FX: USD traded lower and closed below the 50-day SMA at 102.71. Month-end selling seems apparent despite strong US data. The 2-year yield slid to a low of 4.65% before closing near the high of the day around 4.75%. The 10-year yield rebounded off the 200-day SMA at 3.69%. It remains in the recent range between roughly 3.70% and 3.82%.

EUR jumped to 1.0950 after hawkish noises from the ECB forum in Sintra. GBP closed modestly higher in comparison at 1.2748. The two-year Gilt yield made another fresh high above 5.25% amid ongoing hawkish rate bets. USD/JPY hit a new cycle top of 144.17 due to yield differentials.  AUD closed marginally higher trading around the 200-day SMA at 0.6690. But disappointing China data and softer than expected aussie CPI today has seen AUD selling towards 0.66. This all added to market pricing of an unchanged decision by the RBA next week. USD/CAD is consolidating recent loonie strength with the major pushing up above 1.32.

Stocks: US equities found a strong bid and closed in positive territory on Tuesday. The blue-chip S&P 500 added 1.15% 0.45% and the Nasdaq 100 finished higher by 1.75% erasing all the previous day’s loss. The Dow rose for the first time in seven days as Wall Street geared up for the end of the first half. Risk sentiment was spurred by multiple strong data releases. This included US consumer confidence, durable goods, and new home sales. Investors lowered the risk of near-term recession and lifted soft landing expectations.

Asian stocks are mixed. The Nikkei 225 is catching up to the US session helped by the recent currency weakness. But more tech-heavy markets are lower on stories about more restrictions on AI chip exports to China. The Hang Seng was muted after soft China data and the AI chip story.

US equity futures have pulled back as traders await the Sintra. European equity futures are pointing to a higher open (+0.4%). The Euro Stoxx 50 closed up 0.6% yesterday.

Gold was restricted after the pick-up in Treasury yields. A break of support around $1914 sees $1900 and $1893 as next targets for sellers.

Day Ahead – Heads of major central banks in the spotlight

Today is the last day of the ECB forum on central banking in Sintra, Portugal. A policy panel is scheduled later this morning with the chiefs of the Fed, BoJ and BoE. Speeches from ECB officials are also scheduled. A hawkish bias is expected as the battle against stubborn inflation continues.

We didn’t get major fireworks from ECB President Lagarde yesterday. But she said it is likely that the bank will not be able to declare the end of its hiking cycle anytime soon. A July 25bps is a done deal with the data dictating another September hike. Another Governing Council member talked about the ECB’s reaction function. Wunsch said that core inflation should give a clear reading it is heading lower over the next three readings. If not, more hikes will be necessary, which all helps the euro.

Chart of the Day – EUR/USD well supported

The world’s most popular currency pair has been lifted by the recent hawkish ECB speakers. Positive risk sentiment and a drop in energy prices has also acted as tailwinds. The prospect for a September hike also gained more traction after sources noted ECB policymakers see little chance of a pause in hikes in July or September. More recent source reporting has also suggested that some officials at the Bank are mulling a quicker reduction of its bond portfolio.

EUR/USD dipped below the 50-day SMA at 1.0877 last Friday. But buyers quickly stepped in and are hoping to push on to Thursday’s high at 1.1012. Above here is major resistance at the early February top at 1.1032.