Morning from Copenhagen.

Trump is expected to impose individual levies on counterparts ahead of the July deadline, which to us looks like yet another U-turn, going against what has otherwise been communicated by Bessent and Lutnick, who yesterday suggested that many deals are on the way. So maybe the message from Trump is simply another attempt at getting countries to the table to end the negotiations faster. Our take: the trade war is effectively over—except with the EU, as Lutnick yesterday specified that while multiple deals would come, Europe would be the “very very last,” clearly indicating that there is still a larger dispute with the EU, also clear through Section 899 in the Big Beautiful Bill (“The Unfair Foreign Tax Rule”), clearly targeting European investors as the US is unhappy with European corporate taxation policy.

The soft patch in USD inflation, evident from yesterday’s CPI report, is increasingly being priced in, and markets are now increasingly stuck in disinflation mode—also given that the US is now one of the worst-performing economies based on economic surprises. We can see how fund managers are short US versus long Europe/EM in various formats, e.g. long DAX vs. SPX and short USD/xxx. We believe we were ahead of the curve on this, having called it correctly since March.

Looking ahead, the most probable outcome is a substantial uptick in inflation (and likely growth) from here, and the cocktail of low expectations and bearish positioning leaves a decent risk/reward in betting on a reversal. We will likely use the coming days to accumulate more USD reflation bets, e.g. oil, US risk, and long USDs.

Chart 1: The US is now the “worst” performing economy