The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1028 GMT - U.S. Treasury yields rise, particularly short-dated yields, as investors continue to digest Wednesday's Federal Reserve decision to hold rates steady and Chairman Kevin Warsh's communication. "Yields remain at elevated levels and could continue to react to the volatility in energy markets and monetary policy expectations as the lack of Fed guidance increases uncertainty," DHF Capital S.A's Bas Kooijman says in a note. The dollar rises meanwhile, stabilizing after falls following the Fed's interest-rate decision and suspected Japanese currency intervention which boosted the yen. The DXY index rises 0.3% to 100.197. The two-year Treasury yield rises 2.7 basis points to 4.256% while the 10-year yield is up 0.8 basis points at 4.669%, according to Tradeweb. (emese.bartha@wsj.com)
1018 GMT - The timing of Thursday's suspected Japanese yen interventions to shore up the currency were similar to previous interventions, MUFG Bank analysts say in a note. The likely interventions were carried out at month-end, falling into the period in which confirmation won't be published until the end of August, they say. Moreover, it took place during New York trading, given the "clear impression that this had the full support of the U.S. administration." Treasury Secretary Scott Bessent told Fox News Thursday that the yen seemed "very undervalued" while media reports said the New York Federal Reserve performed a dollar-yen rate check. The dollar rises 0.3% to 159.98 yen after reaching an 11-week low of 157.96 Thursday, according to LSEG. (renae.dyer@wsj.com)
1007 GMT - The euro shows little reaction, remaining weaker against the dollar, even after data showed an unexpected acceleration in eurozone inflation in July. Headline annual inflation rose to 2.9% in July from 2.8% in June while core inflation rose to 2.5% from 2.4%. Economists in a WSJ survey expected headline and core inflation to remain at June's levels. The data support the case for the European Central Bank to raise interest rates further this year. However, this was already largely priced in ahead of the data, limiting the euro's reaction. The euro falls 0.2% to $1.1506, little changed from levels before the data. (renae.dyer@wsj.com)
0948 GMT - The cost of euro credit default protection falls as concerns about the Middle East conflict ease and sentiment improves. The U.S. said it had reached a deal with militant groups in the Middle East for the complete disarmament of Hamas and other armed groups in Gaza. The announcement reduces concerns about a broader conflict in the Middle East. Oil prices also fall amid reports of a modest improvement in tanker traffic through the Strait of Hormuz while equities rise as tech stocks recover. The iTraxx Europe Crossover index of euro high-yield credit default swaps falls 5 basis points to 258bps, S&P Global Market Intelligence data show. (miriam.mukuru@wsj.com)
0932 GMT - Taiwan's growth is likely to moderate in 2H despite export orders continuing to show strong momentum, ING says. It adds while there are no signs of a significant slowdown, a hot inflation print could prompt the central bank to deliver a 12.5bp hike in either September or December, but won't significantly drag growth, ING's Lynn Song says. The recent tech sell-off in equity markets are causing jitters and it is unclear how long the tech capital expenditure cycle will continue. There are also increasingly challenging base effects that could start cutting into 4Q growth, Song says. Looking ahead, Taiwan's economic outlook remains firmly tied to the artificial-intelligence boom, given its central role in the semiconductor supply chain. This prompts ING to raise its 2026 GDP growth forecast for Taiwan to 11.1% from 10.1% previously.(amanda.lee@wsj.com)
0927 GMT - The Japanese yen's losses against the dollar could remain contained for now due to the prospect of further currency interventions, MUFG Bank analysts say in a note. Following suspected interventions Thursday, Japan's Ministry of Finance often acts on a second occasion so markets will likely show some reluctance to buy the dollar versus the yen, they say. However, there is a risk that dollar-yen buyers will soon return. There was a "lack of conviction" from the Bank of Japan about the potential need to step up the pace of monetary tightening at Friday's meeting when it left rates steady, the analysts say. The dollar rises 0.3% to 160.03 yen after reaching an 11-week low of 157.96 Thursday, LSEG data show. (renae.dyer@wsj.com)
0911 GMT - The Bank of Japan could potentially pull forward its next interest-rate hike into September or October, rather than the six-month interval many had expected, says Masahiko Loo of State Street Investment Management. The strategist expects the BOJ to gradually move toward a 1.5%-1.75% terminal rate. At Friday's news conference, BOJ Gov. Kazuo Ueda voiced heightened concerns about potential inflation overshooting. He said such a risk is too big to ignore. "If we judge that financial conditions are too accommodative, it is entirely possible that we could accelerate the pace of interest rate hikes," Ueda said.(megumi.fujikawa@wsj.com)
0903 GMT - The Bank of England could announce plans in September to slow the process of unwinding its gilt holdings, known as quantitative tightening, from 70 billion pounds to 50 billion pounds, J.P. Morgan's Allan Monks says in a note. At this week's policy meeting, the BOE increased its estimate of the impact of the QT program on the gilt market to a cumulative impact of 20 to 30 basis points to date, versus last year's estimate of 15 to 25 basis points. "This may be a hint that the monetary policy committee will be more inclined to slow the QT pace as redemptions step down in the year ahead," Monks says. (miriam.mukuru@wsj.com)
0901 GMT - Taiwan's economy is still strong, despite growth moderating in 2Q, says Capital Economics senior Asia economist Gareth Leather in a note. The island's 2Q GDP growth was 12.92% on year, slowing from 1Q's 14.55% expansion. Exports growth should remain very resilient amid robust demand for semiconductors. There are also signs that solid export growth is continuing to filter through the rest of the economy, Leather says. Private consumption grew in 2Q, supported by stronger wage growth and government measures to cushion the impact of higher energy prices. Investment growth should also be firm, given major Taiwanese semiconductor companies' ambitious investment plans, he adds. (amanda.lee@wsj.com)
0900 GMT - There's no urgent need for a U.K. interest-rate rise at the moment, though the Bank of England could increase rates in November, J.P. Morgan's Allan Monks says in a note. If U.K. annual inflation overshoots the BOE's forecasts this could result in a rate increase, Monks says. The BOE forecasts inflation at 3.2% in the fourth quarter. Significantly stronger-than-expected U.K. growth could also cause the BOE to raise rates in November, he says. Markets price in an 82% chance of a November rate hike by the BOE, LSEG data show. (miriam.mukuru@wsj.com)
0834 GMT - Sterling looks vulnerable as the Bank of England's policy decision Thursday confirmed it is in no rush to raise interest rates, Commerzbank's Michael Pfister says in a note. The BOE voted 6-3 to leave rates unchanged, with three policymakers preferring to lift rates. However, BOE Governor Andrew Bailey pushed back against speculation the BOE is moving closer to raising rates and some policymakers said rate cuts could come back into focus if the Iran war ends. Markets trimmed rate-rise bets but there is scope for further adjustments, Pfister says. "Anyone banking on monetary policy to support the pound is likely to be disappointed." Sterling falls 0.2% to $1.3438. The euro rises 0.05% to 0.8562 pounds. (renae.dyer@wsj.com)
0806 GMT - Bank of Japan Gov. Kazuo Ueda's hawkish comments on Friday prompts Capital Economics to bring forward its forecast for the next rate hike to September from October. The central bank maintained its policy rate at 1.0%. Before the latest meeting, markets were pricing in an 80% chance of a rate hike by October, says head of Asia-Pacific Marcel Thieliant in a note. "But Ueda noted that the Bank must scrutinize upside price risks more than ever," he adds. CE maintains its long-held view that BOJ's policy rate will reach an above-consensus 2% by end-2027.
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