ECB

Vasle of the ECB: Rate hikes should begin before the summer

The ECB hawks are out in force today

Inflation is becoming widespread Cannot say that monetary policy cannot curb inflation pressures

Holzmann, Nagel, Kazaks, Knot, Villeroy, and now Vasle have been the most vocal in their calls for faster rate hikes. But it’s possible that Rehn’s shift is the more significant one here. He is perceived as a bit of a dove, so siding with the hawks may indicate a shift in thinking within the ruling council.

So far today, the euro has benefited from the mood music, with EUR/USD up 0.4 percent to 1.0580.

Dollar

• Vasle of the ECB: The best time to start raising rates is before the summer
• The ECB hawks are out in force today
• Inflation is becoming widespread It is incorrect to assert that monetary policy is incapable of containing inflationary pressures.

Holzmann, Nagel, Kazaks, Knot, Villeroy, and now Vasle have been the most vocal in calling for faster rate hikes. However, Rehn’s shift here may have been the most significant. He is perceived as a bit of a dove, so siding with the hawks may signal a shift in thinking within the governing council.

So far today, the euro has benefited from the mood music, with EUR/USD rising 0.4 percent to 1.0580.

Elsewhere, the AUD/USD has risen from 0.7065 to 0.7105 and is now down just 0.1 percent, while the NZD/USD is unchanged at 0.6425 after falling to a low of 0.6396 earlier.

The dollar’s decline coincides with a rebound in US futures, with the S&P 500 futures moving from a low of 4,112.75 (down 0.7 percent) to 4,139.25 (down 0.1 percent) at the time of writing.

It’s a flow show right now, and I expect it to stay that way until the weekend break.

Risk

Risk aversion is resurfacing.

S&P 500 futures are currently down 0.7 percent on the day.

Equities are beginning to come under pressure again in European morning trade. It’s still early in the day, so don’t count your chickens before they hatch, but the latest dribble lower isn’t making me feel any better.

The dollar is also bid this morning as bond yields continue to rise, which is consistent with the overall market mood from yesterday.

Equities

European equities begin the day lower. Sluggish equities tones following yesterday’s thrashing

Eurostoxx -0.6 percent, Germany, Germany’s DAX fell by 0.5 percent, France’s CAC 40 fell by 0.8 percent; the United Kingdom’s FTSE fell by 0.2 percent and Spain’s IBEX fell by 0.8 percent.

It will be difficult for the market mood to shift, and don’t think the US non-farm payrolls release will make much of a difference. We are all aware that labour market conditions are tight, and the main focus right now is on inflation. A softer number is unlikely to derail the Fed, at least not this early in the cycle, so keep that in mind.

Elsewhere, US futures are starting to show nervousness, with the S&P 500 futures now down 0.3 percent.

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