Newsquawk European Market Wrap - 19th June 2025

• European indices in the red amidst ongoing geopolitical angst and as participants await Trump's meeting in the Situation Room at 16:30BST.


• BoE kept rates unchanged; Norges surprisingly cut by 25bps (exp. hold), SNB cut by 25bps as expected (some expected 50bps cut).


• Israel Defence Minister Katz said the military has been instructed to intensify strikes on strategic targets in Tehran, to eliminate the threat to Israel; Iranian National Security Committee member said "we are able to close the Strait of Hormuz".

CENTRAL BANKS

• 
  BoE holds rates held at 4.25%, as expected, in a 6-3 vote (exp. 7-2), Dhingra, Taylor and Ramsden voted for lower rates; retains 'gradual, careful' language. Click for full details.
  


• Post decision, BoE Governor Bailey says the statement that we expect rates to move gradually downwards is not a prediction for August.


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  Norges Bank cuts by 25bps to 4.25% (prev. 4.50%), unexpected; "The economic outlook is uncertain, but if the economy evolves broadly as currently projected, the policy rate will be reduced further in the course of 2025." Q3-2025 4.21% (prev. 4.38%), Q4-2025 3.98% (prev. 4.21%), Q1-2026 3.81% (prev. 3.99%), Q2-2026 3.62% (prev. 3.77%). Click for full details.. Press Conference: Norges Bank's Bache says the central bank plans one or two more rate cuts this year; do not expect a significant drop in rates going forward.


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  SNB cuts its Policy Rate by 25bps to 0.00%, as expected; reiterates "remains willing to be active in the foreign exchange market as necessary". Click for full details.. Press Conference: SNB Chairman Schlegel says do not take decision on negative rates lightly; can never exclude any measure on negative rates. "Interest rate differential is important; if necessary, are ready to intervene in FX markets, that is still true".


• CBRT Weekly Repo Rate held at 46.0%, as expected, O/N Lending rate unexpectedly held at 49.0%.

EQUITIES

• 
  European bourses opened entirely in the red and traversed worst levels throughout the morning. Sentiment today has been pressured amid the ongoing war between Iran-Israel. Into the afternoon European bourses continued on the bearish sentiment and have largely traded sideways amid thin newsflow as US participants are away and focus remains on any geopolitical updates.


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  European sectors held a strong negative bias, with only a couple of industries holding afloat. Energy sat at the top of the pile, with oil prices once again boosted by the ongoing geopolitical environment.


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  US equity futures are in the red, in-fitting with the downbeat mood in Europe. Do note that US cash markets are shut today on account of Juneteenth; as such, the docket is void of any pertinent scheduled events.

FX

• 
  DXY was incrementally firmer/flat throughout the European morning as traders juggled the FOMC policy announcement and a raft of geopolitical updates - now traders await any updates regarding US President Trump's Middle-East briefing in the Situation Room at 16:30BST.


• 
  EUR was trivially softer vs. the USD as it failed to hold above 1.16 and the drag of geopolitics/higher energy costs acted as a headwind for the pair. A number of ECB members on the wires today, but not really any notable language to shift the dial.


• 
  USD/JPY chopped and changed around the 145 mark during APAC trade with broader market sentiment cautious amid the fluid geopolitical landscape before ultimately gaining a firmer footing on a 145 handle and hitting a session peak at 145.76.


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  GBP was lacklustre into the BoE meeting, which lacked surprises. The Bank kept rates steady at 4.25% and retained its "gradual" language. The vote split was a little more surprising, with Ramsden joining Dhingra and Taylor who favoured cutting by 25bps at this meeting. The GBP was little moved on the decision and traded in a 1.3384-1.3449 range.


• 
  Antipodeans are both are at the foot of the G10 leaderboard on account of the broader risk tone and domestic factors. AUD/USD was knocked lower after Australian jobs data showed a surprise contraction in job growth.


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  EUR/CHF saw a knee-jerk lower from 0.9414 to 0.9387 following the SNB's decision to cut rates by 25bps given that there were outside calls for a larger 50bps reduction, which would have taken the key rate negative. However, a bulk of the downside in EUR/CHF was subsequently briefly pared as the accompanying inflation projections for 2025 and 2026 were lowered, suggesting that the possibility of negative rates remains.


• 
  NOK has slumped vs. the EUR following the surprise decision by the Norges Bank to cut rates by 25bps; only 3/26 surveyed by Reuters expected such an outcome. The downside in NOK was exacerbated by accompanying verbal guidance towards more cuts this year. Interestingly, while the language on cuts is caveated to be contingent on the economy developing as projected, the wording is firm in saying the "policy rate will be reduced further". On this, the Q4-2025 MPR forecast is 3.98% (prev. 4.21%); this leaves the door open to two more cuts in 2025, though is heavily skewed to just one.

FIXED

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  USTs were initially incrementally lower in European hours, in-fitting with global peers and in continuation of the pressure seen post-FOMC, but have ground off worst levels in recent trade to now see marginal strength and reside at highs; volume has been light today on account of the US market holiday. Into Trump's Situation Room briefing at 16:30 BST, USTs were contained to a 110-21 to 110-30+ band.


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  Bunds were softer at most 40 ticks today, but did manage to clamber off worst levels in late-morning trade. A slew of ECB speak has kept traders busy today, but none really shifted the dial for the Bank; Villeroy said it is not necessarily the end of the journey, whilst Rehn highlighted geopolitical risks.


• 
  Gilts underperformed into the BoE. A decision which lacked surprises. The Bank kept rates steady at 4.25% and retained its "gradual" language. The vote split was a little more surprising, with Ramsden joining Dhingra and Taylor who favoured cutting by 25bps at this meeting. Gilts saw some incremental upside on the announcement, perhaps with some focus on the surprise vote split - nonetheless UK paper continued to trade within ranges and in the red.


• 
  Spain sells EUR 5.5bln vs exp. EUR 5.0-6.0bln 1.95% 2030, 3.15% 2033, and 3.20% 2035 Bono.


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  France sells EUR 12bln vs exp. EUR 10-12bln 2.40% 2028, 2.75% 2030, and 2.70% 2031 OAT

COMMODITIES

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  Crude spent the majority of the morning in the green, with the complex continuing to be boosted by the ongoing Iran-Israel war. Commentary via Israeli Defence Minister Katz, who said strikes on Tehran will intensify, sparked upside in the complex in early morning trade. Now traders await US President Trump who is scheduled to be in the Situation Room for an intelligence briefing at 11:30 EDT (16:30 BST).


• 
  Spot gold started the European session on the backfoot, but gradually edged higher as the session progressed, but once again trimmed the gains albeit with no headline-specific driver. Trade was contained in a USD 3,347.60-3,388.02/oz range as participants await geopolitical developments and any updates on the potential of US involvement.


• 
  Base metals held a negative bias throughout the European morning, in-fitting with the downbeat risk tone. 3M LME Copper traded in a USD 9,590-9,676.65/t range into the afternoon.


• 
  RDIF CEO Dmitriev says joint action by Russia, US and Saudi to stabilise oil markets is possible, based on precedent of similar action in 2020, via Reuters.


• Russian Deputy PM Novak says nobody has approached Russian Government on a possible purchase of Nord Stream 2 pipeline.


• Russia's Deputy PM Novak on risks over Iran, says they should not scare off the market with forecasts; OPEC+ should calmly execute its plans and should continue with its decisions.

TRADE

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  EU is mulling a UK-style trade deal with the US, according to the FT; "Brussels is pushing for agreement that could leave some tariffs in place" Officials cited say early discussions of retaliatory levies if US President Trump does not lift all measures against EU nations has diminished.


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  European officials increasingly resigned to 10% baseline rate on reciprocal tariffs in any US-EU trade deal, according to Reuters sources.


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  China is to reportedly cooperate with the US on drug control and illegal immigrants, according to Xinhua.


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  EU leaders set to have separate meetings with Chinese President XI and Premier Li during July 24-25th EU-China summit, according to Reuters citing EU source. EU set to focus on better Chinese rare earth access at July EU-China summit.

EUROPEAN HEADLINES

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  ECB's Rehn says the EZ risks stagflation shock if the Middle East crisis deepens.


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  ECB's Villeroy says a return to normal monetary policy is a very positive step; nevertheless, in still abnormal times, it does not necessarily mean an end to the journey. The ECB does not expect surprises on the wages front.


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  ECB's Nagel says there is more that can be done to make the Euro more attractive for investors; banking union is important to boost European chances to attract investors. We are now in the neutral territory of monetary policy. Will do what is necessary. On the correct track.


• 
  Russia's Kremlin says President Putin held a conversation with China's President Xi, will meet again in China, in August.

GEOPOLITICS

Updates during the morning:

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  Israel Defence Minister Katz says the military has been instructed to intensify strikes on strategic targets in Tehran, to eliminate the threat to Israel.


• 
  Air defence system of the Tehran Refinery intercepted and targeted several Israeli drones early Thursday morning, via Iran Nuances.


• 
  Iran's Foreign Minister Aragchi is set to meet the EU High Representative for Foreign Affairs and Troika Foreign Ministers in Geneva on Friday.


• 
  Israel's Defence Minister says Iran's Supreme Leader Khamenei cannot "continue to exist", via journalist Elster; no negotiations with Iran.


• 
  French Foreign Minister says they have received from Iran clear signals confirming their readiness for dialogue on the condition of a ceasefire, via Al Jazeera.


• 
  "Member of the presidency of the Iranian National Security Committee: We are able to close the Strait of Hormuz; Closing the Strait of Hormuz is an option on the table", via Al Arabiya.


• Israeli Military says it targeted Iran's Arak nuclear reactor overnight.


• Iranian Deputy Foreign Minister says if the US wants to actively intervene and support Israel, Tehran will "teach aggressors a lesson".


• Israeli military official says estimated to have struck two-thirds of Iran's missile launchers, and Iran still has more than 100 missile launchers.


• 
  Israel PM Netanyahu in response to a question about the assassination of Iranian Supreme Leader Khamenei says all options are on the table. They dealt severe blows to Iran and took the Natanz facility out of service.


• Israeli Foreign Minister says the Government security cabinet has not designated regime change in Iran as an objective.


• 
  US President Trump posts on Truth "The Wall Street Journal has No Idea what my thoughts are concerning Iran!". Whilst it is not distinctly clear what Trump is inferring to, in the US evening on Wednesday, WSJ reported Trump has privately approved attack plans for Iran on Tuesday, but has withheld the final order.

Key Overnight Stories:

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  US President Trump is scheduled to be in the Situation Room for an intelligence briefing at 11:30 EDT on Thursday, according to CBS' Jacobs.


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  The US is reportedly eyeing this weekend as a possibility for an attack on Iran and is preparing for a possible strike in the coming days, according to Bloomberg.


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  US President Trump is reportedly getting comfortable with the idea of taking out Iran's Fordow nuclear facility with multiple strikes. “There was now a movement to get ready for this,” ABC sources said. “There had been no response from the Iranians regarding ongoing nuclear talks, likely because of the way Trump had demanded an unconditional surrender,” they added.

19 Jun 2025 - 15:00- ForexGeopolitical- Source: Newsquawk