• DXY is relatively rangebound between 94.200-450 after the G20 meeting and Trump’s verbal intervention
• US Treasuries are treading a very tight line with the curve fractionally steeper ahead
• Looking ahead, highlights include US Existing Home Sales and comments from BoE’s Broadbent

ASIA

Asian stocks traded mixed with the regional bourses initially dampened across the board amid speculation the BoJ could discuss tweaking policy and after last week’s renewed tariff threats from US President Trump who stated that the US is ready to impose tariffs on all USD 505bln of imported goods from China. ASX 200 (-0.9%) and Nikkei 225 (-1.3%) were lower with Japan the underperformer amid a firmer JPY and slump in bonds after source reports suggested the BoJ may discuss potential policy changes at its meeting including the yield curve target to allow for a long-term natural increase. This was despite a denial by Governor Kuroda of having any knowledge of the basis for the reports and who stated that remarks would be inappropriate given the proximity of the bank’s monetary policy meeting. Elsewhere, Hang Seng (+0.1%) and Shanghai Comp. (+1.1%) also began subdued amid ongoing trade concerns, although later found some support from PBoC efforts in which the central bank injected CNY 502bln through its 1yr Medium-term Lending Facility. Finally, 10yr JGBs were lower by around 50 ticks shortly after the open on policy tightening fears which saw 10yr yields higher by around 6 bps. This later prompted the BoJ to announce its first fixed-rate buying operation since February to purchase an unlimited amount of 10yr JGBs at 0.110%, which effectively placed a floor on JGBs and helped them nurse part of day’s losses.

PBoC skipped reverse repos but later announced to inject CNY 502bln through its Medium-term Lending Facility. (Newswires)

PBoC set CNY mid-point at 6.7593 (Prev. 6.7671)

WORLD

G20 officials reaffirmed FX commitments made in March and will subsequently pledge to not engage in competitive devaluations. (Newswires)

EU/UK/US

Brussels rejected the UK proposal regarding how to govern its financial services access post-Brexit, with EU chief Brexit negotiator Barnier stating the enhanced equivalence plan would result in EU losing its decision-making autonomy. (FT)

EU officials and diplomats stated a fundamental change in UK politics would be needed for there to be any value for the EU in an extension of the UK’s membership. (Guardian)

UK PM May has said it is time to "get on with" reaching a Brexit deal as she and other cabinet ministers try to sell their plan for it in Europe. (BBC)

UK Brexit Secretary Raab has accused the EU of acting irresponsibly by warning of the risks posed to its citizens in the UK under a no-deal exit. Raab was also reported to say the UK could refuse to pay its GBP 39bln “divorce bill” unless the EU agrees to a binding framework for a future trade deal, while he also noted the government must be ready in the event of a no-deal Brexit. (Sunday Times/Newswires)

According to a YouGov poll, UK PM May is facing an unprecedented political crisis as voters are implacably opposed to her Brexit plan and are prepared to turn to UKIP or parties of the far right. (Sunday Times)

French President Macron is planning a reshuffle of the cabinet and other functions after his security officer was charged with assault on protestors, according to sources. (Newswires)

French Finance Minister Le Maire stated that a trade war has already begun and that the EU will have no option but to retaliate if the US imposes more tariffs. (Newswires)

US Treasury Secretary Mnuchin downplayed recent comments by President Trump by stating that Trump was not trying to intervene in FX markets and respects the independence of the Fed. However, Mnuchin went on to add that he will be watching the CNY for any signs of devaluation. (Newswires)

S&P affirmed Greece at B+; Outlook revised to Positive from Stable, affirmed Czech Republic at AA-; Outlook Stable and affirmed Russia at BBB-; Outlook Stable. (Newswires)

GEOPOLITICAL

US President Trump warned Iranian President Rouhani to never threaten the US again or they will suffer consequences the likes of which few throughout history have ever suffered before. Trump added that US will no longer stand for Iran’s demented words of violence & death, while he warned the Iranian President to be cautious. This was after comments from Rouhani that the US cannot prevent Iran from exporting oil and who warned a confrontation would be the 'mother of all wars'. (Twitter/Al Jazeera)

US President Trump is said to be asking for daily updates on how North Korean negotiations are proceeding and is said to have shown frustration regarding the pace despite tweeting about how well it is going. (Newswires)

EQUITIES

European equities (Eurostoxx 50 -0.4%) trade lower across the board amid a mixed lead from Asia with traders mindful of ongoing trade concerns with US President Trump last week stating that the US is ready to impose tariffs on all USD 505bln of imported goods from China. This also comes in the context of the US Commander-in-Chief having taken to social media to complain about currency manipulation that has subsequently led to a firmer USD. Newsflow from the European session has otherwise been particularly light with not much to look ahead to on the calendar.

In terms of sector specifics, losses are relatively broad-based with price action across the equity space largely dominated by individual stock stories with earnings season well underway. Ryanair (-4.0%) stand at the foot of the Stoxx 600 after their latest earnings update revealed a 20% decline in profits; easyJet (-2.4%) lower in sympathy. Elsewhere, Fiat Chrysler (-2.5%) shares are lower amid the news that their CEO Marchionne has had to stand down from the Co. due to ill-health with Jeep boss Manley named as his successor; Ferrari (-4.2%) and CNH Industrial (-2.4%). Finally, markets await any developments from reports suggesting that Shell could consider a huge USD 25bln buyback alongside their earnings on Thursday and speculation that GSK could consider spinning-off their consumer division.

FIXED INCOME

Bunds retested early Eurex peaks on a lack of follow-through selling at the new (marginal) 162.23 session base (-30 ticks vs -3 ticks at the other end of the spectrum) before topping out again, but Gilts are holding up better having carved out a fresh Liffe best at 123.59 (+6 ticks vs -21 ticks at one stage) in wake of last week’s UK data that broadly missed consensus and took the edge off lofty tightening expectations for August’s BoE policy meeting. Meanwhile, US Treasuries are treading a very tight line with the curve fractionally steeper ahead of the June National Activity Index and existing home sales.  

FX

JPY - The clear G10 outperformer on sourced reports suggesting that the BoJ will look at various policy tweaks at its end of July meeting, including potential changes to the way it manages the JGB yield curve to allow for a long-term natural increase. Even though Governor Kuroda denied any knowledge of the claims, Usd/Jpy retreated further from recent 113.00+ peaks to a low circa 110.75 before retesting offers around 111.00, while Jpy crosses also dropped sharply to 1+ week lows. Technically, the landscape will remain bearish if the headline pair closes below 111.25 (Fib), and more so sub-110.96 (30 DMA).

NZD/CHF/GBP - The next best majors and beneficiaries of US President Trump’s efforts to curb Usd strength via tweets and tirades about China, the EU et al manipulating their currencies for unfair advantage vs the Usd (and the Fed not immune as he also expressed opposition against rate hikes). The Kiwi has rebounded above 0.6800, Franc extended gains towards 0.9900 and Cable firmly recovered 1.3100+ status.

EUR/CAD/AUD - All narrowly mixed vs the Greenback with the single currency maintaining around 1.1700, the Loonie holding above 1.3150 and Aud reclaiming 0.7400+ as China’s Yuans hold off recent lows (Usd/Cny and Usd/Cnh both just below 6.8000).

DXY - The index is relatively rangebound between 94.200-450 after the G20 meeting and aforementioned Trump verbal intervention, with support seen circa the bottom end of the band and not a lot in terms of resistance until 95.000 and the ytd high of 95.652 set last Thursday. All in all, a quiet start to Monday’s session, but US data later may provide some impetus.

COMMODITIES

WTI and Brent crude futures sit comfortably in positive territory (WTI +1.0%, Brent +1.3%) with traders eyeing mounting geopolitical tensions between the US and Iran, while the benchmarks breached USD 69/bbl and USD 74/bbl respectively. Tensions between the two rose over the weekend after Iranian President Rouhani reiterated the US cannot stop its oil exports and warned Trump not to play with the lion’s tail or he will regret it, while Trump responded aggressively in which he warned Rouhani to never threaten the US again or they will suffer consequences the likes of which few throughout history have ever suffered before. Earlier today, reports stated Total’s North Sea oil platforms are hit by a 24-hour strike (as warned of at the end of last week) Price action for oil markets could also be swayed by any trade developments as European Commission Juncker heads to Washington on Thursday in an attempt to defuse tensions.

In metals markets, spot gold sits in minor negative territory alongside the modestly firmer USD. Copper in London is hovering about the yearly lows set last week, whilst steel prices were firmer overnight as production cuts in the Chinese city of Tangshan kicked-in.