KBC Sunrise Market Commentary 30/06/2025 via Trader Talent

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Market Commentary

Markets

•          US yields looked for and found a bottom after a two-week slide in which the front end outperformed. Net daily changes on Friday amounted to 2.9-4.5 bps across the curve. European rates added up to 2.5 bps at the front amidst markets slowly coming to terms with the end of the ECB’s easing cycle. The risk-on vibes, initiated by US Commerce Secretary Lutnick, supported the move. The July 9 tariff pause deadline approaches fast but the US says several deals are in the making. According to US Treasury Secretary Bessent that could be the case for 10 or 12 of the important 18 trade relationships. He added that the remaining 20 others or so may be wrapped up by Labor Day (Sep 1). Noises coming from the EU-US trade talks are encouraging with both sides confident about reaching a deal by the July deadline. And Canada ditched its digital services tax in a bid to revive talks (see below). Trump’s massive tax bill, meanwhile, was being massaged through the Senate. This is particularly important for the long end of the curve. The Senate’s version of the BBB cleared the initial vote by 51-49 over the weekend. It paves the way for a marathon voting session today on dozens of amendments, to be followed by a final vote. That could come as soon as late Monday or early Tuesday. It then returns to the House. If they vote it down, both chambers need to work on a compromise that will almost certainly delay the July 4 deadline imposed by president Trump. If the House greenlights the Senate version, then we’ll be looking for a roughly $3.3tn increase to the US deficit in the 2025-2034 period, the Congressional Budget Office estimated on Friday. More than half, $2tn, would already come in the next five years. Such a dire budgetary prospects don’t bode well for the dollar. We remain structurally cautious on sterling for a similar reason. The greenback continues to decline, be it gradually. The trade-weighted index confirmed a break towards new multiyear lows and is currently floating just north of 97. EUR/USD is closing in on the 1.18 big figure ever since it moved beyond final resistance (ahead of the 2021 high) at 1.1685/1.1704. The pair is trending higher nicely along an upward sloping channel.

•          This week’s economic calendar offers an important update on the US economy with the ISM business confidence indicators, JOLTS job openings and the June payrolls report. US markets are particularly vulnerable for downside surprises that could spur more speculation on Fed cuts. Portugal’s Sintra is in the center of attention with the ECB’s yearly Forum on Central Banking taking place. Kick-off is today. The central bank also releases its conclusions of its strategic review while Germany is scheduled to release inflation numbers ahead of the European print tomorrow.
 

News & Views

•          News agency Reuters this weekend reported that OPEC+ will decide at its July 6 meeting on another 411k b/day production boost for the month of August. They implemented similar-sized output increases in May, June and July. The rumours – according to four OPEC+ delegates – triggered a test of last week’s post cease-fire low in oil prices (Brent crude $67/b). Both easing of geopolitical risks and OPEC’s course boost supply expectations at a time when global demand growth is strained by uncertainty over the impact of trade policies.

•          Canada pulled a 3% tax on revenue for the biggest technology companies just hours before it came into effect. The digital services tax prompted US President Trump to terminate ongoing trade talks between both nations. Canadian PM Carney said that scrapping the tax will support a resumption of negotiations towards a July 21 deadline agreed at this month’s G7-meeting. The Canadian Loonie was in for a wild ride with USD/CAD gaining a big figure on Friday after the Trump comments, only fall all the way back to 1.3665 this morning following the Canadian U-turn.
 

Graphs

German 10-y yield
 
Confidence that inflation is returning to 2% allowed the ECB to reduce to policy rate to 2%, reaching neutral territory. The ECB moved to an outright data-dependent approach, but overall uncertainty remains elevated. German bunds ever more gain safe haven status as uncertainty with respect to US assets intensifies. This slowed the rise in LT yields with market focus fluctuating between tariff wars to public finances.
 

US 10y yield

The Fed’s priority stays on inflation until the labour market is visibly weakening. It suggests steady policy rates at least until after summer . LT bond yields’ trend higher on President Trump’s big, beautiful, deficit-increasing bill recently stalled again on renewed growth concerns. This market flip-flopping between the fiscal and economic theme is here to stay.
 

Calendar & table

Contacts