The dollar is keeping in good stead after the hot US CPI data yesterday, with EUR/USD still flirting with parity and USD/JPY racing above 138.00 on the day. The latter sees buyers establish a firmer footing for a breakout towards 140.00, as Treasury yields also bounce back a little after the retreat yesterday. 10-year yields are up 5 bps to 2.955% currently.
Equities were mostly sluggish as markets sought to price in a 100 bps rate hike by the Fed in two weeks’ time, and stock futures are looking more tepid once again going into European morning trade.
The key release yesterday mainly served to reaffirm the inflation narrative but as mentioned here, I reckon the more interesting reaction is that markets are fine with frontloading rate hikes but instead are looking at a quicker timeline in reaching terminal and then the pivot towards rate cuts next year.
That might not yet be the key focus for now as central banks are still moving in cohesion to tighten policy but it will slowly become more of a mainstay in the narrative come later this year.
0600 GMT – Germany June wholesale prices
0630 GMT – Switzerland June producer and import prices
That’s all for the session ahead. I wish you all the best of days to come and good luck with your trading! Stay safe out there.