A ceasefire in Israel’s antinuclear attack against Iran led to a relief-risk rebound in markets, but interest rate markets parted ways with equity indices. US yields declined 5 basis points across the curve as the Fed maintained its stance on waiting before considering rate moves. However, Fed Chair Powell hinted at an earlier rate cut if inflation or labor market weakness increases.
Oil prices dropped to $68/b, supporting the rebound. The German government approved a budget framework for 2025-29, highlighting the need for €500bn+ of borrowing and raising bond issuance targets. This led to increased yields in European markets.
The trade-weighted dollar (DXY) reached its lowest YTD level since 2018, while sterling gained ground against the euro due to concerns about the UK economy’s excess capacity. Asian markets maintained a modest risk-on bias, with US yields easing slightly further.
New EU car registrations rose by 1.6% Y/Y in May, driven by hybrid-electric and battery-electric vehicle sales. The European Parliament reached a deal on extending gas storage regulation, keeping the existing binding target of 90% but providing flexibility for market participants.
Key market takeaways include:
* US yields declined as the Fed maintained its stance
* Oil prices supported the rebound in equity markets
* German yields increased due to budget concerns
* The DXY reached its lowest YTD level since 2018
* Sterling gained ground against the euro due to UK economic concerns
Source: https://www.actionforex.com/contributors/fundamental-analysis/602024-july-too-early-for-fed-to-get-more-clarity-but-options-for-september-and-beyond-opening-up