Markets
Energy markets remain at the center of attention after a recent escalation in the conflict in the Middle East that included the United States expanding the scope of its air strikes and the Iran-aligned Houthis imposing a naval blockade in the Bab al-Mandeb Strait. Brent crude oil reached an intraday high of $95.5 before paring its gains slightly to the current $94.5. The forward curve is now $4 below the curve the ECB used in its June forecasts (Deadline May 20). Gas prices, another major source of European energy, do not receive as much attention as we think they should. The Dutch reference contract (TTF) is trading at levels seen only at the height of the war in March (60+ EUR/MWh) with a forward curve 12-14 EUR/MWh higher than in June. This puts this component directly in the negative scenario of the ECB (which assumed a rate of €60 in the third quarter). We are keen to know ECB President Lagarde’s view on this matter at tomorrow’s press conference. Recent developments have caused core bond yields to rise again with more of the same happening today. The European curve is flattening with yields rising by up to 4 basis points at the front. UK yields rose between 1.8 and 3.3 basis points. UK inflation came close to expectations and left little impact. The slight shortfall in the headline (2.6% from 2.8% vs. 2.7% expected) was offset by a higher-than-expected reading in the Core and Utilities CPI that, frankly, should be completely ignored due to the recent volatility in energy prices. Stock markets are trading with slight gains in Europe but shaky in the US. Nasdaq opens lower. Post-market results from AI Alphabet Leading It will mark the opening of the earnings season for big tech companies and will be closely watched to see whether or not the massive capital expenditures have paid off (enough). In the currency markets, the Japanese yen made a futile attempt to recover after hitting a new multi-decade low against the US dollar just yesterday. The bounce came on the heels of a report that the Bank of Japan is open to raising interest rates faster than markets and analysts currently assume — which happens roughly every six months. USD/JPY fell to a low of 162.69 before erasing almost all losses to trade back at 163 levels. The US dollar is losing modestly against most other currencies with EUR/USD rising to 1.1416 and DXY to 101.13, in a technically irrelevant trade. EUR/GBP extends its recent recovery towards the 0.8533 level.
News and opinions
The Consumer Confidence Index issued by the Belgian National Bank continued its upward trend Which was already observed last month. The overall index improved from -7 to -5. For the fourth month in a row, consumers became more positive about the economic situation in Belgium (sub-index at -27 from -33). However, their expectations regarding unemployment (14) are still pessimistic and have declined to the level seen two months ago. On a personal level, Belgian consumers have become more optimistic about their ability to save (23 out of 19). However, their expectations regarding their financial situation remain unchanged (-2). In February, before the Middle East conflict began, the overall confidence index was 1.
Retail sales in Poland in June as reported by the Polish Statistical Office today came in stronger than expected. Real sales rose 1.4% m/m and 6.2% y/y (they were -1.7% m/y and 3% y/y in May). During the period from January to June 2026, sales increased by 3.5% year-on-year. In June 2026, retail sales (at constant prices) increased compared to the corresponding month of 2025. On an annual basis, sales increased in all subgroups in June 2026. High sales growth was recorded in categories including “Furniture, radio, television and household appliances” (by 14.8%), “Medicines, cosmetics and orthopedic equipment” (by 10.2%), and “Automobiles, motorcycles and spare parts” (by 10.2%), and “cars, motorcycles and spare parts” (10.2%). 9.6%) “Solid, liquid and gaseous fuels” (9%). The value of online retail sales (at current prices) increased by 12.3% compared to a year ago. The zloty fell marginally today to EUR 4.33/PLN. The pair is holding north of the top of the 4.30 range that has guided trading since the end of 2024 even after the national central bank’s policy decision earlier this month. At the press conference held the day after this decision, Governor Glabinski was very frank in saying that he favored a possible interest rate cut actually after the summer holidays. However, comments from other MPC members showed clear internal division on the issue.
