• Aside from the GBP weakness, NZD moderately underperforms its G10 peers, down 0.40% and consolidating back below 0.6100. Despite the moderate losses for both Aussie and Kiwi today, the medium-term bullish trends for both AUDUSD and NZDUSD have been bolstered this week ahead of RBA and RNBZ central bank decisions next week. For AUD, sights remain on key resistance at 0.6688, the US election related highs.
• US employment report and ISM services headline a packed US calendar on Thursday.