Today's macroeconomic calendar featured Super Thursday, a set of high-caliber events: a decision and press conference by the European Central Bank and the release of US inflation data, which could reach close to 5 percent.
The European Central Bank is expected to keep interest rates at record lows and leave the pace of emergency bond-buying unchanged as well, even as policymakers acknowledge improved growth prospects thanks to ongoing efforts to reopen the economy and the rapid pace of COVID vaccination.
The Bank increased the pace of bond buying earlier this year, but the recent drop in eurozone borrowing costs has reduced the need for such aggressive stimulus. Last month, ECB President Christine Lagarde said it was far too early to discuss scaling back the €1.85 trillion PEPP, while board member Fabio Panetta rejected any reduction in emergency bond-buying. This may be because central bankers still view the current recovery in the economy as not very stable and with plenty of potential risks to its sustainability.
European equities are trading fairly flat before noon today, which is the second session in a row, as investors remained cautious ahead of today's release of the ECB's monetary policy statement and the US consumer price report for May.
The key US CPI inflation data will be closely watched. This is because they may clarify when the Federal Reserve will begin tapering economic support measures. The Fed is also struggling with record excess liquidity in the market and has to draw it down on a daily basis through reverse repo operations. This shows that such massive stimulation may no longer be necessary, especially since inflation will likely have already peaked in the May data for this cycle.
The yield on the 10-year Treasury note was at 1.48 percent on Thursday, oscillating around a level that hasn't been reached in three months, which may be due to the fact that the $38 billion auction of 10-year notes met strong demand on Wednesday, with the bid-to-supply ratio at 2.58, the highest in a year. Tuesday's $58 billion three-year bond auction was also in strong demand, with a yield of 0.325 percent.
Today's events could be key for both the Euro and the US Dollar, with the EUR/USD pair still at very high levels, as well as for stock indices, which are consolidating at historic highs.
Daniel Kostecki, Chief Analyst Conotoxia Ltd.
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