Euro supported by USD weakness, dovish ECB bets and increased EUR-denominated bond issuance

Show notes

The selloff in US equities eased yesterday as pressure in the bond space declined. But the news is far from reassuring for a sustainable relief: US politicians continue to turn a blind eye to the stress building in the sovereign bond space. The House of Representatives passed Trump’s ‘beautiful’ tax bill yesterday—with just one vote. But one vote is all it takes to send the bill to the Senate, which is narrowly controlled by the same Republicans who proposed it. As such, US yields have eased slightly but the crisis is far from over. The US dollar was better bid during the Thursday session, though selling pressure returned in Asia. In contrast, Europe’s PMI data disappointed but the euro is performing well against a basket of G7 currencies. Lower energy prices and increased issuance of euro-denominated bonds are also supportive of the euro appetite.
In commodities, crude oil prices took another hit yesterday after reports emerged that OPEC+ is considering a sizable production hike in July—reportedly 411,000 barrels per day—to meet growing demand. Any escalation in Middle East tensions could trigger a spike in prices and may present interesting tactical opportunities, but they are likely to be short-lived.
Listen to find out more!