This week’s economic calendar is rather light, and investor attention will likely be focused on Washington D.C. with the approaching July 9 deadline for trade deals. Though we do not dismiss the potential for the Trump administration to raise tariff rates on some countries where trade talks may have stalled, we do not expect the overall effective tariff rate – currently around 10% - to surge back up to “Liberation Day” levels north of 20%. This week US macro data is fairly light with Fed meeting minutes for 18th June due on 9th July. Even Fed Speak is very light during the week. There is 58 BN USD supply of 3 year USTs, 39 BN USD supply of 10 year USTs & 22 BN USD supply of 30 year USTs. . In Eurozone, ECB speakers have started speaking about the ill effects of a rapidly appreciating Euro. According to ECB analysis, a 10% appreciation in the euro lowers headline HICP inflation by around 40bp after a year. The Euro’s appreciation of 14% CY25TD would therefore push HICP inflation closer towards 1.5%, and maybe even below, thereby forcing the ECB to act and cut rates. Hence we expect that ECB will likely cut rates below neutral, and we forecast a terminal depo rate of 1.50%, with 25bp cuts in September and December. In UK markets last week made a mountain of unable to execute a 5BN GBP spending cut in our view. Even the UK PM did offer stronger words of support – that Reeves would remain as Chancellor “for many years to come” and that the two were “in lockstep”. We believe GBP is over sold at current levels wrt Euro & hence expect EURGBP to fall to .8550 from current levels of .8630. Canada has it's labor data due this week on Friday which should be a modest 11k increase but should also unemployment rate rising to 7.1% due to increase in labor force.
