The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0939 ET - The European Central Bank remains caught in a dilemma, Federated Hermes' Filippo Alloatti says in a note. "On one side, persistently high energy costs threaten to weigh on industrial activity and consumer demand across Europe, with economies such as Germany and Italy especially exposed to prolonged energy shocks," the head of financials says. "On the other, the central bank is still dealing with the legacy of having kept rates too low for too long after the pandemic," he says. Ultimately, credibility is now central to the policy outlook. "Anchoring inflation expectations and reinforcing commitment to price stability will likely keep the ECB on a tightening path in the near term, even as growth risks continue to build across the eurozone." (emese.bartha@wsj.com)
0935 ET - It is not a one and done for the European Central Bank, Nuveen's Laura Cooper says in a note after the ECB's 25-basis-point rate increase on Thursday. "Policymakers delivered the widely anticipated quarter point rate hike and signaled that more increases likely lie ahead, raising policy rates for the first time since 2023 and leading major peers in responding to the energy shock," the global investment strategist and head of macro credit says. The data-dependent, meeting-by-meeting guidance carried over from April, but the underlying message was clear enough, she says. Nuveen sees September as shaping up as the next live possibility, with projections showing a larger inflation overshoot than previously anticipated and alluding to no longer being able to look through the energy shock's broadening effects on prices. (emese.bartha@wsj.com)
0935 ET - The ECB is unlikely to consider a one-and-done rate hike sufficient, says Thomas Pugh at RSM UK in a note. Today's hike was inevitable given rising inflation, he says. "Indeed, today's hike is a form of insurance against second-round effects." September is the most likely date for a follow-up hike, though a fresh energy price surge could bring July into play, he adds. Still, any tightening cycle should be short-lived given the relative weakness of the labor market, Pugh writes. "Ultimately, policy moves beyond June will depend on how the war with Iran unfolds. Energy prices would need to rise much further to warrant more than two rate hikes." (don.forbes@wsj.com)
0920 ET - The European Central Bank's updated staff projections show core inflation more persistent in the years ahead than expected, with a baseline of 2.5% in 2027 and 2.2% in 2028, Point72's Soeren Radde says in a note. Real GDP growth was revised down less than anticipated, to average 0.8% this year. "Taken together, these revisions are hawkish and, at face value, validate the nearly three hikes which the new staff forecast is likely based on," Radde says. However, rate guidance so far remains unchanged, as expected, and it will be up to ECB President Christine Lagarde to guide ahead, he says. "We expect her to gently nod towards September." The ECB raised its key rate by 25 basis points to 2.25%. (edward.frankl@wsj.com)
0917 ET - The European Central Bank's first interest-rate increase since 2023 was unsurprising, and more encouragingly, "they don't see much risk to GDP, although growth expectations are already muted," Premier Miton CIO Neil Birrell says in a note. Thursday's 25-basis-point rate hike was unsurprising given the inflation backdrop and their own rising forecasts for 2026 and 2027, he says. The current rate increase is likely to be followed by more rate hikes this year, depending on the data, but it is hard to think this is the end of the policy move, he says. (emese.bartha@wsj.com)
0909 ET - The European Central Bank looks less likely to increase interest rates again in the coming months, following Thursday's quarter-point rate hike, Fitch Ratings' Charles Seville says in a note. The latest rate-rise decision is likely "one and done, barring a more lasting and severe energy shock that stokes further price pressure", Seville says. Investors fully price in another ECB interest rate rise in September, LSEG data show. (miriam.mukuru@wsj.com)
0911 ET - Further interest rate hikes by the European Central Bank would risk repeating past mistakes, Carsten Brzeski at ING says in a note. The decision to cut on Thursday appears largely shaped by its determination not to repeat its 2022 mistake of reacting too late to an inflation surge, he says. "However, continuing to hike rates after today's decision increases the risk of repeating another mistake from the past: the rate hikes in 2011," Brzeski says. Back then, the ECB hiked prematurely as inflation started to pick up, only to find out soon after that the eurozone was on the brink of deflation. The ECB's own projections don't obviously demand aggressive action, the analyst says. Headline inflation is forecast at 3.0% this year before easing. (don.forbes@wsj.com)
0905 ET - The European Central Bank's interest-rate increase makes the institution the first of the major central banks to hike, reflecting the euro area's acute exposure to energy-driven inflation, Principal Asset Management's Seema Shah says in a note. "While today's move was fully priced in, the future path is less clear and remains highly dependent on the duration of the conflict," the chief global strategist says. As it stands, the combination of higher inflation projections and only marginal growth downgrades indicates that the ECB must have a clear bias toward addressing inflation risks, she says. The projections point away from a one-and-done move, with further tightening likely as policymakers seek to contain the inflation shock, even if that requires sacrificing some growth in the near term, Shah says. (emese.bartha@wsj.com)
0902 ET - The European Central Bank's decision to hike rates is likely to prove ineffectual, State Street Investment Management's Simona Mocuta says in a note. Contrary to its goals, the monetary policy risks tightening into economic weakness--a course of action more likely to damage growth than to ease inflation, the chief economist says. "Indeed, a rate hike is likely to be ineffective in fending off inflationary pressures driven by a supply shock." With wage inflation well under control and consumer sentiment and spending depressed, there is limited scope for second round inflation effects in any case, she says. State Street Investment Management sees another hike in the autumn as most likely. (emese.bartha@wsj.com)
0859 ET - Treasury yields and the dollar rise amid hotter-than-expected U.S. wholesale inflation and as President Trump renews military threats against Iran. May PPI was 1.1%, matching April's advance and beating WSJ consensus of 0.7%. Weekly jobless claims accelerate to 229,000 from 225,000, consensus was 220,000. President Trump posts on Truth Social that the U.S. will be hitting Iran "VERY HARD TONIGHT." Oil prices rise less than 1%. The WSJ Dollar Index is up 0.1%. The 10-year yield rises to 4.544% from 4.523% before Trump's post and the data. The two-year rises to 4.148% from 4.125%. (paulo.trevisani@wsj.com; @ptrevisani)
0858 ET - Long-dated gilt yields are expected to show sensitivity to political risk in the lead-up to the special election in Makerfield constituency on June 18, Bank of America strategists say in a note. One of the candidates in the election, Andy Burnham, is also a potential contestant for the Labour Party leadership. U.K. political uncertainty is high in the lead-up to the election, causing investors to put a risk premium on U.K. government bonds. U.K. 30-year gilt yields last trade at 5.606%, the highest among developed market sovereign bonds, Tradeweb data show. (miriam.mukuru@wsj.com)
0852 ET - The European Central Bank's 25-basis-point rate increase doesn't mark the beginning of a new interest-rate hike cycle, Union Investment's Michael Herzum says in a note. Rather, the rate increase serves as a safeguard against any potential second-round effects, the head of economics and macro strategy says. "Little will be needed for this, as the recent weakening of the labor market in the currency union makes significant wage increases unlikely," he says. At the same time, the ECB does not want to jeopardize the fragile growth in the eurozone with a restrictive monetary policy, he says. (emese.bartha@wsj.com)
(END) Dow Jones Newswires
June 11, 2026 09:39 ET (13:39 GMT)
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