Bitcoin Hit by Profit-Taking After Surge to Record Highs — Market Talk

0822 GMT - Bitcoin falls as traders take profits after the cryptocurrency surged to record highs, Tickmill Group's Patrick Munnelly says in a note. Bitcoin's earlier rally was driven by optimism surrounding possible advancements in U.S. digital assets regulation that could support President Trump's crypto-friendly policies, he says. "Additionally, the cryptocurrency has gained from a recent upswing in other risk assets, including near-record U.S. stock prices, as worries about the economic repercussions of [President] Trump's new trade war subsided." Bitcoin falls 2.8% to $116,851, LSEG data show. It reached a record high of $123,153 Monday. (renae.dyer@wsj.com)

0812 GMT - Gold prices rise in early trade, with futures are up 0.4% to $3,371.50 a troy ounce ahead of key U.S. inflation data due later on Tuesday. "Today's CPI print matters given all the recent tariff volatility and new calls to replace Fed Chair Powell," analysts at Peak Trading Research say. The data is expected to provide further clues on the path of U.S. interest rates, with markets expecting cuts by year-end. Prices are also supported by demand for safer assets amid escalating tariff tensions, with traders closely monitoring developments in trade talks before the Aug. 1 deadline. "Investors are in 'show me, don't tell me' mode regarding Trump's new tariff announcements," the analysts say. (giulia.petroni@wsj.com)

0801 GMT - The Japanese yen falls to a one-year low against the euro as concerns about the fiscal implications of Japan's parliamentary election send yields on long-dated government bonds surging. Latest polls suggest Japan's ruling coalition could lose its 50% majority in the Upper House election on July 20, RBC Capital Markets forex strategist Richard Cochinos says in a note. This could lead to future tax cuts and increased fiscal stimulus, potentially hurting Japan's fiscal position, he says. The Bank of Japan could also come under political pressure to delay interest-rate rises. The euro rises to a high of 172.73 yen. The 30-year yield on government bonds rises to a record high of 3.225%, LSEG data show. (renae.dyer@wsj.com)

0732 GMT - Yields on U.K. government bonds fall slightly on growing expectations for more interest-rate cuts by the Bank of England. BOE Governor Andrew Bailey signalled the possibility of more rate cuts if U.K. labor market data weaken in an interview with the Times on Monday. Markets price in an 86% probability of the BOE lowering interest rates to 4.0% in August, LSEG data show. The 10-year gilt yield falls 1 basis point to 4.588%, Tradeweb data show. (miriam.mukuru@wsj.com)

0717 GMT - The spread between 10-year French OATs and 10-year German Bunds could rise towards 75 basis points, from 70 basis points currently, as focus shifts to next year's budget, Danske Bank Research's Jens Peter Sorensen says in a note. French Prime Minister Francois Bayrou is expected to announce measures to cut the budget deficit in 2026 to 4.6% from 5.4% in 2025, the chief analyst says. "This is [the] government's current target, but the budget for 2026 is likely to slip." This could lead to another vote-of-confidence of the French government, Sorensen says. The uncertainty has pushed the 10-year OAT-Bund spread wider by some 4-5 basis points since the start of July, he says. (emese.bartha@wsj.com)

0715 GMT - Sterling falls to a three-month low against the euro due to the risk of more aggressive Bank of England interest-rate cuts and tighter U.K. fiscal policy. Recent weak U.K. economic data have heightened expectations for further rate cuts this year, City Index analyst Fawad Razaqzada says in a note. BOE Governor Andrew Bailey told The Times that larger cuts were possible if the jobs market shows signs of slowing. Meanwhile, the U.K. government's self-imposed fiscal rules could lead to tax rises to bolster the public finances. The euro rises to a high of 0.8696 pounds, LSEG data show. Against the dollar, sterling rises 0.1% to $1.3439, having hit a three-week low of $1.3418 overnight. (renae.dyer@wsj.com)

0701 GMT - Uncertain global conditions will likely keep China's policy accommodative, says Stefan Angrick at Moody's Analytics in a note. Beijing has responded with extra fiscal and monetary support, including key interest rate cuts, infrastructure spending and measures to lift consumption, but their effectiveness will be constrained by weak consumer and business demand as well as limited appetite for borrowing. While China is running an annual trade surplus of around $1 trillion, its domestic economy is fragile, says the head of Japan and Frontier markets economics. Household confidence and spending are weak, youth unemployment is stubbornly high and the property sector is struggling. With domestic demand in the doldrums, consumer prices have changed little since mid-2022. If growth falters, more easing will likely follow, he adds. (monica.gupta@wsj.com)

0650 GMT - China's growth momentum could slow in 2H but remain on course for a 5.1% GDP increase in 2025, ANZ economists say in a research note. Net exports could be the biggest drag to China's 2H economic growth, pulling it down 0.5 percentage points, they say. But Beijing has likely reserved sufficient policy room to offset the shock, they add. Consumption could benefit from a low base in 2H with retail sales growth likely elevated to 5%-6%, they say. Given China's GDP growth of 5.3% in 1H, the pace of expansion in 2H will likely reach 4.9%. In the medium term, government investment could continue to be primary driver of growth, until the economy rebalances toward consumption. (sherry.qin@wsj.com)

0650 GMT - Beijing is in a wait-and-see mode and may not unveil a stimulus in the near term to boost the economy, Macquarie economists write in a note. Since China's 1H GDP growth exceeded the 5% annual target, policymakers aren't feeling the urgency to announce any significant new stimulus, they say. In the first half, the GDP consensus rose after the better-than-expected 1Q number, but then fell after the tariff hike, and then rose after the trade truce, they say. In 2H, the consensus may rise, fall, and rise again. Beijing will do just enough to hit the 5% growth target. Tariffs won't change the 5% annual growth target, but only how Beijing will try to achieve that target, they add.(jiahui.huang@wsj.com; @ivy_jiahuihuang)

0641 GMT - Sterling is likely to stay under pressure against the dollar, based on its daily chart, says Quek Ser Leang of UOB's Global Economics & Markets Research in a research report. GBP/USD broke below both trendline support and the 55-day exponential moving average on Monday, the senior technical strategist notes. This downside breach suggests GBP/USD could continue to weaken, though the presence of a thick daily Ichimoku cloud will probably slow the pace of any decline, the strategist says. The closest support level is near June's low, at 1.3375, the strategist adds. GBP/USD is 0.1% higher at 1.3441. (ronnie.harui@wsj.com)

0636 GMT - The dollar's recent recovery stalls as investors turn cautious ahead of U.S. inflation data at 1230 GMT. Economists in a WSJ survey expect inflation to rise to 2.7% year-on-year in June from 2.4% in May. Normally, one would expect higher inflation to lead to tighter monetary policy and to support the dollar, Commerzbank's Volkmar Baur says in a note. However, there are question marks over the Federal Reserve's response function, he says. It's therefore "quite conceivable" that the dollar could weaken if inflation rises as this would increase tensions between the Fed and President Trump, who is calling for lower interest rates. The DXY dollar index falls 0.1% to 97.973 after hitting a nearly three-week high of 98.136 Monday. (renae.dyer@wsj.com)

0635 GMT - Major government bond curves continue steepening, with the latest pressure on long-end yields coming from Japanese government bonds, says Commerzbank Research's Christoph Rieger in a note. "'Nothing ever happens', but the curve continues steepening! This is worrisome," says the head of rates and credit research. The 20-year JGB yield hit a new multi-decade high of 2.657% early Tuesday, the highest level since November 1999, before easing back to 2.617%, according to LSEG. (emese.bartha@wsj.com)