There is a high possibility that the market will become one that watches each country’s monetary easing and economic indicators and determines the timing of its moves.
From YEN Kura-san's investment newsletter "Real-Time Top Trading" provided by GogoJungle, here are a few excerpts from today's issue.
【Market View】
The divergence in monetary policy temperatures among various countries continues to influence the market.
The 0.25% rate cut at July's FOMC was priced in from the beginning of the week, and the US 10-year yield fell to 1.94%.
In June's US employment report released on the 5th, nonfarm payrolls rose by 224,000, beating expectations of 160,000. Consequently, average monthly payrolls for the first half of the year increased by 172,000, slowing from the 2018 monthly average of 223,000. The unemployment rate rose from 3.6% to 3.7%, and the U-6 unemployment rate increased from 7.1% to 7.2%.
In response to the numbers, the US 10-year yield recovered to 2% and USD/JPY rose to the mid-108s.
According to FEDWATCH, rate hikes are fully priced in for the July 31 FOMC meeting.
The Fed released its semiannual Monetary Policy Report to Congress on the 5th. The economy in the first half of this year continued at a firm pace, but tariff hikes were said to be weighing on global trade and business investment, leading to a recent slowing of the economy. The report suggested taking appropriate actions, including rate cuts, to sustain economic expansion. The labor market has continued to strengthen since the start of the year, and the recent slowdown in inflation was noted as temporary.
Powell, Fed Chair, will testify before Congress in a semiannual hearing on the 10th–11th. Since the market has already fully priced in a 0.25% rate cut, there may not be much surprise even if hints toward a cut emerge. However, given the stronger employment data, there is a possibility that long-term US rates and the dollar will rise further, followed by a drop after the testimony.
Also, expectations for ECB rate cuts have risen. The appointment of the EU Commissioner President as a German and the likely selection of a hawkish candidate suggests that the succession of ECB President Draghi will move away from a dovish stance toward a more hawkish line, with France's Lagarde as IMF Managing Director confirmed. As a result, a July rate cut by the ECB is expected, and the euro has fallen. Nevertheless, in the global trend of monetary easing, bond yields are declining, and the drop in long-term rates is supporting stock prices, with the Dow and the S&P 500 reaching new highs.
Unlike previous trends of risk appetite vs risk aversion, there is now a pattern of higher stocks, a stronger yen, and higher bonds.
YEN Kura's Real-Time Newsletter "Real-Time Top Trading" (Gaku Tashiro)—Quoted.
With US rate cuts seemingly almost certain, we will be watching how last week's US employment data will influence markets. In Europe as well, questions about rate cuts are being raised, making fundamental analysis important going forward. (Editorial staff)
