Insights 
VT 
Crude oil prices are stabilising as supply concerns lessen, following tensions in the Middle East. Israel claims to have destroyed a third of Iran’s missile launchers, while the EU is ready to accept a 10% tariff by the US under specific conditions.
India aims to sign a deal with the US by July 9, as the US pushes Vietnam to cut reliance on Chinese technology. The European Central Bank, represented by Nagel, does not indicate a pause or rate cut currently. Italy’s final May CPI reached 1.6%, unchanged from the preliminary figure, while Swiss producer and import prices fell by 0.5% in May.
Market Dynamics
In markets, the New Zealand dollar is leading, while the Swiss franc and Japanese yen lag. European stocks are up, with S&P 500 futures rising 0.6%, and US 10-year yields increasing slightly to 4.444%. Gold has decreased by 0.5% to $3,413.62, and West Texas Intermediate crude dropped 3.4% to $70.45. Bitcoin increased by 2.1% to $106,981.
Despite unresolved Iran-Israel tensions, markets are cautiously optimistic. Equities show moderate gains with the dollar slightly down. EUR/USD, AUD/USD, and other major currencies show minimal changes. Focus shifts to central bank meetings as the Bank of Japan, Federal Reserve, Swiss National Bank, and Bank of England prepare for policy announcements.
With geopolitical worries temporarily easing, there’s a distinct sense that markets are starting to recalibrate. The waning tension between Iran and Israel, paired with actions on both sides suggesting a reluctance to escalate further, has helped suppress fears of wider disruptions—particularly in energy. Oil prices, previously buoyed by speculation over supply shocks, now hover at lower levels, aided too by broader macroeconomic signals suggesting demand may not accelerate as much as once thought. For those reacting to short-term contract exposure in commodities, the cooling momentum in crude could compel adjustments, especially if inventory data later this week confirms a slower drawdown pace.
Now, with the European Central Bank maintaining a less dovish tone, as Nagel indicated no appetite yet for a pivot, there’s less appetite to expect a rate cut soon from Frankfurt. This stance might encourage flattening trades across the euro curves, particularly as inflation hasn’t strayed far from recent estimates. Interestingly, Italy’s final inflation print holding at 1.6% gives authorities little reason for immediate alarm. Those anticipating sharp monetary loosening in the bloc perhaps need to reconsider how persistent the ECB’s patience can be—especially if core prices stick.
On the other hand, Switzerland’s import and producer prices falling again suggests weaker input cost pressures. For us, the more subdued price trend here could help reinforce bets on a more dovish tilt from Zurich. That said, things remain sensitive to broader European data cadence as well as currency strength—something that can’t be ignored, particularly when considering how the franc’s relative weakness today compares to prior safe-haven flows.
Shifts in Asia-Pacific and Market Outlook
Over in Asia-Pacific spheres, the New Zealand dollar gaining momentum compared to the more defensive Swiss franc and yen reflects a partial shift away from standard risk-off positioning. This might also tie into the tentative bid in equity markets. We’ve observed the S&P 500 index futures nudging higher, a 0.6% lift amid improving risk sentiment. That movement, alongside the firming of US 10-year yields, indicates that markets aren’t pricing in imminent dovish action from the Federal Reserve—despite the macro noise.
What this implies for interest rate sensitive exposures is subtly changing. Bond traders adjusting to slight upward moves in the US yield curve may be positioning ahead of next week’s policy decision. The 4.444% on benchmark 10-years doesn’t scream concern either way, but it does suggest rates are unlikely to decline near term unless there’s a sharp deterioration in US economic data.
Spot gold dropping by half a per cent, to around $3,413, adds another layer of clarity. In our view, some of the safety premium is being released as immediate headline risks fade. Those holding long positions in precious metals might reassess given softer inflation trends, improved dollar liquidity, and renewed equity appetite.
Bitcoin, however, climbing over 2%, has diverged again. At levels around $106,981, speculative positioning seems alive, possibly driven by broader de-risking temporarily favouring digital assets. Not necessarily a clean signal, but an indication that certain pockets of the market are still looking to deploy cash into higher-beta instruments.
On the macro front, headlines suggest India seeks a near-term deal with Washington, nudging towards greater alignment amid broader supply chain reconfigurations in Asia. Meanwhile, encouragement from the United States for Vietnam to scale back its dependence on Chinese infrastructure isn’t just about technology—it’s a continued policy stance that might have longer term implications for sector-specific equity valuations in the region.
The market, meanwhile, focuses intently on the upcoming central bank decisions. Traders calibrating positions must now account for a confluence of event risks. The Bank of Japan, typically more dovish, remains a variable. While policy settings there tend to anchor risk appetite more passively, any deviation from script could trigger volatility given crowded yen short positions. The Federal Reserve’s stance will test just how firm the US economy truly stands beneath the surface. Swiss and UK central banks will provide further clarity, although the National Bank’s hand could be forced earlier than the BoE if domestic price pressures remain tame.
All of this leaves multiple path dependencies. But pricing is increasingly nuanced, with macro signals separating hawkish sentiment from actual tightening action.
