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In yesterday’s session, the focus was still on monetary policy decisions, as the ECB decided to raise the official interest rates by 25 bp (depo and refi rate at 3.25% and 3.75%, respectively). Despite lowering the pace of rate increases, Lagarde clearly signaled that the ECB cannot pause rate hikes yet as inflation is still too much elevated.

Another session with mixed results across financial markets. The key themes were signs that inflationary pressures are abating coupled with data suggesting an economic slowdown. In the UK, the BoE raised policy rates by 25 pb to 4.5%, in line with expectations, while signalling that additional rate hikes are likely.

In the last session of the week, investors’ expectations on additional interest rate hikes by the US Federal Reserve were seen as more probable. That, together with debt ceiling concerns and an increase of inflation expectations seen in the University of Michigan survey, pushed US Treasury yields higher.

In yesterday’s session, US debt ceiling negotiations continued to center the stage in financial markets as President Joe Biden and Republican speaker of the House Kevin McCarthy keep pushing for a deal to avoid a default on sovereign bonds. Biden specified that negotiations are on the fiscal budget, not on whether the US will pay or not its debt.

Tensions around the US debt ceiling negotiations continued weighting on investors’ sentiment. Even though the opposition leader, McCarthy, signaled optimism about a deal after the latest round of talks, rating agency Fitch Ratings warned the nation’s AAA rating may be downgraded due to the political standoff.

Negotiations to raise the US debt ceiling progressed over the course of Thursday, with both the Government and the opposition party suggesting talks were in a better place, though not finalised yet. Should a deal be reached soon, Parliament would have to approve it before June 1, the deadline stated by Treasury Secretary to run out of cash.

A larger-than-expected decline in US inflation in May, from 4.9% yoy to 4.0%, increased the odds investors attach to a pause in the Federal Reserve interest rate hikes at today’s meeting. Nevertheless, core inflation declined by less than expected, from 5.5% yoy to 5.3%, pushing the Fed to, at the very least, maintain a hawkish tone.

The minutes of the Fed's June meeting showed that the decision to hold interest rates steady in June was not unanimous, and that most officials expected further rate hikes would be necessary, as the dot plot had shown. Also yesterday, US factory orders data for May came in below expectations, but still showed growth.

In yesterday’s session, investor sentiment was soured by data showing the resilience of the US economy and its labour market. Private surveys showed that US companies added the most jobs in over a year in June, and the services sector expanded faster than expected, which investors fear will allow the Fed to continue raising rates.

Investors started the week trading with a cautious mood, still digesting the mixed US employment report released on Friday and awaiting tomorrow's key CPI inflation data. Also, comments from San Francisco Federal Reserve President Mary Daly pointed to further interest rate increases even if signaling the end of the hiking cycle is nearing.

Investors traded in a subdued mood on Tuesday, as they awaited today’s US CPI report and digested the latest dovish comments from several Fed officials on Monday: Bostic, who said that inflation could be brought back to target without further rate hikes; and Daly, who said the Fed was approaching «the last part» of its hiking cycle.

Greetings back to work in a week beginning with the downbeat echoes of Friday, when investors traded in a risk-averse mood. Sovereign bond yields ended the week sliding across the board, especially in Europe, and so did stocks, with the biggest falls in China. The USD was broadly flat, while commodities rose slightly.

With little novelties on the data front, investors started the week resuming their positioning to higher rates for longer selling off sovereign bonds, bringing yields up again. The surge was greater on long-term references and widespread across developed economies, with the US 10-year benchmark rising 9 bps. to hit multi-year highs.

Investors ended the week on a cautious note: trading volumes were light and most asset prices were little changed. Sovereign bond yields were largely unchanged in the eurozone, while rising slightly in the US despite most Fed officials who spoke in recent weeks tended to lean towards a pause in the hiking cycle at the September meeting.

In yesterday’s session, investors traded cautiously as they awaited  key economic data later this week (US CPI inflation) and the ECB monetary policy decision on Thursday. The main economic event yesterday was the downward revision of the European Commission’s summer GDP forecasts.

The Fed delivered a hawkish pause yesterday, leaving interest rates unchanged but acknowledging a strong US economy. The dot-plot projects a tighter policy through 2024 and 2025, consistent with rates higher for longer. US stock indices fell and US Treasury yields rose on the news, with the yield curve flattening, while the USD appreciated.

In the first session of the week, investors traded with a risk-off mood amid the escalation of Israeli-Palestinian conflict. In the macroeconomic front there were no relevant data releases.

Investors’ perception that  central banks will still need to increase interest rates in this hiking cycle was the main driver in yesterday’s session. The release of the last ECB meeting minutes and the somewhat higher-than-expected September CPI inflation data for the US fueled this expectation.

Friday´s session was clouded by the risk that geopolitical tensions in the Middle East could escalate further causing a sustained rise in oil prices. On the economic side, US University of Michigan Consumer Sentiment fell from 68 to 63 from last month and China exports fell, although by less than expected by the consensus.

In yesterday’s session, investors once more weighed the growing tensions in the Middle East and the future path of interest rates. Fed Chair Jerome Powell said the central bank would proceed carefully with rates, highlighting that the rise in yields in bond markets is helping to tighten financial conditions.