Debt Ceiling & CNY FX Gyrations Dominate Pre-NY

U.S. debt ceiling matters still dominate, with post-Biden-Congressional leadership meeting rhetoric pointing to some limited positive developments on Tuesday. House Speaker McCarthy alluded to the potential for a deal by the end of the week, albeit with both sides still apparently far apart. President Biden has shortened his international trip surrounding the G7 meeting to deal with the matter and staff level talks surrounding the issue have seen a bit of a rejig.

• Overnight Fedspeak from Goolsbee (’23 voter) & Bostic (’24 voter) saw the two continue to provide measured to slightly dovish overviews.
• FOMC-dated OIS prices ~63bp of cuts by year-end vs. current terminal rate pricing which sits ~4bp above the prevailing EFFR (in line with late Tuesday levels).
• ECB speak saw de Cos stick to the dovish side of the spectrum.
• Core global FI is a touch firmer.
• Quarterly performance metrics and guidance from U.S. retailers Target & TJX weren’t particularly reassuring, albeit not as worrying as Home Depot’s offering on Tuesday. E-minis are a touch firmer on the day, outperforming European benchmarks.
• FX trade has seen USD/CNH & USD/CNY show above 7.00 for the first time since Dec. BBDXY is a touch firmer as a result.
• Looking ahead, U.S. debt ceiling rhetoric and lower tier data will present the focal points of the U.S. docket, while ECB speak will continue to filter out.