Headlines:
- ECB policymakers reportedly to discuss 50 bps rate hike this week
- Odds of back-to-back 50 bps rate hikes by the ECB jump
- Euro gets a lift on report that ECB might consider 50 bps rate hike this week
- Eurozone June final CPI +8.6% vs +8.6% y/y prelim
- UK June payrolls change +31k vs +90k prior
- Investor pessimism at its weakest since 2008 - BofA
Markets:
- NZD leads, USD lags on the day
- European equities mixed; S&P 500 futures up 0.8%
- US 10-year yields up 1.8 bps to 2.978%
- Gold up 0.3% to $1,713.23
- WTI crude down 2.0% to $100.50
- Bitcoin up 2.3% to $21,989
The session started off with some dollar sluggishness but that went into overdrive on reports that the ECB may be considering a 50 bps rate hike later this week. Expectations were for the central bank to hike by 25 bps on Thursday and then 50 bps in September but that pricing is now being ramped up after the "leaks".
The euro took flight on that with EUR/USD climbing from 1.0150 to break 1.0200 and hitting a high of 1.0268 on the session. The dollar melted across the board as the selling picked up amid the euro jump. GBP/USD pulled higher to above 1.2000 while USD/JPY was weighed down from 137.90 to a low of 137.40.
US futures are showing much promise, gaining on the session and that is helping with the mood for the aussie and kiwi as well. AUD/USD built on earlier gains to move up from 0.6850 to test 0.6900 while NZD/USD moved higher from 0.6170 to 0.6230 as both currencies capitalised on the dollar's woes.
As much as the euro is looking perky as traders get hyped about a 50 bps rate hike, I want to say that it hardly really matters at this point. The fundamental outlook for the euro remains rather dire and an additional 25 bps rate hike this week won't change that.
As for equities, well best be reminded that the storm clouds are still hanging over markets. If yesterday is any lesson, it is that easy come, easy go.
