Cryptic Message!
Although the global markets with a biased mindset refuse to see, the reality is that the global easing cycle is certainly still a year or two away.
It’s in this context, the assertion of Poland Central bank Governor yesterday merits attention - He said that a cut might only be possible in 2026 at the earliest; he stressed that core inflation is high, and it would continue to remain at elevated levels, primarily due to prices of services linked to high wage dynamics. Read again - the Factors he cited are relevant across the regions.
The mood music in Cryptos turns bearish- bordering a panic - heavy selling pressure - Mt Gox continuing to make movements for payout - depressed euphoria will definitely impact equities in the Global day.
Today ' payroll consensus is 190k vs. 272k in May. The average gain over the past 12 months is 232k -pace of wage growth will be a bigger driver of rate expectations. Beyond the headline, its Average hourly earnings that matters - expected to rise 0.3% m/m, with y/y rate expected to fall two ticks to 3.9%.
ECB minutes make it very clear that last month's rate cut was not necessarily a start of a series of rate cuts - balance between data dependency & reputational risks has become more delicate, given the dissenting views at last - no more cuts is the simple message - however for now, politics on top of agenda - market listing Likely scenarios around Sunday's French vote.1.0852 June high to hold well.
PBoC said to be readying capacity for 'hundreds of billions' in yuan bond sales. No fixed dates of returning bonds and borrowing these bonds on credit. It’s a bit unconventional - simply put it wants to control the whole yield curve and doesn’t want any of the interest rates along the curve to go down much (If the market wants to go there with lower yield, it will sell bonds to prevent it)
Cable as expected is trading flat like a pancake -Labour to govern with significant majority for the next five years. Having pledged, during the campaign, not to raise income tax, national insurance, or VAT, it remains to be seen how proverbial books can be balanced. Elevated gilt yields reflect the fact that public debt is within touching distance of 100%, & the deficit is at 4.4%. -
In this backdrop, can't expect BOE to cut in Aug although markets think otherwise.
Cable to stay resisted at 1.2776 for 1.2679.
Japan data : May household spending -1.8% y/y (expected +0.1%)- much worse. Little more aggression in the comments from Suzuki - what we expected last Friday happening now - Japanese investors exiting OATS ahead of French vote rumoured- expect 160.77 (200 hma) to hold this dip