Yield Curve and Stock Market Downside Risks

The yield curve compares three-month, two-year, five-year, 10-year and 30-year US Treasury bonds. Under a normal curve, the longer the maturity, the higher the yield.

Canada: Inflation Cools in May

Canadian inflation continued to cool in May, but progress is unlikely to be enough to prevent the Bank of Canada from raising rates in July. Improvements in core inflation are slow, particularly on the services side, with inflation picking up in discretionary areas like travel services and restaurant meals (6.8% y/y in May). Cooler goods inflation is welcome, but the BoC has likely been counting on that already as supply chain snarls improve.

Sunset Market Commentary

The euro is having the upper hand on currency markets today. EUR/USD rebounds from 1.0906 to 1.0969 currently. It is being helped by an overall lackluster USD performance. The Japanese yen hits a new 15-y low against the euro at EUR/JPY 157.38 with hawkish ECB talk marking an ever bigger contrast with BoJ policy. EUR/GBP extends its recent bottoming out process. The pair is trying to recoup the 0.86 big figure.

Can This Week's Inflation Report Steer the ECB Away from Another Rate Hike?

The European Central Bank has been on a monetary policy restrictive path for the past 11 months, raising rates at every single meeting with the last rate move announced at the June 15 gathering. Lagarde was quite clear at the last press conference that the ECB is determined to continue hiking, unabated by the recent inflation figures and the weaker survey data.

GBP/USD Lower Ahead of UK Inflation

The UK releases the May inflation report on Wednesday and BoE policy makers will be hoping that inflation continues to trend lower. Inflation dropped in April to 8.7%, decelerating for a second straight month. The consensus stands at 8.4%, and the good news is that those awful readings above 10% appear to be over. On a monthly basis, inflation is expected to fall to 0.5% in May, down from 1.2% in April.

BTCUSD Analysis: Positivity Has Returned to the Markets, But for How Long?

Meanwhile, the bitcoin chart shows that the market has formed a false breakout of the USD 25k psychological level. We wrote about this option on June 15th.

BoE Expected to Hike after CPI Figures

The consensus that the BoE will hike at the meeting on Thursday is pretty near unanimous. Where rates go after that is subject to intense debate, with the market and economists (and, potentially, the BoE) having different views. All of this could shake up the pound, especially if inflation is not in line with expectations tomorrow.

SNB to Raise Rates, But Will It Be Enough to Lift the Franc?

The Swiss National Bank (SNB) is widely expected to raise interest rates at 07:30 GMT Thursday, although markets are divided about the size of the move. With inflation grinding lower, the risks seem tilted towards a smaller rate increase that could briefly hurt the Swiss franc, although its overall path will also depend on global risk appetite and FX interventions.  

Can Fed Chair Powell Wake Up Dollar Bulls?

Despite the Fed’s updated dot plot last week signaling that two more rate hikes may be on the cards, market participants are finding it hard to believe it. Fed Chair Powell did not convince them either when he held the press conference following the decision. However, he is being given another opportunity to pass his message this week as he is testifying before Congress on Wednesday and Thursday at 14:00 GMT.

British Inflation Doesn't Ease

Released this morning, the British inflation was expected to ease from 8.7% to 8.4% but did not ease… while core inflation unexpectedly jumped past the 7% mark again. These numbers warn that inflationary pressures in the UK are not under control and call for further rate hikes which will further squeeze the British households, without a guarantee of easing inflation.