Asian Stocks Fall as Surging Bond Yields Rattle Markets 
UK PM Burnham to Unveil Economic Vision at Labour Conference 
Fed’s Hammack Says Bond Yield Surge Is Not Driven by Inflation Fears 
Australia Unemployment Hits Five-Year High Despite Strong Jobs Growth 
Japanese Bank Stocks Surge as Bond Yields Fuel Rate Hike Bets 
Japanese Yen Rebounds as Trump Flags Currency Weakness 
Gold Holds Near $4,275 as Rising Treasury Yields Fuel Fed Rate Hike Bets 
Canadian Dollar Faces Pressure as Fed-BoC Policy Gap Widens 
US Stock Futures Fall as Treasury Yields Surge Ahead of Trump-Xi Summit 
Oil Prices Fall on U.S.-Iran Hormuz Deal Hopes 
Soybean Futures Slip as Traders Await Trump-Xi Trade Signals 
Dollar Falls as Oil Eases, Yen Jumps on Intervention Signals 
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The euro has extended its losses against the US dollar, to the tune of almost 6 percent since mid-April (1.24). Political uncertainty in Italy and Germany, a ‘dovish’ European Central Bank (ECB), ‘hawkish’ Federal Reserve (Fed), and the risk of an escalation in U.S.-EU 'trade wars' have been key factors weighing on EUR/USD, according to the latest research report from Lloyds Bank.
However, having repeatedly tested and held the 1.15 level, it is believed the pair could rally from here. The political climate across Europe has calmed somewhat and recent data appear firmer. Moreover, with market pricing already pointing to further hikes, the ability of US rates to drive USD strength appears limited.
Meanwhile, the latest guidance from ECB Council members suggests a first rate rise in September 2019 is a realistic prospect. This is ahead of market pricing but in line with the forecast. As such, interest rate dynamics are expected to prove increasingly supportive for the EUR/USD.
In contrast, US President Trump’s trade-related threat to the European auto sector, and the increased risk of elevated tensions between the US and EU could increase bearish sentiment ahead of the US mid-term elections in November.
"However, with our fundamental models estimating EUR/USD ‘fair value’ at around 1.22, we remain broadly positive on the euro’s prospects, forecasting 1.25 for year-end," the report added.
