The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1026 GMT - India's food-price inflation and growth face risks due to weather conditions, Shilan Shah of Capital Economics writes in a note. India recorded its driest June in over a decade, and the Indian Meteorological Department is forecasting weaker-than-normal rainfall for the rest of the season due to El Nino weather conditions, the economist says. Sowing conditions have deteriorated, weighing on the agriculture sector and lowering the crop yield, which adds upside risks to food inflation, Shah says. Water levels in Indian reservoirs will also be affected by low rainfall, which are used to generate hydroelectricity. "Periodic shortages of energy or blackouts could weigh on industrial activity" and affect growth, he adds. CE retains the view that the central bank will hike rates over the coming months. (kimberley.kao@wsj.com)
1000 GMT - U.S. Treasurys are expected to underperform other markets in the wake of economic divergence between U.S. and overseas markets, BlueBay Asset Management CIO Mark Dowding says in a note. That said, BlueBay AM continues to express no clear directional bias on U.S. Treasurys. A degree of monetary tightening is already discounted in futures curves, he says. Markets price in a quarter-point rate hike by the Federal Reserve in December, with a high probability of a rate increase already in October, according to LSEG. (emese.bartha@wsj.com)
0952 GMT - The U.S. dollar weakens, with softening market expectations regarding potential Federal Reserve interest-rate hikes. "It [the dollar] remains on track to end the week in negative territory following Thursday's disappointing jobs report," DHF Capital's Bas Kooijman says in a note. Looking ahead, traders will turn to next week's ISM Services PMI, FOMC minutes and weekly jobless claims for further clues on the Fed's monetary policy path, the CEO and asset manager says. Developments in U.S.-Iran talks will also be monitored, as progress could ease safe-haven demand and add further pressure on the dollar, while any setbacks could support it, he says. The DXY dollar index falls 0.1% to 100.748. (emese.bartha@wsj.com)
0941 GMT - Eurozone sovereign yield spreads have been creeping wider in the past few weeks, even as corporate credit spreads move in the opposite direction, BlueBay Asset Management CIO Mark Dowding says in a note. There is no substantive fundamental driver for this price action, though BlueBay would observe reduced demand from overseas weighing somewhat on yields, he says. BlueBay currently doesn't hold an active position in eurozone spreads. "Though around 85 basis points on 10-year bonds is a spread level which we think may represent interesting longer-term value in both Italy and France," Dowding says. The 10-year OAT-Bund yield spread is just shy of 80 basis points, while the 10-year Italian BTP-Bund yield spread is just below 78 basis points, according to Tradeweb. (emese.bartha@wsj.com)
0927 GMT - The Philippine economy recovery will be slow as the Strait of Hormuz gradually reopens, Maybank analysts say in a report. Transport costs in the Philippines are expected to decline, with the waterway reopening and oil prices falling. However, the macro recovery will likely take about two to three quarters, even with petroleum prices returning near preconflict levels. That is because the Philippines is still recovering from the lingering second-round effects of war-related supply shocks, including higher food prices, Maybank says.(amanda.lee@wsj.com)
0913 GMT - U.S. employment data seem to confirm that the labor market is still hovering around its equilibrium point, Edmond de Rothschild Asset Management's Michael Nizard and Nabil Milali say in a note. Job creation is still enough to prevent the unemployment rate from rising and to continue supporting household consumption, but not enough to generate wage pressures that could lead to a further rise in inflation, they say. "We believe these statistics will provide a strong argument for the Federal Reserve's most dovish members to maintain the status quo and rule out the risk of a rate hike as early as the July meeting." Inflation figures will be decisive in settling this debate once and for all, but they believe that caution will ultimately prevail. (emese.bartha@wsj.com)
0901 GMT - Trade tensions between Germany and China pose a potential headwind to the euro, Commerzbank's Volkmar Baur says in a note. The dispute could result in trade restrictions against China given concerns about Germany's growing trade deficit with the country, he says. Any EU measures taken would certainly not go unanswered by China, although it's pointless to speculate on what any response might look like, he says. "However, it is unlikely to be positive for the European economy and would therefore probably weigh on the euro as well." The euro last trades up 0.2% at $1.1452. (renae.dyer@wsj.com)
0856 GMT - The Bank of Thailand is still likely to keep its policy rate on hold at 1.00% through end-2027, UOB economists say in a note. A rate cut wouldn't address an imported energy shock, they say. Conversely, a hike would risk further tightening financial conditions for households and small and medium-size enterprises, and shouldn't be necessary unless a second-round of inflation or disorderly FX pass-through becomes more evident. "The more appropriate policy mix is therefore a prolonged monetary hold, targeted fiscal relief, energy-cost smoothing, debt restructuring, and credit-support measures," UOB says. (amanda.lee@wsj.com)
0836 GMT - Japanese authorities might have intervened Thursday to support the yen and could take further action Friday during U.S. holiday-thinned liquidity, ING's Francesco Pesole says in a note. The dollar fell against the yen Thursday morning even before soft U.S. nonfarm payrolls data pushed it below 161.00, he says. "We cannot rule out that this initial move was driven by FX intervention." Further interventions remain a risk despite the yen's recovery, he says. Japan tends to intervene around holidays and spread operations over multiple days. Acting after a dollar-negative event would also be consistent with their approach in 2024, he says. The dollar falls 0.1% to 160.87 yen, having reached a two-week low of 160.51 earlier, according to LSEG. (renae.dyer@wsj.com)
0836 GMT - Citi sees an increasing risk of the 10-year Japanese government bond yield testing 3% sooner than anticipated with a rising fiscal premium, strategist Tomohisa Fujiki says in a note. The JGB curve has steepened due to fiscal concerns and yen weakness, and the key is whether there is repricing of the five-year sector, he says. "Underperformance by the 10-year sector may continue as it has become even harder to take on duration risk," he says. Rate-hike pricing has been brought forward but only modestly, and the two- to five-year sector looks "rich." The 10-year JGB yield last trades at 2.78%, up 1.2 basis points, according to LSEG. (emese.bartha@wsj.com)
0827 GMT - The dollar is unlikely to enter a sustained downward trend after Thursday's worse-than-expected U.S. nonfarm payrolls report, ING's Francesco Pesole says in a note. The data aren't weak enough on their own to trigger a significant repricing in rate rise bets for the Federal Reserve, he says. While markets scaled back the prospect of imminent tightening, there is still more than 25 basis points priced in by December. The DXY dollar index falls 0.2% to 100.691 and ING expects it to stabilize in a range of 100.0-101.500 in coming weeks. (renae.dyer@wsj.com)
0824 GMT - Thailand's economic growth is likely to pick up in 2H, since the U.S.-Iran hostilities paused in late June and the Strait of Hormuz gradually reopened, Maybank economists say in a report. Thailand is one of the Asean economies that is more exposed to the Gulf shock through supply disruptions and shortages as well as higher input costs. However, the Middle East truce should lead to a lower risk of slowing growth, they note. Maybank expects Thailand's GDP growth to come in at 2.2% in 2H and average 2.1% in 2026, before accelerating to 2.7% in 2027. (amanda.lee@wsj.com)
(END) Dow Jones Newswires
July 03, 2026 06:26 ET (10:26 GMT)
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