Markets
Energy markets remain at the center of attention after the latest escalation in the Middle East conflict which involved the US widening the scope of its airstrikes and Iran-allied Houthis imposing a maritime blockade in the Bab-el-Mandeb Strait. Brent crude hit an intraday high of $95.5 before paring gains a bit to $94.5 currently. The forward curve is now less than $4 below the one the ECB used in its June projections (cut-off date May 20). Gas prices, another key European energy source, isn’t grabbing as much attention as we think it should. The Dutch reference contract (TTF) is trading at levels seen only at the height of the war in March (€60+ per MWh) with the forward curve between 12-14 €/MWh higher than in June. That brings this component straight in the ECB’s adverse scenario (which assumed a €60 price in Q3). We’re keen to find out ECB president Lagarde’s view on this at the press conference tomorrow. The recent developments have caused core bond yields to bounce higher again with more of the same happening today. The European curve bear flattens with yields adding up to 4 bps at the front. UK yields increase between 1.8-3.3 bps. UK inflation came close to expectations and barely left a dent. A slight miss in headline (2.6% from 2.8% vs 2.7% expected) was compensated by a higher-than-anticipated reading in core and services CPI and, frankly, should be ignored altogether due to the recent energy price swings. Stock markets trade with minor gains in Europe but are fragile in the US. The Nasdaq opens lower. After-market results from AI bellwether Alphabet serve as the opening to the Big Tech earnings season and will be closely watched for huge capex to have paid off (enough) or not. In currency markets, the Japanese yen staged a futile attempt to recover after hitting a new multi decade low against the US dollar just yesterday. The bounce followed a report that the Bank of Japan is open to hike rates faster than markets and analysts currently assume – which is more or less every six months. USD/JPY went as low as 162.69 before wiping out almost all losses to trade back at 163 levels. The greenback loses out modestly against most other peers with EUR/USD rising to 1.1416 and DXY to 101.13, in technically irrelevant trading though. EUR/GBP extends a recent recovery towards 0.8533.
News & Views
The National Bank of Belgium’s consumer confidence indicator continued the upward trend that was already observed last month. The overall index improved from -7 to -5. For the fourth consecutive month, consumers are more positive about the economic situation in Belgium (subindex at -27 from -33). Their expectations concerning unemployment (14), however, remain pessimistic and have dropped back to the level seen two months ago. On a personal level, Belgian consumers became more optimistic about their capacity to save (23 from 19). Even so, their expectations concerning their own financial situation remain unchanged (-2). In February, before the start of the conflict in the Middle East, the overall confidence indicator stood at 1.
Retail sales in Poland in June as reported by the Statistical office of Poland today came out stronger than expected. Real sales rose 1.4% m/m and 6.2% y/y (was -1.7% M/M and 3% Y/Y in May). Over the period of January-June 2026 sales increased by 3.5% y/y. In June 2026, retail sales (at constant prices) increased compared with the corresponding month of 2025. In y/y terms, sales increased in all subgroups in June 2026. High sales growth was recorded in categories including “furniture, radio, TV and household appliances” (by 14.8%), “pharmaceuticals, cosmetics, orthopedic equipment” (by 10.2%), “motor vehicles, motorcycles, parts” (by 9.6%), “solid, liquid and gaseous fuels” (by 9%). Also the value of retail sales via internet (current prices) was 12.3% higher than a year ago. The zloty eases marginally today to EUR/PLN 4.33. The pair holds north of the 4.30 range top that guided trading since end 2024 until after the NBP policy decision earlier this month. At the press conference the day after that decision Governor Glapinski was quite outspoken that he favoured a rate cut potentially already after the summer break. However, comments from other MPC members showed manifest internal division on the topic.
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