• U.S. Treasury Secretary Mnuchin reiterated a deal between the U.S. and China was 90% complete ahead of the Trump-Xi meeting at the G20 summit on Saturday 29th, increasing hopes for an eventual agreement. Meanwhile, Fed Chairman warned yesterday the downside risk of the US economy but failed to reinforce the dovish guidance delivered in the last FOMC. As a result, expectations for a 50bps Fed funds rate cut in July’s FOMC waned. Powell also reminded the market that monetary policy should not overreact to any individual data point or short-term swings in sentiment.
  • On the economic front, consumer confidence in Germany from GfK is expected to decline below the consensus in July (9.8 points, consensus 10 points, previous month 10.1 points). In U.S. durable goods orders continued falling more than expected in May (-1.3%, consensus -0.3%, previous month -2.1%) while the U.S. merchandise-trade deficit widened in May to a five-month high, when the gape increased to $74.5 billion from $70.9 billion in the prior month.
  • Safe-haven bond yields oscillated, increasing slightly driven by Fed officials’ comments and hopes of a deal between Trump and Xi. Elsewhere, peripheral risk premia narrowed led by search for yield strategies in bond markets as investors’ risk appetite increased with Mnuchin statements.
  • Across FX markets, the USD strengthened against the JPY and the CHF supported by lower expectations for a 50bps Fed fund rate cut in July. In emerging markets, MXN and TRY appreciated slightly, while ARS weakened. Furthermore, gold prices reverted trimming yesterday’s six-year high gains, while crude oil prices extended sharply its gains after data showed a drop in U.S. crude stockpiles.
  • Equity markets fluctuated in a narrow range, with banking sector standing out led by less dovish stance of Fed officials.

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