EUROPEAN FIXED UPDATE: Bonds paring NFP upside, but with focus on dovish implication of Fed's Kugler resignation & BLS firing

USTs: -6.5 ticks, 112-00

• USTs are lower by a handful of ticks, attempting to pare back some of the post-NFP upside seen on Friday, but with focus also on the dovish implications of Fed’s Kugler resignation and Trump’s firing of the BLS Chief. On the jobs report, the economy added just 73k jobs (exp. 110k); a bleak report, especially when accounting for the major downward revisions to prior months. As it stands, money markets currently price in an 88% chance of a cut in September, with two cuts fully priced in by year-end.


• On Trump/Fed; it was announced that Fed’s Kugler is to resign from her role at the Fed (sparking a slight dovish reaction on Friday); thereafter, US President Trump said he will announce a replacement in the coming days. Traders will keep an eye on the appointment, as it provides Trump the opportunity to shove in his favoured candidate to replace Powell, once his term ends. As it stands, betting markets assign a 45% chance that the next Fed will be Former Fed member Kevin Warsh; 25% for White House Economic Adviser Hassett; 17% for Fed’s Waller. And finally, on the Trump-BLS saga; after blaming (and then firing) the BLS Chief for a poor NFP report, Trump confirmed he will be announcing a new appointee in the coming days.


• Elsewhere, weekend trade-related updates were overall non-incremental; USTR Greer said the trade truce deadline for China is still under discussion. Elsewhere, Canada’s trade envoy LeBlanc said PM Mark Carney and US President Donald Trump are expected to talk “over the next number of days”. As for the Fed; US President Trump continued his attacks on Chair Powell, saying he would remove him in a “heartbeat” but said he will most likely stay on till her term ends.


• Price action today has been relatively contained and trades at the mid-point of a 111-31+ to 112-12 range; the peak for the day surpassed Friday’s high at 112-11, and further upside will bring into play the high from 1 July at 112-12+.


• As for today, the docket is lacking in Tier 1 data; markets will receive US Durable Goods (Revisions), Factory Orders and Employment Trends. The week ahead includes ISM Services (on Tuesday), where markets will assess if the past strength of the Services sector can be sustained.

Bunds: -22 ticks, 129.58

• Bunds are downbeat, in-fitting with global peers. Currently trading in a 129.50 to 130.06 range, which is well within Friday’s confines of 129.12 to 130.21. Newsflow has been very light today, aside from EZ Sentix Index which printed at -3.7, far below the expected 8.0; the Sentix director manager described the recent EU-US trade deal as a “mood killer”. Elsewhere, Germany’s engineering association VDMA said engineering orders -5% Y/Y in June (domestic -5%, foreign -5%); engineering orders -2% Y/Y in April-June (domestic -2%, foreign -1%) – the accompanying commentary suggested that it is not yet possible to estimate the impact of the 15% US tariff.


• Commentary over the weekend came via ECB’s Patsalides, who said that the EZ continues to remain resilient despite trade woes; though he added that “the environment remains uncertain”. On the latest ECB policy decision (where the Bank opted to keep rates steady), Patsalides said it would be “premature to interpret this decision as a pause”.

Gilts: -12 ticks, 92.29

• Gilts are also trading in tandem with peers, holding a bearish bias but with price action fairly muted. UK paper is currently lower by around 12 ticks in a 92.24 to 92.49 range. Newsflow has been exceptionally quiet so far, but all attention will be on Thursday’s BoE policy announcement.


• On that, the BoE is expected to lower its Base Rate by 25bps to 4% with markets assigning an 83% probability of such an outcome. Focus will also be on the vote split; Morgan Stanley touts the possibility of a 1:7:1 vote with Mann to vote for a hold and Dhingra to back a 50bps reduction. Data since the prior meeting has underscored the stubborn nature of inflation in the UK, with Y/Y CPI in June advancing to 3.6% from 3.4%, and services holding steady at 4.7%. However, the MPC also needs to balance this against the slowdown in growth and perceived loosening in the labour market.

04 Aug 2025 - 09:55- ForexData- Source: Newsquawk