CHILE: USDCLP Bear Threat Still Present, CPI Data Support July Rate Cut

The gov't has confirmed a U-turn on ending universal Winter Fuel Payments for pensioners this morning. The gov't had been under significant pressure to change course from its own backbenchers and the opposition, with the U-turn widely expected but, until today, not confirmed. 

• Hygo Gye at The I Paper posts on X: "Govt confirms U-turn on cuts to winter fuel payment. Every pensioner earning less than £35,000 in taxable income will receive the payment this winter. Decision will cost £1.25bn - a black hole to be filled in at the Budget". Beth Rigby at Sky News: "That’s 9m - 3/4 - of all pensioners at cost of £1.25bn. Govt will save £450m on means testing > Size of reversal reflective of the scale of misstep".
• Chancellor of the Exchequer Rachel Reeves: “Targeting Winter Fuel Payments was a tough decision, but the right decision because of the inheritance we had been left by the previous government. It is also right that we continue to means-test this payment so that it is targeted and fair, rather than restoring eligibility to everyone including the wealthiest."
• With regards to impact on future policy, there is the prospect that backbenchers and ministers on the left of PM Sir Keir Starmer's Labour party see the U-turn as a signal that the gov't will not keep to hard-lines on welfare cutting measures. Given Reeves' almost non-existant fiscal headroom, this could bolster the chances of tax hikes coming further down the line rather than spending reductions. 

Late on Friday J.P.Morgan recommended imitating SFRZ5/M6 futures flatteners paired with 70% risk in SFRH6/H7 futures steepeners

• The recommendation is based on the idea that “Fed will likely be on hold for some time”, leading to them looking to fade “the front loading of easing that is currently priced in”.

• EUR/USD: $1.1300(E797mln), $1.1350(E1.4bln), $1.1375(E572mln), $1.1425(E1.9bln), $1.1500(E775mln), $1.1520-30(E828mln), $1.1600(E1.6bln)
• USD/JPY: Y143.55-65($982mln), Y144.00($660mln), Y145.00($512mln)
• EUR/GBP: Gbp0.8440-50(E680mln)