US inflation and Trump-Putin talks on Ukraine rattle the market

The US inflation data pushed US long-term yields significantly higher, with the 10-year benchmark rising roughly 10 basis points, reaching as high as 4.65% yesterday.

Key Takeaways

Yields have surged amid mounting concerns over persistent inflationary pressures, leading investors to reevaluate the Federal Reserve’s monetary policy path. Speculation is growing over whether the central bank will keep interest rates elevated for a prolonged period to effectively combat inflation. This rise in yields has also pressured equities, as higher borrowing costs could dampen economic growth and weigh on corporate earnings.

• The Thai baht weakened against the US dollar, reaching a one-week low of 34.12 baht per dollar.
• The US dollar strengthened due to rising trade tensions and President Trump’s decision to increase tariffs on aluminum imports.
• The Thai baht is expected to trade within a range of 33.85-34.15 baht per dollar, influenced by factors such as US trade policies, Chinese yuan direction, and Federal Reserve statements.

Thai baht drops to a one-week low against the US dollar.

The Thai baht weakened against the US dollar, reaching a one-week low before stabilizing around 34.06-34.08 baht per dollar. This decline aligns with a general weakness in Asian currencies and a strengthening US dollar. The dollar’s strength is attributed to rising trade tensions, including President Trump’s decision to increase aluminum tariffs and remove exemptions for certain products. Market expectations that the Federal Reserve won’t signal a rate cut soon also support the dollar. The baht is expected to trade between 33.85-34.15 baht per dollar, with key factors to watch including US economic and trade policies, the Chinese yuan’s direction, Federal Reserve statements, and foreign capital flows.

Euro’s Turbulence Amid Hopes for Peace in Ukraine

The euro surged sharply yesterday, reflecting the implications of the U.S. stance on a post-Ukraine war scenario. Several euro-positive factors are driving this movement. Optimism is growing in Europe, as an end to the war could reduce uncertainty and potentially provide significant relief through lower energy prices, especially if Russian energy supplies resume flowing more freely to the West in the future.

Trump has emphasized his preference for Europe to take greater responsibility for its own defense by strengthening its military to safeguard its borders and bolster Ukraine’s military standing. Additionally, he suggests that the financial burden of rebuilding Ukraine’s economy should primarily rest on the Eurozone.

Trump has also reiterated that the United States should not bear a disproportionate share of the costs associated with European security, urging NATO allies to meet or exceed their defense spending commitments. Furthermore, he has proposed fostering stronger partnerships within Europe to ensure a more unified and self-reliant approach to addressing regional security challenges and economic recovery efforts in the aftermath of the conflict in Ukraine.