• The US is closed for Independence Day and there’s no economic data scheduled for release in Europe either. Things can’t possibly get more dull for traders and the likes. A speech by German ECB member Nagel didn’t hold much information other than the by now well-known “a July hike is a done deal, we’ll see in September”. Rates in the country rise a few bps, especially at the long end of the curve (30-y +4.9 bps) though under much lighter volumes than usual. Short maturities, including in swap yields, remain just inches away from the previous cycle/15-yr high. European equity markets hold no direction whatsoever. The EuroStoxx50 flatlines (-0.042%) after again testing but failing to clear the 2021/2022/2023 high yesterday. The euro is under marginal selling pressure against most G10 peers. EUR/USD is trending lower towards the 1.09 pivot compared to an open of 1.0915. Sterling has a remarkable run higher even as Gilts today outperform (3.4-4.9 bps lower) following a sell-off yesterday. EUR/GBP slips sub 0.86 to trade around 0.856 currently. We didn’t see a specific trigger but the EUR/GBP move lower did accelerate after losing end last week/this week’s lows. The Aussie dollar was a bit disappointed after the RBA’s status quo this morning but in the meantime reversed losses into gains. AUD/USD is trading close to 0.67 at the time of writing. We note the strong performance of cyclical/commodity currencies in general. NZD/USD extends gains into a third day, rising to 0.6195. The NOK (EUR/NOK 11.6) and to a lesser extend CAD (USD/CAD 1.321) profit from advancing oil prices. Brent oil bumps higher from $74.65 to $75.95 currently. Saudi Arabia yesterday announced it will extend its voluntary 1 mln b/d production cut into August.
• In a tribute to the US celebrating Independence day, we present an often quoted end from founding father Patrick Henry’s speech during the Second Virginia Convention in March, 1775. He sought to rally support in Virginia to oppose any British military intervention in that colony. The convention passed Henry’s resolution to form militias to defend Virginia, and in the following month, fighting broke out at Lexington and Concord up north between British troops and the colonists, marking the official start of the Revolutionary War. (source: Constitutioncenter.org)
“Gentlemen may cry, ‘Peace, Peace,’ but there is no peace. The war is actually begun! The next gale that sweeps from the north will bring to our ears the clash of resounding arms! Our brethren are already in the field! Why stand we here idle? … Is life so dear, or peace so sweet, as to be purchased at the price of chains and slavery? Forbid it, Almighty God! I know not what course others may take; but as for me, give me liberty, or give me death!”
– Patrick Henry March 23, 1775
News & Views
• Bloomberg News refers to a draft report from the EU’s executive arm which suggests that the bloc must invest an additional €700bn/year to green the economy while shutting out cheap Russian fossil fuels. That’s a significant increase from the previous (Nov 2021) estimate of €470bn annually already on top of the €578bn earmarked in the multiannual budget (2021-2027). The Strategic Foresight report will be published tomorrow. The bulk of the new investment will have to come from the private sector, while member states must also tap their own funds, according to the report.
• Czech National Bank policy maker Kubicek backed this weekend’s comments by CNB governor Michl by pointing out that Q3 rate cut bets are premature. Contrary to Michl, who floated the option of raising policy rates first if needed, Kubicek thinks that monetary policy is sufficiently restrictive. But that of course requires holding on to peak rates for longer… The Czech currency trades marginally stronger today with EUR/CZK declining from 23.75 to 23.70. The next key input for the CNB are next week’s monthly CPI readings (June) which might show single digit inflation for the first time since January 2022. The CNB meets next on August 3rd.