1028 GMT - U.S. Treasury yields and the dollar rise in European trade, helped by U.S. rate-hike expectations but also likely by position adjustments as a new quarter gets underway. Recent solid U.S. data maintain expectations that the Federal Reserve will raise interest rates. "The dollar has pushed higher against every G-10 peer as investors wait for the next steer from central-bank speakers, including Fed Chair Warsh," Tickmill's Patrick Munnelly says in a note. The two-year Treasury yield rises 3.3 basis points to 4.172%, while the 10-year yield is up 4.3 basis points at 4.465%, according to Tradeweb. The DXY dollar index rises 0.2% to 101.389. (emese.bartha@wsj.com)
1006 GMT - Inflation in the eurozone is falling significantly, Stephanie Schoenwald at KfW Research says in a note. With the peak of the energy shock now behind us, significant second-round effects on the labor market can be largely ruled out, she says. Eurozone inflation slowed faster than expected in June to 2.8% from 3.2% in May. "This reduces the likelihood of a further interest-rate hike by the ECB," Schoenwald says, noting that a hike in July now looks remote. Still, more monetary tightening down the line cannot be ruled out. "Only the data from the coming weeks and months will reveal how much additional price pressure the four-month high in energy prices is still exerting on the economy." (don.forbes@wsj.com)
0936 GMT - RHB maintains a cautious view on Indonesia's external trade outlook in 2H after the country posted its first monthly trade deficit since 2020 in May, economist Wong Xian Yong says in a note. Weaker commodity prices, softer external demand and stronger imports are expected to narrow the trade surplus, he says. Palm oil exports could be constrained by higher domestic biodiesel consumption, while lower nickel prices might weigh on export values despite a recovery in shipment volumes, he reckons. Changes in U.S. trade policy and tighter government oversight of commodity exports could add volatility to trade flows, he adds. (yingxian.wong@wsj.com)
0935 GMT - The South Korean won is nearing its weakest level against the U.S. dollar in 17 years. The dollar earlier rose to an intraday high of about 1,559 won on the first trading day of July after climbing to around 1,562 won in June, its highest level since 2009, LSEG data show. The greenback traded at 1,596.90 won on March 6, 2009, the data show. "Strong U.S. employment data and higher interest rates continue to support the U.S. dollar," KB Kookmin Bank FX economist Lee Min-hyeok says in a note. "On the supply-and-demand front, a tug-of-war persists between foreign investors' equity sales and exporters converting dollar proceeds into won," Lee adds.(kwanwoo.jun@wsj.com)
0930 GMT - Eurozone government bond yields remain unmoved by flash estimate June inflation data and remain higher on the day. Headline June inflation came in at 2.8%, down from 3.2% in May, and below analyst expectations of 3.0% in the Wall Street Journal's poll. Weaker data came as less of a surprise as it followed on from softer-than-anticipated inflation figures from Germany, France and Italy. The 10-year German Bund yield trades at 2.878%, up 1.6 basis points on the day after the data, unchanged from before the data, according to Tradeweb data. (emese.bartha@wsj.com)
0925 GMT - The euro remains at weaker levels after preliminary eurozone inflation data for June were lower than expected. Inflation eased to 2.8% in June from 3.2% in May, below the 3.0% forecast by economists in a WSJ survey. Core inflation fell to 2.4% from 2.6%, against an expected 2.6%. The impact on the euro was limited as the data followed softer-than-anticipated inflation prints from Germany, France and Italy. The euro falls 0.2% to $1.1395, little changed from levels before the data. (renae.dyer@wsj.com)
0905 GMT - Sterling is showing resilience to political headwinds but this probably won't last, Monex Europe analysts say in a note. "Of note, the government's long-delayed Defence Investment Plan offered little indication of how the government will pay for increased spending, despite the promised sums underwhelming already low expectations," they say. With fiscal risks and political uncertainty still elevated, Monex continues to see risks of sterling falling, the analysts say. Sterling drops 0.1% to $1.3247 versus a stronger dollar but rises to a 10-month high of 0.8598 per euro, according to LSEG. Prime Minister Keir Starmer announced his resignation last week. (renae.dyer@wsj.com)
0904 GMT - Asia appears to have withstood the global energy price shock reasonably well, Capital Economics' Gareth Leather says in a webinar. The region looked vulnerable initially when the Iran war broke out, due to its heavy reliance on energy supplies from the Middle East. However, many Asian governments provided fiscal support through subsidies and price controls to mitigate the impact of rising energy prices. Consumers and businesses haven't really borne the brunt of higher energy prices; instead, governments' fiscal positions have been hit, he says. (amanda.lee@wsj.com)
0859 GMT - Sterling rises to a 10-month high against the euro, helped by easing concerns about potential fiscal policy under Andy Burnham, the frontrunner to become the U.K.'s next prime minister. A weaker euro due to concerns about a fragile eurozone economy also help sterling. U.K. fiscal concerns remain, however. "We have been surprised by the lack of reaction in U.K. assets to the growing likelihood that Energy Secretary Ed Miliband, rather than centrist Wes Streeting, lands the role as the next Chancellor of the Exchequer," Ebury strategist Matthew Ryan says in a note. Still, Burnham has said he will stick the the U.K.'s fiscal rules. The euro falls to a low of 0.8598 pounds. Against a stronger dollar, sterling falls 0.1% to $1.3250. (renae.dyer@wsj.com)
0849 GMT - The U.K. government may have to increase taxes or reduce spending in some departments to finance defense spending, RBC Capital Markets strategists say in a note. The government published the Defence Investment Plan on Tuesday, outlining 10.3 billion pounds ($13.6 billion) of funding to be raised by "reallocating budget from across government departments". The plan noted that a further 4.7 billion pounds will be confirmed at the budget statement in autumn. (miriam.mukuru@wsj.com)
0845 GMT - The European Central Bank is likely to wait for more data, such as fresh macroeconomic forecasts at its September meeting, before deciding its next interest-rate move, its vice-president Boris Vujcic says. "We will have to wait for the data to come in until the July meeting, and then in September we have new projections, and then we will decide, depending on further data that will come in," he told CNBC in an interview on the sidelines of the ECB's conference in Sintra, Portugal. The bank still won't pre-commit to a rate path, Vujcic says. So far, inflation data for June has provided no surprises, he says. The ECB last raised its key rate at its June meeting by a quarter point. (edward.frankl@wsj.com)
0842 GMT - The euro is at risk of further falls if Wednesday's eurozone inflation data are lower than expected and European Central Bank President Christine Lagarde dampens expectations for further interest rate rises, Monex Europe analysts say. The inflation data are likely to miss expectations given softer-than-expected prints from Germany, France and Italy, they say in a note. This could reinforce the case that the ECB is "one and done" after last month's rate increase, they say. Largarde could also validate this argument at the ECB's forum in Sintra, Portugal Wednesday. The euro falls 0.2% to $1.1400. (renae.dyer@wsj.com)