US TSY FUTURES: TU Blocked

GBP strength Monday has prompted EUR/GBP to trade through a major support area we flagged last week at 0.8520-31 - marking both the early April pullback low as well as the 50% retracement of the tariff-inspired upleg off 0.8323.

• GBP outperformance over the EUR over the past two weeks will partly be a mean reversion effect, but could be as markets see greater near-term potential for a US-UK trade settlement over a US-EU agreement inside the 90-day tariff pause window (after which Trump has said the stricter levies - 20% for the EU - will return).
• On the surface, a UK/US trade settlement seems simpler - despite Reeves' claim the UK are "not going to rush into a deal". Food standards are the main sticking point, but with the UK publicly willing to lower levies on UK-bound cars, a compromise seems politically straightforward relative to the higher number of moving parts for an EU agreement.
• Less noted, however, is the UK's decision not to follow the EU in raising tariffs against Chinese electric car imports, which could become a bargaining chip as Washington look to freeze Chinese industry from global markets - and restrict the UK's ability to enjoy easy relations with all parties.
• These trade prospects could provide a quick win for GBP, and markets may be seeing some of this strength play out against the rest of G10 - however the implications for BoE policy are likely minimal, and should keep BoE on track for 3x25bps cuts this year: Bailey specified last week that even preferential treatment on tariffs wouldn't spare the UK economy - while Greene stated it was the April pay settlement round that will be key for policy.

• A few low prints for the EUR, against the JPY, GBP and the SEK.
• The EURJPY tested its highest level since the beginning of April on Friday, this was a 163 pips gain, but the cross is now looking at fully reversing that move.
• Friday's low is at 162.13, it is now exchanging hands at 162.57.

Voting is now underway across all of Canada in an election contest dominated by the severe deterioration in relations with the United States. Earlier, US President Donald Trump posted on Truth Social regarding the election, calling on voters to "Elect the man who has the strength and wisdom to cut your taxes in half, increase your military power, for free, to the highest level in the World, have your Car, Steel, Aluminum, Lumber, Energy, and all other businesses, QUADRUPLE in size, WITH ZERO TARIFFS OR TAXES, if Canada becomes the cherished 51st. State of the United States of America." 

• At the start of the year, the main opposition centre-right Conservatives looked all but certain to return to power for the first time since 2015. Then-PM Justin Trudeau had poor approval ratings, and the main topic of the election was the high cost of living, shortages of housing, and immigration, which saw public anger directed at the incumbents.
• However, Trudeau's resignation and replacement as PM by Mark Carney, combined with Trump's tariff imposition and increasingly aggressive rhetoric towards the very notion of a Canadian nation has bolstered the centre-left Liberals. A 'rally round the flag' effect has seen Carney's party become strong favourites to expand their seat total and govern as a majority for the first time since 2019.
• Polls close across most of Canada at 2130ET, with the last areas in the Pacific timezone closing at 2200ET. Exit polls are not commonly carried out in Canada, but early results should start filtering through a short time afterwards. 

Chart 1. Federal Election Opinion Polling, % and 8-Poll Moving Average

Source: Liaison Strategies, Mainstreet Research, Nanos Research, Abacus Data, Innovative Research, Angus Reid, Pollara, MQO Research, Leger, Research Co., Ekos, Ipsos, Pallas Data, MNI