Markets
The June PMIs come with an important disclaimer this time: “Most of the responses used to calculate preliminary June PMI data were received prior to the signing of the Memorandum of Understanding to Cessation of Hostilities between the United States and Iran on June 17.” An agreement was reached at the start of last week, meaning some related optimism has filtered into closely watched business confidence indicators. But with the actual signing of the deal days later, The final reading (July 3) will likely be revised upwards. Currently, the eurozone economy is contracting at a slower pace than in May with the headline index recovering from 48.5 to 49.5. Al-Malik said that the survey indicates no change in the gross domestic product during the second quarter. The services sector continued to improve amid signs of recovery in demand after war-related disruptions. Activity slowed at a slower pace (48.9 from 47.7). Industrial production continued to rise modestly (51.2 from 51.3). New business declined again. The slight increase in manufacturing failed to offset further declines in services. June saw a renewed but marginal increase in staffing levels for the service. But continued job cuts in the manufacturing sector more than offset that. Manufacturers reported lengthening supplier delivery times while purchasing activity was broadly unchanged. The latter marks the end of a three-month surge in expected buying. Inflationary pressures declined. Input costs rose rapidly, but at the slowest pace since February in both sectors. Charged prices/production prices are up again. Although it was slower than in May, It did not fully reflect the larger reduction in factory gate prices. Optimism for the year ahead has risen from a 31-month low seen in June. Although the price is still historically low, the trend is encouraging. The PMIs were close to consensus and left little impact on the markets. German bond prices gradually rose, resulting in yield changes of between -3.5 and -4.6 basis points. It’s more a Something of refuge Nevertheless. Technological changes impact stock markets as value continues to rotate and small caps continue to rotate. The Nasdaq is trading another 1.6% lower. It turns out that the fragile risk environment is the biggest driver of the currency market as well. It could remain a major factor for trading until the end of the second quarter of 2026 and the first half of 2026. The US dollar is the main beneficiary. EUR/USD is testing the crucial support level at 1.1392. A break down would mean a return to intermediate support in the 1.1214-1.1276 area (2024 and 2023 highs respectively). Strong support is at the 1.1109/1.1111 area, where the 38.2% pullback and the 50% pullback in the 2022-2026 and 2025-2026 rally combine. The DXY index breaks the resistance level of 101.14 (38.2% rebound on 2025-2026 decline) to trade at 101.30. The next stops are 102.86 (50% recovery), followed by 104.59 (61.8%) and 104.68 (March 2025 correction high). Today’s market environment helps the yen stop the bleeding that it witnessed over the past two weeks. The USD/JPY pair is holding near multi-decade highs around 161.5. Sterling continues to enjoy a politically inspired bid, shrugging off significantly weaker than expected UK PMIs. The composite index unexpectedly slipped marginally into contraction territory (49.4). EUR/GBP is trading at 0.8618, the weakest level since mid-March. US PMIs improved from May to 52.2 (composite) with better readings in both sectors. It reaches 1% annual growth in the second quarter. PMI holders are taking a cautious tone, especially when it comes to hiring. Factory job cuts are at their highest levels since 2009 if the pandemic is excluded. Input cost inflation is high but has eased since May while prices have risen at the same pace as seen last month.
News and opinions
The Hungarian Central Bank (MNB) cut interest rates as widely expected by 25 basis points, from 6.25% to 6%. the The inflation path in June forecasts has turned significantly lower Compared to the March inflation report. The rise in the value of the forint, as well as lower energy and food prices, has led to lower inflation. With the decline in the intensity of the conflict in Iran, fuel prices in the market began to fall below the level of fuel price ceilings. For the rest of this year and next, the rate of price increases will remain below the central bank’s target of 3%. On annual average, inflation is expected to be 1.8% this year, 2.3% in 2027, and 3% in 2028. New GDP forecasts range between 2% and 3% and 2.9% over the policy horizon. The basic scenario is Surrounded by balanced inflation and upside growth risks. The global risk environment has become more favourable, Hungarian risk premia remain limited, and frozen EU funds will be released. Looking forward, If current positive developments continue, MNB – While maintaining a positive real interest rate – He sees scope for further interest rate cuts throughout the summer, with a decision on whether to continue them based on the September inflation report. MNB meets on both July (21) and August (25) suggesting a 5.5% interest rate ahead of the September meeting. this Faster than markets expected. EUR/HUF extends today’s gains on risk aversion, moving from 352 to 355. The Hungarian Forint (HUF) swap rate curve is sharpening as yields fall by up to 6 basis points on the front end.
