0937 GMT - German industrial data point to broad-based strength in the first two months of the second quarter, despite the jump in energy prices due to the Iran war, Pantheon Macroeconomics' Claus Vistesen says in a note. Industrial production climbed 0.9% on month in May, after a 0.2% increase in April. That puts German manufacturing on track for a decent second quarter, and signals upside risk to GDP growth, he says. Survey data has softened in recent months, with the manufacturing PMI and the IFO recent production index subdued in May and June. "But we still think that production rose over the second quarter as a whole," Vistesen says. (edward.frankl@wsj.com)
0900 GMT - The prospect of large-scale interventions to support the Japanese yen poses a major risk for the dollar, ING's Francesco Pesole says in a note. The dollar versus the yen continues to go its own way, regardless of dollar swings, and is close to 162 yen despite a brief correction lower after last week's weak U.S. nonfarm payrolls data prompted markets to trim Federal Reserve interest-rate rise expectations, he says. "Failing to intervene below 163.0 could fuel speculation [that] the new line in the sand is closer to 165." The dollar falls 0.1% to last trade at 161.92 yen. (renae.dyer@wsj.com)
0859 GMT - A Paris appeals court ruling on whether to allow Marine Le Pen to run for office has great implications for French politics but probably won't have much impact on the euro, ING's Francesco Pesole says in a note. The court will rule Tuesday on Le Pen's attempt to overturn a ban on holding elected office for embezzling European parliament funds. A reversal of the ban could strengthen her far-right National Rally party and shift expectations towards a Le Pen candidacy over Jordan Bardella, Pesole says. However, markets have largely priced in a Le Pen or Bardella win and "either would deliver sufficient fiscal prudence to limit bond volatility." The euro last trades down 0.1% at $1.1427. (renae.dyer@wsj.com)
0844 GMT - The Philippines's near-term inflation outlook faces risks including El Niño-related supply disruptions and peso volatility, UOB economists say in a note. Prolonged dry weather could affect agricultural production and raise food prices, especially for rice and vegetables. "Such supply-side pressures typically persist for several quarters and could delay the pace of disinflation," UOB writes. El Niño's impact would be felt more strongly on headline inflation, given that food accounts for a significant portion of the CPI basket. That makes it a key risk factor even as energy prices ease. Still, UOB lowers its 2026 inflation forecast for the Philippines to 6.0% from 7.5% due to factors including the sharper-than-expected easing in headline inflation over the past two months. (amanda.lee@wsj.com)
0828 GMT - Central banks in Asia are unlikely to rush to unwind recent rate hikes, given rising El Nino risks to food inflation, Capital Economics' Gareth Leather says in a note. Central banks responded aggressively to the earlier surge in energy prices, with many hiking interest rates at least once. While the subsequent decline in energy prices has reduced the urgency for central banks to further tighten policy, El Nino conditions could keep them cautious. The impact from El Nino could be more significant than the energy shock, as food carries a larger weight in Asian consumer price baskets than energy. Capital Economics continues to expect India, Pakistan and South Korea to further tighten monetary policy over the coming months. (amanda.lee@wsj.com)
0826 GMT - Sterling could receive an indirect boost from the U.K. government bond market following the upcoming Bank of England Financial Stability Report, ING's Chris Turner says in a note. "In focus will be whether the BOE removes gilts from its Leverage Exposure Measure, against which banks have to hold 3.25% of Tier 1 capital." This could increase domestic demand for gilts, reduce government borrowing and loosen financial conditions, he says. If delivered, the euro could fall towards 0.8500 pounds, Turner says. The report is due at 0930 GMT. The euro falls 0.1% to a one-year low of 0.8537 pounds, LSEG data show. Gilt yields trade higher, with the 10-year yield up 2.1 basis points at 4.807%, Tradeweb data show. (renae.dyer@wsj.com)
0812 GMT - Despite surging energy prices from the Middle East conflict, German industrial production is proving resilient, ING's Carsten Brzeski says in a note. Industrial output rose 0.9% on month in May, from 0.2% in April. Some sectors seem to have benefited from the war, as Asian competitors were hit harder by the closure of the Strait of Hormuz, Brzeski says. Automotive production rose 3.6% on month, the data shows. The opening of the Strait, as well as easing geopolitical tensions, should help the German economy and move past recession fears, he says. "However, it won't be a huge boost but rather a mild tailwind. Despite some improvement, production expectations in industry remain weak, and order books are only very gradually filling up again." (edward.frankl@wsj.com)
0811 GMT - It is more important to watch the broader impact of climate change on inflation than to focus solely on the effects of El Nino, Carsten Menke of Julius Baer writes in a note. "Although it raises fears about food inflation, there is no clear evidence of El Nino structurally pushing up prices," Menke says. Historically, non-El Nino-related droughts pushed prices up, as did higher energy prices, demonstrating that a mix of factors can hurt agricultural production around the world, Menke adds. With extreme weather risks on the rise, inflation driven by climate change could become more prominent, but it is still remains to be seen whether it means more volatile or lastingly higher food prices, Menke says. (kimberley.kao@wsj.com)
0805 GMT - The euro could stay stuck in a range against the dollar over the summer as there doesn't appear to be any major drivers to move it, Commerzbank's Volkmar Baur says in a note. The European Central Bank looks set to keep interest rates unchanged in July while at the same time making it clear that another rate rise is possible but not certain, he says. The Federal Reserve is also likely to leave rates steady while providing few clues on future policy, he says. However, the ECB could raise rates in September while the Fed refrains from tightening, potentially providing support to the euro versus the dollar later in the year, he says. The euro falls 0.1% to $1.1426. (renae.dyer@wsj.com)
0740 GMT - Germany appears to be weathering the Iran war, after an industrial pickup follows strong retail sales figures released last week, Capital Economics' Andrew Kenningham says in a note. Industrial production grew 0.9% on month in May, which with other data suggests the German economy may have expanded in the second quarter of the year. However, the rise in industrial output was mostly due to an increase in auto production, which is unlikely to be sustained given the challenges which this sector faces, Kenningham says. "While German manufacturing seems not to have been greatly affected by the Iran conflict, this does not change the reality that it is likely to shrink as a share of the economy over the medium term," he says. (edward.frankl@wsj.com)
0738 GMT - Bitcoin eases after reaching a two-week high overnight as its recent appreciation loses steam. The pullback comes as tech shares are under renewed pressure after Samsung's results failed to impress lofty expectations. Geopolitical concerns also flare up again after Iran's Islamic Revolutionary Guard Corps fired missiles at two commercial ships near the Strait of Hormuz early Tuesday, the WSJ reports, citing a U.S. official. Bitcoin falls 0.7% to $63,355 after hitting a high of $64,539 overnight, according to LSEG. Bitcoin's recent recovery reflects a trimming of U.S. interest-rate rise expectations after last week's weak U.S. jobs data, although markets still expect tightening by year-end.(renae.dyer@wsj.com)
0730 GMT - Yields on 10-year U.K. government bonds, or gilts, rise to their highest in two weeks, tracking rises in U.S. Treasury yields. Treasury yields rise ahead of Wednesday's minutes of the Federal Reserve's June meeting as traders bet on a U.S. interest-rate increase by year-end. However, gilts could get a boost from the BOE's financial stability report at 0930 GMT, ING strategists say in a note. The report might include eased leverage ratio requirements for banks, which could make gilts more attractive, they say. "The leverage ratio is especially punitive for low-risk activities such as government bond repos." The 10-year gilt yield rises around 3 basis points to a high of 4.823% in early trade, Tradeweb data show. (jessica.fleetham@wsj.com)