Latest news with #AlunJohn
Yahoo
a day ago
- Business
- Yahoo
Euro bulls wince as US-EU trade deal slams the brakes on rally
By Alun John, Yoruk Bahceli and Nell Mackenzie LONDON (Reuters) -Euro bulls are facing the first big test of their conviction in the form of the European Union's U.S. trade deal, which has cast doubt on the durability of one of 2025's most popular trades. The euro, which hit a four-year high of $1.1830 earlier this month, was last at $1.1554 following its biggest two-day drop since April on Tuesday, after the EU agreed to a 15% tariff on its U.S. exports - half the rate President Donald Trump had previously threatened, but well above the roughly 1.5-2% rate prior to his return to the White House. While it inched higher on Wednesday, it was set for its first monthly drop this year, down nearly 2% in July. That's quite a reversal. The euro's 14% gain in the first half of the year was the biggest since its creation, as investors rushed to the common currency on the back of the announcement of a once-in-a-generation shift in German fiscal spending just as U.S. President Donald Trump's erratic trade policies drove flows out of U.S. assets. But both of those factors are challenged by the agreement: The European economy will still take a hit from the tariffs, while deals the U.S. has agreed with the EU and other partners have reduced fears about a major slowdown there. "The long euro trade is undoubtedly facing a reality check this week," said Bruno Schneller, managing director at Erlen Capital Management. "Monday's sharp drop in euro/dollar felt like more than just a reaction to headlines — it exposed how stretched positioning had become in one of the market's most consensus views." "What stood out wasn't just the magnitude of the move, but the lack of support on the way down." Going into the weekend, speculators were sitting on a bullish bet on euro futures worth $18.4 billion, the largest since December 2023, according to weekly data from the Commodity Futures Trading Commission. That position has been building since last December. At the start of the year speculators held one of their largest bearish positions in the euro in almost five years. RELATIVE ECONOMIC PERFORMANCE The euro also weakened sharply against other currencies on Monday, dropping 0.8% on the pound and 0.7% on the Japanese yen, again after recent gains. But the bulk of its moves, both up this year, and down this week, have been against the dollar. In trade-weighted terms, the euro is only up about 5% this year. And its gains on the U.S. currency were already slowing as initial pessimism towards the U.S. at the start of the year faded thanks to strong economic data and earnings, reinforced by the flurry of trade deals with Japan and the EU, and ongoing negotiations with China. "The (U.S.-EU) trade deal has removed a potential headwind (for the euro) but it has also removed an uncertainty for the dollar too, which leaves the euro looking a little overvalued," said Michael Metcalfe, head of macro strategy at State Street. But the end of the euro's rally on the dollar is not yet a done deal. "The vast majority of people - ourselves included - think that this is just a correction to an underlying bull trend in euro/dollar," said Chris Turner, global head of research at ING. He said the biggest test would be on the dollar side of the currency pair, as investors had now digested the impact of the trade deal on Europe. Therefore, the focus turns to this week's economic data, including U.S. jobs and inflation and European economic growth, and Wednesday's Federal Reserve meeting. The Fed is likely to keep U.S. interest rates steady, which may generate more angry rhetoric from Trump who has been pushing for big cuts. This matters for the dollar. The currency fell sharply earlier this month, including against the euro, when Trump appeared close to trying to fire Fed Chair Jerome Powell. And even setting aside the trade deal, there are reasons to be optimistic about Europe, particularly given Germany's spending plans. "We haven't changed our view of upside risks to growth in Europe," said Russel Matthews, portfolio manager at RBC BlueBay Asset Management, who has been neutral on currencies as he balanced "the long term structural bias for a weakening dollar" with "the more positive short-term technical picture." "The new narrative that the U.S. has got a better deal has tarnished, to some extent, the upside potential from developments in the last three to six months in Europe, but it hasn't necessarily changed that dynamic."
Yahoo
2 days ago
- Business
- Yahoo
Euro bulls wince as US-EU trade deal slams the brakes on rally
By Alun John, Yoruk Bahceli and Nell Mackenzie LONDON (Reuters) -Euro bulls are facing the first big test of their conviction in the form of the European Union's U.S. trade deal, which has cast doubt on the durability of one of 2025's most popular trades. The euro, which hit a four-year high of $1.1830 earlier this month, was last at $1.1554 following its biggest two-day drop since April on Tuesday, after the EU agreed to a 15% tariff on its U.S. exports - half the rate President Donald Trump had previously threatened, but well above the roughly 1.5-2% rate prior to his return to the White House. While it inched higher on Wednesday, it was set for its first monthly drop this year, down nearly 2% in July. That's quite a reversal. The euro's 14% gain in the first half of the year was the biggest since its creation, as investors rushed to the common currency on the back of the announcement of a once-in-a-generation shift in German fiscal spending just as U.S. President Donald Trump's erratic trade policies drove flows out of U.S. assets. But both of those factors are challenged by the agreement: The European economy will still take a hit from the tariffs, while deals the U.S. has agreed with the EU and other partners have reduced fears about a major slowdown there. "The long euro trade is undoubtedly facing a reality check this week," said Bruno Schneller, managing director at Erlen Capital Management. "Monday's sharp drop in euro/dollar felt like more than just a reaction to headlines — it exposed how stretched positioning had become in one of the market's most consensus views." "What stood out wasn't just the magnitude of the move, but the lack of support on the way down." Going into the weekend, speculators were sitting on a bullish bet on euro futures worth $18.4 billion, the largest since December 2023, according to weekly data from the Commodity Futures Trading Commission. That position has been building since last December. At the start of the year speculators held one of their largest bearish positions in the euro in almost five years. RELATIVE ECONOMIC PERFORMANCE The euro also weakened sharply against other currencies on Monday, dropping 0.8% on the pound and 0.7% on the Japanese yen, again after recent gains. But the bulk of its moves, both up this year, and down this week, have been against the dollar. In trade-weighted terms, the euro is only up about 5% this year. And its gains on the U.S. currency were already slowing as initial pessimism towards the U.S. at the start of the year faded thanks to strong economic data and earnings, reinforced by the flurry of trade deals with Japan and the EU, and ongoing negotiations with China. "The (U.S.-EU) trade deal has removed a potential headwind (for the euro) but it has also removed an uncertainty for the dollar too, which leaves the euro looking a little overvalued," said Michael Metcalfe, head of macro strategy at State Street. But the end of the euro's rally on the dollar is not yet a done deal. "The vast majority of people - ourselves included - think that this is just a correction to an underlying bull trend in euro/dollar," said Chris Turner, global head of research at ING. He said the biggest test would be on the dollar side of the currency pair, as investors had now digested the impact of the trade deal on Europe. Therefore, the focus turns to this week's economic data, including U.S. jobs and inflation and European economic growth, and Wednesday's Federal Reserve meeting. The Fed is likely to keep U.S. interest rates steady, which may generate more angry rhetoric from Trump who has been pushing for big cuts. This matters for the dollar. The currency fell sharply earlier this month, including against the euro, when Trump appeared close to trying to fire Fed Chair Jerome Powell. And even setting aside the trade deal, there are reasons to be optimistic about Europe, particularly given Germany's spending plans. "We haven't changed our view of upside risks to growth in Europe," said Russel Matthews, portfolio manager at RBC BlueBay Asset Management, who has been neutral on currencies as he balanced "the long term structural bias for a weakening dollar" with "the more positive short-term technical picture." "The new narrative that the U.S. has got a better deal has tarnished, to some extent, the upside potential from developments in the last three to six months in Europe, but it hasn't necessarily changed that dynamic." Connectez-vous pour accéder à votre portefeuille
Mint
3 days ago
- Business
- Mint
Dollar rises against major peers after US-EU trade pact
By Alun John and Chibuike Oguh NEW YORK/LONDON (Reuters) -The dollar rose against the euro and yen on Monday as markets were buoyed by a trade agreement between the U.S. and the EU, which brought some market certainty and averted a global trade war. U.S. President Donald Trump and European Commission President Ursula von der Leyen reached a framework trade agreement on Sunday, which provides for an import tariff of 15% on EU goods, half the rate Trump had threatened from August 1. That follows last week's U.S. agreement with Japan, while top U.S. and Chinese economic officials resumed talks in Stockholm on Monday, aiming to extend a truce by three months and keep sharply higher tariffs at bay. "If you rewind back to early April or Liberation Day, the overarching theme has been selling US assets because of uncertainties due to the new trade regime," said Eugene Epstein, head of structuring for North America at Moneycorp in New Jersey. "I would argue that what you're seeing is some resemblance of return to normalcy." The dollar rose against the safe-haven Swiss franc, up 1% at 0.80325 francs. It rose against the Japanese yen, up 0.59% at 148.535. The euro was last down 1.25% at $1.159125, set for its biggest daily loss since mid-May, reversing an initial knee-jerk rise in Asia trade as investors' focus shifted to what an easing in global trade tensions meant for the dollar overall. The dollar tumbled sharply earlier this year, particularly against the euro, as fears that dramatically higher tariffs on trade with most of its major partners would hurt the U.S. economy caused investors to consider shifting out of U.S. assets. U.S. stocks were mostly lower but still trading near record highs. The Dow Jones Industrial Average fell 0.3%, the S&P 500 dipped 0.15% and the Nasdaq Composite rose 0.14%. Normally, the gap between yields on government bonds is a major factor for currency moves, but at present, the euro is significantly higher than the gap between U.S. and euro zone yields would imply. "If you think about what we expected in the beginning of the year, no one really thought that the euro was going to be so strong. We all thought that, especially post Liberation Day, the dollar will remain strong," said Anthi Tsouvali, multi-asset strategist at UBS Wealth. "We continue to see the dollar weakening." The euro fell against the yen and sterling, having hit a one-year high on the Japanese currency and a two-year high on the pound at the start of trade. The dollar strengthened against the pound, which was 0.67% lower at $1.33545. As concerns subside about the economic fallout from punishing tariffs, investor attention is shifting to corporate earnings and central bank meetings in the United States and Japan in the next few days. Both the Fed and the Bank of Japan are expected to hold rates steady at policy meetings this week, but traders will watch subsequent comments to gauge the timing of the next moves. Investors will also be watching to see Trump's reaction to the Fed's decision. The 2-year note yield, which typically moves in step with interest rate expectations for the Federal Reserve, rose 1.5 basis points to 3.932%, from 3.917% late on Friday. Trump has been putting the Fed under heavy pressure to make significant rate cuts, and Trump appeared close to trying to fire Powell last week, but backed off with a nod to the market disruption that would likely follow. In cryptocurrencies, bitcoin fell 0.52% to $118,205.38. Ethereum declined 0.61% to $3,800.90. Descripti RIC Last U.S. Pct YTD High Low on Close Chan Pct Bid Bid Dollar 98.65 97.612 1.08 -9.06 98.68 97.4 Euro/Doll 1.158 1.1738 -1.2 11.95 $1.17 $1.1 Dollar/Ye 148.5 147.66 0.6% -5.6% 148.5 147. Euro/Yen 172.1 173.35 -0.6 5.48% 173.8 172. Dollar/Sw 0.803 0.7953 1.01 -11.4 0.803 0.79 Sterling/ 1.335 1.3445 -0.6 6.76% $1.34 $1.3 Dollar/Ca 1.373 1.3697 0.28 -4.48 1.374 1.36 Aussie/Do 0.651 0.6565 -0.7 5.31% $0.65 $0.6 Euro/Swis 0.930 0.933 -0.2 -0.89 0.935 0.93 Euro/Ster 0.867 0.8739 -0.7 4.88% 0.876 0.86 NZ 0.596 0.6016 -0.8 6.65% $0.60 0.59 Dollar/No 10.19 10.147 0.51 -10.2 10.21 10.1 Euro/Norw 11.81 11.921 -0.8 0.42% 11.93 11.8 Dollar/Sw 9.614 9.5035 1.17 -12.7 9.619 9.49 Euro/Swed 11.14 11.164 -0.2 -2.83 11.19 11.1 (Reporting by Chibuike Oguh in New York and Rocky Swift in Tokyo and Alun John in London; Additional reporting by Twesha Dikshit and Kevin Buckland; Editing by Kevin Liffey, Nick Zieminski, Rod Nickel)
Yahoo
19-06-2025
- Business
- Yahoo
Global uncertainty puts big central banks in a tight spot
By Alun John and Naomi Rovnick LONDON (Reuters) -Central banks are grappling with elevated uncertainty about economic growth and inflation, complicating decision-making, especially for those trying to calibrate policy as they near the end of their rate-cutting cycles. That's making life hard for investors too. Norway's central bank on Thursday gave markets a shock by cutting interest rates, and even the U.S. Federal Reserve is warning not to put much weight on its policy projections. 1/ SWITZERLAND The Swiss National Bank cut its benchmark rate to 0% on Thursday, in response, it said, to falling inflation, a stronger Swiss franc and economic uncertainty caused by unpredictable U.S. trade policy. The big question is whether it will cut rates into negative territory next time. The SNB is keeping all options on the table, but chairman Martin Schlegel says the hurdle to further cuts is higher now rates are at zero. 2/ CANADA The Bank of Canada held rates at 2.75% in early June and said another cut might be necessary if the economy weakened in the face of tariffs. That pause was the second in succession for the BoC, after an aggressive cutting cycle which shrank rates by 225 basis points over nine months. Markets anticipate one further 25 bps cut by year-end. 3/ SWEDEN Sweden's central bank cut its key rate to 2% from 2.25% on Wednesday and said that, with price pressures weak, it may ease further before year-end to boost sluggish growth. The Riksbank has been one of the more aggressive central banks, with 200 bps of cuts since May 2024. 4/ NEW ZEALAND Markets expect the Reserve Bank of New Zealand to hold steady on July 9 after a 25 bps rate cut to 3.25% in May to protect the China-focused economy. The RBNZ also warned that global trade uncertainties made future moves unclear. Markets see one more 25 bps cut this year, on top of the 225 bps of cuts already this cycle. 5/ EURO ZONE The ECB cut rates earlier this month, its eighth cut since mid-2024, and kept all options on the table for its next meetings. ECB President Christine Lagarde says the euro zone central bank's 2% inflation target is in reach. The question for investors is whether inflation will undershoot that target, and necessitate further easing. Markets price in one more rate cut by year-end. 6/ UNITED STATES The Federal Reserve held rates steady on Wednesday and signalled borrowing costs are still likely to fall in 2025, although Chair Jerome Powell warned against putting too much weight on that projection. "No one holds these ... rate paths with a great deal of conviction, and everyone would agree that they're all going to be data-dependent," Powell said. He added that if not for tariffs, rate cuts might be in order given recent inflation readings have been low. Markets still see roughly two 25 bps cuts by year-end. 7/ BRITAIN The sometimes surprising Bank of England met market expectations on Thursday, keeping interest rates at 4.25%. The BoE has been cutting roughly once a quarter for the past year, and markets expect it to continue at that pace, with two more cuts priced in by year end. Three of the nine rate-setters voted on Thursday for a cut however. Some investors speculate softening labour data could cause the BoE to up the pace of cuts, though others reckon it will be held back by high UK inflation. 8/ AUSTRALIA Weak growth data and fears commodities producers and miners will take a blow from a U.S.-China trade war means the Reserve Bank of Australia stands ready to deliver rapid rate cuts. The RBA cut rates by 25 bps to 3.85% in May and traders see borrowing costs dropping to near 3% by year-end. 9/ NORWAY Norway's central bank cut its policy interest rate by 25 bps to 4.25% on Thursday, its first reduction since 2020, a decision that took most analysts by surprise and weakened the currency. The Norges Bank has been the most cautious among developed market central banks on rate cuts, and governor Ida Bache said only one or two more reductions were planned this year. 10/ JAPAN The Bank of Japan, the sole central bank in hiking mode, kept rates steady on Tuesday, as expected by investors. Escalating Middle East tensions and U.S. tariffs complicate the BOJ's task of raising still-low interest rates and reducing a balance sheet that has ballooned to roughly the size of Japan's economy. On Tuesday it decided to decelerate the pace of its balance sheet drawdown next year, signalling its preference to move cautiously in removing remnants of its decade-long stimulus.
Mint
16-06-2025
- Business
- Mint
Shares nudge up, oil dips, with Mideast and central banks in focus
Oil dips after initial rise, Brent at $73.85 a barrel China retail data beat forecasts, factory output in line Asia, European shares and U.S. futures nudge up Busy central bank week ahead, eyes on Middle East Dollar steadies, gold dips (Updates after morning European trading) By Wayne Cole and Alun John SYDNEY/LONDON, June 16 (Reuters) - World shares nudged up on Monday, with oil prices steadier but holding on to most of last week's increase, as the conflict between Israel and Iran added further uncertainty to the world's economic troubles in a week packed with central bank meetings. The escalation in the Middle East came just as Group of Seven leaders were gathering in Canada, with U.S. President Donald Trump's tariffs already straining ties. Yet there was no sign of panic among investors as currency markets stayed calm and Wall Street stock futures firmed after an early dip. Brent was last off 0.5% at $73.85 a barrel,, but last week's 13% surge means its inflationary pulse, if sustained, could make the Federal Reserve more nervous about giving too many hints at its Wednesday meeting about interest rate cuts later in the year. Markets are still wagering on two easings by December, with a first move in September seen as most likely. "The key is how much flexibility the Fed thinks it has, we've been pleasantly surprised we've not yet seen in inflationary pass-through from the tariffs," said Ben Laidler, head of equity strategy at Bradesco BBI. "The situation in the Middle East is the major issue of the day. The message from the market is that it isn't too afraid, but it does turn what was already going to be a busy week into a frenetic one, and that has a lot of people on the sidelines." Data on U.S. retail sales on Tuesday will also be a hurdle, as a pullback in autos could drag the headline down even as core sales edge higher. A market holiday on Thursday means weekly jobless claims figures are out on Wednesday. For now, investors were waiting on developments and MSCI's all-country world share index gained 0.2%, to sit a touch below last week's record high. Europe's STOXX 600 rose 0.3% and S&P 500 futures rose 0.5%. Earlier in the day, Chinese blue chips added 0.24%, and Hong Kong gained 0.7% as data showed Chinese retail sales rose 6.4% in May to handily top forecasts, while industrial output was in line with expectations. In currency markets, the dollar gave back of some of last Friday's gains against European currencies - the euro was up 0.3% at $1.1582 - and held steady on the Japanese yen at 144.10. The spike in oil prices is a negative for the yen and euro at the margin as both Japan and the EU are major importers of energy, while the United States is an exporter. Currencies from oil exporters Norway and Canada both benefited, with the Norwegian crown hitting its highest since early 2023. "We should expect that economies with a positive energy trade balance should see their currencies benefiting from the shock to oil prices," noted analysts at Deutsche Bank. "It's notable the dollar is in this category, highlighting how the U.S. has moved from a net energy-importer to a net exporter in recent years." Central banks in Norway and Sweden meet this week, with the latter thought likely to trim rates. The Swiss National Bank meets on Thursday and is considered certain to cut by at least a quarter point to take rates to zero, with some chance it may go negative given the strength of the Swiss franc. The Bank of Japan holds a policy meeting on Tuesday and is widely expected to hold rates at 0.5%, while leaving open the possibility of tightening later in the year. There is also speculation it could consider slowing the rundown of its government bond holdings from next fiscal year. Government bond yields nudged higher around the world. The U.S. 10-year Treasury yield was last up 1 bp at 4.44% Germany's 10-year Bund yield was up nearly 3 bps at 2.56%. The calmer mood across markets saw some of gold's safe-haven bid reverse and it was down 0.55% at $3,413 an ounce.. (Reporting by Wayne Cole; Editing by Sam Holmes and Alex Richardson)
