Group 1 - The "Big and Beautiful" tax and spending bill has temporarily alleviated concerns over a U.S. debt default by raising the borrowing limit by $5 trillion, but it exacerbates long-term debt issues, with an estimated increase of $3.4 trillion in national debt over the next decade [1] - The Treasury General Account (TGA) has been depleted during the debt standoff, dropping from approximately $840 billion in February to about $340 billion by July 8, and its rebuilding may tighten liquidity conditions [1][2] - The TGA plays a crucial role in the Federal Reserve's balance sheet, and its increase could lead to a significant reduction in reserve balances, potentially resulting in a liquidity loss of around $510 billion by the end of September [2][3] Group 2 - Historically, TGA rebuilding has negatively impacted the S&P 500 index, as seen in January 2022 when TGA rebuilding and increased reverse repo activities led to a significant drop in reserve balances, affecting margin levels and the index [4][5] - The last TGA rebuilding in the summer of 2023 did not impact the stock market due to the depletion of reverse repo tools, but current conditions suggest that with reverse repos nearing their low point and ongoing quantitative tightening, a decline in reserves is expected [5] - The anticipated increase in TGA and a decrease in reserve balances to around $3 trillion or lower could lead to a liquidity crunch in the market [5]

Group 1 - The Bank of England's Governor Bailey emphasized the importance of closely monitoring the steepening of the yield curve during the quantitative tightening process [1]

Core Viewpoint - The Governor of the Bank of England, Bailey, emphasizes that financial stability is fundamental to growth, highlighting ongoing risks and uncertainties in the market [1] Group 1: Financial Stability - Financial stability is identified as the cornerstone of economic growth [1] - There is a particular focus on leveraged strategies due to associated risks [1] - A discussion paper has been released to enhance the resilience of the repurchase market [1] Group 2: Global Economic Outlook - Global economic risks remain elevated, impacting overall market conditions [1] - The trend of a steepening yield curve is observed globally, not limited to the UK [1] - Quantitative tightening (QT) remains an open option for monetary policy [1] Group 3: Banking Sector Resilience - UK borrowers are noted for their resilience, indicating a stable borrowing environment [1] - The banking sector is positioned to provide necessary support amidst current economic challenges [1]

Core Viewpoint - The Governor of the Bank of England, Andrew Bailey, stated that quantitative tightening remains an open option for the central bank [1] Group 1 - The Bank of England is considering various monetary policy tools, including quantitative tightening, to address economic conditions [1] - Bailey emphasized the importance of flexibility in monetary policy to respond to changing economic circumstances [1] - The central bank's approach will be data-driven, focusing on inflation and economic growth indicators [1]

Core Viewpoint - Germany's fiscal expansion is increasing debt supply and driving economic growth, leading to warnings from major global banks regarding German government bond risks [1] Group 1: Economic Impact - The fiscal spending actions in Germany are expected to boost economic growth [1] - Major banks are adjusting their forecasts for German bond yields due to this fiscal expansion [1] Group 2: Yield Predictions - Goldman Sachs strategists predict that the 10-year German government bond yield will reach 2.80% by the end of 2025 and 3.25% by 2026 [1] - HSBC's Chris Attfield and other strategists have raised their yield forecasts, citing fiscal expansion and the potential for the European Central Bank to reduce bond purchases next year [1] - The 10-year yield forecast for the end of 2025 has been increased by 25 basis points to 2.45%, while the 30-year yield forecast has been raised by 45 basis points to 3% [1]

Currency Market Overview - The Euro is fluctuating around 1.1760 against the US Dollar, while the British Pound has risen for the fourth consecutive trading day, trading above 1.3700 [1] - The US Dollar against the Japanese Yen is under pressure, remaining below 145.00, and the Australian Dollar is consolidating below 0.6600 [1] - The Canadian Dollar has dropped to around 1.3570, approaching an eight-month low of approximately 1.3540 [1] Key Developments in the US Dollar - President Trump announced that a tariff letter will be issued on Friday, with a floating range of 10%-70%, effective from August 1 [2] - US non-farm payroll data exceeded expectations, leading traders to abandon bets on a rate cut by the Federal Reserve in July [2] - Federal Reserve's Bostic noted that the labor market remains healthy, and the US economy may experience prolonged high inflation [2] Developments in Major Non-USD Currencies - ECB official Demarco stated that the Euro will not replace the Dollar as a reserve currency [3] - Japan's FY2025 wage growth forecast has been revised down to 5.25%, remaining above 5% for two consecutive years [3] - The Bank of England's survey indicates that UK businesses have lowered their wage growth expectations for the year [3] - ECB's Lagarde emphasized the need to improve the economy to enhance the Euro's global standing [3] Technical Analysis - The Euro/USD is trading above bullish moving averages, with the 20-day simple moving average (SMA) around 1.1570 [6] - The Australian Dollar/USD has broken through a multi-week range, indicating an upward trend, with key support at 0.6540-0.6530 [7] - The Dollar/Canadian Dollar has faced resistance near the 200-period SMA on the 4-hour chart, indicating a bearish outlook [7] Upcoming Economic Data - Key economic data to watch includes Switzerland's June adjusted unemployment rate and the Eurozone's May PPI [8]

Summary of Key Points Core Viewpoint - The global foreign exchange market is experiencing significant developments, particularly regarding interest rates and currency valuations, which could impact investment strategies and economic forecasts. Group 1: Central Bank Policies - The European Central Bank (ECB) meeting minutes indicate that some members believe current interest rates should be maintained, highlighting concerns about the potential dangers of euro appreciation for exporters [3] - A Reuters survey shows that 19 out of 27 economists expect the Reserve Bank of New Zealand to keep rates at 3.25% on July 9, with 16 out of 22 economists predicting a rate cut to 3.00% in Q3 [3] Group 2: Economic Indicators and Forecasts - U.S. non-farm payroll data exceeded expectations, leading futures traders to abandon bets on a rate cut by the Federal Reserve in July [5] - The labor market in the U.S. remains healthy, with the possibility of prolonged high inflation, according to Federal Reserve official Bostic [5] - The ECB warns that a heatwave could impact inflation and economic growth [5] Group 3: Currency Dynamics - ECB official Demarco stated that the euro is unlikely to replace the dollar as the global reserve currency [5] - The Bank of Japan has revised its salary increase forecast for FY2025 down to 5.25%, maintaining a level above 5% for two consecutive years [5] - The Polish central bank governor mentioned the possibility of a rate cut in September if data permits [5]

Group 1 - The global bond term premium is rising, reflecting investor concerns about future interest rate risks and economic policy uncertainties, with Japan's 10-year bond term premium increasing by over 40 basis points since early last year [1] - In Germany, the term premium has also risen over the past two years due to the need to absorb the impact of the European Central Bank's balance sheet reduction and increased government stimulus plans [1] - Goldman Sachs notes that since late April, the market has begun to bet more aggressively on the Federal Reserve adopting easing policies, although any deterioration in U.S. economic growth and employment data could reignite growth concerns [1] Group 2 - BlackRock indicates that while the U.S. economy is slowing, it has not reached alarm levels, with expectations of a moderate slowdown in the labor market maintaining job growth around 100,000 [2] - UBS economists highlight early indicators of a weak U.S. job market, with rising unemployment claims and predictions of only 100,000 new jobs in June [2] - The National Australia Bank suggests that increasing government spending beyond fiscal capacity may undermine market confidence in the U.S. dollar, contributing to its decline [2] Group 3 - Analysts from the Netherlands International Group state that the Bank of England's potential slowdown in quantitative tightening seems to support the British pound, reducing the risk of further depreciation [2] - The South Korean inflation rate is expected to remain around the Bank of Korea's 2% target, allowing for a cautious monetary policy approach focused on financial stability [2] - South Korea's overall consumer inflation rate rose by 2.2% year-on-year in June, slightly above market expectations, indicating stable underlying inflation pressures [2] Group 4 - Phillip Nova's analysis suggests that a weaker U.S. dollar may extend upward momentum in oil prices, despite the market already digesting production increase news [3] - Nomura's economists note that South Korea's strong exports and increased fiscal spending plans may alleviate concerns about economic growth, potentially leading to a more hawkish stance in the upcoming policy meeting [3] - The median wage growth among major employers in the UK increased from 3.2% to 3.4%, with a significant impact on the service sector, while manufacturing was less affected [3]

Group 1: USD Outlook - The USD's performance is influenced by the Federal Reserve's data-dependent stance and recent strong economic data, alongside looming trade tariff risks [1][2] - The upcoming employment and inflation data are crucial for the USD, especially after recent JOLTS and ISM manufacturing index data indicated labor market resilience and potential inflation pressure [2][4] - The Senate's approval of a debt bill is expected to increase significant debt, but the bond market's muted reaction suggests that expectations for early Fed easing are cushioning its impact [2] Group 2: Euro Outlook - The European Central Bank (ECB) officials are maintaining a wait-and-see approach, aligning with their hawkish shift in June, as they await further data [7] - The euro's strength has become a focal point, with comments from ECB Vice President Guindos indicating a tolerance limit for the euro/USD at 1.20, but the euro's movement is primarily driven by the USD [8] - If US non-farm data significantly underperforms expectations, the euro/USD may quickly test the 1.20 level [8] Group 3: GBP Outlook - Political uncertainty in the UK is highlighted by the government's cancellation of welfare cuts, which may increase the likelihood of tax hikes in the fall, posing potential challenges to the economic outlook [9] - The UK bond market has reacted calmly, partly due to the Bank of England's Governor Bailey hinting at a potential slowdown in quantitative tightening, providing some support for the GBP [9] - The lack of significant UK data releases in the short term means that market focus will be on upcoming data performance to assess whether the euro/GBP can sustain a breakthrough above the 0.8600 level [10]

Group 1 - Goldman Sachs predicts copper prices may peak at $10,050 per ton by the end of 2025, with an average price adjustment to $9,890 for the second half of 2025 [1] - Morgan Stanley forecasts a 40% chance of recession in the U.S. due to tariff-induced stagflation, lowering the GDP growth estimate for 2025 to 1.3% [2] - Morgan Stanley reports a decline in global demand for long-term assets, predicting 2-year and 10-year U.S. Treasury yields to be 3.50% and 4.35% respectively by year-end [3] Group 2 - Barclays indicates mild selling pressure on the dollar by the end of June, while the euro shows weak signals for a significant rebound [4] - Mitsubishi UFJ suggests the Bank of England may slow its quantitative tightening pace, with potential announcements in September [5] - Bank of America states that since the announcement of tariffs, interest rate differentials are no longer the main driver of the dollar's movement, reflecting structural risks in the U.S. economy [6] Group 3 - French Foreign Trade Bank's survey shows that 41% of respondents view currency depreciation as the main risk of holding cash, with 38% preferring better returns elsewhere [7] - Westpac anticipates the Reserve Bank of Australia may cut rates in July, but emphasizes that this is not a certainty [8] - China International Capital Corporation notes potential recovery in the photovoltaic industry, with a beta opportunity of 30%-50% if expectations improve [5][6]