ECB

Makhlouf, ECB: The era of negative interest rates is coming to an end.

It is time to end the APP next month or in July;

The current level of inflation is concerning;

It is reasonable to expect rates to be in positive territory by early next year; and

The ECB is continuing on its path toward policy normalisation.

For one of the dovish members to take such a stance, it is clear that there has been a perception shift within the ECB.

A rate hike in July appears to be all but certain at this point.

Despite the fact that many policymakers have called for the end of negative interest rates, it may still be too early to tell.

Equities

Risk sentiment remains gloomy in European morning trade as equities remain under pressure.

A look at the current European indices:

• Eurostoxx Index -2.3 percent

• Germany’s DAX fell 2.2 percent.

• FTSE 100 -2.2 percent

• CAC 40 -2.3 percent in France

• IBEX Spain -1.5 percent

• Italy’s FTSE MIB is down 1.7 percent.

But things are looking bleak for European stocks, which are attempting to catch up to Wall Street’s sharp decline yesterday. However, the overall market mood today is not encouraging. S&P 500 futures are currently down 0.7 percent, Nasdaq futures are down 1.1 percent, and Dow futures are down 0.6 percent.

If this trend continues, the S&P 500 will fall below its 100-week moving average.

USD/JPY

USD/JPY falls 1% on the day, testing short-term support.

The yen is leading the charge in the currency market today.

The low hit 128.60, challenging daily support from the 4 May low at 128.62.

Today’s markets are risk-off, and the yen is benefiting greatly from it, not least because Treasury yields have fallen this week.

Ten-year yields have fallen from a high of 3.20 percent on Monday to 2.84 percent today. This has contributed to the yen’s recovery in recent sessions, with USD/JPY now teetering on the verge of testing the short-term support level above.

It may not appear to be much, but it is a significant level because a break below it leaves little technical support for USD/JPY next through the 26-27 April lows near 127.00.

Dollar

On risk-off sentiment, the dollar and yen rose across the board.

A risk classic in markets so far today

The dollar and yen are firmer across the board as equities fall and bonds rise. Commodities are mostly down, and cryptocurrencies are also in turmoil. Today in Europe is shaping up to be a classic risk-off session.

EUR/USD is now down more than 0.5 percent to 1.0445, its lowest level since January 2017, with an eye on the 1.0400 level:

Meanwhile, the antipodeans are bearing the brunt of market risk-off sentiment, with the AUD/USD falling 0.8 percent to 0.6880 levels, as noted here. GBP/USD has also reached new lows since May 2020, falling 0.5 percent to 1.2190 at the time of writing.

The dollar is being bid across the board, but only by the Japanese yen, with USD/JPY briefly falling below 129.00. The pair is currently trading at around 129.10, down 0.7 percent on the day. This comes as bond yields continue to fall, falling for the fourth consecutive day for the first time this year.

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