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Shares firm, pound slips after BoE decision tees up August cut

Global shares neared record highs on Thursday, supported by investor confidence in the prospect of a drop in U.S. interest rates this year, while the pound eased after the Bank of England left rates unchanged in a dovish decision. In an action-packed day for central banks in Europe, the BoE kept UK rates at a 16-year high of 5.25%, but said the decision not to cut had been “finely balanced”, a sign traders took to mean an August cut could be on the table. The Swiss National Bank cut interest ...

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China central bank head says slower credit growth ‘natural’

A slowdown in China’s credit expansion is natural due to factors such as economic shifts and less lending to the property sector and local governments, Pan Gongsheng, the governor of the People’s Bank of China (PBOC), said on Wednesday. Pan’s comments come after data showed new bank lending China rebounded far less than expected in May and some key money gauges hit record lows, suggesting the world’s second-largest economy is still struggling to regain its footing despite policy support. “It is natural for growth of the financing aggregate to fall, ...

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The dollar, Treasuries, and ‘US exceptionalism’

Any week with U.S. inflation figures, Federal Reserve and Bank of Japan policy meetings and a core euro zone nation plunging into political turmoil is bound to be sending a blizzard of conflicting signals for investors, and so it proved last week. But one clear signal did emerge, a peculiarity strengthening the “U.S. exceptionalism” narrative that’s drawing capital from all over the world into U.S. assets – the breakdown of the traditional relationship between the dollar and U.S. Treasuries. Broadly speaking, the dollar and U.S. yields often rise and fall ...

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FX Daily: Central bank meetings in Europe dominate

USD: Current account data could be interesting It has been a relatively quiet week for the dollar, where Tuesday’s slightly softer-than-expected US retail sales release has not had a marked impact on rates or the dollar. Barring some major verbal intervention from the Federal Reserve, it looks as though this range-bound trading can extend into 28 June, when we see the core PCE price data for May. This should prove a mild dollar negative by supporting market expectations of a September Fed rate cut. This is only priced at a ...

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Asian shares steady, sterling treads with caution ahead of BoE meeting

Asian stocks took a breather on Thursday, hovering near their highest in two years as traders waited for more U.S. policy clues, while sterling was steady before a Bank of England meeting where rates are expected to remain unchanged. Apart from the BoE, investors will also watch for central bank decisions from Switzerland and Norway on Thursday to set the tone for a global rates outlook. MSCI’s broadest index of Asia-Pacific shares outside Japan .MIAPJ0000PUS was little changed at 572.42, just below the two-year high of 573.38 it touched on ...

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Asia week ahead: It’s not all about rate cuts

Inflation and central banks Following the revelation that the Reserve Bank of Australia (RBA) discussed rate hikes at its last meeting (and that is not a typo – we did mean hikes, not cuts), the May CPI data will probably raise the question, “well, why didn’t they?” We think that the May data will show a 0.3% month-on-month decline in the price level, mainly driven by seasonal declines in holiday prices as well as clothing. On top of this, we will also see some influence from sharply lower retail gasoline ...

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Asian bonds see biggest monthly foreign inflows in a year in May

Asian bonds attracted their largest monthly foreign inflows in a year in May, helped by a cooling inflation trend in the United States and an improving economic outlook in Asia. Overseas investors purchased about $9.5 billion worth of bonds in Indonesia, Malaysia, India, South Korea and Thailand last month, marking their largest net buying since May 2023, data from regulatory authorities and bond market associations showed. “Softening inflation numbers in the U.S. helped improve investor sentiment, particularly towards bonds,” said Khoon Goh, head of Asia research at ANZ. Data released ...

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Dollar rises and Swiss franc drops on busy central bank day

The dollar climbed on Thursday, while the Swiss franc dropped and the pound dipped as a busy day of central bank meetings kept currency traders alert. The dollar index, which tracks the currency against six peers, was last up 0.28% at 105.49 after a volatile 10 days that has seen mixed signals from the U.S. economy and European markets rocked by French political uncertainty. Helping the U.S. currency climb was a drop in the Swiss franc after the Swiss National Bank lowered interest rates to 1.25%, following on from a ...

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China’s cenbank signals it may soon start bond market trading as rally persists

China’s central bank on Wednesday signalled that it might soon start trading in the secondary bond market as yields continue to fall, reinforcing policymakers’ concerns that sharp speculative-driven moves could unwind rapidly in a blow to financial stability. The People’s Bank of China, which has pledged to add treasury bond trading to its monetary policy toolkit, has issued repeated warnings against plummeting yields in long-dated government bonds, but has failed to reverse the trend. “At present, it is particularly important to pay attention to the maturity mismatch and interest rate ...

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Hedge fund’s trades with lenders point to return of crisis-era structures

Earlier this year a hedge fund structured two trades worth $642 million, the kinds of which have not been seen since the 2008 crisis. It sold insurance to two U.S. lenders against losses on a loan portfolio, and then sold much of that risk to investors. The trades, a form of re-securitization, were done by Bayview Asset Management after it sold credit default swaps (CDS) to Huntington HBAN.O and Sofi SOFI.O late last year, according to Moody’s reports about the trades seen by Reuters and a person familiar with the ...

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G10 FX Talking: US disinflation could be drowned out by European politics

EUR/USD: Fed convergence trade faces French politics • It has been a struggle, but it is starting to look like investors are swinging behind Federal Reserve rate cuts this year. US May CPI and PPI price data are showing encouraging signals and point to another low print for the Fed’s preferred price gauge – core PCE – when it is released on 28 June. We think there is plenty of room for US short-dated yields to fall – a clear dollar negative. • EUR/USD may not be able to take ...

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FX Daily: UK inflation helps sterling ahead of Bank of England

USD: US markets closed today US data and communication from the Federal Reserve appear to be in a ‘tug-of-war’. If the Fed stayed relatively dovish in the first quarter despite the slow disinflation, last week’s FOMC and communication afterwards were relatively hawkish given the improvement in the US inflation picture and some softer activity data. On the activity side, retail sales for May were weaker than expected yesterday and a downward revision to the April print was also published. The reading is in line with our view that consumer spending ...

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Stocks boosted by Nvidia rally; dollar steady

Global stocks hit record highs on Wednesday, driven by a rally in tech shares that has made AI chipmaker Nvidia (NASDAQ:NVDA) the world’s most valuable company, while the dollar stalled as soft U.S. retail sales data suggested rates could fall this year. MSCI’s All-World index was up 0.2% at 805.13, having traded at an all-time high of 805.43. A burst higher in tech stocks on Wall Street overnight that allowed Nvidia to dethrone Microsoft (NASDAQ:MSFT) as the world’s most valuable company carried on through Asian hours, sending regional tech stocks ...

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Asia FX Talking: China to continue resisting a weaker renminbi

• USD/CNY has trended weaker over the past month, in line with our expectations. The reprieve from depreciation pressure amid a few dovish US developments proved to be short-lived. • The People’s Bank of China has held back on rate cuts so far this year to help stabilise the renminbi. However, with more global central banks easing now, and weak domestic credit and confidence data, the odds of a rate cut in the next few months are rising. • Yield spreads will likely remain the main catalyst for FX moves. ...

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Dollar struggles for direction, sterling rises after data

The dollar steadied on Wednesday as soft U.S. economic figures weighed by boosting U.S. rate-cut bets but political jitters in Europe offered some support by weakening the euro. Meanwhile sterling rose after data showed UK service inflation was stronger than expected. U.S. retail sales barely rose in May and previous month’s figures were revised down, data showed on Tuesday, suggesting that economic activity remained lacklustre in the second quarter. That pushed the U.S. currency lower, though it later regained some ground against a basket of currencies as the euro, which ...

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