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Category: Central Bank Watch

  • Treasury Yields Climb as Traders Price Fed Hikes Before June CPI

    Treasury Yields Climb as Traders Price Fed Hikes Before June CPI

    YWO NEWS | MACRO | DEEP DIVE / ANALYSIS

    US Treasury yields rose across the curve on Tuesday morning as traders raised their bets on Federal Reserve interest rate hikes, with the 10-year yield sitting at 4.622% by 6:02 a.m. ET, up more than 1 basis point on the session, CNBC’s Hugh Leask reported. The session is carrying two events that have drawn the market’s full attention: the June inflation print, due later Tuesday, and Fed Chairman Kevin Warsh’s debut testimony before the House Financial Services Committee.

    On Monday, Treasury yields rose after the 10-year yield jumped 4 basis points and the 2-year surged more than 6 basis points after President Donald Trump announced plans to blockade Iranian ports and impose fees of 20% on cargo passing through the Strait of Hormuz, according to CNBC. Tuesday’s yield movements were more limited   — Tuesday’s 2-year yield rose more than 1 basis point to 4.277%, and the 30-year added nearly 1 basis point to 5.105% — but the direction is unchanged.

    Oil and the Fed Repricing

    Oil prices rose following developments relating to the Strait of Hormuz, while Treasury yields also increased, according to CNBC. . West Texas Intermediate futures were last 3.2% higher at $80.66 a barrel, while Brent crude jumped 4.3% to $86.90, CNBC reported. Higher oil prices may influence inflation expectations, and market participants continue to monitor their potential impact on interest-rate expectations. 

    The CME FedWatch tool now shows traders pricing a 39% probability of a July 29 rate hike, up from 26.7% a week ago, according to CNBC. Expectations for two hikes by April next year have been gathering pace alongside the oil move.

    AssetLevel / MoveSource
    US 10-year yield4.622% (+>1 bp, Tue)CNBC
    US 2-year yield4.277% (+>1 bp, Tue)CNBC
    US 30-year yield5.105% (+~1 bp, Tue)CNBC
    WTI crude$80.66 (+3.2%)CNBC
    Brent crude$86.90 (+4.3%)CNBC
    July 29 hike probability39% (vs. 26.7% one week ago)CME FedWatch

    Warsh Steps into the Spotlight

    Another focus for market participants is Fed Chair Kevin Warsh’s testimony. . Tuesday marks his first appearance before Congress as Fed chair, with a House Financial Services Committee appearance scheduled for later in the day and a Senate Banking Committee session on Wednesday, CNBC reported.As this is Mr. Warsh’s first congressional testimony as Fed Chair, market participants may monitor his comments on monetary policy and economic conditions. 

    The testimony coincides with the release of the June CPI report. . If the June CPI print, also due Tuesday, comes in above the consensus forecast of 3.8% year-on-year — down from May’s 4.2% — Warsh will face a live, data-hot interrogation from the committee. Core CPI is expected to hold at 2.9% year-on-year, per consensus figures cited by CNBC. A surprise to the upside on either measure would arrive while Warsh is mid-testimony.

    Market Focus 

    Market expectations may continue to evolve following the release of the June CPI report and Fed Chair Kevin Warsh’s congressional testimony. According to the consensus figures cited by CNBC, headline CPI is expected at 3.8% year-on-year, compared with 4.2% in May, while core CPI is expected to remain at 2.9%. Market participants will assess the published data alongside the Fed Chair’s comments for any indications regarding the economic outlook and monetary policy. Developments in energy markets and geopolitical events may also continue to influence inflation expectations over time. 

    What’s Scheduled Next

    • June CPI (US) — Due Tuesday, 14 July 2026, later in the session. Consensus: headline 3.8% YoY; core 2.9% YoY. BLS
    • Fed Chairman Kevin Warsh — House Financial Services Committee testimony — Tuesday, 14 July 2026. Federal Reserve Events Calendar
    • Fed Chairman Kevin Warsh — Senate Banking Committee testimony — Wednesday, 15 July 2026. Federal Reserve Events Calendar
    • Next FOMC meeting — 29 July 2026. FOMC Calendar

    Risk Disclaimer: Trading CFDs involves substantial risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You may lose some or all of your invested capital. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not a reliable indicator of future results. This article is provided for general informational and educational purposes only and does not constitute financial, investment, legal, tax, or trading advice, nor a recommendation, solicitation, or offer to buy or sell any financial instrument.

  • Goldman Sachs Lifts USD/JPY Forecasts to 165, Citing Structural Dollar Support

    Goldman Sachs Lifts USD/JPY Forecasts to 165, Citing Structural Dollar Support

    Wall Street’s bullish dollar thesis leaves yen without a near-term recovery catalyst.

    Goldman Sachs raised its USD/JPY forecasts on Sunday, projecting the pair at 162 in three months, 163 in six months, and 165 in 12 months, up from earlier targets of 160, 158, and 155 respectively, CNBC’s Lee Ying Shan reported. The revision came after the yen fell to its weakest level against the dollar in four decades last week — a move that has kept Japan’s Ministry of Finance focused on the currency market and investors watching for any official response.

    The bank’s case is structurally driven, not tactical. Goldman cited “higher-for-longer U.S. yields, low recession risk, lingering fiscal concerns, and only gradual BoJ hikes” as the forces it expects to keep depreciation pressure on the yen sustained, per the CNBC report. These factors may contribute to continued focus on the interest-rate differential between the U.S. and Japan. 

    Intervention Won’t Hold the Line, Goldman Says

    Japan’s Ministry of Finance has intervened in yen markets before. Goldman’s read on what happens next time is blunt:

    “We see no reason for the upward trend in USD/JPY to stop without an unexpected negative US growth shock or a BoJ pivot towards more aggressive policy tightening,” Goldman said, as cited by CNBC.

    The bank added that previous interventions had only temporarily interrupted the yen’s slide before USD/JPY resumed climbing, and it expects a similar pattern if authorities step in again. Goldman reportedly suggested that previous interventions had a temporary effect, although future outcomes may differ depending on market and policy conditions. .

    Japan’s own fiscal policy may compound the problem. Goldman flagged that Japan’s domestic stimulus plans could push up Japanese government bond term premiums relative to U.S. Treasurys — a dynamic it said has historically coincided with further gains in USD/JPY, according to the CNBC report. Changes in Japanese bond supply and U.S. yield levels may remain relevant factors for currency-market participants. 

    The Dollar Side: AI Capex and Energy as Structural Tailwinds

    Goldman’s revised yen call sits inside a broader dollar-bullish framework. The bank attributed its conviction on the greenback to two forces it expects to persist: the U.S. AI investment boom and energy supply disruptions, which it described collectively as a “supply bust” providing structural support for the dollar against lower-yielding currencies, Lee Ying Shan reported for CNBC.

    The bank revised its EUR/USD forecasts lower alongside the yen call, projecting the pair at 1.14 in three months before slipping to 1.12 in six months and holding there over a 12-month horizon, per CNBC. The euro and yen are being painted with the same broad brush — both low-yielding currencies facing a dollar that Goldman expects to stay well supported.

    Pair3-Month Forecast6-Month Forecast12-Month Forecast
    USD/JPY162163165
    EUR/USD1.141.121.12

    Source: Goldman Sachs via CNBC

    Where Goldman Is Still Bullish: High-Carry EM

    The divergence in Goldman’s views is worth registering. While the bank cut its yen and euro outlooks, it strengthened forecasts for the Indian rupee, citing improved growth, lower inflation, and expected capital inflows following Reserve Bank of India measures. It also turned more optimistic on Colombia’s peso following a hawkish central bank stance and expectations of fiscal consolidation, CNBC reported.

    Goldman said it continues to favour using the yen “as a funder for high-carry EM expressions” — the carry trade framework, borrowing in a low-yielding currency to finance positions in higher-yielding markets. This reflects Goldman’s reported view that rate differentials remain an important consideration. 

    What Could Change the Picture

    Goldman is explicit about the two conditions that could break its thesis: a U.S. recession shock, or a materially faster pace of Bank of Japan rate hikes. The bank said intervention may buy time but — absent either of those developments — any support for the yen is likely to prove temporary, per CNBC.

    Both remain plausible tails. A sharper-than-expected U.S. labour market deterioration would reprice the Fed’s path quickly, compressing the yield differential that is doing much of the heavy lifting in Goldman’s dollar call. On the BoJ side, core inflation in Japan has been running above target, and the central bank has shown more willingness to adjust policy than its pre-2024 posture suggested. A shift in BoJ forward guidance — particularly one tied to wage data — could move the pair faster than Goldman’s 12-month path implies.

    Neither scenario is Goldman’s base case. Market participants may continue to monitor Bank of Japan policy statements and U.S. economic data for further context  in the Bank of Japan’s upcoming policy statements and U.S. growth prints on the BLS calendar.

    Risk Disclaimer: Trading CFDs involves substantial risk and may not be suitable for all investors. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You may lose some or all of your invested capital. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not a reliable indicator of future results. This article is provided for general informational and educational purposes only and does not constitute financial, investment, legal, tax, or trading advice, nor a recommendation, solicitation, or offer to buy or sell any financial instrument.

  • India’s RBI Holds Rates, Flags Iran Conflict as Inflation and Growth Risk

    India’s RBI Holds Rates, Flags Iran Conflict as Inflation and Growth Risk

    The Reserve Bank of India left its benchmark policy rate unchanged on Tuesday, while issuing an explicit warning that the ongoing Iran conflict and elevated global energy costs are materially complicating the central bank’s monetary policy calculus, according to CNBC and Investing.com. The Indian Rupee (INR), SENSEX, and NIFTY 50 each registered measured declines on the session as markets digested the cautious policy tone.

    Context

    The RBI’s decision to hold rates was broadly anticipated by market participants, but the central bank’s accompanying language drew considerable attention. Policymakers explicitly flagged the Middle East crisis as a material source of uncertainty, citing the potential for sustained energy price pressures to feed through into domestic inflation, according to CNBC.

    India imports approximately 85% of its crude oil requirements, making it structurally sensitive to disruptions in global energy supply chains. Analysts note that a prolonged period of elevated oil prices, should the Iran conflict persist or escalate, could compress corporate margins, weigh on consumer purchasing power, and widen India’s current account deficit — all of which may constrain the RBI’s flexibility to ease monetary policy in the near term, according to Investing.com.

    At the same time, the RBI acknowledged growing headwinds to domestic economic growth. Softer global demand, tighter financial conditions in advanced economies, and the risk of capital outflows from emerging markets amid geopolitical uncertainty are all factors that markets are pricing into Indian assets, according to Reuters.

    The central bank’s position reflects a dual-mandate tension familiar to many emerging market central banks: inflation pressures that may argue for policy restraint, set against growth risks that could, over time, argue for accommodation. Market participants are watching closely for any forward guidance signals that might indicate a policy pivot in either direction.

    “The RBI appears to be in a holding pattern, balancing upside inflation risks from energy against downside growth risks from external demand weakness. The Iran conflict has genuinely complicated their calculus.” — attributed to analysts cited by Investing.com

    Key Data

    • RBI Benchmark Repo Rate: Held steady; exact rate level per CNBC
    • USD/INR: The rupee has traded under pressure in recent sessions, with the pair observed at elevated levels relative to recent ranges, according to Reuters
    • SENSEX: Declined on the session following the RBI’s cautious commentary, according to Investing.com
    • NIFTY 50: Tracked broader SENSEX weakness; energy and consumer discretionary sub-sectors observed among underperformers, per Reuters
    • Brent Crude: Remained elevated amid ongoing Middle East supply uncertainty, per Reuters

    Historically, periods of sustained crude oil price elevation have tended to weigh on India’s trade balance and currency, though market relationships are dynamic and may change over time. Past correlations do not guarantee future performance.

    Market Snapshot

    AssetLevelChangeSource
    USD/INRElevated vs. recent rangeRupee under modest pressureReuters
    SENSEXDeclined on sessionNegativeInvesting.com
    NIFTY 50Tracked SENSEX lowerNegativeInvesting.com
    Brent CrudeElevatedPositive bias on supply riskReuters
    India 10Y Bond YieldWatched for directionMixedBloomberg
    MSCI EM IndexUnder broad pressureNegativeBloomberg

    Note: Precise intraday levels should be confirmed via live market data providers. Table reflects directional observations based on available sourcing.

    Bull and Bear Case

    Bull case: Some analysts suggest that a rate hold, rather than a hawkish hike, preserves policy optionality and may support a degree of economic activity. Should the Iran conflict de-escalate and energy prices recede, the RBI could find room to ease — a scenario that may prove supportive for Indian equities and the rupee over time, according to Bloomberg.

    Bear case: If elevated oil prices persist, India’s import bill may expand materially, widening the current account deficit and placing sustained downward pressure on the INR. In this scenario, the RBI may face a difficult choice between defending the currency and supporting growth — a constraint that could weigh on risk sentiment across Indian assets, according to Investing.com.

    Events Ahead

    The following upcoming events may serve as catalysts for INR, SENSEX, and NIFTY 50 price action. Outcomes remain uncertain and should be monitored rather than anticipated:

    • India CPI Inflation Data — The next domestic inflation print will be closely watched to gauge whether energy pass-through is accelerating; see Investing.com Economic Calendar for scheduled release dates
    • Global Oil Market Developments — Any escalation or de-escalation in the Iran conflict may influence Brent crude pricing and, by extension, India’s inflation and current account outlook; tracked via Reuters
    • US Federal Reserve Communications — Fed policy signals may influence global capital flows toward or away from emerging market assets including India; monitored via Federal Reserve
    • RBI Minutes and Forward Guidance — Publication of the MPC meeting minutes may offer additional clarity on the policy committee’s internal deliberations and inflation tolerance; see Investing.com Economic Calendar
    • India GDP and Industrial Output Data — Upcoming growth-related releases may provide evidence of whether the RBI’s growth concerns are materialising in real economic activity, per Bloomberg

    Risk Disclaimer: Trading CFDs involves substantial risk and may result in the loss of your invested capital. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money. Past performance is not indicative of future results. This content is for informational and educational purposes only and does not constitute investment advice.