The latest Market Talks covering FX and Fixed Income. Published exclusively on Dow Jones Newswires throughout the day.
0744 GMT - Investors raise their expectations of the Bank of England increasing interest rates in the coming months due to inflation concerns as oil prices edge above $100 per barrel in early trade Wednesday. Traders fully price in three BOE rate rises by July 2027, up from two rate hikes priced in on Tuesday, LSEG data show. (miriam.mukuru@wsj.com)
0738 GMT - The euro firms against the dollar, driven by the dollar's broader weakness and in anticipation of a 25-basis-point interest-rate hike by the European Central Bank on Thursday. "The euro remains well supported, benefiting from broad U.S. dollar weakness and expectations that the European Central Bank will raise rates on Thursday," LMAX Group's Joel Kruger says in a note. The anticipated rate hike is "leaving the currency's next direction dependent on the ECB's updated outlook and whether policymakers signal scope for further tightening as elevated energy prices reinforce inflation risks," the market strategist says. The euro rises 0.15% to a 12-day high of $1.1645, LSEG data show. (emese.bartha@wsj.com)
0731 GMT - A "stronger-for-longer" chip upcycle, driven by sustained global AI investment, is likely to further boost South Korea's GDP growth, BofA economists say in a note. They raise their forecasts for 2026 and 2027 growth to 3.6% and 2.5%, respectively, from 3.1% and 2.2% previously. "We expect the elevated 'chip surplus' to become a multi-year phenomenon, supported by sustained global AI investment, tight advanced memory supply, and long lead times for new fabrication capacity," they say. Some spillovers are already emerging, they add, including growth in manufacturing and construction investment, fiscal spending supported by rising tax revenue, and stronger consumption through wealth effects. BofA expects the Bank of Korea to deliver two further 25bp rate increases, likely in November 2026 and February 2027. (jihye.lee@wsj.com)
0726 GMT - Yields on U.K. government bonds, or gilts, climb due to inflation worries as oil prices rise further. U.S.-Iran hostilities intensified, with the U.S. striking Iranian oil tankers on Tuesday in retaliation to Iran's attacks on U.S. warships. As a result, Brent crude price rises 2.1% to $99.99 per barrel. Ten-year gilt yields rise 2.3 basis points to last trade at 5.185%, Tradeweb data show. (miriam.mukuru@wsj.com)
0721 GMT - Bitcoin rises as investors look to diversify their investments beyond the dollar ahead of the Treasury's long-dated bond buyback operation starting on Thursday. The Treasury is expected to announce the size of the buybacks on Wednesday. Markets also await U.S. inflation data due on Friday. Bitcoin rises 1.0% to last trade at $79,256. (miriam.mukuru@wsj.com)
0701 GMT - Eurozone bond yields rise, responding to higher oil prices, while investors' focus remains on the European Central Bank's interest-rate decision on Thursday. "Euro rates continue to trade largely as a function of energy rather than domestic fundamentals," Mizuho's Evelyne Gomez-Liechti says in a note. Money markets have fully priced in a 25-basis-point rate increase which would bring the deposit rate to 2.50%. Therefore, the main question for investors is what changes the ECB will make in its new GDP and inflation forecasts, and what signals it gives for the future policy path. Brent oil is up 1.7% at $99.59 per barrel. The 10-year German Bund yield rises 1.9 basis points to 3.375%, according to Tradeweb. (emese.bartha@wsj.com)
0629 GMT - The U.S. dollar falls to its lowest in nearly three weeks against a basket of currencies, weighed by a decline in Treasury yields and by continued strength in the Japanese yen. The dollar has fallen against the yen ahead of interest-rate decisions by the Bank of Japan and the Federal Reserve next week. "With a Bank of Japan hike almost fully priced at next week's meeting and our expectation that the Fed will remain on hold, there could be more downside in store for the [dollar against the yen]," Danske Bank's Filip Andersson says in a note. The DXY falls 0.2% to a low of 98.630. The dollar falls 0.6% to 153.05 yen, near Tuesday's six-month low of 152.87. (emese.bartha@wsj.com)
0608 GMT - UOB expects China's inflationary pressures to remain contained in 2027, with PPI and CPI projected to increase by 1.0% and 1.1%, respectively. While escalating tensions in the Middle East could exert upside pressure, weaker global demand could exert downward pressure on prices, says economist Ho Woei Chen in a report. Chen attributes the moderate rise in August inflation to higher oil prices. PPI remains closely linked to global oil and commodity price trends, while consumer inflation continues to be constrained by subdued consumption demand and persistent declines in food and accommodation costs, Chen says. UOB maintains its 2026 forecasts for PPI to rise 2.5% and headline CPI to rise 0.9%. (monica.gupta@wsj.com)
0604 GMT - Malaysia's 2027 budget could carry an election-friendly tone that benefits certain domestic-facing sectors, TA Securities analyst Kaladher Govindan says in a note. Likely priorities include rail infrastructure projects in Penang and Johor, flood-mitigation and water infrastructure, as well as AI, data centers and semiconductor manufacturing incentives. Cost-of-living relief is also probably on the table. Sectors including construction, property and utilities are expected to benefit the most from fiscal spending, he says. Technology and plantation sectors could also gain from targeted incentives to support long-term growth. TA Securities flags Gamuda, Tenaga Nasional, Telekom Malaysia, Nestle (Malaysia) and Sime Darby Property as among the companies that stand to gain. (yingxian.wong@wsj.com)
0558 GMT - Germany's 10-year Bund auction on Wednesday will be watched for investor appetite as 10-year Bund yields are near 15-year highs. The German Finance Agency will auction 5.5 billion euros in the August 2036 Bund. The 10-year Bund yield closed at 3.356% on Tuesday, having touched a high of 3.398% during the session, according to LSEG data. Besides Germany, Portugal will auction 1.5 billion euros to 1.75 billion euros in February 2030, October 2034 and June 2035-dated bonds. (emese.bartha@wsj.com)
0556 GMT - The supply-driven rebound in Chinese inflation is more akin to "bad inflation," Citi economists write in a note. The headline readings held up and improved, and nominal readings could stay solid as such, they say. Yet, the rebound in both CPI and PPI was almost fully driven by global factors, including energy and gold prices and the AI capex cycle, they add. Domestic demand remains sluggish amid cost-push inflation, they add. Citi remains cautious about China's inflation outlook as it hinges largely on global factors, especially energy prices. Domestic factors still call for more policy support should the energy shock subside, it adds. (jiahui.huang@wsj.com; @ivy_jiahuihuang)
0542 GMT - The two-year U.S. Treasury yield edges up, while longer-dated yields decline slightly in Asian trade, shrugging off a rise in oil prices and further military escalation between the U.S. and Iran. The U.S. destroyed five Iranian oil tankers on Tuesday in response to fresh attempts by Tehran to strike U.S. warships in the Middle East in recent days, according to U.S. Central Command. Brent oil is trading 1.1% higher at $99.04 per barrel. The two-year Treasury yield is up 0.2 basis points at 4.399%, while the 10-year yield falls 1.4 basis points to 4.789%, and the 30-year yield falls 2.5 basis points to 5.240%, according to Tradeweb.
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