The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1105 GMT - The European Central Bank is likely to hold interest rates at this week's meeting after a hike in June but retain a hawkish tone, Nuveen's Laura Cooper says in a note. The ECB will keep its options open for further tightening should renewed tensions drive energy prices higher, the global investment strategist says. Inflation has been softer than feared and PMI pricing components show little sign of reacceleration, while producer price data confirms that upstream cost pressures are fading, she says. "That makes the case for a pause this month." The complication is renewed disruption to commodity flows, which risks reigniting energy price pressure just as the ECB was gaining confidence in the disinflation path, she says. (emese.bartha@wsj.com)
1100 GMT - The outlook for European government bonds remains constructive, Payden Global SIM SpA's Antonella Manganelli says in a note. Although the geopolitical tensions in the Middle East have brought volatility back to energy markets, the rise in oil prices appears contained for now and does not alter the scenario of a gradual normalization of inflation in the euro area, the CEO says. This backdrop continues to favor intermediate maturities particularly--those between five and ten years--which offer the best balance between yield and risk, she says. "One note of caution remains, however: the greater financing needs linked to investment in defence and the energy transition could limit any further decline in yields, especially on longer maturities." (emese.bartha@wsj.com)
1005 GMT - Sterling could weaken against the euro given U.K. fiscal risks and the prospect of the Bank of England refraining from raising interest rates, ING's Francesco Pesole says in a note. Euro versus sterling looks cheap according to ING's short-term value metrics, he says. The lack of any fiscal/political risk premium, alongside overly aggressive pricing for BOE rate rises, argues for a higher euro versus sterling, he says. Andy Burnham became the U.K.'s prime minister Monday. The newly formed government plans to remove VAT from electricity bills with further details on cost of living measures expected later. The euro rises 0.1% to 0.8505 pounds, having reached a 13-month low of 0.8453 last Wednesday, LSEG data show. (renae.dyer@wsj.com)
1002 GMT - U.S. Treasury yields and the dollar trade steady amid hopes that diplomatic talks between the U.S. and Iran could be revived and a ceasefire put in place, Kudo.com's Konstantinos Chrysikos says in a note. "Progress on that front would limit the demand for safe-haven assets, weighing on the greenback," he says. However, falls in the dollar and Treasury yields could remain limited after Yemen's Iran-aligned Houthi movement declared a naval blockade on Saudi Arabia. Meanwhile, military operations continue in the region and disruptions to maritime traffic persist, Chrysikos says. The 10-year U.S. Treasury yield is steady at 4.598%, according to Tradeweb. The DXY dollar index is stable at 100.926. (emese.bartha@wsj.com)
0957 GMT - The spread between 10-year Italian and German government bonds--currently 82 basis points, according to LSEG--could tighten as Italian yields could come down during the summer season when there is less issuance, Generali Asset Management's Mauro Valle says in a note. The spread is at an appealing level to trade, the head of fixed income says. "In absolute terms the 10-year BTP is close to the 4.0% level and the summer seasonality is usually supportive [due to lower issuance]." However, Italian bonds face risks from geopolitical events and energy prices, he says. (emese.bartha@wsj.com)
0943 GMT - Most central banks in Asia are likely to remain on hold with a hawkish stance following the re-escalation of U.S.-Iran tensions, says Julius Baer's Magdalene Teo in a note. The region's growth is expected to moderate this year as supply-chain disruptions and the global energy shock continue to affect consumers and traditional industries. Teo expects central banks in Japan, South Korea, Indonesia and the Philippines to be hawkish, while the PBOC is likely to keep an easing bias, partly due to weak domestic demand. "That said, if U.S. data continues to soften, a weaker [dollar] could provide the central banks here some room to support growth," the fixed-income analyst for Asia says. (amanda.lee@wsj.com)
0931 GMT - The latest U.K. jobs data show a still-fragile labor market, albeit with tentative signs of stabilization, Deutsche Bank's Sanjay Raja says. The jobless rate stayed at a slightly elevated rate of 4.9% and payroll data dipped again. However, vacancy data showed an increase in job adverts for the first time since December, while the number of redundancies dropped to 108,000 in the three months through May, its lowest reading since July last year. The Bank of England's surveys have suggested that the jobs market could be turning a corner with employers intending to keep payrolls broadly steady for now, Raja says. The slowdown in wage growth will also comfort the BOE in its fight to get inflation back to target. (edward.frankl@wsj.com)
0926 GMT - John Healy's appointment as treasury chief is a positive development for U.K. manufacturers, Emily Sawicz at RSM UK says in a note. Alongside Wes Streeting as defense secretary, the move signals a focus on delivering defense investment, placing stronger emphasis on supporting U.K.-based producers and supply chains, she says. "This could provide a meaningful boost for domestic industry, helping to strengthen manufacturing capacity, support skilled jobs and encourage investment and innovation across the wider industrial base." Still, increased spending will need to be combined with investment in technological advancement, production capacity and workforce development, Sawicz adds. With the industry facing a lack of skills availability and significant order backlogs, a stable pipeline of defense projects will be needed to boost business confidence, she says. (don.forbes@wsj.com)
0923 GMT - Sterling turns lower against the euro as investors digest initial measures under new Prime Minister Andy Burnham. The newly formed government said it will remove value added tax on electricity bills, which will help lower inflation and be funded by scrapping a digital ID scheme. The surprise appointment of former defense minister John Healey as treasury chief also fuels speculation that defense spending will be increased, MUFG Bank's Lee Hardman says in a note. Healey resigned from former Prime Minister Keir Starmer's government on concerns over inadequate defense spending. Burnham also said Monday he would use flexibility within the fiscal rules. The euro rises 0.1% to 0.8505 pounds. It hit a 13-month low of 0.8453 pounds last week, LSEG data show. (renae.dyer@wsj.com)
0912 GMT - The U.K. jobs market looks stable, but a divergence in performance between the public and private sectors remains a concern, James Smith at ING says in a note. Public sector payroll numbers have risen 0.7% so far in 2026, but the private sector has declined 0.5%, he says. Meanwhile annual wage growth is above 5% in the former, and below 3% in the private sector. "That weakness is particularly concentrated in consumer services--hospitality, retail and entertainment," Smith says. Softness in the private sector jobs markets is likely due to last year's National Insurance and minimum wage hikes, as well as overstaffing, he says. "This is a key factor in our call for the Bank of England to keep rates on hold this year." (don.forbes@wsj.com)
0903 GMT - New Prime Minister Andy Burnham's choice for Treasury chief might reassure markets at the margin, Pantheon Macroeconomics chief U.K. economist Rob Wood says in a note. John Healey is seen as more market-friendly than most alternatives, though his only known fiscal view is he wants markedly higher defense spending, he says. Wood notes that U.K. government bonds lost ground late Monday after Burnham talked about using flexibility in fiscal rules. Burnham reportedly wants to take more control of fiscal policy, starting with a VAT cut to energy bills that should lower inflation by about 0.1 percentage points for a year. But more tax-funded spending can be expected, with the government boosting borrowing as much as allowed by fiscal rules, Wood adds. (edward.frankl@wsj.com)
0845 GMT - The Canadian dollar's limited reaction to President Trump imposing new tariffs on Canada appears justified for now, Commerzbank's Volkmar Baur says in a note. "Given the multitude of threats Trump has made in recent months--not all of which have been carried out--the muted reaction seems reasonable for now." However, trade tensions will dominate news surrounding the Canadian dollar in coming weeks and the 50% tariff on a wide range of goods is likely to weigh on Canadian exports, he says. The U.S. dollar trades flat at 1.4065 Canadian dollars, having reached a one-week high of 1.4085 overnight, according to LSEG. The Canadian dollar's modest falls earlier could also reflect lower-than-expected June inflation data, he says. (renae.dyer@wsj.com)
(END) Dow Jones Newswires
July 21, 2026 07:06 ET (11:06 GMT)
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