2025-07-02 10:32

July 2 (Reuters) - Schroders upgraded its outlook for global corporate bonds to 'neutral' from 'negative' on Wednesday and maintained its positive view on global equities as it expects reduced risks of a U.S. recession. The British asset manager upgraded its stance on both U.S. investment grade and high yield bonds to 'neutral' from 'negative' backed by stabilising growth, rising demand and positive consumer sentiment data. Sign up here. In May, Moody's downgraded the U.S. sovereign credit, while President Trump's tariff policies has caused some volatility in benchmark Treasury bonds, which in turn have lifted corporate bond yields. U.S. junk bond issuance totaled $28.9 billion in May, the most for a month since September 2024, according to brokerage J.P. Morgan. Schroders said the "biggest risks seem to have passed" for U.S. investment grade credit but pointed out that valuations remain high for domestic corporate bonds overall. "Now, the market can pay more attention to deregulation and government spending," it added. Earlier this month, data from the Treasury Department showed foreign investors' holdings of U.S. Treasuries showed a modest decline in April from record levels of U.S. debt. The asset manager reiterated its positive stance on global equities, including U.S. equities. It maintained a negative outlook on the dollar. "While economic uncertainty persists, we think downside risks are contained and the risk of recession this year is lower," they added. https://www.reuters.com/business/schroders-upgrades-global-corporate-bonds-easing-us-recession-risks-2025-07-02/

2025-07-02 10:16

MUMBAI, July 2 (Reuters) - The Indian rupee declined on Wednesday as the dollar nudged higher ahead of closely watched U.S. economic data, with investors focused on prospects for trade deals ahead of a July 9 deadline. The rupee closed at 85.7025 against the U.S. dollar, down 0.2% on the day. Sign up here. Asian currencies declined as well, led by the Malaysian ringgit, which fell 0.7%. The dollar index was up nearly 0.3% and hovering just shy of the 97 handle. Stronger-than-expected U.S. economic data released on Tuesday offered mild support to the greenback with investors now awaiting a key non-farm payrolls report on Thursday and developments on bilateral trade negotiations. Despite the looming trade deadline, the rupee's very near-tenor implied volatility, a gauge of future expectations, was hovering a tad below its three-month average, indicating that traders are not yet pricing in the possibility of sharp swings in the near-term. U.S. President Donald Trump has said he was not considering extending the deadline for countries to negotiate trade deals but expects an agreement will be reached with India. While Trump has ruled out an extension of the deadline, "markets are wary of taking this at face value given recent reversals," ING said in a note. "The prevailing view may be that global tariff threats peak before another last-minute reprieve," ING said. Analysts polled by Reuters expect the rupee to be largely rangebound over the next year, trailing Asian peers amidst sustained weakness in the dollar. In three months, the rupee is forecast to decline 0.1% from current levels to 85.75 per dollar. It is then expected to trade at 85.50 in six months and weaken marginally to 86.13 in a year, according to the median forecast of 41 FX strategists. https://www.reuters.com/world/india/rupee-slips-volatility-expectations-unruffled-by-looming-tariff-deadline-2025-07-02/

2025-07-02 09:59

LONDON, July 2 (Reuters) - The pound eased a touch against the dollar on Wednesday but held near its near-four-year top hit the previous day, one of the many beneficiaries of the greenback's recent weakness. Investors by and large looked through political drama in Britain where Prime Minister Kier Starmer suffered the largest parliamentary rebellion of his premiership even as he was forced to back down on key parts of a benefit-cutting package. Sign up here. Markets this week were more focused on hints from Bank of England governor Andrew Bailey on Tuesday that the central bank could change the BoE's quantitative tightening process - the pace of which, analysts say, has been weighing on longer dated government bonds known as gilts. "The gilt market did not react negatively to the news from the Commons, at least partly thanks to Bank of England Governor Andrew Bailey hinting at a potentially slowing quantitative tightening to give some relief to back-end liquidity. That may have helped shield sterling, too," said Francesco Pesole, currency analyst at ING, in a note. Sterling was last down 0.35% on the dollar, largely moving in line with peers, as the dollar's recent decline paused for breath. The pound hit $1.3787 on Tuesday, its highest since autumn 2021. Other European currencies such as the euro and Swiss franc are also at their strongest in years. Sterling was also a touch weaker on the euro, which was up 0.15% at 85.98 pence, an over two-month high. There is little British economic data expected for the rest of the day, though policy maker Alan Taylor will speak at the ECB's central bank conference at Sintra, Portugal. Taylor voted for a rate cut at the central bank's last meeting in June, when the rate-setting monetary policy committee voted to keep rates steady. Market pricing indicates a good chance of a BoE rate cut at their meeting next month, though it is not yet fully priced in. https://www.reuters.com/world/uk/sterling-nudges-lower-still-near-multi-year-highs-looking-past-uk-politics-2025-07-02/

2025-07-02 09:35

Not uncomfortable with market pricing of interest rates There is a risk of inflation falling too low Strong euro also argument for supportive stance SINTRA, Portugal, July 2 (Reuters) - Euro zone inflation is at risk of falling short of the ECB's target and there is a case for the bank to provide a mildly supportive policy stance, Belgian central bank Governor Pierre Wunsch said on Wednesday. The ECB has cut rates by two full percentage points since last June, and its 2% deposit rate provides a so-called "neutral" setting, which neither slows nor stimulates economic growth. Sign up here. However, the growth outlook was muted and inflation could be pulled down by a host of factors, suggesting that neutral may not be enough, Wunsch argued. "There is an argument for providing a mildly supportive policy stance," Wunsch told Reuters in an interview. "If the recovery is delayed — and it has been delayed a few times — and output is below potential, then being supportive is rational." He added that the euro's surge to 1.18 against the dollar, its highest level since late 2021, was also an argument to provide this support, since the stronger currency would dampen inflation and could also weigh on economic growth. Cheap imports from China, lower energy prices, the lack of tariff retaliation, the strong euro and a substantial slowdown in wage growth were all putting downward pressure on prices, Wunsch said, joining Portuguese policymaker Mario Centeno and Finland's Olli Rehn in warning about the risk of too-low inflation. "All these factors combined suggest that the upside risk is limited and the overall risk is to the downside," Wunsch said. ECB projections see inflation below 2% for 18 months from the third quarter, before a return to target in early 2027. Financial markets anticipate one more rate cut from the ECB later this year, taking the deposit rate to 1.75%, a stance some already consider to be mildly stimulating. "I don’t disagree with market pricing for interest rates," Wunsch said. "I won’t endorse expectations but I am also not uncomfortable with them either." But Wunsch also appeared to play down worries that ECB rates would have to go too deep, arguing that the economy was holding up well. "I am not overly concerned about growth," Wunsch said. "Recent national PMI numbers were rather comforting. German fiscal plans are also game changing. Major fiscal expansion by a country that can afford it, provides a major boost." https://www.reuters.com/markets/us/ecb-should-consider-mildly-supportive-stance-low-growth-inflation-wunsch-says-2025-07-02/

2025-07-02 09:22

BENGALURU, July 2 (Reuters) - The Indian rupee will trade in a narrow range over the next six months as global risk-off sentiment slows capital inflows to a trickle, potentially offsetting gains from a weaker U.S. dollar, a Reuters poll of FX analysts showed. Despite the dollar index (.DXY) , opens new tab falling nearly 11% so far this year, the rupee has remained largely stable. The Reserve Bank of India has been shoring up its reserves to near record levels to limit volatility and to meet dollar obligations when needed. Sign up here. Foreign portfolio investors have been net sellers of Indian assets this year. Most strategists in the June 30–July 2 Reuters poll said they did not expect the rupee to make any meaningful gains. This comes even as global investors sell American assets over concerns rising debt levels in the world's largest economy are unsustainable in the long run. In three months the rupee is forecast to be down around 0.1% from current levels at 85.75 per dollar. It is then expected to trade at 85.50 in six months and weaken marginally to 86.13 in a year, according to the median forecast of 41 FX strategists. "The overall trend for USD/INR should be downward, with the Fed cutting rates, the dollar index falling and possibly a breakthrough on the U.S. trade deal in the coming days," said Anil Bhansali, head of treasury at Finrex Treasury Advisors. "It's going to be a slow and steady journey for the rupee because the RBI is currently buying dollars to meet its liabilities." U.S. President Donald Trump said on Tuesday a trade deal could be reached with India. The rupee has been a laggard compared to most regional peers, down around 0.1% for the year. The Korean won, Thai baht, Malaysian ringgit and Singapore dollar have gained more than 5%. However, the RBI's recent policy stance shift to "neutral," signalling the end of its brief rate-cutting cycle, may help underpin the currency. "(Given) better growth prospects, with a lot of monetary and fiscal stimulus being front-loaded and the expectation India might end up benefiting on the trade front compared to peers, there is a case for the rupee to somewhat appreciate from where we are today," said Sakshi Gupta, principal economist at HDFC Bank. (Other stories from the July foreign exchange poll) https://www.reuters.com/world/india/indian-rupee-range-bound-despite-weaker-us-dollar-set-trail-most-asian-peers-2025-07-02/

2025-07-02 09:04

Cbank deputy governor says economy to slow down in H2 due to U.S. tariffs Says political uncertainty not an elevated concern U.S. tariffs are weighing on growth Says softer baht would support economy Says need for central bank to collaborate more with government BANGKOK, July 2 (Reuters) - Thailand's economy faces a challenging second half of 2025 due to uncertainty about U.S. tariffs, a central bank deputy governor said on Wednesday, just as the country is caught in a new wave of domestic political turmoil. Under these circumstances, Roong Mallikamas, one of the two candidates short-listed to lead the Bank of Thailand from October, said that the central bank's monetary policy should remain accommodative to support the economy. Sign up here. "We'll see a tailing of the economic growth in the second half of this year, mainly due to the tariff effects," Roong told Reuters in an interview. "We anticipate a marked slowdown in economic activities. I think basically the tariff effects also magnify ... our country's structural problems." Southeast Asia's second largest economy has lagged regional peers since the pandemic, growing only 2.5% last year. The central bank forecast the economy will expand by a slower 2.3% in 2025, bogged down by high levels of household debt and tepid consumption. A threat by the United States to impose a 36% tariff on imports from Thailand has added to the challenges facing the floundering economy. Thai Finance Minister Pichai Chunhavajira is currently in Washington for negotiations. The talks, ahead of a July 9 deadline to negotiate a trade deal with the U.S., come as Thailand has been plunged into renewed political chaos after Prime Minister Paetongtarn Shinawatra was suspended from office by the Constitutional Court on Tuesday. The political uncertainty is currently not an elevated concern, with government spending and trade negotiations with the U.S. likely to continue without interruption, Roong said. After cutting interest rates in October, February and April, the Bank of Thailand last week left its key interest rate unchanged at 1.75%, outlining the need to save some policy ammunition in case the economy slowed more than expected. Members of the BOT's monetary policy committee feel that policy should be at an accommodative level to support the economy, said Roong, who is not part of the seven-member MPC. "I think the pause was just to say that this is to assess what we have already taken," she said. "Another issue is how to maximise the remaining policy space that we have." "If the outlook deteriorates, if I were an MPC member, I would not be reluctant to ease," Roong said. The BOT will next review policy on August 13. A softer baht would also support the economy, and the central bank would look to ensure that the currency's moves are not affected by non-fundamental factors, such as gold prices, she said. The baht has risen by 5.7% against the U.S. dollar so far this year. While recent negative inflation readings did not signal the economy was in deflation, they are a "reflection of very soft demand and it's more of a concern that the momentum of the economy is rather slow," Roong said. 'DIVERT CONFRONTATIONS' The ruling Pheu Thai party, which took power in 2023, has long been at loggerheads over rate cuts and the currency with the central bank, currently led by Governor Sethaput Suthiwartnarueput, whose five-year term ends in September. Last year, before she became prime minister, Paetongtarn said that central bank independence was an obstacle to solving economic problems. Roong, 56, said that there was a need for the central bank to communicate and collaborate more deeply with the government. "When you talk early, a lot of things can be resolved before it gets to the point where it's more confrontational," said Roong, who has spent nearly three decades at the central bank. "I would hope to divert a lot of confrontations." Roong, who holds a Ph.D. in economics from the Massachusetts Institute of Technology, is shortlisted for the top job along with Vitai Ratanakorn, 54, president and chief executive of Government Savings Bank, Thailand's largest state-run lender. Facing down concerns over assertive governments pushing the central bank to toe their line, Roong underlined the need for open dialogue. "You can voice your concerns, and you can share freely what you think. I think that is independence," she said. "It's not about going separate ways." https://www.reuters.com/world/asia-pacific/thai-monetary-policy-must-stay-flexible-headwinds-build-central-bank-deputy-says-2025-07-02/