Sunset Market Commentary

In the article, sources close to the matter suggested that hawkish ECB members wanted to accelerate running down the balance sheet by either actively selling bonds from the APP portfolio or by phasing out the reinvestment policy from the Pandemic Emergency Purchase Programme.

Key Japanese Data This Week But Market's Mind Already on Next BoJ Meeting

Despite the quiet start of Governor Ueda’s term, there are some expectations being built up for the BoJ’s July meeting. This week’s data prints could, on the margin, tip the balance in favour of some sort of policy announcement at the next meeting. Will these developments, though, allow the yen to finally record some gains against the pound?

All Eyes on Riksbank

Today we expect a 25bp hike from the Riksbank. We expect the Riksbank to conclude their hiking cycle with another 25bp hike in September putting the terminal policy rate at 4.0% like the ECB, see more in the Nordic section below.

Fed Got Greenlight for More Hikes

The US banks passed the Fed’s stress test, giving a greenlight to the Fed for more rate hikes. The US banks gained in the afterhours trading, with Bank of America and Wells Fargo leading gains, but the new regulations regarding capital requirements will likely hold back investors from full heartedly going back to banks.

Inflation (Headline and Core) Should Reaccelerate Due to Base Effects

Attention shifts to the economic calendar, containing US jobless claims, European economic confidence and inflation readings of several European member states including Belgium, Spain and Germany. Because of its weight in the European index, the latter will be closely watched. Inflation (headline and core) should reaccelerate due to base effects following the introduction of a cheap transport ticket one year ago for three months.

Sunset Market Commentary

The euro held the upper hand against the dollar but growing yield differentials favoured the dollar eventually. EUR/USD returned earlier gains to trade lower for the day below 1.09.

USD/JPY Steady Ahead of Key Japanese Inflation Release

Japan releases Tokyo Core CPI on Friday USD/JPY moves closer to symbolic 145 line Ueda says no changes to policy unless core inflation rises USD/JPY has edged lower on Thursday. In the European session, the yen is trading at 144.19, down 0.20%. The yen dropped as low as 144.70 in the Asian session, as the […]

Cliff Notes: Persistence of Underlying Inflation Continues to Trouble Policy Makers

The main data release for Australia this week was the Monthly CPI Indicator which provided a mixed read on current inflation trends. The headline index surprised to the downside in May, the 0.4% monthly decline seeing the annual rate ease from 6.8%yr in April to 5.6%yr. The detail was broadly as anticipated, with prices for many services still rising on a monthly basis; however, a large decline in holiday travel and accommodation prices (–11.3%mth) more than offset this.

We Confirm Our Call for 0.25% Increase in Cash Rate Next Week

With core inflation holding above 6%; the unemployment rate holding nearly 1 ppt below the NAIRU (RBA's estimate) and the cash rate only around 1 ppt into contractionary territory (we see neutral around 3%) the cash rate will need to go higher. A second pause, to gather further information, seems unnecessary and only risks the need for the cycle to extend even further into 2023 when the prospects for damage to the economy increase substantially.

Focus on Flash HICP

Today, markets will look closely at flash euro area HICP figures. The country figures released on Wednesday and Thursday were on balance a bit higher than consensus, driven by Spain and Germany. Even so, headline inflation is falling and thus consumer headwinds are waning. We have seen early signs of momentum in core prices declining in Q2, and gauging the underlying price pressure will be key for markets. The country releases so far would point to a 5.7% headline print.