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EUR

20 Jun 2023

Risk assets pause for breath as Fed pushback becomes more likely

Markets are turning more cautious after last week’s “melt-up” in risk assets, with the dollar climbing against its rivals, Treasury yields ticking higher, and equity markets beating a slow retreat. The British pound is holding near to a ten-month high against the euro and a 14-month peak against the dollar, supported by rising rate expectations. Following strong labour market and wage growth data, the latest inflation print, out tomorrow morning, is expected to show headline price growth easing only slightly in the the month of May, and the core measure is seen holding close to 6.8 percent in year-over-year terms. In response,...

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19 Jun 2023

Shaky sentiment

• Negative vibes. US on holiday, but European equities dipped & bond yields rose. Hawkish central bank rhetoric was a factor.• China stimulus. Lack of an announcement by China on a stimulus package also weighed on sentiment. We think markets are too ‘bulled up’ about China stimulus.• AUD softer. AUD has given back a little ground. RBA meeting minutes released today. RBA’s Kent & Bullock also due to speak. With the US on holiday it was a relatively quiet night for markets, though risk appetite has been softer across those that were open. European equities dipped (EuroStoxx600 -1%), oil prices...

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18 Jun 2023

Lofty heights

• Policy divergence. JPY continues to weaken with the BoJ’s stance continuing to diverge from the rest of the world. AUD near a multi-month high.• Fed talk. Chair Powell testifies to Congress this week. Markets still aren’t pricing in the Fed’s views. A shift up could give the USD some support.• China stimulus. More stimulus to support the faltering recovery is anticipated, but we think China may not meet the markets seemingly lofty thinking. US markets had a relatively quiet end to a busy week on Friday. US equities retreated from their 14-month highs (S&P500 -0.4%), while bond yields increased...

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15 Jun 2023

Another hawkish ECB hike

• Weaker USD. ECB delivered another hawkish hike. Policy divergence between the ECB & US Fed has boosted the EUR & weighed on the USD.• AUD stronger. Compounding the softer USD was another strong local labour market report & expectations China could announce stimulus to boost growth.• BoJ today. No changes expected. But tweaks appear inevitable. JPY is at quite low levels. We think there are more upside than downside risks from here. US and European markets diverged overnight, with contrasting central bank expectations a driver. European equities eased back (EuroStoxx50 -0.3%) and bond yields rose after the ECB delivered...

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15 Jun 2023

Markets soften on hawkish Fed messaging

As had been clearly telegraphed and widely anticipated, the Federal Reserve opted to hold interest rates at yesterday’s meeting. Officials said “Holding the target range steady at this meeting allows the Committee to assess additional information and its implications for monetary policy,” and Jerome Powell avoided committing to any further moves, instead saying the July meeting would be “live” and dependent on incoming data. More unexpectedly, new projections showed policymakers expect to deliver two additional hikes by year end. But the “dot plot”, as the Summary of Economic Projections is colloquially known, has evolved into a strange hybrid between a forecast update...

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