0950 GMT – U.S. Treasury yields rise with Federal Reserve rate-hike expectations fueling the moves, while the dollar edges lower ahead of PCE data, the Fed’s preferred inflation gauge. “Inflation concerns, coupled with a resilient labour market and solid economic activity, reinforced expectations that the Federal Reserve could maintain a hawkish stance,” Empire FX’s Crispus Nyaga says in a note. “A stronger-than-expected reading could reinforce expectations of a September rate hike and extend the recent rise in Treasury yields, while softer inflation could prompt traders to reassess the outlook for monetary policy and limit the dollar’s gains,” the analyst says. The 10-year Treasury yield is up 1.2 basis point at 4.411%, according to Tradeweb. The DXY dollar index falls 0.1% to 101.498 after reaching a 13-month high of 101.800 Wednesday. ([email protected])
0948 GMT – AI is front and center of China’s economic recovery, Citi analysts say in a research note. The AI supercycle is further powering the economy from exports to production. However, AI-driven job displacement is weighing on consumer confidence, they note. “The DeepSeek moment in early 2025 helped materially accelerate the AI-centric new economy, which has since broadened its macro footprint through intensifying AI deployment,” the Citi analysts say. Citi keeps its 2026 growth forecast for China at 4.7%, with 2Q likely the low point for the year. ([email protected])
0919 GMT – The ECB isn’t expected to hike interest rates again as falling energy prices rein in inflation, Oliver Rakau at Oxford Economics says in a note. Still, the central bank could keep rates elevated for longer than previously expected amid upside risks to medium-term inflation, he adds. “The ECB may opt for a higher-for-longer scenario, where it reverts the June hike much later than our call for March 2027, or not at all.” While a relatively weak economy limits the risks of second-round effects from the energy shock, upward pressure could still come from German fiscal stimulus and a weaker euro, Rakau says. And another small hike could still be an option should conflict in the Middle East flare up again, he adds. ([email protected])
0922 GMT – The cost of insuring euro-denominated credit against default declines as optimism returns after U.S. tech company Micron Technology posted impressive earnings results. The positive earnings eased concerns about AI-related investments and boosted appetite for risk assets. The iTraxx Europe Crossover index of euro high-yield credit default swaps falls 1 basis point to 247bps, S&P Global Market Intelligence data show. ([email protected])
0905 GMT – The share of non-U.K. companies issuing debt in the sterling credit market has decreased since the U.K. voted to leave the European Union a decade ago, CreditSights analysts say in a note. The overall proportion of non-U.K. credit issuers in the sterling market has declined to around 40% currently from 60% at the peak, the analysts say. “U.K. corporate issuers have picked up the slack for the lack of foreign deal flow.” ([email protected])
0905 GMT – The Japanese yen is unlikely to recover until next year when the Bank of Japan slows quantitative tightening, RBC Capital Markets analyst Abbas Keshvani says in a note. The slower QT planned from April 2027 should stabilize Japanese government bonds, he says. Japanese bonds offer higher yields than their foreign-exchange-hedged alternatives, he says. “So if the BOJ’s slower QT results in bond yields stabilizing, assuaging concerns that investors will incur losses, local investors will likely be motivated to start rotating to yen assets.” RBC expects the dollar to fall to 154 yen by the end of 2027. It last trades flat at 161.82, having reached its highest level since December 1986 on Monday at 161.92, according to LSEG data. ([email protected])
0854 GMT – U.K. companies issue more debt in the U.S. and eurozone credit markets than in the local sterling market, CreditSights analysts say in a note. This trend has accelerated since the U.K. voted to leave the EU a decade ago, the analysts say. Following the Brexit vote, U.K. companies “turned toward euro and U.S. dollar markets as their main sources of debt financing”, the analysts say. As a result the sterling credit market has expanded at a significantly slower pace compared to the growth in the global credit market, on a net basis, CreditSights analysts say. ([email protected])
0844 GMT – Over the past 30 years, every time that the U.S. two-year Treasury yield crossed above the fed funds rate, the Federal Reserve’s next move was a hike, Aptus Capital Advisors’ John Luke Tyner says in a note. “We are currently in that situation,” the portfolio manager and head of fixed income says. Over the last few months, expectations for Fed rate cuts have been slashed, and transitioned to expectations for rate hikes on the back of a strong economy and high inflation, mostly related to higher energy prices, he says. The fed funds rate is 3.50%-3.75%. The two-year Treasury yield last trades at 4.147%, up 1 basis point, according to Tradeweb. ([email protected])
0843 GMT – The U.S. dollar should continue to trade at stronger levels on the prospect of the Federal Reserve raising interest rates, MUFG Bank analysts say in a note. “If the Fed is serious about restoring price stability, a significant tightening of monetary policy will be required so it makes sense that more [rate] hikes have been priced in recently encouraging a stronger dollar.” The dollar’s strength should persist unless upcoming data show slowing inflation or the Fed signals it won’t follow through with rate rises, the analysts say. PCE data, the Fed’s preferred inflation measure, will be released at 1230 GMT. The DXY dollar index falls 0.2% to 101.451, easing slightly from the 13-month high of 101.800 reached Wednesday. ([email protected])
0831 GMT – Consumer inflation, excluding volatile fresh food prices, in the Tokyo metropolitan area likely rose 1.6% in June from a year earlier, according to a poll of economists by data provider Quick. That would be higher than May’s 1.3% increase but below the Bank of Japan’s 2% target. Still, higher oil costs are expected to feed through to consumer prices with some time lag, economists say. BOJ Deputy Gov. Ryozo Himino recently said that the impact of surging crude prices will likely start appearing in consumer prices more clearly around summer. Tokyo’s consumer price data is due Friday. ([email protected])
0818 GMT – Singapore’s core inflation is likely to continue accelerating and peak at over 3% on year in early 2027 before easing, ANZ Research’s Khoon Goh says in a report. Inflation remains moderate despite higher oil prices. There has also been no signs of a broader spillover into other prices yet, despite rising petrol and other energy-related costs. However, inflation will likely pick up in the coming months, as there is a lag effect from rising oil prices. ANZ expects Singapore’s core inflation to average 2.1% for both 2026 and 2027. ([email protected])
0804 GMT – Sterling rises as risk sentiment improves, oil prices fall and U.K. political concerns ease. Risk appetite recovers as fears over an artificial-intelligence bubble fade after chip giant Micron Technology posted record quarterly earnings. Oil prices reach the lowest level since before the Iran war as traffic through the Strait of Hormuz gradually resumes. Political concerns wane on expectations for a swift leadership transition after Prime Minister Keir Starmer announced his resignation on Monday. Andy Burnham, the front-runner to replace Starmer, has said he is committed to the fiscal rules. Sterling rises 0.1% to $1.3178 after hitting a seven-month low of $1.3137 Wednesday, according to LSEG. The euro falls 0.1% to 0.8614 pounds after reaching a 10-month low of 0.8601 Wednesday. ([email protected])