The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
1246 ET - Canada's economic outlook is expected to improve after a soft start this year, but risks remain from U.S. tariffs and higher fuel prices, Fitch Ratings says. While Canada's economy was in a technical recession in 1Q, more recent data suggests a downturn will not persist, according to Fitch. Canada saw an increase in consumer spending in 1Q, led by food and financial services, Fitch says. And while a soft labor market led to consumers drawing down savings and relying more on credit cards, a rebound in employment and wages in 2Q augurs a mending labor market, Fitch adds. (stephen.nakrosis@wsj.com)
1042 ET - The Swiss franc is unlikely to weaken much further as the Federal Reserve might refrain from raising interest rates and the European Central Bank could cut rates next summer, ING analysts say in a note. More sustainable franc falls against the euro would require solid eurozone growth and a larger ECB tightening cycle which look unlikely, they say. The franc's recent decline is driven by widening rate differentials as the Swiss National Bank is expected to keep rates at 0% while rates rise elsewhere. The euro rises 0.2% to 0.9337 francs, having reached a seven-month high of 0.9350 last week, according to LSEG. ING expects it to reach 0.94 in the near term before falling to 0.92 in six months. (renae.dyer@wsj.com)
1027 ET - The Gulf's non-oil recovery is taking hold, but its sustainability depends on the Strait of Hormuz reopening for an extended period, Capital Economics' Nicolas Crittenden says in a note. The GDP-weighted Gulf whole-economy purchasing managers' index rose to 52.5 in July from 51.8 in June, according to Capital Economics. This reflected a rebound in the UAE, an easing downturn in Qatar and signs of recovery in Kuwait, while Saudi Arabia remained the strongest of the Gulf's four biggest economies. Crittenden says the initial reopening of Hormuz helped drive the pickup in activity, but whether the recovery continues will depend on whether current negotiations over reopening the waterway prove successful. (farhan.rafid@wsj.com)
1024 ET - Saudi Arabia's resilience to the closure of the Strait of Hormuz masks a worsening underlying fiscal position, says William Jackson, chief emerging markets economist at Capital Economics, in a note. Access to the Red Sea helped keep oil exports flowing, while higher oil prices offset lower production and lifted second-quarter oil revenue 22% from a year earlier, according to Capital Economics. However, Jackson says the recent windfall only masks a budget deficit running at around 7% of GDP on a four-quarter basis, compared with 2.5% at the end of 2024. He expects oil prices to fall back, pushing public debt above 50% of GDP within the next few years and leaving the government with limited room to provide fiscal stimulus if another shock hits. (farhan.rafid@wsj.com)
1022 ET - The dollar could recover in the coming weeks if the recent joint intervention by the U.S. and Japan to strengthen the yen fades, Monex Europe analysts say in a note. "Longer term, however, fundamentals continue to favor modest weakening, and as such, our year-ahead call remains little changed, projecting the DXY dollar index around 98 over a 12-month horizon." U.S. labor market conditions are somewhat weaker than some official data suggest, they say. A series of soft nonfarm payroll numbers should disabuse markets of the notion that the Federal Reserve will raise interest rates, weighing slowly but progressively on the dollar, they say. The DXY rises 0.1% to 99.765, having reached a seven-week low of 99.418 Monday. (renae.dyer@wsj.com)
1002 ET - The Czech koruna falls to its lowest in three weeks against the euro after the Czech National Bank kept interest rates at 3.75% The central bank said its previous rate increase "brought about the desired tightening of monetary conditions" and its main strategy now is to assess upcoming data and inflation risks. The decision to hold rates wasn't a surprise, Capital Economics economist William Jackson says in a note. Headline inflation remains below target and second-quarter growth wasn't as strong as expected, he says. Capital Economics expects the CNB could deliver two more rate rises early next year as underlying inflation is elevated. The euro rises 0.2% to a three-week high of 24.241 koruna. (renae.dyer@wsj.com)
0927 ET - U.S. interest rates could remain high due to growing demand for funding by corporates and the government, Federated Hermes' R.J. Gallo says in a note. Rising debt issuance by AI-linked companies and persistently high borrowing from the U.S. government suggest that interest rates could stay elevated to attract capital, he says. (miriam.mukuru@wsj.com)
0922 ET - Treasury yields rise after initial jobless claims come in at 199,000 versus the WSJ consensus of 204,000, suggesting a healthy labor market. Meanwhile, oil prices edge higher amid talks to reopen the Strait of Hormuz. A separate report from outplacement firm Challenger, Gray & Christmas finds that U.S.-based employers announced 33,429 job cuts in July, down 27% from cuts announced in June. The 10-year yield is at 4.65%, slightly higher than yesterday's close of 4.62%. The 2 year-yield is at 4.22%, also slightly higher than yesterday's close of 4.12%.(jessica.coacci@wsj.com)
0849 ET - Sterling's reaction to fiscal policy announcements under new Prime Minister Andy Burnham has been orderly so far but risks remain, Ebury's Matthew Ryan says in a note. Burnham's appointment of John Healy as treasury chief and his commitment to the fiscal rules is calming nerves, he says. A handful of modest tax breaks have been announced, but concerns remain over how these will be funded and whether increases to other taxes can be expected in the autumn budget, he says. The government has reduced business rates for pubs, clubs and live music venues while removing value added tax from electricity bills. Sterling trades flat at $1.3463. The euro falls 0.1% to 0.8573 pounds. (renae.dyer@wsj.com)
0800 ET - Euro investment-grade credit could lag U.S. equivalents in September due to heavy supply in the European market, Bank of America credit strategists say in a note. Companies issuer a larger share of the total new supply in the euro credit market than in the U.S. dollar credit market, they say. In addition, cash inflows into U.S. investment-grade funds have been stronger than into European investment-grade funds so far in 2026, the strategists say. (miriam.mukuru@wsj.com)
0757 ET - Eurozone retail sales declined in June, though it was a decent quarter for goods sales, Pantheon Macroeconomics economist Melanie Debono says in a note. Sales volumes were down 0.3% on the month, partly reversing the 0.4% rise in May. Fuel sales rose 1.5% on lower oil prices, though that was not enough to offset declines in both food and non-food, non-fuel sales. "It seems, still-high fuel prices are eating into consumers' spending outside of fuel," Debono says. Despite June's fall, sales were up 0.2% in the second quarter, only a touch below the 0.3% increase in the first quarter. Since then, consumer confidence has risen, though fuel prices also increased further, pointing to subdued retail-sales readings through the summer, she says. (edward.frankl@wsj.com)
0746 ET - A deal to reopen the Strait of Hormuz would be positive for the euro but not enough to materially alter the single currency's trajectory, Ebury's Matthew Ryan says in a note. This is partly because market positioning already reflects a fairly high degree of optimism around Iran war de-escalation, he says. The future of Iran's nuclear ambitions also remains far from resolved, which could contain risk appetite, he says. The European Central Bank could raise interest rates in September even if a peace deal is agreed as elevated energy prices aren't weighing the economy as heavily as anticipated yet remain an inflationary risk, he says. However, this is largely priced in. The euro falls 0.1% to $1.1540.
Comments