2025-06-11 13:59
MEXICO CITY, June 11 (Reuters) - Mexico's central bank may pause cuts to its benchmark interest rate in the face of an inflationary rebound, deputy governor Jonathan Heath said in an interview with local newspaper El Economista published on Wednesday. Mexico's annual inflation rate accelerated in May and exceeded the upper-end of the central bank's target range of 3% plus or minus one percentage point. Sign up here. "We expect this small rebound to be temporary and inflation to resume its downward trajectory in the coming months", Heath said. The inflationary rebound has created an uncertain landscape for borrowing costs in Latin America's second-largest economy, but Banxico is expected to cut its key interest rate by another half percentage point in June. Analysts believe the pace of rate cuts could slow if prices remain under control. https://www.reuters.com/world/americas/mexicos-central-bank-may-pause-rate-cuts-deputy-governor-heath-says-2025-06-11/
2025-06-11 13:48
June 11 (Reuters) - Cooler-than-expected U.S. inflation last month deepened conviction in financial markets on Wednesday that the Federal Reserve will start cutting interest rates by September and deliver a second reduction by the end of this year. A U.S. government report showed the Consumer Price Index - a measure of underlying inflation - rose just 0.1% in May after a 0.2% rise in April, with overall consumer prices rising 2.4% from a year earlier, up just one-tenth of a percentage point from the prior month and less than the 2.5% economists had expected. Sign up here. Within minutes of the release, traders of short-term interest rate futures had priced in a 68% chance that the U.S. central bank would cut rates by a quarter of a percentage point by September, compared with 57% before the data. They now also see a still small but rising chance of an earlier rate cut, putting about an 18% probability of that happening in July versus about 13% earlier on Wednesday. The Fed will almost certainly leave its benchmark interest rate steady in the 4.25%-4.50% range at the end of its two-day policy meeting next week. The policy rate has been in that range since December. Fed policymakers expect the Trump administration's tariffs to slow progress toward their 2% inflation target and to weaken the labor market, but feel that as long as the job market holds up - the unemployment rate has been steady at a relatively low 4.2% - they can leave borrowing costs where they are to keep continued downward pressure on inflation. Uncertainty over the path of tariffs and their effects on the economy remains high. President Donald Trump announced earlier on Wednesday that a U.S.-China trade deal had been struck that would set tariffs on Chinese goods at 55% - lower than the 145% imposed in April but much higher than in recent decades. The U.S. has otherwise struck only one other trade deal, with the U.K., as the clock ticks toward the early July expiration of a 90-day pause on sharply elevated tariffs on imports from most of the rest of the world. Even so, financial markets breathed a sigh of relief after the inflation data. "We are still cautious, but many of the risks that were present in early April appear to be receding at this time," said Chris Zaccarelli, chief investment officer at Northlight Asset Management. https://www.reuters.com/business/traders-add-bets-september-start-fed-rate-cuts-2025-06-11/
2025-06-11 12:54
MUMBAI, June 11 (Reuters) - The Indian rupee ended slightly higher on Wednesday, sticking to rangebound price action for a third consecutive session on two-sided client flows and the absence of cues to firm a directional bias on the currency. The dollar-rupee pair's implied volatility, a gauge of future expectations, has receded on the back of muted moves in the currency. The 1-month gauge eased to about 4.4%, the lowest in over one month. Sign up here. On the day, the rupee closed at 85.51 against the U.S. dollar, up slightly from its close of 85.6025 in the previous session. Asian currencies were largely steady as well while the dollar index was hovering sideways around the 99-handle. Mild dollar sales from foreign banks helped the rupee tick higher in early trading but routine corporate dollar demand stood in the way of the local currency extending its rise, a trader at a state-run bank said. India's benchmark equity indexes, the BSE Sensex (.BSESN) , opens new tab and Nifty 50 (.NSEI) , opens new tab, ended slightly in the green, tracking a rise in regional equities as markets gave a guarded welcome to the latest signs of progress in trade talks between the United States and China. "The dollar remains one of the best gauges of trade sentiment. While it has held up generally well early this week, it hasn’t built on the late-week momentum following the US-China meeting announcement," ING Bank said in a note. Worries about the impact of wide-ranging U.S. tariffs have weighed on the dollar this year and left it nursing losses of more than 8.5% against major peers. The focus now turns to U.S. consumer price inflation data, due later on Wednesday, which is expected to show month-on-month core consumer prices rose 0.3% in May, according to a Reuters poll, slightly higher than the 0.2% rise in the previous month. https://www.reuters.com/world/india/rupees-sticks-muted-price-action-implied-volatility-retreats-2025-06-11/
2025-06-11 12:54
FRANKFURT, June 11 (Reuters) - The dollar continued to lose market share as the world's dominant currency last year but mostly smaller rivals and gold benefited rather than the euro, an ECB report showed on Wednesday. However, an acceleration in the selling of dollar assets since April because of erratic U.S. economic policy provides an opportunity for the single currency, ECB President Christine Lagarde has said, provided the 20-nation bloc finally pushes ahead with key integration steps including joint borrowing. Sign up here. In 2024 alone, the dollar lost 2 percentage points from its share of global foreign exchange holdings and while the euro made small gains, the Japanese yen and the Canadian dollar were the big winners, the ECB said on Wednesday. Although the dollar still had a 58% market share of global foreign exchange reserves by end-2024, this is down by 10 percentage points in the past decade. Meanwhile, the euro's share has hovered at just below a fifth. Another big winner last year was gold, with central banks increasing their stock by more than 1,000 metric tons, a record pace and double the average annual level seen in the previous decade, the ECB said. "Survey data suggest that two-thirds of central banks invested in gold for purposes of diversification, while two-fifths did so as protection against geopolitical risk," it said. When all foreign reserves are added together, gold accounted for 20%, and the euro 16%, the ECB added. However, there have been signs since April that euro assets may finally be benefiting. Treasury yields have risen but the dollar has weakened sharply against the euro, a highly unusual correlation which appears to suggest that investors are questioning the dollar's status as the world's premier asset and demanding a higher risk premium to hold U.S. assets. JOINT DEBT The euro zone, however, lacks a truly liquid, large-scale safe asset since debt is issued by individual countries, leaving the bloc's debt market fragmented unless more joint bonds are issued. Renowned economists Olivier Blanchard and Angel Ubide recently proposed that European countries create separate revenue streams to repay joint 'blue' bonds and national 'red' ones. "The conditions today are far more favourable, especially if the scale of blue bond issuance were to be calibrated in a prudent manner," ECB chief economist Philip Lane said on Wednesday. He also revived his own proposal for a synthetic euro zone bond, effectively a portfolio of different government bonds sold in tranches. But Europe's banking system is also fragmented and the EU lacks a capital market union with harmonised rules and large, cross-border players. Moreover, the region lacks military defence capabilities to provide the sort of geopolitical assurance that reserve managers demand. https://www.reuters.com/business/finance/dollar-keeps-losing-market-share-euro-is-no-winner-either-ecb-study-2025-06-11/
2025-06-11 12:47
UK long-term borrowing costs hold higher Sterling stays close to 3-year high vs dollar Analysts say fiscal worries likely to persist LONDON, June 11 (Reuters) - Britain's borrowing costs rose and sterling stayed close to recent three-year peaks against the dollar on Wednesday, as a multi-year spending review underlined fiscal challenges even as pressure mounts to boost the economy. British finance minister Rachel Reeves delivered a spending review dividing up more than 2 trillion pounds ($2.7 trillion) of public spending, with the government's departmental budgets to grow by 2.3% a year in real terms. Sign up here. Britain's 10-year gilt yield was up as much as 7 basis points (bps), rising ahead of the review, but fell back after weaker-than-expected U.S. inflation numbers prompted a broad rally in government bond markets. It was last up 2 bps to 4.56% , still underperforming its peers. Bond yields across other big European government markets were slightly lower on the day , . Sterling was last up 0.2% at $1.353 as the dollar fell against major currencies following the U.S. data . Ahead of that report, sterling had showed a muted reaction to the spending review and was just a touch softer against the euro at 84.77 pence . "The spending review itself was about the allocation of an existing spending total, in other words how you cut the cake,” said Investec chief economist Philip Shaw. CONSTRAINED Analysts said the main takeaway for markets from Reeves' speech was confirmation that the UK remains constrained in spending, raising the prospect of tax increases later this year. "Were the chancellor to raise taxes, then that could weigh on demand. But presumably that would be offset by an increase in spending, so the picture really isn't very clear," said Shaw. Investors are left grappling with a darkening economic outlook with the potential for more rapid rate cuts, implying downward pressure on borrowing costs and fiscal worries that are putting upward pressure on yields. "It is very difficult to manage this balance. Because typically what happens is when you have economic growth which is a bit soggy, that tends to bring down bond yields," said Jason Da Silva, director of global investment strategy at Arbuthnot Latham. "But the increasing fiscal spend and government debt being extremely high is a headwind for (UK government) bonds," he added. Concerns about the UK's weak fiscal position have weighed on UK assets in recent months, and Britain's 30-year bonds remain the highest in the Group of Seven industrialised economies. Sterling and UK equities meanwhile have been cushioned by bearishness towards U.S. assets given President Donald Trump’s tariff policy and a murky economic outlook, prompting global investors to diversify away from U.S. markets. The FTSE 100 (.FTSE) , opens new tab is a fraction away from a fresh record high it last reached in March, having risen almost 9% so far in 2025. In contrast the U.S. benchmark S&P 500 is up almost 3% (.SPX) , opens new tab. Meanwhile sterling has rallied almost 8% so far this year versus the dollar. The Bank of England delivers its next policy decision next week, with markets betting on no change to the bank rate, though weak jobs data on Tuesday raised the prospect of more rate cuts by the end of the year. https://www.reuters.com/world/uk/sterling-steady-gilts-yields-hold-higher-reeves-delivers-spending-review-2025-06-11/
2025-06-11 12:29
BRUSSELS, June 11 (Reuters) - European Union countries may demand that Brussels simplify the EU's methane emissions law, which has stoked concerns from companies that it could hamper imports of U.S. liquefied natural gas, according to a document seen by Reuters. From this year, the EU requires importers of oil and gas to monitor and report the methane emissions associated with these imports. Methane, which escapes from leaky gas infrastructure, is the second-biggest cause of climate change after carbon dioxide emissions. Sign up here. Draft conclusions from a meeting of EU countries' energy ministers on Monday showed governments are preparing to ask the European Commission to add the methane law to its "simplification" drive to cut bureaucracy for companies. The draft asked the Commission to quickly assess which EU energy laws can be simplified, "in order to decrease the administrative burden on Member States, industry and citizens, for example the methane regulation as it might impact the cooperation with economic operators from outside of the EU". The conclusions are still being drafted by Poland, which holds the EU's rotating presidency, and could change before ministers adopt them on Monday. The EU agreed its methane law last May, but the policy has come under increased scrutiny as the EU attempts to quit Russian gas - and to buy more U.S. liquefied natural gas to replace it. Washington and Brussels have each indicated that EU purchases of U.S. LNG could form part of a broader U.S.-EU trade deal. U.S. President Donald Trump has set a July 9 deadline for the EU to reach a deal and avert steep tariffs. Romania and Slovakia are among countries warning that the methane law could disrupt gas imports. Some U.S. LNG firms have warned they will struggle to comply with the EU law, since the fragmented nature of the country's industry means they cannot track emissions along their entire value chains, down to specific gas wells. Environmental groups have rejected this idea, arguing that systems exist which can digitally trace gas through the value chain, in line with the EU law's demands. In a letter to U.S. and EU officials this month, seen by Reuters, U.S. industry group LNG Allies asked for a trade deal to ensure U.S. gas exporters are deemed to be following "equivalent" methane rules to those of the EU, and therefore automatically comply with the methane law. https://www.reuters.com/sustainability/boards-policy-regulation/eu-countries-consider-softening-methane-emissions-law-gas-imports-2025-06-11/
