Fed's Williams: Monetary Policy Well Positioned to Achieve Dual Mandate Goals — Market Talk

0922 ET - New York Fed President John Williams reiterates his view that monetary policy is well positioned to achieve the Fed's dual mandate goals in an interview on Fox Business. Regarding the labor market, he says he sees stable, solid growth. While acknowledging inflation is still too high, he says "I do feel a little bit more positive about the near-term inflation outlook because of the energy price declines that we're going to see."([email protected])0911 ET - The cost of insuring euro credit against default edges higher as technology stocks sell off following Samsung's earnings report and oil prices rise. Energy prices gain after Iran's Revolutionary Guard fired at two commercial ships near the Strait of Hormuz, adding to risk-averse sentiment in markets. Still, CDS prices remain at relatively low levels, buoyed as an easing in Middle East tensions has caused oil prices to drop well below peaks hit around two months ago. The iTraxx Europe Crossover index of euro high-yield credit default swaps rises 1 basis point to 241 basis points, S&P Global Market Intelligence data show. The iTraxx Europe Main index of euro investment-grade CDS climbs 1 basis point to 52 basis points. ([email protected])0658 ET - The ongoing build-up of investor bets on a weaker Japanese yen highlights the potential for the currency to recover when the tide turns but this looks unlikely in the near term, MUFG Bank's Lee Hardman says in a note. "There is currently no clear catalyst to trigger a stronger yen." Investor unease over fiscal policy has increased after Japan's government unveiled a new multiyear investment framework. This adds pressure on the yen, which was already hit by higher energy prices and the Federal Reserve recently signaling potential interest rate rises, he says. Further interventions by Japanese authorities to support the yen might not reverse the weakening trend, he says. The dollar falls 0.1% to 161.88 yen. ([email protected])0639 ET - UBS expects the 10-year French OAT-German Bund yield spread to settle in a 65-75 basis point range in the next two months, tightening from around 79 basis points currently. Immediate fiscal risks seem constrained and risk sentiment is doing the heavy lifting now, says strategist Reinout De Bock in a note. UBS broadly expects spreads to trade in relatively tight ranges. ([email protected])0624 ET - Bitcoin's recent rebound could prove limited and temporary, ING technical analyst Roelof-Jan van den Akker says in a note. The cryptocurrency rose to a two-week high of $64,539 overnight, rebounding from the 21-month month low of $57,775 reached July 1, according to LSEG. It last trades down 0.8% at $63,329. Bitcoin's appreciation potential looks capped around the important resistance zone between the horizontal barrier at $65,670 and the flat exponential moving average-200 line, currently at $68,603, he says. ING expects a resumption of bitcoin's previous downtrend with a break below the July 1 low in the near-term and towards $47,705. "Investors should also be mindful of the implications of a weekly close below the crucial horizontal support level at $54,450," he says. ([email protected])0621 ET - Taiwan is likely to raise rates if inflation stays sticky, according to ING in a research note. The island's CPI rose to a 17-month high of 2.6% year over year in June amid a broad-based uptick in inflation, ING points out. "This level looks likely to be at or near the peak for the year, given the fall in energy prices and more favorable base effects in the coming months," it says. There will be a higher chance of a rate increase in the third quarter if inflation stays high, CE says. ([email protected])0620 ET - U.S. Treasury yields rise and the dollar edges up amid fresh tensions in the Middle East and higher oil prices. "Renewed tensions in the Strait of Hormuz, with a ship being attacked, sent oil prices higher and kept traders on watch for further developments," Empire FX's Crispus Nyaga says in a note. A re-escalation in tensions could support the dollar through safe-haven demand and raise concerns over inflationary pressure from higher energy costs, the analyst says. Meanwhile, the Federal Reserve's minutes of the June meeting, due Wednesday, could shape near-term expectations for both currency and bond markets, Nyaga says. The 10-year Treasury yield rises 1.4 basis points to 4.492%, according to Tradeweb. The DXY dollar index rises 0.1% to 100.971. ([email protected])0617 ET - Sterling continues to trade near a one-year high against the euro while gilt yields stay higher, little moved after the Bank of England published its Financial Stability Report. The report said the U.K. financial system has remained resilient and continued to support the real economy despite Middle East developments. However, vulnerabilities remain in risky assets, sovereign debt markets and risky credit markets. The Financial Conduct Authority and Prudential Regulation Authority are reviewing measures such as removing the countercyclical leverage buffer from banks' leverage requirements and reducing the leverage ratio Tier 1 minimum requirements from 3.25% to 3%. The euro falls 0.1% to 0.8537 pounds after hitting a low of 0.8531 earlier. The 10-year gilt yield is up 2.9 basis points at 4.814%, Tradeweb data show. ([email protected])0555 ET - The rapid expansion of data centers in India could have significant broader macroeconomic effects, Shilan Shah of Capital Economics writes in a note. Much of the discourse regarding the impact of AI on India's economy has focused on disruption to the services sector, but AI still requires a large amount of physical infrastructure investments, Shah says. While announced data-center investments over 2026-2030 is equivalent to only 0.5% of annual GDP, the impact could be much larger if it proves to be a catalyst for policymakers to upgrade India's power system and water sources, Shah adds. Demand for domestic capabilities in electronics and precision engineering will also help India move up the manufacturing value chain, Shah says. ([email protected])0537 ET - German industrial data point to broad-based strength in the first two months of the second quarter, despite the jump in energy prices due to the Iran war, Pantheon Macroeconomics' Claus Vistesen says in a note. Industrial production climbed 0.9% on month in May, after a 0.2% increase in April. That puts German manufacturing on track for a decent second quarter, and signals upside risk to GDP growth, he says. Survey data has softened in recent months, with the manufacturing PMI and the IFO recent production index subdued in May and June. "But we still think that production rose over the second quarter as a whole," Vistesen says. ([email protected])0500 ET - The prospect of large-scale interventions to support the Japanese yen poses a major risk for the dollar, ING's Francesco Pesole says in a note. The dollar versus the yen continues to go its own way, regardless of dollar swings, and is close to 162 yen despite a brief correction lower after last week's weak U.S. nonfarm payrolls data prompted markets to trim Federal Reserve interest-rate rise expectations, he says. "Failing to intervene below 163.0 could fuel speculation [that] the new line in the sand is closer to 165." The dollar falls 0.1% to last trade at 161.92 yen. ([email protected])0459 ET - A Paris appeals court ruling on whether to allow Marine Le Pen to run for office has great implications for French politics but probably won't have much impact on the euro, ING's Francesco Pesole says in a note. The court will rule Tuesday on Le Pen's attempt to overturn a ban on holding elected office for embezzling European parliament funds. A reversal of the ban could strengthen her far-right National Rally party and shift expectations towards a Le Pen candidacy over Jordan Bardella, Pesole says. However, markets have largely priced in a Le Pen or Bardella win and "either would deliver sufficient fiscal prudence to limit bond volatility." The euro last trades down 0.1% at $1.1427. ([email protected])