The euro is now at the highest level vs the US dollar since 2021, but look at oil and what the Fed will be doing with interest rates.
June 24 (King World News) – Peter Boockvar: After Michelle Bowman yesterday shared her dovish stance with colleague Chris Waller, the fed funds futures are now fully pricing in a 100% of two cuts this year and a 16% chance of a 3rd vs 100% of one and about 70% of a second after Powell spoke last week. With respect to the July meeting that Bowman and Waller seem open to cutting, rate cut odds are at just 22% though and we’ll of course see if Jay Powell today sounds like he did last week which would likely keep the odds low. On the other hand, any bend in his thoughts over the past week similar to what his colleagues expressed and of course markets will pull forward the odds of a cut.
Either way, I still think what we’re looking at, for now, is more of a rate tweaking cycle with still risk that longer term rates stay elevated and even go higher again as we saw after the initial 100 bps of rate cuts.
The German 30 yr bund yield is rising to a one month high, up 8 bps, as the German government said they are going to issue more bunds than expected to fund defense spending and for other growth initiatives including infrastructure spend.
Germany, The Global Safe Haven?
The Q3 funding plan is 118.5b euros, 19b euros more than what was expressed in December. With a still low debt to GDP ratio, along with its AAA credit rating, the bund market has become a global safe haven.
Also influencing German bunds today was the lift in the June IFO business confidence index to 88.4 from 87.5 and just above the forecast of 88. That’s the best level since May 2024 with most of the improvement in the Expectations component.
Sector wise, the services piece finally got back above zero at 3.8 from -.4 and that led the way. Manufacturing was little changed but less negative at -13.7. Construction and trade were negative too but also less so m/o/m. The IFO said succinctly, “The German economy is slowly building confidence.”
With this, the euro is rising today to the highest level vs the US dollar since November 2021. Yes, the global rethink of where to allocate assets is real and changing.
KING WORLD NEWS NOTE: Euro Hits Highest Level vs US Dollar Since 2021
Note that this is to the question, “What WTI oil price does your firm need to profitably drill a new well?” For existing wells, the breakevens are in the $30s and $40s.
No “Drill, Baby Drill!” With Oil Price At Current Level
JUST RELEASED!
James Turk discusses what is happening in the gold and silver markets and much more CLICK HERE OR ON THE IMAGE BELOW.
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