FED: US TSY TO SELL $50.000 BLN 52W BILL SEP 30, SETTLE OCT 02

Tsy futures are just off the top end of a narrow session range (TUU5 +2.38 at 103-29.75 vs. 103-30 high); TYU5 currently +4 at 112-03 vs. 112-03.5 low) ahead of the $69B 2Y note auction (91282CNV9) at 1300ET, WI is currently running at 3.659%, 26.1bp rich to last month's stop.

• July auction recap: Tsy futures gained slightly but remain offered (2Y Tsy near session low 103-17.75, yield at 3.9319%) after the latest $69B 2Y note auction (91282CNP2) stopped through: 3.920% high yield vs. 3.925% WI; 2.62x bid-to-cover vs. 2.58x prior.
• Peripheral stats: Indirect take-up retreated to 55.33% from 60.5% prior, directs climbed to 34.37% vs. 26.33% prior, primary dealer take-up 10.30% vs. 13.17% prior.

• Headlines surrounding the uncertain future for Fed Governor Lisa Cook inspired some sharp two-way flows for the dollar early Tuesday, with the initial dip finding solid demand. Second-tier US data in the form of durable goods and consumer confidence beat expectations, however, a weaker labour differential and the stable session for equities has allowed the greenback to consolidate at moderately weaker levels on the session.
• USDJPY’s intra-day range has been contained within 147.00-148.00, comfortably within the short-term parameters established following Powell’s Jackson Hole remarks. Clearance of the bear trigger at 146.21 (Aug 14 low) would reinstate a downtrend, however, a resumption of gains would instead open 149.12, 61.8% of the Aug 1 - 14 bear leg.
• Despite a 0.3% bounce today, EURUSD remains lower on the week as political uncertainty has ratcheted up following French Prime Minister Francois Bayrou’s plan to call a confidence vote. The trend set-up in EURUSD remains bullish and short-term weakness is for now considered corrective. Support at the 50-day EMA remains intact, at 1.1597. A clear break of it would signal scope for a deeper retracement and potentially expose key support at 1.1392, the Aug 1 low.
• Ahead of the UK Budget (likely late October/early November), vols are recovering off seasonal lows: EUR/GBP 3m implied vols have recovered the entirety of the early August dip - with EUR, USD vols also improving.
• The 30-min candle chart shows EUR/GBP testing the nascent uptrend drawn off the late May lows of 0.8356. The level, today at 0.8624-0.8627, has been tested, and a break below could mark a resumption of the fade off 0.8769, opening 0.8508 in the short-term.
• Australia July CPI headlines a quiet schedule on Wednesday, before the market turns its attention to US GDP & PCE later in the week, as well as Eurozone inflation prints.  

The Financial Times reports that the US has said it is, “prepared to provide intelligence assets and battlefield oversight to any western security blanket for postwar Ukraine and take part in a European-led air defence shield for the country, European and Ukrainian officials said.”

• According to FT, “Trump told European leaders last week America would be part of “co-ordination” of security guarantees for postwar Ukraine, something Kyiv has demanded to deter a future attack from Russia after any peace deal.”
• The report continues: “It could still be rescinded, they said. But it represents a significant shift in stance from the Trump administration — which earlier this year ruled out any US participation in protecting post-conflict Ukraine — and has buoyed European officials who have spent months lobbying Washington to lend more support to Kyiv."
• With the prospect of a peace deal with Russia appearing increasingly remote, Ukraine's primary objective over the coming weeks is to formalise a post-war security architecture with Europe that can be backstopped by the US. With a robust security guarantee in place, Kyiv will be better positioned to address the territorial exchanges demanded by Moscow.
• Ukrainian President Volodymyr Zelenskyy said in a statement on Saturday: “At present, the teams of Ukraine, the United States, and European partners are working on their architecture. All the developments will be ready in the coming days.”