• Fox's Gasparino posted that Team Trump said it was close to announcing a handful of trade deals. The major ones the White House claimed progress on involved Japan, South Korea, and Vietnam.
• European bourses are mixed in quiet newsflow whilst US futures hold around the unchanged mark.
• USD looks to claw back recent losses. EUR/USD pulls back from multi-year high.
• USTs await Powell part 2 and details from the NATO summit; Bunds are pressured and currently towards session lows.
• Crude bid but still at the trough of recent parameters, metals marginally firmer.
• Looking ahead, US Building Permits, CNB Policy Announcement; NATO Summit, Fed SLR meeting, BoE’s Lombardelli; Fed's Powell; US President Trump, Supply from the US, and Earnings from General Mills, Paychex, Micron.

EUROPEAN TRADE

EQUITIES

• European bourses (STOXX 600 U/C) opened mostly and modestly firmer and have traded choppily throughout the morning. More recently, some selling pressure has been seen taking a few indices modestly into the red.
• European sectors hold a positive bias, and aside from the top performer, the breadth of the market is fairly narrow. Autos is the clear outperformer today, lifted by strength in Stellantis (+4.5%) after the Co. received an upgrade at Jefferies. Telecoms is found at the foot of the pile, joined closely by Food Beverage & Tobacco; though losses which are modest by nature.
• US equity futures (ES U/C, NQ +0.1%, RTY U/C) are essentially flat, taking a breather from the hefty upsides seen on Tuesday, which saw the NDX gain 1.5%.
• US pre-market movers; FedEx (-5.9%) moves lower after it guided Q1 adj. EPS below expectations, citing tariff uncertainty and weak demand. BlackBerry (+8.5%) gains after reporting better-than-expected Q1 results and raised guidance.
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FX

• DXY is a touch higher following Tuesday's selling pressure which was triggered by an easing in geopolitical tensions and comments by Fed Chair Powell. On the former, ING believes that "the negative impact of the reduced geopolitical risk on the dollar has largely played out". Today's calendar is light in terms of data. However, investors are still mindful of the trade front after FBN's Gasparino revealed last night that Team Trump said it was close to announcing a handful of trade deals. On the fiscal front, US Treasury Secretary Bessent said the Senate is on track for a vote on Trump's tax bill on Friday. As we head closer to month-end, modelling from Barclays and Citi suggests modest USD selling. DXY is currently contained within Tuesday's 97.70-98.27 range.
• After hitting a multi-year high on Tuesday at 1.1641, the rally in EUR/USD has paused for breath with the pair returning to a 1.15 handle. Fresh macro drivers for the Eurozone are on the light side following a raft of ECB speak at the start of the week, which suggested that recent geopolitically-driven gains in the energy space are not affecting the Bank's outlook for inflation. EUR/USD has ventured as low as 1.1591 but is holding above Tuesday's trough at 1.1574.
• JPY is seeing some give back vs. the USD following a strong session of gains, which brought the pair down from a 146.17 peak to a 144.51 trough. Overnight, we initially saw downside in USD/JPY following hawkish remarks from BoJ taper-dissenter Tamura, who reiterated that 0.5% is not a barrier for BoJ rate hike. The currency was also underpinned after FBN’s Gasparino flagged progress between the US and Japan on trade talks. However, these moves were reversed in early European trade as the USD looked to claw back some of its recent losses.
• GBP is flat/lower vs. the USD with incremental macro drivers from the UK lacking. On today's docket, we have been awaiting comments from Lombardelli and Pill. Greene and Lombardelli (again) are due to speak later.
• Antipodeans are marginally outperforming amid the recent upside in global equities and a broader rise in commodity prices. AUD/USD saw an immediate knee-jerk lower on the sub-forecast monthly CPI metric, which ultimately did little to change the current course of the RBA; a July cut is still priced at 92%.
• Citi month-end FX modelling: moderate USD selling at the end of June. Average signal is 0.7 historical standard deviations. The signal is weaker in GBP/USD, due to Gilts and UK equity outperformance vs European markets.
• Barclays month-end FX modelling: moderate USD-selling signal by month-end against most majors, with a weak sign on EURUSD. Quarter-end rebalancing model: indicates a strong USD-selling signal against most majors, with a weak sign on EURUSD and a moderate sign on USDJPY. Overall, the signal shows moderate dollar-selling at the end of June
• PBoC sets USD/CNY mid-point at 7.1668 vs exp. 7.1709 (prev. 7.1656)
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FIXED INCOME

• JGBs were initially bid, catching up to some of the gains seen in peers on Tuesday. However, the move was capped by BoJ remarks and the SOO.
• USTs are essentially flat, but still remain at elevated levels following Fed Chair Powell's commentary in the prior session, where he said “many paths are possible” when questioned on a July cut. Do note that the Fed Chair is due to speak later today also. Elsewhere, data docket is fairly light so focus will be on the 5yr auction, which follows a robust 2yr outing on Tuesday. USTs are currently just off the upper-end of a 111-17+ to 111-23+ band and 1+ ticks above Tuesday’s best.
• A firmer start to the day. Bunds were the upper-end of a 130.61 to 131.12 band, after being relatively contained in APAC trade around that low, a bid emerged in the European morning as the region's risk tone deteriorated. Thereafter, Bunds were pressured for the remainder of the morning, with downside exacerbated by the poor Gilt auction; currently trade towards session lows at 130.65;
• OATs outperforming Bunds a touch with focus on French politics. The Socialist Party (PS) on Tuesday announced that the government's “unfulfilled commitments on pensions” and other issues mean that they will have to file a motion of censure against PM Bayrou’s government. While the motion will be put forward by the left, those on the right and particularly National Rally (RN) have cautioned that they could oppose Bayrou given points of disagreement on other issues; together, PS, RN and their allies could bring Bayrou’s government down.
• Gilts are trading in-line with USTs at first. Spent the morning at the upper-end of a 93.33-57 band. Specifics for the UK are very light, no commentary from BoE’s Lombardelli or Pill while supply was robust on the main metrics but saw a particularly chunky 10bps price tail. Results that pushed Gilts back to the above trough and into the red.
• UK sells GBP 3.25bln 4.375% 2040 Gilt: b/c 2.88x (prev. 2.58x), tail 1.0bps (prev. 0.9bps), average yield 4.850% (prev. 4.917%).
• Italy sells EUR 3.0bln vs exp. EUR 2.5-3.0bln 2.10% 2027 BTP & EUR vs exp. EUR 2.5-3.0bln 1.10% 2031 BTPei.
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COMMODITIES

• Crude futures are firmer today, calmly attempting to pare back some of the recent losses, with overnight newsflow relatively light aside from private inventory data, which printed a larger-than-expected draw. WTI and Brent are trading on USD 65/bbl and 66/bbl handles respectively, back above their 50DMAs.
• Spot gold is cautiously attempting to rebound from recent losses sparked by the improved geopolitical backdrop. The haven traded above the USD 3,300/oz mark for the entirety of the APAC session, and now approaches session highs, after support around the USD 3,326/oz mark.
• Copper futures trade with modest gains, 3M LME contracts trading on either side of USD 9,700/t mark.
  • Israel's NewMed says Leviathan field is to resume activity.
  • Private Inventories: Crude -4.28mln (exp. -0.8mln), Distillate -1.03mln (exp. +0.4mln), Gasoline +0.75mln (exp. +0.4mln), Cushing -0.08mln.
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NOTABLE DATA RECAP

• French Consumer Confidence (Jun) 88.0 vs. Exp. 89.0 (Prev. 88.0)
• Spanish GDP YY (Q1) 2.8% vs. Exp. 2.8% (Prev. 2.8%); QQ (Q1) 0.6% vs. Exp. 0.6% (Prev. 0.6%)

NOTABLE EUROPEAN HEADLINES

• UK is to reportedly purchase twelve F-35A fighter jets, with an announcement from the UK PM potentially on Wednesday, according to The Telegraph. Unlike the F-35B jets the UK currently possesses, the F-35A variant can carry nuclear weapons.
• Spain's Economy Minister says when NATO's military capabilities are reviewed, Spain could revise its own military spending.

NOTABLE US HEADLINES

• Morgan Stanley expects the Federal Reserve to begin cutting rates in March 2026, sees a total of seven cuts in 2026, bringing the terminal rate to 2.5-2.75%
• Several Senate committees expect the updated reconciliation text as soon as Wednesday morning, according to Punchbowl sources, to reflect modifications based on initial parliamentarian rulings.
• New York Independent System Operator said it had issued an energy warning for June 24 due to a decline in operating reserves, according to Reuters. The grid was operating normally at the time, but emergency operations might be initiated to maintain system reliability.
• A US judge blocked the Trump administration from withholding funds awarded to 14 states for EV charger infrastructure, according to a court filing.
• Key member of Musk's DOGE resigned from government, according to the New York Times.
• Andrew Cuomo conceded in the New York City mayoral Democratic primary.

GEOPOLITICS

EUROPEAN MORNING

• US Secretary of State Rubio says US President Trump will buck Europe’s pleas to ratchet up sanctions on Russia, adding that the US still wants room to negotiate a peace deal, according to Politico.
• US President Trump says NATO will be very strong, when asked about article 5, says "we are with them all of the way". Thinks the Iran-Israel ceasefire is good. Last thing Iran want to do is enrich (uranium), they want to recover. Thinks US will have a relationship with Iran. Asked if the US would strike Iran again if the nuclear programme is rebuilt, says "sure" Progress is being made on Gaza.
• "Al-Akhbar reported this morning from its sources that Houthi attacks in Yemen against Israel are expected to intensify and escalate in the coming days in response to the Israeli escalation in Gaza", via Kan's Kais on X.
• Iranian Parliament approves bill to suspend cooperation with UN nuclear watchdog, according to Nournews

OVERNIGHT

• “There have been no [US] sanctions lifted on Iran,” said Fox Business' Lawrence, in reference to President Trump's post suggesting China could continue to buy oil from Iran. A senior White House official added: “The President was simply calling attention to the fact that because of his decisive actions to obliterate Iran’s nuclear facilities and broker a ceasefire between Israel and Iran, the Strait of Hormuz will not be impacted, which would have been devastating for China. The President continues to call on China and all countries to import our state-of-the-art oil rather than import Iranian oil in violation of US sanctions.”
• Iranian Foreign Minister Araqchi said the nuclear programme continues, according to Al Arabiya.
• White House Middle East envoy Witkoff said the US and Israel had achieved their goals in Iran, according to Fox News. He described talks with Iran as encouraging and stated it was time to sit with Iran and make a comprehensive deal.
• Iran's Revolutionary Guards denied there was any drone attack in the northwestern city of Tabriz following reports air defences were activated in the area, according to Iranian news sites.
• Israel’s representative to the UN Security Council stated that Iran had been involved in producing a nuclear bomb, according to Sky News Arabia.
• Israel's representative to the United Nations said that diplomatic talks with Iran will take place soon, according to Al Arabiya.
• US is set to open its embassy in Jerusalem on June 25th, following the ceasefire between Israel and Iran and the lifting of all restrictions by Israel’s Home Front Command, according to a statement.
• Iran executed three men for allegedly working for Israel’s spy agency Mossad, according to the Mizan News Agency.

TRADE/TARIFFS

• Fox's Gasparino posted that Team Trump said it was close to announcing a handful of trade deals. The major ones the White House claimed progress on involved Japan, South Korea, and Vietnam. India was not on the list of pending agreements amid the recent spat with Pakistan.
• Vietnam expects "good results" from talks with the US in less than two weeks, according to Bloomberg.
• Switzerland expects US tariffs to stay at 10% after July 9 during talks, via Bloomberg.

CENTRAL BANKS

• Fed's Schmid (2025 voter) said the central bank has time to study the effects of tariffs on inflation before making any rate decisions. He noted that both employment and inflation are near the Fed's goals. Contacts indicated that tariffs would raise prices and weigh on economic activity. He added that the economy’s resilience meant the Fed could afford to wait and observe developments before proceeding with rate cuts.
• BoJ June meeting Summary of Opinions stated that, while much of the hard data for April and May had been relatively solid, it was likely that the effects of tariff policies had yet to materialise. Although uncertainty regarding trade policies remained extremely high, on the domestic front, wage developments had been solid and the CPI had been slightly higher than expected. Japan’s economy was at a crossroads between making a transition to a “growth-oriented economy driven by wage increases and investment” and falling into stagflation. Although the direct impact of US tariff policy has not been observed so far, Japan’s economy has been somewhat stagnant. Despite the impact of US tariff policy, many firms would likely continue to raise wages to address labour shortages and make high levels of business fixed investment. While the impact of the US tariff policy would certainly exert downward pressure on firms’ sentiment, the Bank needed to take some time to examine the magnitude of the impact on the real economy. Given high uncertainty, the Bank should at this point maintain accommodative financial conditions with the current interest rate level and thereby firmly support the economy. Even though prices had been somewhat higher than expected, it was appropriate for the Bank to maintain current policy given downside risks stemming from US tariff policy and the situation in the Middle East. Although the CPI had been higher than expected, the pass-through of higher wages to services prices seemed to have plateaued. The situation of government bond markets around the world had been a major topic of discussion, such as at international meetings, and attention was warranted on the possibility that developments overseas would spread to Japan. Increased volatility in the super-long-term zone might spill over to the entire yield curve, thereby spreading unintended tightening effects to the market as a whole.
• BoJ board member Tamura said that if upward price risks heightened, the BoJ could face a situation where it would need to raise rates decisively, even if uncertainty remained high, adding that he does not see 0.5% as a barrier for BoJ rate hikes. He stressed the need to steadily normalise the balance sheet, even though it may take time, and noted he had voted against the June decision to slow the pace of bond-buying taper next year, arguing the BoJ should normalise bond holdings as soon as possible. Tamura stated that while the JGB market function had improved somewhat, it still remained low. He reiterated his stance that rate hikes must be timely and appropriate, neither too quick nor too late. On the economy, he assessed that inflation was on track or somewhat stronger than expected, with upward risks having been elevated until March. He flagged that market-based services inflation was exceeding 2%, and both rent and public service costs were rising gradually. He noted the rise in fresh food prices could no longer be described as temporary and must be monitored carefully. Medium- and long-term inflation expectations were gradually heightening, with household and corporate expectations already around 2%. He warned of the risk that Japan’s inflation expectations could overshoot further. Tamura also said US tariffs would likely weigh on Japan’s economy and prices, but projected inflation would remain near 2% until fiscal 2027. Despite some downside risks, he assessed that the probability of Japan reverting to a low wage/price growth environment was low. Consumer inflation data for April and May had overshot expectations, and wage momentum in Japan was sufficiently strengthening.

CRYPTO

• Bitcoin is a little firmer and trades around USD 106k, with Ethereum also edging higher but still shy of the USD 2.5k.

APAC TRADE

• APAC stocks traded stronger following the firm lead from Wall Street, with gains capped as traders were cautious amid the fragility of the Israel-Iran ceasefire. From a central bank perspective, some attention in US hours was on Fed Chair Powell, who echoed his wait-and-see stance but left July options open during the Q&A. Thereafter, sentiment in APAC trade was somewhat capped after BoJ taper-dissenter Tamura struck a hawkish tone, suggesting the BoJ may need to raise rates decisively—even amid high uncertainty—if upward price risks heighten. He also noted that he does not see 0.5% as a barrier for BoJ rate hikes.
• ASX 200 fluctuated between modest gains and losses before a sub-forecast Aussie Monthly CPI print provided a mild boost. The monthly gauge came in at 2.1%, towards the bottom end of the RBA’s 2–3% target range, though market pricing barely shifted.
• Nikkei 225 saw choppy trade in limited ranges following commentary from BoJ’s Tamura, who said he does not see 0.5% as a ceiling for rate hikes. On the trade front, FBN's Gasparino suggested progress in US-Japan trade talks. The BoJ Summary of Opinions noted that the effects of tariff policies are likely yet to materialise.
• Hang Seng and Shanghai Comp conformed to the broader tone following a muted open as traders awaited the next catalyst. The indices saw upticks following remarks from China's Premier Li who said judging from key indicators, China's economy showed a steady improvement in Q2, and he is confident in China's ability to maintain a relatively rapid growth.

NOTABLE ASIA-PAC HEADLINES

• China’s Premier Li said that key indicators pointed to steady improvement in Q2, and expressed confidence in maintaining a relatively rapid growth rate. He added that regardless of global developments, China’s economy had consistently shown strong growth momentum.
• Chinese Premier Li said the world economy and international economic and trade cooperation once again faces new difficulties and challenges, according to remarks at the World Economic Forum in Tianjin. He added that the risk of fragmentation in global industrial supply chains is on the rise.
• Chinese President Xi Jinping is reportedly not attending next week’s BRICS summit, marking his first-ever absence, due to a scheduling conflict, according to SCMP sources.
• PBoC injected 365.3bln via 7-day reverse repos with the rate maintained at 1.40%.
• CBA now anticipates RBA to cut rate in July (prev. August), following the softer-than-expected Australian CPI data.
• BYD (002594 CH/BYDDY) has started to cut vehicle production by at least a third of capacity in some factories in China by cancelling night shifts, suspended plans to set up new production lines, according to Reuters sources.
• Japanese government will consider cutting this year's growth forecast, according to Reuters citing sources. Japan’s government may cut its 2025 GDP growth forecast from 1.2% to below 1%, with final projections due by end-July, due to uncertainty over US tariff developments.

DATA RECAP

• New Zealand Trade Balance (May) 1.235B (Prev. 1.426B, Rev. 1.285B); Annual Trade Balance (May) -3.79B (Prev. -4.81B, Rev. -4.97B)
• New Zealand Imports (May) 6.44B (Prev. 6.42B, Rev. 6.41B); Exports (May) 7.68B (Prev. 7.84B, Rev. 7.70B)
• Japanese Services PPI (May) 3.30% (Prev. 3.10%, Rev. 3.40%)
• Australian Weighted CPI YY (May) 2.1% vs. Exp. 2.3% (Prev. 2.4%)