Rates

Global core bonds edged higher yesterday with US Treasuries outperforming German Bunds. Risk sentiment was fragile at the start of the day with EU investors still digesting EU election results and the renewed EU-Italy fiscal tensions. The ongoing trade spat between the US and China continues to weigh on sentiment as well, as hopes of an agreement fade by the day. Better-thanexpected confidence indicators in both the EU and the US provided no solace. Investors continue to flee to safe havens, further supporting core bonds. The German yield curve was mixed with yield changes varying between -1.7 bps (10-yr) to +0.5 bps (2-yr). The US yield curve edged lower with losses up to -5.4 bps (10-yr). Peripheral spreads remained rather stable, with Greece (+5 bps) underperforming. The ongoing rally in US Treasuries pushed the 10yr/3m spread to 10 bps, surpassing this year's low to levels not seen since the start of the financial crisis. Historically, an inverted curve has been a signal of a looming recession.

Asian equity markets are largely trading with losses overnight as the US-Sino trade tensions heat up again. Beijing yesterday announced it is gearing up to use its dominance of rare earths as a countermeasure in the trade spat with Washington, while the US Treasury Department refrained from labelling China a currency manipulator in its semi-annual foreign-exchange report. It did, however, change the criteria used to evaluate countries, thereby adding Ireland, Italy, Vietnam, Singapore and Malaysia to its watchlist. China, Japan, South Korea and Germany were already on that shortlist. The ongoing market uncertainties keep investors in full risk-off, further supporting core bonds at the start of the day.

Today's eco calendar only contains secondary data in both the US (Richmond Fed manufacturing index) and the EMU. Sweden publishes its first-quarter GDP result, while the Bank of Canada holds its May policy meeting. ECB governors Mersch and Rehn speak today. The international trade story continues to dominate financial markets, with investors eyeing key eco data next week.

Long term view: markets concluded that the ECB missed out on this cycle. They start pondering the possibility of an additional deposit rate cut. The downtrend in the German 10-yr remains in place so far and is moving towards the 2016 alltime low (-0.205%). Regarding the Fed policy, markets are now largely discounting a Fed rate cut by December. The US 10-yr yield fell below the cycle low (2.34%) and successfully tested the 50%-retracement (2.28%). A confirmed break would bring the 62%-retracement level (2.06%) on the radar.

 

Download The Full Sunrise Market Commentary

 

This non-exhaustive information is based on short-term forecasts for expected developments on the financial markets. KBC Bank cannot guarantee that these forecasts will materialize and cannot be held liable in any way for direct or consequential loss arising from any use of this document or its content. The document is not intended as personalized investment advice and does not constitute a recommendation to buy, sell or hold investments described herein. Although information has been obtained from and is based upon sources KBC believes to be reliable, KBC does not guarantee the accuracy of this information, which may be incomplete or condensed. All opinions and estimates constitute a KBC judgment as of the data of the report and are subject to change without notice.

Analysis feed

FXStreet Trading Signals now available!

Access to real-time signals, community and guidance now!

Latest Analysis


Latest Forex Analysis

Editors’ Picks

EUR/USD capped under 1.13 as Lagarde hints at inaction

EUR/USD is trading below 1.13, steady. ECB President Lagarde hinted she will pause in next week's decision while urging leaders to agree on fiscal stimulus. US coronavirus data and Sino-American relations are eyed.

EUR/USD News

Gold: Bulls await fresh impetus to conquer $1800

The flight to safety theme, in the face of rising coronavirus cases and regional lockdowns globally, drove Gold drove to its highest level since November 2011 just below the $1800 mark. Will it conquer the key level in the day ahead? 

Gold News

GBP/USD holds up around 1.2550 ahead of Sunak's speech

GBP/USD is trading around 1.2550, holding onto its gains. UK Chancellor Sunak is set to lay out the fiscal stimulus plan. Brexit remains deadlocked as PM Johnson told German Chancellor Merkel that Britain could leave without a deal.

GBP/USD News

Forex Today: Gold eyeing $1,800, dollar mixed, as coronavirus, Hong Kong peg move markets

Markets are looking for a new direction after stocks retreated and the dollar gained some ground on Tuesday. Concerns about coronavirus cases in the US and geopolitical tensions are in play.

Read more

WTI looks for a firm direction below $41.00, EIA inventories eyed

WTI recedes from intraday top while also keeping the bounce off daily low near $40.30. Global pressure on China, coronavirus resurgence keeps a lid on the blackgold. European oil giant follows BP and Shell to cut price forecast. EIA Crude Oil Stocks expected to drop 3.4M versus prior fall of 7.195M.

Oil News

Forex Majors

Cryptocurrencies

Signatures