• European bourses & US futures trade on the backfoot post-FOMC and pre-ECB
• DXY propped up, AUD outperforms following a strong jobs report whilst NZD lags as it enters a recession
• JPY majorly lags on the prospect of even wider BoJ-Fed divergence ahead of Friday’s meeting
• Core benchmarks slip and extend on post-Fed declines whilst European supply was well received
• Base/industrial metals dented on softer Chinese activity data despite a 10bp MLF cut
• Looking ahead, highlights include; ECB's Policy announcement, Lagarde Press Conference, US IJC, US Philly Fed Business Ind, US Retail Sales MM, US Industrial Production,  BoE's Cunliffe

EUROPEAN TRADE

EQUITIES

• European bourses are somewhat mixed but have generally been edging lower throughout the morning pre-ECB & post-FOMC, Euro Stoxx 50 -0.4%.
• Sectors are similarly lower overall with Basic Resources lagging on base metals prices while Banks are weighed on by CJEU's ruling on Polish mortgages; though, Retail names buck the trend after H&M's update.
• Stateside, futures are lower across the board with the NQ -0.6% as yields continue to rise. Overall, the ES remains just above the 4400 mark ahead of US data and as the FOMC blackout lifts to feature Bullard, Barkin & Waller on Friday's schedule.
• Click here and here for a recap of the main European updates.
• Click here for more detail.

FX

• Hawkish dot plots help Dollar recover from pre-FOMC lows, DXY firmer within 103.380-102.910 range.
• Yen sharply lower pre-BoJ on yield and policy divergence dynamics, USD/JPY around 141.00 between 141.50-139.95 parameters.
• Euro eyeing ECB for independent direction via guidance beyond widely expected 25 bp hike, EUR/USD back above 1.0800.
• Aussie underpinned after stellar jobs data, but Kiwi undermined as NZ tech recession confirmed, AUD/USD reclaims 0.6800+ status, NZD/USD loses 0.6200 handle and AUD/NZD cross bounces almost big figure from sub-1.0950
• Norges Bank Regional Network Survey (Q2): Slightly better outlook, but wide variations. Click here for details & analysis.
• Click here for notable OpEx for the NY Cut.
• Click here for more detail.

FIXED INCOME

• Bonds extend post-Fed declines and curves remain flatter on balance on hawkish dot plot trajectory.
• Bunds pivot 133.00, Gilts sub-95.00, albeit holding up better having traded above par and T-note hovering within 112-31+/16+ range.
• ECB in focus and expected to hike 25 bp, but several top tier US data releases also ahead.
• Click here for more detail.

COMMODITIES

• Commodities are generally in familiar ranges in what has been relatively quiet trade post-FOMC and pre-ECB; crude benchmarks firmer, but in familiar ranges.
• With the exception of base/industrial metals which are dented after China’s disappointing activity data whereby both industrial production and retail sales missed expectations.
• Spot gold is unable to glean any support from the modest equity pressure that has crept in throughout the European morning. Though, similarly, it hasn’t been tarnished too much by the stronger USD.
• Kremlin says it sees no positive prospects for future of Black Sea Grain Deal; parts of grain deal affected Russia remain unfulfilled, cannot go on like this forever.
• Click here for more detail.

CRYPTO

• Bitcoin is incrementally lower but remains relatively contained with specifics limited and markets very much focused on broader macro drives.

NOTABLE EUROPEAN HEADLINES

• UK PM Sunak abandoned the plan for a supermarket price cap following a backlash, according to The Telegraph.
• UK's ONS says 17% of companies expect to increase prices in the month ahead; lowest since the series began in March 2022.
• Brussels is under pressure to impose restrictions on Chinese electric cars, over fears that imports are flooding the European market at a speed and scale that threaten the Continent’s own production of such vehicles, according to Politico.
• EU Top Court says Polish banks cannot charge for the cost of capital in FX mortgage contracts which have been deemed as invalid, consumers with such contracts can demand compensation from banks. In response, Polish Banking Regulator KNF says the CJEU ruling on Polish FX loans is negative for the Polish banking sector and the economy. Click here for details & analysis.

NOTABLE US HEADLINES

• US President Biden congratulated both parties after a West Coast port contract deal was reached and said port workers will finally get the pay, benefits and quality of life they deserve, according to Reuters.
• US Fed will release the results of 2023 bank stress tests on June 28th at 16:30EDT/21:30BST, according to Reuters.
• Redfin: total number of US homes for sales -6% YY, four weeks to June 11th in the biggest decline for 13-months.

GEOPOLITICS

• Israel told Russia it is highly concerned about its growing military cooperation with Iran in the war in Ukraine and the possibility it will provide Tehran with advanced weapon systems, according to Axios.
• Japanese Chief Cabinet Secretary Matsuno said Japan, Philippines and US security advisers will meet on Friday to discuss regional matters, according to Reuters.
• Russia and the US have been in direct contact on new start Nuclear Arms Treaty, according to Tass citing Russia's Ryabkov.
• Russian Defence Ministry and Federal Security Service consider it to be possible to hold elections in Russia's newly annexed regions, according to Tass citing Head of Electoral Commission.

APAC TRADE

• APAC stocks traded mostly higher but with gains capped in the aftermath of the FOMC where a hawkish knee-jerk reaction to the Fed’s dot plots was partially unwound during the press conference after Powell distanced himself from projections, while the attention in the region shifted to the slew of key data releases.
• ASX 200 was kept afloat in rangebound trade with stellar jobs data partly clouded by yield curve inversion.
• Nikkei 225 benefitted from currency depreciation and encouraging data including Exports and Machinery Orders.
• Hang Seng and Shanghai Comp. were positive with outperformance in Hong Kong after the HKMA kept rates unchanged for the first time since March 2022 in lockstep with the Fed, while the advances were led by property names amid expectations for more support measures for the industry and after Chinese House Prices returned to growth. Furthermore, the PBoC cut its 1-year MLF rates by 10bps following similar cuts to short-term funding rates although participants also digested disappointing activity data from China in which both Industrial Production and Retail Sales missed estimates.

NOTABLE ASIA-PAC HEADLINES

• PBoC conducted CNY 237bln in 1-year MLF lending with the rate cut by 10bps to 2.65%.
• HKMA maintained its base rate unchanged at 5.50%, as expected.
• China National Bureau of Statistics said the economic recovery is not yet solid but noted that Q2 growth will be significantly faster than Q1 and that China's economy is resilient despite facing some pressures. China's stats bureau also stated that pressure on employment and structural problems persist, while it added that consumption recovery faces some hurdles and China will support consumption growth.
• China's commerce Ministry says will continue to improve consumption policies and introduce a series of policy measures to support the recovery and expansion of consumption; China faces relatively big pressure on exports.
• JP Morgan cuts China's 2023 full year GDP growth forecast to 5.5% (prev. 5.9%).
• Japan's opposition party is making final preparations to submit a no-confidence vote on Friday.

DATA RECAP

• Chinese Industrial Production YY (May) 3.5% vs Exp. 3.6% (Prev. 5.6%); Retail Sales YY (May) 12.7% vs Exp. 13.6% (Prev. 18.4%)
• Chinese Urban Investment YTD YY (May) 4.0% vs Exp. 4.4% (Prev. 4.7%)
• Chinese House Prices YY (May) 0.1% (Prev. -0.2%)
• Japanese Machinery Orders MM (Apr) 5.5% vs Exp. 3.0% (Prev. -3.9%); YY (Apr) -5.9% vs Exp. -8.0% (Prev. -3.5%)
• Japanese Trade Balance (JPY)(May) -1372.5B vs Exp. -1331.9B (Prev. -432.4B, Rev. -432.3B)
• Japanese Exports YY (May) 0.6% vs Exp. -0.8% (Prev. 2.6%); Imports YY (May) -9.9% vs Exp. -10.3% (Prev. -2.3%)
• Australian Employment (May) 75.9k vs Exp. 15.0k (Prev. -4.3k); Unemployment Rate (May) 3.6% vs Exp. 3.7% (Prev. 3.7%)
• Australian Participation Rate (May) 66.9% vs Exp. 66.7% (Prev. 66.7%)
• New Zealand GDP QQ (Q1) -0.1% vs. Exp. -0.1% (Prev. -0.6%, Rev. -0.7%); YY (Q1) 2.2% vs. Exp. 2.6% (Prev. 2.2%, Rev. 2.3%)