The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0921 GMT - The euro should benefit if the European Central Bank strongly signals it is willing to raise interest rates further as the escalating Middle East conflict pushes up energy prices, Commerzbank's Thu Lan Nguyen says in a note. The ECB is expected to leave rates unchanged Thursday but raise rates again in September. Given the rise in energy prices, it is crucial how clearly the ECB underscores that it is prepared to raise rates beyond September, she says. "This is likely to be decisive in limiting the downside potential in euro versus the dollar in the event of a further escalation in the U.S.-Iran conflict." The euro trades steady at $1.1438. (renae.dyer@wsj.com)
0908 GMT - Sterling is unlikely to rise much further in response to higher U.K. real yields adjusted for inflation and reduced fiscal concerns, MUFG Bank's Lee Hardman says in a note. "After recent strong gains, we believe that a lot of good news is now priced into the pound which should curtail further upside." Higher energy prices due to the U.S.-Iran conflict have lifted U.K. bond yields. Markets have scaled back initial worries over political risks as incoming Prime Minister Andy Burnham has pledged to be fiscally responsible. Reports that Burnham will pick Home Secretary Shabana Mahmood as his treasury chief could ease fiscal concerns, he says. Sterling rises 0.1% to $1.3470. The euro falls 0.1% to 0.8494 pounds. (renae.dyer@wsj.com)
0905 GMT - The cost of insuring euro-denominated credit against default remains steady but relatively high due to cautious sentiment amid the U.S.-Iran war. Over the weekend, the U.S. attacked Iranian military sites after two U.S. service members were killed by Iranian missiles in Jordan. The escalating conflict is pushing up oil prices and reducing appetite for risk. The iTraxx Europe Crossover index of euro high-yield credit default swaps is unchanged at 257 basis points, after climbing 6 basis points to that level on Friday, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0853 GMT - Fixed income assets enter the third quarter of the year on a stronger footing than many expected, but the path forward is less straightforward, Principal Asset Management says in a note. Yields are elevated, fundamentals are broadly healthy while demand for income continues to support markets. "That combination gives investors a solid starting point," the asset manager says. At the same time, healthy fundamentals are now largely reflected in valuations, with credit spreads tighter across much of the market, leaving less room for error across sectors, it says. Principal AM sees the biggest shift in recent months around policy expectations, as markets have moved from confidently anticipating rate cuts to debating whether policy may need to stay restrictive for longer. (emese.bartha@wsj.com)
0826 GMT - Malaysia's export growth is likely to moderate in 2H as favorable base effects fade, MBSB Research says in a report. The country's saw robust export performance in 1H, rising 27.5% on year, thanks to resilient global demand for technology products, inventory building, higher re-exports as well as positive price effects. However, exports continue to be exposed to headwinds such as supply disruptions, potentially weaker demand, risks of tighter trade rules as well as elevated costs and price pressures. MBSB Research expects Malaysia's exports to grow 18.9% in 2026, faster than 6.5% in 2025.(amanda.lee@wsj.com)
0824 GMT - Investors are keen to find out who will serve in the U.K.'s new cabinet as Andy Burnham is poised to become U.K. prime minister on Monday following Keir Starmer's resignation. Burnham is also expected to provide more detail on economic plans and briefings on policy plans, Barclays economists say in a note. Media reports indicate that Shabana Mahmood, who is considered to be a centrist candidate, could become the new treasury chief. U.K. 10-year gilt yields rise 2.2 basis points to 4.972%, Tradeweb data show. (miriam.mukuru@wsj.com)
0814 GMT - Sterling could rise slightly further if markets grant incoming Prime Minister Andy Burnham a honeymoon period, ING's Chris Turner says in note. However, gains could prove limited as the U.K.'s tight fiscal situation suggests a new cabinet will need to raise taxes to fund plans to improve areas such as social care, he says. The euro could fall to as low as 0.8400 pounds this summer but further falls look unlikely, he says. The euro falls 0.1% to 0.8492 pounds, having reached a 13-month low of 0.8453 on Wednesday, LSEG data show. A large part of sterling's recent strength reflects investors closing stale short positions which bet on the currency weakening, Turner says.(renae.dyer@wsj.com)
0804 GMT - A tighter correlation between energy prices and short-dated euro swap rates seems to be supporting the euro as the Middle East conflict escalates, ING's Chris Turner says in a note. Higher energy prices have driven a sizeable narrowing in euro-dollar two-year swap spreads, he says. Two-year euro swap rates are trading at a new high for the year, while last week's lower-than-expected U.S. inflation data has left short-dated U.S. rates off their highs, he says. "We do favor the euro moving back below $1.14 on these high energy prices, but we are cognisant of the risk of a surprise rate hike from the European Central Bank this Thursday." The euro rises 0.1% to $1.1445.(renae.dyer@wsj.com)
0754 GMT - Markets raise their bets on the prospects of the Bank of England increasing interest rates in the coming months due to rising oil prices. Escalating hostilities between the U.S. and Iran over the weekend earlier caused the price of Brent crude to rise above $90 per barrel, increasing concerns about prospects of higher inflation. Markets price in a total of 42 basis points of BOE rate increases in 2026, 4 basis points higher than Friday's pricing, LSEG data show. (miriam.mukuru@wsj.com)
0727 GMT - Sterling rises as Andy Burnham is set to become the U.K.'s prime minister Monday. It completes a surprisingly smooth transition of power from Keir Starmer who announced his resignation as prime minister last month, Commerzbank's Thu Lan Nguyen says in a note. The market appears to be betting that the period of political turmoil and recurring scandals in recent years is coming to an end, she says. However, Burnham needs to revive the economy while consolidating the public finances, she says. "If he fails to achieve either of these goals, the currently positive sentiment could quickly reverse." The composition of his cabinet will be key, she says. Sterling rises 0.1% to $1.3465. The euro falls 0.1% to 0.8493 pounds. (renae.dyer@wsj.com)
0726 GMT - Yields on U.K. government bonds climb as the U.S.-Iran conflict drives up oil prices, raising inflation risk. Investors are concerned that the prolonged hostilities could push up inflation and cause the Bank of England to increase interest rates. Ten-year gilt yields climb 4.4 basis points to last trade at 4.994%, Tradeweb data show. (miriam.mukuru@wsj.com)
0717 GMT - Eurozone government bond yields rise in opening trade, in line with U.S. Treasury yields, as higher oil prices reignite inflationary fears. The significant military escalation between the U.S. and Iran has driven Brent oil back above $90 per barrel, last trading 3.2% higher at $90.91. The rise in oil prices will concern policymakers at the European Central Bank ahead of Thursday's decision. However, money markets continue to suggest the ECB won't raise rates until September, LSEG data show. Yields on the 10-year German Bund, maturing in August 2036, rises 2.2 basis points to 3.145%, while the increase is slightly more on bonds of eurozone peers, according to LSEG. (emese.bartha@wsj.com)
(END) Dow Jones Newswires
July 20, 2026 05:21 ET (09:21 GMT)
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