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In yesterday's session, central banks gave some fresh air to financial markets, fueling a relief rally across the board, with yields on sovereign bonds declining sharply in both sides of the Atlantic. 

During a volatile session, investors continued to trade with a cautious mode, taking position ahead of the crucial Federal Reserve meeting today. Implied forwards suggest a 75 bp interest hike is expected to be announced today.

Financial markets started the week with another sell-off session in which traders increased their demand for safe-haven assets. The higher-than-expected US inflation reading is still weighing on sentiment and investors raised their bets for a 75bp interest rate hike from the US Federal Reserve this Wednesday.

The upside surprise in the US CPI figure for May led to a sell-off session on Friday as investors reinforced their bets for additional 50bp interest rate hikes from the Federal Reserve beyond the June and July meetings. Headline inflation accelerated to 8.6% y/y while core inflation ticked down to 6.0%.

Financial markets extended losses on Thursday, following the confirmation by the ECB to accelerate the withdrawal of  policy accommodation, including ending net purchases on July 1st and starting a rate liftoff cycle on the 21st.

Investors traded cautiously on Wednesday, amid persisting worries about high inflation and slowing economic growth, and ahead of the crucial ECB meeting today. We expect the ECB to confirm the end of net asset purchases in early July and to signal the start of a hiking cycle in the policy rates thereafter.

During a volatile session, financial markets closed the day with no clear direction, with investors taking position ahead of the crucial ECB meeting on Thursday and the release of the US CPI inflation on Friday.

Investors started the week with a risk-on mood, with sentiment supported by easing COVID restrictions in China, including reports that Chinese regulators are relaxing some rules against some tech giants. Data also showed the decline in the Chinese services sector eased in May (the services PMI rose from 36.2 to 41.4).

A risk-on session across financial markets on Thursday, with sentiment boosted by the recent decision by the OPEC to ramp up plans to increase its oil supply (+650k barrels a day in both July and August) and solid economic data (eg the decline in new weekly jobless claims in the US).

In yesterday's session investors traded cautiously amid mixed economic data and hawkish comments by Federal Reserve members. US manufacturing PMI and ISM moved in opposite directions, both remaining comfortably above the 50-threshold, and US job openings in April confirmed that the labor market remains tight.

Inflation and monetary policy continued to center financial markets’ stage in yesterday’s session. Euro area HICP surprised again to the upside and reinforced the views of those in the ECB Governing Council pushing for a 50bp interest rate hike in July.

A positive start of the week across financial markets, with sentiment boosted by resilient survey data in Europe and a relaxation of COVID restrictions in China. Markets were closed in the US due to a public holiday.