Japanese bond futures experienced late selling pressure today due to announcements of significant pay increases by various labour unions. The Japanese Association of Metal, Machinery and Manufacturing Workers secured an average pay rise of 5.32%. However, the Japanese yen, trading at USD/JPY 147.70, failed to benefit further from expectations of normalization by the Bank of Japan (BoJ). Today’s economic calendar is relatively quiet, with only a $22 billion 30-year Bond auction scheduled. The influence of yesterday’s CPI-related trends is expected to persist, likely resulting in the underperformance of US Treasuries and a strengthening of the dollar. Moreover, several European Central Bank (ECB) governors, including those with hawkish views like ECB Wunsch, are increasingly focusing on a potential rate cut in June.

In other news, the Hungarian forint weakened against the euro yesterday, nearing EUR/HUF 400, amid political tensions between the government and the central bank. Additionally, ongoing discussions with the EU regarding the release of blocked funds are contributing to the currency’s depreciation. The Hungarian central bank expressed concerns that new legislation expanding the Supervisory Board’s authority could undermine its independence. Meanwhile, the European Parliament’s Legal Committee voted to challenge the European Commission’s decision to release €10.2 billion in blocked EU funds, pending approval from the EP President.

Meanwhile, the Bank of Spain revised its growth forecast in its quarterly update. Spanish GDP growth is now projected to slow to 1.9% this year, compared to the estimated 1.6%. This adjustment aligns more closely with the government’s forecast of 2% growth. The Bank of Spain anticipates further declines in unemployment and inflation over the projection period, attributing the revision to lower energy prices and the continuation of specific measures to address inflation. Factors such as the influx of foreign workers and European relief funds are also expected to support Spanish economic growth.

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