BUNDS: German 10yr Yield rises above 2.754% high,

• Sterling resilience has stood out Monday amid the heightened uncertainty regarding US tariffs, with one analyst at BofA highlighting the UK will avoid some of the worst excesses that await the rest of Europe.
• As such, GBPUSD is not far from bridging its gap to Friday’s close around 1.2400, and this relative outperformance is weighing on EURGBP, currently down 0.75% to start the week and testing 0.8300 once more in recent trade.
• Overall, the bear cycle that started Jan 20 remains in play, bolstered by the cross holding trendline resistance, drawn from the 2022 highs. Today’s price activity has strengthened a bearish threat and further weakness would renew the focus on the first key support at 0.8223, the Dec 19 low, before the key 2022 low at 0.8203, the weakest point of a multi-year range.
• Ahead this week, the BOE is expected to cut Bank Rate by 25bp to 4.50% on Thursday. We would be surprised to see anything other than an 8-1 vote in favour of the 25bp cut with Mann likely to continue to provide the sole hawkish dissent. The bar to changes in guidance is likely still fairly high, and we expect unchanged language surrounding the “gradual” approach to removing restraint and that the “Committee will decide the appropriate degree of monetary policy restrictiveness at each meeting.

US President Donald Trump said in a message on Truth Social that he has completed a call with Canadian Prime Minister Justin Trudeau and will speak to him again at 15:00 ET 20:00 GMT.  The confirmation of a second call appears to point towards ongoing tariff negotiations.

• Trump: "Canada doesn’t even allow U.S. Banks to open or do business there. What’s that all about? Many such things, but it’s also a DRUG WAR, and hundreds of thousands of people have died in the U.S. from drugs pouring through the Borders of Mexico and Canada. Just spoke to Justin Trudeau. Will be speaking to him again at 3:00 P.M."
• MNI noted in an earlier bullet that comments from the White House's Economic Council, Kevin Hassett, this morning may have hinted at space within which tariffs can be eased. See: US: Bullish Hassett Lifts CAD and MXN Further Off Lows
• Mexican President Claudia Sheinbaum is expected to hold a televised press conference to provide details on her 'Plan B' response to tariffs at 10:00 ET 15:00 GMT. Given the completed Trump-Trudeau call, Trump and Sheinbaum may have spoken before the presser, providing the first data point today from a directly involved leader.
• Sheinbaum said in a lengthy statement yesterday: “Mexico does not want confrontation. We start from collaboration between neighboring countries,” adding: “I propose to President Trump that we establish a working group with our best public health and security teams.”

Bank of America outline a couple of trades “for those keen to continue the curve steepening theme - perhaps wishing to position for the possibility that the market focuses on the BoE's 2y- and 3y-ahead inflation forecasts next week (which we expect to be lowered).” 

• They maintain their 3s5s7s swap fly position (targeting a move to 10bp, stop set at -21bp).
• Elsewhere, they still “think 5-Year real rates need to be higher than priced to combat inflation but now see that being delivered via lower-than-priced inflation.” As a result, they have switched their “bearish real rate bias into a bearish RPI view in the 5-Year area.”