KBC Sunset Market Commentary 20/06/2025 via Trader Talent

Daily Market Overview

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Markets

•          US President Trump’s decision to give diplomacy a chance in the Middle East conflict brought some relief to risky assets. European leaders to that end hold nuclear talks with Iran in Geneva today. Trump said he’ll decide “within the next two weeks” whether or not the US will get militarily involved. There were concerns of an immediate direct attack after the country had sent military aircrafts and warships to the region these last couple of days. “Within the next two weeks” is quite vague and it wouldn’t be the first time Trump joined a disinformation campaign (he said he didn’t knew about the Israeli opening strike on Thursday yet evacuated amongst others the Iraqi embassy hours prior to it). The wording (“within”) also keeps all options on the table (including a weekend strike?!) but it eases some of the tension in markets nonetheless. The technical picture of the likes of the EuroStoxx50 began to look pretty dire after a slide that began late last week but the index is rallying around 1.2% now. Wall Street opens with minor gains but dodged the risk-off downleg on Thursday due to Juneteenth. Core bonds lose ground with Treasuries underperforming Bunds. US yields march 1.7-4.3 bps higher in a bear steepener. But then Fed Waller upended the rise to a certain extent with some remarkably dovish comments. He played down the inflation impact coming from tariffs. Unless in case of a big shock, the Fed should look through it. Waller thinks the Fed should not wait much longer for rate cuts (July could be a candidate, he said), favouring to move pre-emptively and not wait until the labour market tanks. German rates add around 1 bp across the curve. FX markets trade muted. The US dollar is performing mixed against G10 peers and loses out amongst others against the euro. EUR/USD ekes out a slight gain to change hands around 1.152. The trade-weighted dollar index eases to 98.7. DXY clearly struggles to escape from the recent multiyear lows. Sterling quickly overcame early morning weakness triggered by awful retail sales. Headline volumes dropped by 2.7% m/m, wiping out all of gains made YtD through April. The gauge excluding auto fuel was equally bad (-2.8% m/m) and suggests the consumer, representing around two-thirds of the British economy, is letting down. We’ll need to see some follow-up readings first before drawing any conclusions though. That appeared sterling’s take as well with EUR/GBP now actually down for the day (0.852). The  Japanese yen trades stoic even after this morning’s inflation numbers came well above the 2% central bank target and suggest continued growing price pressures, including in the services economy. USD/JPY fills bids around 145.6.

•          As this week is coming to an end, let’s take a look at the next one. The eco calendar is well filled. May PMI business confidence are on tap on Monday. The US Conference Board consumer confidence and the Hungarian central bank meeting are due on Tuesday while the Czechs meet the day after. Fed chair Powell also on Tuesday delivers its semi-annual testimony before Congress. His British colleague Bailey is doing a similar thing the same day (before the House of Lords). June 26-27 features an EU leader summit which centers, amongst others, around the international role of the euro. US PCE inflation and the first EMU member states CPI prints are scheduled for release on Friday. We’re also on the look out for the trade and fiscal topic to return as Trump’s July 9 tariff pause deadline and the July 4 target date for the Big Beautiful Bill is drawing near.
 

News & Views

•           The National Bank of Belgium’s monthly survey showed that consumer confidence in the country improved further to -7 to -4. In this respect the index returned back to the level last seen in February of this year. More positive expectations concerning the economic situation in Belgium and waning fears of unemployment are boosting confidence. The subindex assessing confidence on the economic situation in Belgium improved to -24 from -30 in May, to be compared to a cycle low of -44 in April. Concerns about unemployment eased to 6 from 13. On a personal level, households’ expectations regarding their savings (19) and their own financial situation (-3) remained unchanged compared to last month.
 

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