0927 GMT - The Philippine economy recovery will be slow as the Strait of Hormuz gradually reopens, Maybank analysts say in a report. Transport costs in the Philippines are expected to decline, with the waterway reopening and oil prices falling. However, the macro recovery will likely take about two to three quarters, even with petroleum prices returning near preconflict levels. That is because the Philippines is still recovering from the lingering second-round effects of war-related supply shocks, including higher food prices, Maybank says.(amanda.lee@wsj.com)
0913 GMT - U.S. employment data seem to confirm that the labor market is still hovering around its equilibrium point, Edmond de Rothschild Asset Management's Michael Nizard and Nabil Milali say in a note. Job creation is still enough to prevent the unemployment rate from rising and to continue supporting household consumption, but not enough to generate wage pressures that could lead to a further rise in inflation, they say. "We believe these statistics will provide a strong argument for the Federal Reserve's most dovish members to maintain the status quo and rule out the risk of a rate hike as early as the July meeting." Inflation figures will be decisive in settling this debate once and for all, but they believe that caution will ultimately prevail. (emese.bartha@wsj.com)
0901 GMT - Trade tensions between Germany and China pose a potential headwind to the euro, Commerzbank's Volkmar Baur says in a note. The dispute could result in trade restrictions against China given concerns about Germany's growing trade deficit with the country, he says. Any EU measures taken would certainly not go unanswered by China, although it's pointless to speculate on what any response might look like, he says. "However, it is unlikely to be positive for the European economy and would therefore probably weigh on the euro as well." The euro last trades up 0.2% at $1.1452. (renae.dyer@wsj.com)
0856 GMT - The Bank of Thailand is still likely to keep its policy rate on hold at 1.00% through end-2027, UOB economists say in a note. A rate cut wouldn't address an imported energy shock, they say. Conversely, a hike would risk further tightening financial conditions for households and small and medium-size enterprises, and shouldn't be necessary unless a second-round of inflation or disorderly FX pass-through becomes more evident. "The more appropriate policy mix is therefore a prolonged monetary hold, targeted fiscal relief, energy-cost smoothing, debt restructuring, and credit-support measures," UOB says. (amanda.lee@wsj.com)
0836 GMT - Japanese authorities might have intervened Thursday to support the yen and could take further action Friday during U.S. holiday-thinned liquidity, ING's Francesco Pesole says in a note. The dollar fell against the yen Thursday morning even before soft U.S. nonfarm payrolls data pushed it below 161.00, he says. "We cannot rule out that this initial move was driven by FX intervention." Further interventions remain a risk despite the yen's recovery, he says. Japan tends to intervene around holidays and spread operations over multiple days. Acting after a dollar-negative event would also be consistent with their approach in 2024, he says. The dollar falls 0.1% to 160.87 yen, having reached a two-week low of 160.51 earlier, according to LSEG. (renae.dyer@wsj.com)
0836 GMT - Citi sees an increasing risk of the 10-year Japanese government bond yield testing 3% sooner than anticipated with a rising fiscal premium, strategist Tomohisa Fujiki says in a note. The JGB curve has steepened due to fiscal concerns and yen weakness, and the key is whether there is repricing of the five-year sector, he says. "Underperformance by the 10-year sector may continue as it has become even harder to take on duration risk," he says. Rate-hike pricing has been brought forward but only modestly, and the two- to five-year sector looks "rich." The 10-year JGB yield last trades at 2.78%, up 1.2 basis points, according to LSEG. (emese.bartha@wsj.com)
0827 GMT - The dollar is unlikely to enter a sustained downward trend after Thursday's worse-than-expected U.S. nonfarm payrolls report, ING's Francesco Pesole says in a note. The data aren't weak enough on their own to trigger a significant repricing in rate rise bets for the Federal Reserve, he says. While markets scaled back the prospect of imminent tightening, there is still more than 25 basis points priced in by December. The DXY dollar index falls 0.2% to 100.691 and ING expects it to stabilize in a range of 100.0-101.500 in coming weeks. (renae.dyer@wsj.com)
0824 GMT - Thailand's economic growth is likely to pick up in 2H, since the U.S.-Iran hostilities paused in late June and the Strait of Hormuz gradually reopened, Maybank economists say in a report. Thailand is one of the Asean economies that is more exposed to the Gulf shock through supply disruptions and shortages as well as higher input costs. However, the Middle East truce should lead to a lower risk of slowing growth, they note. Maybank expects Thailand's GDP growth to come in at 2.2% in 2H and average 2.1% in 2026, before accelerating to 2.7% in 2027. (amanda.lee@wsj.com)
0804 GMT - The euro's modest rise against the dollar after Thursday's weak U.S. nonfarm payrolls data highlights the lack of a convincing positive narrative for the single currency, ING's Francesco Pesole says. That largely reflects doubts the European Central Bank will raise interest rates again, he says in a note. There's a risk markets price out all ECB rate rises before they do the same for Federal Reserve tightening, he says. The paring of Fed rate rise bets could still support the euro-dollar exchange rate as it reacts more to U.S. rates, but its recovery might be slow, he says. The euro rises 0.2% to $1.1453, and ING expects it won't return to above $1.16 until late in the summer. (renae.dyer@wsj.com)
0803 GMT - French industry is on track for a solid second quarter, helped by stronger capital goods production despite a small retreat in May, Pantheon Macroeconomics' Claus Vistesen says in a note. Industrial production edged down 0.1% on month in May, having risen 0.3% in April. Production in May was lifted by a surge in energy output, though output of machinery and transport dipped. But over the quarter as a whole, production of transport equipment--mainly aircraft--remains on track for a solid increase, as does output of machinery and equipment more broadly, Vistesen says. (edward.frankl@wsj.com)
0715 GMT - Eurozone government bond yield spreads continued to widen this week, driven by the French OAT-German Bund yield spread and supply pressure, Societe Generale rates strategists say. Supply pressure arises from France's 14 billion euro auction of long-dated OATs on Thursday. However, with supply set to fade into the summer, there is room for narrower spreads near term, they say. "If summer seasonality is at play, we should see some tightening in the coming weeks." Beyond that, markets are likely to refocus on fiscal dynamics, foreign flows and French political risk, the strategists say. "We expect OATs to underperform [Italian] BTPs and Spanish government bonds amid renewed political stress." The 10-year OAT-Bund yield spread is 77 basis points, according to Tradeweb. (emese.bartha@wsj.com)
0713 GMT - Eurozone government bond yields rise in early trade and the trend could continue throughout the day, Commerzbank's Hauke Siemssen says in a note. "Without a circuit breaker in sight and the U.S. out on holiday, the bearish dynamics could continue ahead of the weekend," the rates strategist says. "Long-end EGBs remain under pressure with the curve steepening from both sides," he says. The rates strategist points to the bearish dynamics with long-end Japanese government bonds under renewed pressure this week. Eurozone 10-year government bond yields rise by between 1.6 basis points and 2.6 basis points, with the 10-year German Bund yield up 2.1 basis points at 2.919%, according to Tradeweb. (emese.bartha@wsj.com)