US Yields Stabilize After Falling To Three-Month Lows

Europe

The ECB vowed to keep its bond-buying at a "significantly higher" level through September, though there was some disagreement about what to do in August when the lack of new issuance and liquidity typically sees lower purchases. This comes as the staff revised growth and inflation projections higher. This year's GDP was raised to 4.6% (from 4.2%) and next year to 4.7% (from 4.1%). Its inflation projection was lifted to 1.9% (from 1.5%) this year and 1.5% (from 1.2%) in 2022. The 2023 forecasts (2.1% GDP and 1.4% CPI) were left unchanged. The risks were said to be broadly balanced for the first time since 2018.  

The UK reported a surge in April GDP of 2.3% after a 2.1% increase in March.  In the month, industrial output and manufacturing fell (-1.3% and -0.3%, respectively). Construction output also weakened (-2.0%).However, strength was seen in services (3.4%) and a reduced trade imbalance (-GBP935 mln from -GBP1.97 bln). The plans to re-open the economy fully in ten days look to be delayed to the end of the month.  

Biden and Putin are to meet next week. The Nordstream 2 pipeline was completed yesterday, and testing starts today. The Russian central bank is widely expected to hike rates by 50 bp later today to bring the target to 5.50%. It will be the third hike this year. The first was for 25 bp, and the April move was for 50 bp. May's inflation was reported earlier this week. The headline and core rates rose from 5.5% to 6.0%.  

The euro is trading quietly inside yesterday's range (~$1.2145-$1.2195). Two large option expirations today mark the broader range. There is a 2.2 bln euro option at $1.21 and a 1.8 bln euro option at $1.22.In the middle of the range is a nearly 2 bln euro option at $1.2150.The euro has been sold in the European morning, and the intraday momentum indicator is stretched before US dealers return to close out the week. The euro settled last week slightly above $1.2165. Sterling recovered around a cent from the lows yesterday to close near $1.4175. Today, it reached $1.4185, just shy of the week's high (it has not been above $1.4190 this week are reaching almost $1.4250 last week). It too has been sold in Europe today. Initial support is seen near $1.4140. 

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Read more by Marc on his site Marc to Market.

Disclaimer: Opinions expressed are solely of the author’s, based on current ...

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