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Analysts at TD Securities explained that market sentiment recovered after a rocky start to the North American session, with the S&P 500 (+0.7%) rallying into the close on reports of a “deal” between Trump and Juncker.

Key Quotes:

“Treasuries saw a modest selloff in the front-end, helping the curve bear-flatten, while Canadian rates underperformed.”

“The USD saw a broad selloff against G10 currencies, with CAD (+0.9%) leading the rally amid NAFTA optimism after talks resumed; MXN (+1.1%) also saw strong gains against the greenback. EUR (+0.3%) strengthened into the North American close on Trump/Juncker headlines.”

“The ECB will provide the main risk event on Thursday along with US/Mexico NAFTA talks.”

“Today’s ECB meeting is largely a placeholder for FX and rates markets.”

“Our base case calls for EUR/USD to finish the day anchored within recent ranges.”

“We think Draghi would have to go far out of his way to generate a large hawkish or dovish response by investors.”

“MXN pushed to a 2-plus month high on the back of optimism from Mexico’s Economy Minister that a NAFTA deal in the coming months.”

“Volatility will remain high but hope for a trilateral deal has been bolstered by a signal of unity from Canada and Mexico.”

“Treasuries will be watching trade headlines closely ahead of Friday’s Q2 GDP release. Sources suggesting that President Trump secured concessions from the EU on trade pushed Treasury yields sharply higher as equities rallied. Any confirmation of a de-escalation in trade tensions should prove risk-positive and could push yields higher.”