Morning Preview: Shift in rate expectations has halted, supporting GBP/USD as markets adjust views on near-term Fed and BoE cuts amid new inflation data.
Japanese yen tries to withstand the laws of gravity, but we’re likely only minutes/hours away from a push beyond USD/JPY 150 which could trigger interventions by the MoF/BoJ. Unless the BoJ profoundly changes its monetary policy stance, we believe that any interventions will eventually be in vain. Strong underlying trade dynamics are likely to remain at play today (higher real rates, stronger dollar and equity weakness).
Core bonds extended this week’s gains during European trading hours as the data drum echoed yesterday’s sound. Additionally, risk sentiment soured following dismal Chinese figures this morning. French inflation fell by 0.1% M/M in May (vs 0.3% consensus) with the Y/Y-figure come down from 6.9% to 6% (vs 6.4% expected).