Broad Dollar weakness after WSJ report on shadow Fed Chair

EU mid-market update: Broad dollar weakness after WSJ report on Shadow Fed Chair; Pentagon to hold press conference this morning; H&M shares higher after June sales color and margin beat.

Notes/observations

- Fed independence concerns weigh upon USD sentiment; Fed futures now price 90% chance for 25bps cut by Sept's meeting v 60% w/w after report Trump considers "Shadow Fed Chair" by fall; EUR/USD tests at 1.172 (highest since Sept 2021).

- WSJ reports that Trump is considering naming a “shadow” Fed chair—likely Warsh, Hassett, Bessent, or Malpass—by September-October as an explicit signal that Powell will be replaced.

- Micron’s earnings call flagged record revenue and margins on tight DRAM supply, robust HBM- and AI-driven data-center demand, and favorable mix heading into Q4, while modest tariff pull-ins, lean inventories, and a $200B U.S. expansion plan underpin guidance that sees DRAM bit-growth outpacing NAND and HBM market-share parity by 2H CY25.

- H&M shares trade sharply higher in Stockholm after it provided June sales color and reported better-than-expected margins; It also noted expensive US dollar and higher freight costs.

- UK ministers hold talks with Labour MPs over welfare bill concessions; At least 126 Labour MPs have signed a 'reasoned amendment' to block the PM Starmer's benefit cut; Analysts note that concessions to welfare bill could cost Chancellor Reeves billions and prompt to new tax hikes in the autumn budget.

- Ahead of Pentagon press conf this morning, Axios reported that Trump administration plans to limit sharing classified information with Congress after someone leaked an internal assessment on bombing Iran nuclear facilities.

Asia

- South Korea Jun Manufacturing Business Survey: 94.4 v 94.7 prior; Non-Manufacturing Business Survey: 87.4 v 88.1 prior.

Global conflict/tensions

- President Trump announced that talks with Iran would begin next week.

- US special envoy Witkoff was hopeful for a comprehensive peace deal with Iran; Stressed that was a red line if Iran tried nuclear enrichment again.

Europe

- PM Starmer said to be preparing to water down welfare reforms to avoid turmoil in his own party.

- President Trump called for planned corruption trial of Israel PM Netanyahu to be cancelled (Netanyahu has been summoned to the court in Israel on Monday (Jun 30th).

- European Commission Pres Von der Leyen said to be facing a no-confidence vote over a Covid-19 pandemic scandal (Pfizergate); While von der Leyen was likely to survive the vote, which could take place next month, it might force her to make more compromises both to the left and the right to secure their support.

Americas

- Pres Trump said to have considered selection of new Fed Chair as successor to Powell by Sept, Oct, in a bid to 'undermine' Powell (Warsh, Hassett and Bessent under consideration). An early decision on his successor would be seen a undermining Powell’s position which is exactly what Trump wants. Trump wants rate cuts and Powell refused to deliver.

- Treasury Sec Bessent sent letter to Congress: Must act on debt limit by August recess; Debt-limit measures extended through July 24th. Confident that US House would pass Senate version of tax/budget bill; They're in a good spot.

- Trump administration said to be planning to limit sharing classified info with Congress after leak on Iran bombing damage.

Trade

- Japan Trade Negotiator Akazawa stated that would keep in mind July 9th deadline for negotiations. Could not accept 25% auto tariffs.

Speakers/fixed income/FX/commodities/erratum

Equities

Indices [Stoxx600 +0.24% at 538.28, FTSE +0.13% at 8,730.00, DAX +0.71% at 23,676.00, CAC-40 +0.10% at 7,565.83, IBEX-35 +0.40% at 13,874.46, FTSE MIB +0.12% at 39,367.00, SMI +0.22% at 11,906.34, S&P 500 Futures +0.33%].

Market focal points/key themes: European indices opened modestly higher across the board and maintained a cautious positive trend in the early part of the session; sectors leading the way higher include consumer discretionary and materials; lagging sectors include industrials and technology; rumors that Shell was considering a bid for BP were denied; earnings expected in the upcoming US session include Nike and Walgreens Boots Alliance.

Equities

- Consumer discretionary: H&M [HMB.SE] +8.0% (earnings; June sales), Next 15 [NFC.UK] -21.5% (trading update), EDENRED [EDEN.FR] +8.0% (noted meal voucher reform in France), Inchcape [INCH.UK] +5.5% (trading update), Moonpig [MOON.UK] -7.5% (earnings; CEO to resign).

- Energy: Shell [SHEL.UK] +0.5%, BP [BP.UK] -0.5% (Shell again clarifies that it has not been actively considering BP offer and confirmed that no discussions have taken place with BP about a possible acquisition).

- Industrials: Volkswagen [VOW3.DE] -0.5% (owner families of Volkswagen want Manfred Döss as the successor to the incumbent chairman of the supervisory board, Hans Dieter Pötsch).

Speakers

- Germany Lower House said to back Chancellor Merz €46B tax break package.

- France govt noted that the 2025 budget deficit to GDP of 5.4% remained achievable but needed €5.0B more in spending cuts to achieve target.

- UK govt said to be holding talks over implementing welfare cuts; Plan to bring welfare bill to vote Tue, July 1st.

- Austria WIFO Quarterly Economic Forecasts raised the 2025 GDP growth from -0.3% to +0.1% while cutting the 2026 GDP growth outlook from 1.2% to 1.0%. Projections raised the 2025 CPI forecast from 2.7% to 2.9% and raised the 2026 CPI outlook from 2.1% to 2.2%.

- South Korea to announce steps in July to cool down home prices.

- China Commerce Ministry (MOFCOM) stated that would speed up approval of rare earth export licenses.

Currencies/fixed income

- USD exhibit a fresh bout of weakness after reports circulated that Pres Trump had considered selection of new Fed Chair as successor to Powell by Sept, Oct, in a bid to 'undermine' Powell. An early decision on his successor would be seen undermining Powell’s position. Trump wants rate cuts and Powell thus far had refused to deliver.

- EUR/USD powered above the 1.17 level and nearing the mid-point of its 25-year trading period.

- USD/JPY moved below the 144 level.

- 10-year German Bund yield at 2.55% and 10-year Gilt yield at 4.47%. 10-year Treasury yield: 4.27%.

Economic data

- (FI) Finland May House Price Index M/M: -0.4% v +1.4% prior; Y/Y: -1.3% v -0.4% prior.

- (DE) Germany July GfK Consumer Confidence: -20.3 v -19.2e.

- (SE) Sweden May Trade Balance (SEK): 3.9B v 6.2B prior.

- (NO) Norway May Trend Unemployment Rate: 4.5% v 4.4% prior.

- (HU) Hungary Q1 Current Account Balance: €1.1B v €2.1Be.

- (SE) Sweden Jun Consumer Confidence: 84.6 v 83.6 prior; Manufacturing Confidence: 99.3 v 100.1 prior; Economic Tendency Survey: 92.8 v 94.5 prior.

- (AT) Austria Jun Manufacturing PMI: 47.0 v 48.4 prior (35th month of contraction).

- (ZA) South Africa Q2 BER Consumer Confidence: -10 v -20 prior.

- (HK) Hong Kong May Trade Balance (HKD): -27.3B v -14.0Be; Exports Y/Y: 15.5% v 12.5%e; Imports Y/Y: 18.9% v 13.0%e.

Fixed income issuance

- (KR) South Korea opened its book to sell EUR-denominated 3-year and 7-year notes via syndicate.

- (UK) DMO sold £1.0B in 4.25% Dec 2046 Gilts via tender; Avg Yield: 5.162% v 2.345% prior; bid-to-cover: 1.99x v 2.54x prior.

- (IT) Italy Debt Agency (Tesoro) sold total €3.0B vs. €3.0B indicated in 6-month Bills (2 tranches).

Looking ahead

- 05:25 (EU) Daily ECB Liquidity Stats.

- 05:30 (ZA) South Africa May PPI M/M: 0.2%e v 0.5% prior; Y/Y: 0.5%e v 0.5% prior.

- 05:30 (HU) Hungary Debt Agency (AKK) to sell combined HUF40B in 3-year, 5-year and 10-year bonds.

- 05:40 (UK) BOE 7-day short-term repo operation (STR).

- 05:45 (ES) ECB’s De Guindos (Spain).

- 06:00 (UK) Jun CBI Retailing Reported Sales: -25e v -27 prior; Total Distribution Sales: No est v -43 prior.

- 06:00 (IL) Israel Apr Manufacturing Production M/M: No est v 0.5% prior.

- 06:00 (VN) Vietnam Finance Ministry announcement on upcoming bond issuance (held on Wed).

- 06:00 (FI) Finland to sell Ori Bonds.

- 06:00 (RO) Romania to sell RON400M in 6.75% Apr 2035 Bonds.

- 07:00 (BR) Brazil Central Bank (BCB) Quarterly Monetary Policy Report.

- 07:00 (UK) BOE Gov Bailey.

- 08:00 (BR) Brazil Mid-Jun IBGE Inflation IPCA-15 M/M: 0.3%e v 0.4% prior; Y/Y: 5.3%e v 5.4% prior.

- 08:00 (MX) Mexico May Trade Balance: $0.4Be v -$0.1B prior.

- 08:00 (UK) Daily Baltic Dry Bulk Index.

- 08:00 (DE) ECB’s Schnabel (Germany).

- 08:30 (US) Q1 Final GDP Annualized (3rd reading) Q/Q: -0.2%e v -0.2% prelim; Personal Consumption: 1.2%e v 1.2% prelim.

- 08:30 (US) Q1 Final GDP Price Index: 3.7%e v 3.7% prelim; Core PCE Price Index Q/Q: 3.4%e v 3.4% prelim.

- 08:30 (US) May Preliminary Durable Goods Orders: +8.5%e v -6.3% prior; Durables (ex-transportation) 0.0%e v 0.2% prior; Capital Goods Orders (non-defense/ex-aircraft): +0.1%e v -1.5% prior; Capital Goods Shipments (non-defense/ex-aircraft): -0.2%e v -0.1% prior.

- 08:30 (US) May Advance Goods Trade Balance: -$86.1Be v -$87.0B prior (revised from -$87.6B).

- 08:30 (US) May Preliminary Wholesale Inventories M/M: 0.1%e v 0.2% prior; Retail Inventories M/M: -0.1%e v -0.1% prior.

- 08:30 (US) May Chicago Fed National Activity Index: -0.22e v -0.25 prior.

- 08:30 (US) Initial Jobless Claims: 243Ke v 246K prior; Continuing Claims: 1.95Me v 1.945M prior.

- 08:30 (US) Weekly USDA Net Export Sales.

- 08:45 (US) Fed’s Barkin.

- 0900 (US) Fed’s Hammack.

- 09:00 (RU) Russia Gold and Forex Reserve w/e Jun 20th: No est v $682.8B prior.

- 10:00 (US) May Pending Home Sales M/M: 0.0%e v -6.3% prior; Y/Y: No est v -3.5% prior.

- 10:30 (US) Weekly EIA Natural Gas Inventories.

- 11:00 (US) Jun Kansas City Fed Manufacturing Activity: -4e v -3 prior.

- 11:30 (US) Treasury to sell 4-Week and 8-Week Bills.

- 12:00 (CA) Canada to sell 2 Year Bonds.

- 13:00 (US) Treasury to sell 7-Year Notes.

- 14:30 (EU) ECB chief Lagarde.

- 15:00 (MX) Mexico Central Bank (Banxico) Interest Rate Decision: Expected to cut Overnight Rate by 50bps to 8.00%.

- 15:00 (AR) Argentina Apr Wages M/M: No est v 3.0% prior.

- 18:00 (NZ) New Zealand Jun ANZ Consumer Confidence Index: No est v 92.9 prior.

- 19:30 (JP) Japan May Jobless Rate: 2.5%e v 2.5% prior; Job-To-Applicant Ratio: 1.26e v 1.26 prior.

- 19:30 (JP) Japan Jun Tokyo CPI Y/Y: 3.3%e v 3.4% prior; CPI Ex-Fresh Food Y/Y: 3.3%e v 3.6% prior; CPI Ex-Fresh Food, Energy Y/Y: 3.3%e v 3.3% prior.

- 19:50 (JP) Japan May Retail Sales M/M: 0.3%e v 0.7% prior(revised from 0.5%); Y/Y: 2.5%e v 3.5% prior (revised from 3.3%);Dept. Store, Supermarket Sales Y/Y: No est v 1.5% prior.

- 21:00 (PH) Philippines May Trade Balance: -$4.1Be v -$3.5B prior; Exports Y/Y: 5.0%e v 7.0% prior; Imports Y/Y: -3.4%e v -7.2% prior.

- 21:30 (CN) China May Industrial Profits Y/Y: No est v 3.0% prior; Industrial Profits YTD Y/Y: 1.0%e v 1.4% prior.

- 23:30 (JP) Japan to sell 3-Month Bills.