The US 2-year Treasury yield has climbed sharply to multi-month highs, hitting levels last seen in February 2025 after the Federal Reserve’s June FOMC meeting. On June 17, the yield spiked more than 16 basis points in a single session — the largest one-day jump on an FOMC announcement day since March 2008 — closing around 4.20–4.22%. It has since consolidated near those elevated levels into Monday’s close. Markets have responded aggressively. Rate futures now fully price in a

As of mid-June 2026, the 10-year US Treasury yield is around 4.46% and the 10-year German Bund yield hovers around 2.96%, resulting in a transatlantic spread of approximately 150 basis points. This spread remains one of the key medium-term drivers for EUR/USD. EUR/USD usually declines when the US 10Y-Bund spread widens (US yields exceed Bund yields) because USD assets look more appealing and the outlook for a stricter US monetary policy becomes more pronounced. Conversely, a

The market-implied Fed pricing curve has moved significantly hawkish over the past month. Following the June 17 FOMC meeting (Chair Kevin Warsh’s first), the CME FedWatch probabilities moved from a baseline already biased toward fewer cuts to one now pricing two 25 bp rate hikes in 2026. The odds of at least one hike by year-end have surged into the 85-89% range, with the biggest jumps concentrated around the September and December meetings. While the July meeting still has a

The jobs market recovery looks less impressive when you exclude private health/social care and hospitality. Those sectors account for only a quarter of jobs, but two thirds of jobs growth so far this year. Yes, hiring has improved elsewhere, but not nearly as rapidly as the headline figures imply. And crucially, there’s very little sign that this improvement is feeding into broader wage pressure. That’s one reason why inflation fears should start to recede as the year goes on

The deal between the US and Iran is set to reopen the Strait of Hormuz for oil shipments. While it will take months to ramp up production and exports closer to normal capacity again, it greatly eases the supply constraint that has pressured the market since the beginning of March, when the war started. The path for world oil supply over the coming months also depends on how long the US and others will continue to sell strategic reserves. There is less need for the emergency s

Over the last six months, the relationship between G10 FX and the CBOE VIX Index has been largely textbook in nature, with the US dollar acting as a safe haven asset in times of rising volatility. In this regard, beta quantifies how sensitive G10 currency pairs or baskets are to the VIX. A positive beta for the dollar means that it tends to strengthen when fear in equity markets increases, whereas risk-sensitive currencies like the Australian and New Zealand dollars tend to h

Since 2010, central banks have been net purchasers of gold every year, but the pace accelerated sharply following 2022. Average annual purchases over the last four years have been around 1,000 tonnes – roughly double the average over the previous decade. This official sector demand has been one of the major structural supports for the price of gold. Central banks remain structurally bullish on gold. Even after several years of very strong buying and much higher gold prices, a

We expect the BoJ to stick to a gradual pace of monetary tightening and deliver another rate hike later this year. The weak yen is one factor which could encourage the BoJ to speed up the pace of rate hikes but there was no strong indication over the timing of the next hike at today’s policy meeting. The yen’s failure to strengthen on the back of today’s BoJ rate hike will keep pressure on Japan to intervene again to provide support. As we highlighted in yesterday’s FX Daily

The likelihood of another rate hike by the Reserve Bank of Australia would rise, especially in a potentially rocky summer for energy markets. The Bank might have a slightly higher bar to tighten again, but it has shown little hesitation to act if data heats up. The positive impact on AUD/USD from another RBA hike would, however, be more than offset by potential Fed tightening, which tends to have a deeper impact on high-beta currencies than domestic stories. Beyond a potentia

Another rate hike expected, likely in September. At this stage, forward-looking price indicators (European Commission surveys and PMIs) confirm a gradual transmission of the energy shock to other sectors. However, the transmission remains less significant than what was observed in 2022 and still only marginally affects finished goods. The emergence of a price-wage spiral appears, for now, unlikely, as wage pressures should remain contained in 2026. The ECB anticipates a slowd

Over the last 10 years, the ECB has gone through two tightening cycles, April 2011 and July 2022. Central bank tightening may or may not feed into currency price action as the premium to hold assets in the denominated currency increases and carry attractiveness rises. However, over the last decade, this has not been the case for the single currency. Our calculation shows the EUR/USD fell more than 1.0% on average 30 days into the ECB tightening cycle, and while the sample siz

End-2026 Markets are pricing a peak close to 2.50-2.75% with the highest probability mass centered at 2.50%. This is in line with the Reuters poll which shows >60% of economists expecting one more hike this year (most likely September). 2027: The ECB’s own Survey of Professional Forecasters (Q2 2026) expects average DFRs of about 2.25% for 2027, with the modal outcome closer to 2.00–2.25%. Previous Bloomberg surveys had also suggested a partial reversal in 2027 to protect gro

Overall, the US economy continues to show resilience despite higher energy prices, which will push household expenses higher. Strong US data have offered some support to the dollar, but we expect the dollar to weaken in the coming months due to structural factors. We forecast the Fed to remain on hold, but if the data continue to be strong, we do not rule out a rate hike. That said, the probability of a hike during the summer remains low. Our baseline remains four ECB hikes i

Below we show the daily correlations, via dollar cross rates, between a group of currencies against both the Philadelphia Semiconductor Index (SOX) and the broader tech sector represented by the Nasdaq 100. Looking at correlations since the tech sector began to surge at the start of April, within the G10 space, it is the Swedish krona which retains its mantle as the most tech-sensitive currency, while the yen is the least correlated to the sector. And somewhat surprisingly, i

The Trimmed Mean PCE is often viewed as a cleaner signal of medium-term inflation trends because it is less sensitive to volatile items. At 2.3%, it suggests inflation is moving closer to target but not yet fully there, especially with headline PCE rising to 3.8% in April due to broader price pressures. The Trimmed Mean has shown more stability and a slightly softer trend than the official core PCE (which excludes only food and energy). This divergence has been notable since

The CPB World Trade Monitor, produced by the Netherlands Bureau for Economic Policy Analysis (CPB) on behalf of the European Commission, tracks global trade volumes with a lag of about two months. World merchandise trade volumes contracted by 2.1% M/m in March as regional disruptions took toll; this is the largest one-month decline since the Covid crisis. Imports from Africa and the Middle East plunged 11.2% while exports contracted by 32.3% due to the ongoing war in the Gulf

We forecast Brent crude to average USD100/bbl in Q2, before falling to USD90/bbl in Q3, further to USD80/bbl in Q4. and rising to USD85/bbl next year. We expect Brent to trade well above the pre-war level of USD60-70/bbl even after a reopening of the Strait of Hormuz. Prediction markets are increasingly sceptical of the near-term outlook for a reopening of the Strait of Hormuz. If/when it opens again, it will likely take some time, probably a couple of months, for production

Fertiliser production is also highly energy-intensive and closely linked to natural gas prices. Higher energy costs have therefore amplified existing supply disruptions. Several fertiliser producers across both the Middle East and South Asia have either reduced or halted production entirely. India has reportedly instructed fertiliser producers to cut natural gas consumption to around 70% of normal levels due to supply shortages. Fertiliser prices have already started to rise

We expect GDP to remain on a recovery path, though the pace of growth should moderate in the current quarter amid energy supply disruptions. We think recent data support a Bank of Japan rate hike in June. Separate from the data, the BoJ’s board member, Junko Koeda, signalled support for raising policy rates, citing the possibility that underlying inflation may exceed 2%. She is considered a hawkish-to-neutral policymaker. Koeda didn’t cast a dissenting vote in April, but she

**AS SEEN IN RISK IN THE WEEK REPORT, 01/06/26 GET FULL ACCESS HERE This week: ISM Mfg, Svcs PMIs. ECB rate devision, Non Farm Payroll, JOLTs Job Openings Read our economic risk previews; contact for questions