USD down (USDIndex 104.70), Stocks mixed (NASDAQ +0.18%, Dow -0.5% & S&P -0.38%). A boost to Australia’s minimum wage and RBA pledge to do what is necessary to meet the inflation target fueled the jump in yields. Expectations are now for 50 bp hikes in July as well as September and Australia’s curve shifted more than 20 bp higher today. – Yields extended higher as dip buyers have thrown in the towel for now, leaving sellers in control as the market adjusts to the potential for a very hawkish FOMC. (US 5yr & 7yr rates up to 3.606% and 3.59%, 2yr at 3.43%). US PPI increased 0.8% in May and the core rose 0.5% – bearish for the markets. ECB to hold emergency meeting “to discuss current market conditions”. A Bloomberg source story yesterday suggested that the ECB remains tight lipped on new plan to keep spreads in.
“Against a backdrop of sky-high inflation, rising rates, and growing recession concerns, the S&P 500 has had its worst start to the year since 1962,” noted analysts at Goldman Sachs.
- USDIndex pulled back to 104.78.
- Υields have extended higher, at the highest rates in well over a decade. The 10-year cheapened over 12 bp to 3.488%, not seen since the spring of 2011.
- Equities – Nikkei and ASX lost a further 0.9% and 1.3% respectively. Hang Seng and CSI 300 are currently up 1.6% and 2.7%.
- Oil drifted to 116.55 before settling at 119.58 – amid FED and reports that US Senate Finance Committee chair Ron Wyden plans to introduce legislation setting a 21% surtax on oil company profits considered excessive.
- Golds near its lowest area in a month, now at $1,820.
- Bitcoin steady above $20K.
- BOJ offers to buy unlimited sum of JGBs with 7 years left until maturity.
- FX markets – EURUSD rebounded to 1.0498 from 1.0396, USDJPY back below 135 zone, Cable settled at 1.2040.
Today – The focus will be on the ECB meeting but also on the dot plot and the terminal rate, as well as how Chair Powell assesses the outlooks of inflation, growth, and the labor market.
Biggest FX Mover @ (06:30 GMT) USDIndex (-0.35%) down to 50-hour SMA, 104.72. Intraday, MAs aligned lower, MACD histogram neutral, RSI 41 & sloping. H1 ATR at 0.14 & Daily ATR at 0.79.
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Andria Pichidi
Market Analyst
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