📢 Macro-News round-up
📈 Market News
🔥 French bond spreads remain overheated. Macron, to calm things down, has said that if the extremist parties win, there will be a civil war in France. According to the polls, Le Pen’s party, considered as “extreme” right, is increasingly reasserting itself as the winner. Markets seem to fear more fiscal indiscipline if a left-wing coalition emerges victorious. France’s public deficit is -5.5%. According to the Maastricht Treaties, on which the economic convergence of European nations is based, the maximum tolerable deficit in a member state is 3%.
📉 Related markets: European equities have been showing weakness since the European elections. Indices such as the DAX 40 or the CAC 40 are showing bearish patterns, such as the loss of the 200 averages on intraday charts. EURUSD is still trying to regain the 1.0750 levels. The euro continues to lose ground against a robust dollar.
💹 Markets continue to lack confidence in the central Bank of Japan. Despite the announcements detailed below, USDJPY is reaching critical levels. The BOJ is signalling that its July QT plan could be larger than markets expect and could include an interest rate hike to counter further yen declines. The BOJ will announce in July a detailed plan to cut bond purchases and reduce its large balance sheet. Ideas include cutting purchases to a narrow range each month and an “escape clause” to curb tapering if markets become volatile. The reduction will be across all maturities to avoid distortions in the yield curve.
📊 Related markets: The USDJPYP is at 30+ year highs, a corrective move could be aggressive and imminent.
📅 This Friday we will have the US PCE inflation data, the most important index for measuring inflation according to the Fed.
🌐 Geopolitics:
🗺️ Two Trump advisers offer a plan in which aid to Ukraine would be conditional on it sitting down to negotiate a peace deal with Russia. Hardliners in the Republican Party would be unwilling to continue sending money to Ukraine.
🇺🇸 Donald Trump and Nigel Farage, both government candidates in their respective countries, have said in various media interviews that attempts to bring Ukraine into NATO are the reasons for the current war. In the case of Britain’s Farage, he claims that NATO’s eastward expansionism is the main cause of conflict with Russia.
🛢️ Related markets: The oil market is in the eye of the storm, with Russia as one of the world’s main fuel suppliers. Gas futures in Europe continue to rise.
In a humorous tone, another news today is the Donald Trump request. He has asked, through his social networks, that Joe Biden be drug tested before the debate with him, which will take place this weekend. Of course, he has said that he will also submit to the drug test. This would be in line with growing speculation that Biden’s cognitive health may be deteriorating.
