Chair Powell’s comments – cancelled each other out – talked more “disinflation” with “significant declines in inflation.” in 2023 but the surprise 517k NFP he could not explain – adding to the 5-5.25% range argument. Fed Fund futures are now pricing the terminal rate at 5.15% in July. (up from 4.9% ahead of NFP). So “As we were.” USD slipped and then reversed, Stocks (NASDAQ +1.90%) & Yields (US10yr 3.6745) closed higher. Biden’s SOU speech has high ambitions but has little chance of success with a divided Congress.
- The USD Index continued to rally from 8-mth lows last week at 100.65. Third day higher touched 103.80 before reversing under 103.00 and is back to 103.20 currently.
- EUR – sank to new 21-day lows at 1.0675 yesterday, rallied to 1.0760 and back to 1.0735 now.
- JPY – Declined over 1.3% yesterday to 130.40 lows, over 131.00 now at 131.20.
- GBP – Sterling rallied to 1.2080 then weakened again to breach the psychological 1.2000 yesterday to touch 23-day lows at 1.1960. The pair is back to 1.2050 now.
- Stocks – The US markets rallied on the disinflation side of the story (0.78% to 1.90%) US500 1.29%, (52.94) 4164, holding the key 4100. US500 FUTS trade at next key resistance 4175. MSFT +4.2%, GOOG +4.42% & Bidu +12.18%. All rallied on AI news, Oil majors rallied on back of BP Earnings. ATVI +5.62% on back of MSFT, their own Earnings and takeover rumours.
- USOil – Futures rallied again to trade at $77.55 today from $72.20 lows on Monday.
- Gold – Advanced from $1865 lows yesterday to $1880 resistance now.
- BTC – Tested $22.7k lows yesterday, before lifting over $23k, to 23.2k now.
Today – BoC Minutes, Speeches from Fed’s Williams, Cook, Barr, Bostic, Kashkari & Waller, ECB’s Knot & Elderson, Earnings from ABN AMRO, Credit Agricole, Equinor, Societe Generale, (Beat) AP Moeller-Maersk, CVS, Disney and Uber.
Biggest FX Mover @ (07:30 GMT) AUDJPY (+0.20%). Sank from a test of 91.95 yesterday to 90.70, before rallying again to 91.50 today. MAs aligned higher, MACD histogram & signal line rising & testing 0 line. RSI 55.00 & rising, H1 ATR 0.190, Daily ATR 1.105.
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Stuart Cowell
Head Market Analyst
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