With US markets closed for Juneteenth, trading was confined to Asia and Europe yesterday. The economic calendar contained no important data but several high-profile speeches, including from president Lagarde as she appeared before the European Parliament. She didn’t spill the beans though and simply sticked to the normalization path laid out at the June meeting. Neither did she dwell on the outcome of the emergency meeting or on the details of the new bond-buying tool. Turning to markets, core/German bonds initially looked as if economic growth would once again take over from the inflation & tightening narrative. Further easing commodity prices (eg. oil) provided similar clues. But that soon changed with German yields eventually adding 5.9 bps (2y) to 9 bps (30y), be it in low-volume trading. European stock markets rose about 1%. The dollar traded a tad softer. The trade-weighted index (DXY) stabilized near Friday’s closing levels but EUR/USD eked out a gain to close just north of 1.05. EUR/GBP tried to reconquer the 0.86 barrier but failed to do so (close at 0.858). Norway’s krone outperformed G10 peers after a losing streak that brought EUR/NOK to the highest level since August last year. The pair eased from 10.5 to 10.42 yesterday. The Norges Bank is meeting on Thursday.Equities in the Asian-Pacific region are better off than yesterday. Gains mount up to 2.5% in Japan. US yields add about 5 bps across the curve after cash markets reopen from a long weekend. Yields in Australia went in reverse after RBA governor Lowe dampened expectations for a 75 bps hike. He added that policy rates of 4% by year-end, as expected by markets, is unlikely. The Aussie dollar trades stable sub AUD/USD 0.70. Moves on other currency markets are muted too. The Japanese yen (USD/JPY 135.02) is unimpressed by an umpteenth verbal intervention by Japanese MinFin Suzuki. US markets join the rest in the waiting game today. The economic calendar only starts to heat up from Wednesday with UK CPI, EMU consumer confidence and Fed chair Powell’s semi-annual testimony before Congress. It may mean a quiet trading day within the bigger picture of some short-term consolidation on core bond markets. As dust settles a bit after a volatile last week, we expect the dollar to continue topping out for the time being. EUR/USD 1.0601 serves as first intermediate resistance. Sterling investors will probably stick to the sidelines, awaiting key data (CPI, PMI and retail sales) that may affect Bank of England tightening expectations.
Israelian PM Bennett yesterday announced that he and foreign minister Lapid had decided to dissolve parliament, making way for the fifth election in four years and setting the stage for a potentially sooner than hoped for return of current opposition leader Netanyahu. Lapid will become caretaker PM in the run-up to a ballot which should take place before the end of October. Bennet’s fragile coalition, which centered more around the will to oust than sitting PM Netanyahu rather than around political ideas, already lost its majority earlier this year following the resignation of two MP’s.