USD steady at 108 & Euro steady slightly above $1 with US inflation ahead a key test for the asset. EUR was hit by a very weak ZEW sentiment report. Sterling adrift as markets wait for Tories to choose leader (Chancellor Sunak front runner). Cautious comments from BoE’s Bailey that he expects inflation to come down next year have pressured the Pound. Stocks’ bears took over once again. In China, stocks rose today, after data showed export growth beat analysts’ expectations, while recent rising COVID-19 cases clouded outlook for an economic recovery. German June HICP inflation was confirmed at 8.2% y/y. Italy is also facing yet another political crisis as PM Draghi is pressured to agree to more handouts.
Overnight: : RBNZ and BOK each hiked rates 50 bps, both as expected amid the global inflation fight. The former pushed its official cash rate up to 2.50% after a half point boost in May to 2.00%, and a half point in April to 1.50%. The bank also indicated it is appropriate to continue to tighten apace, and forecasts project another 150 bps in hikes over the next year.
- USDIndex hovering around the 108.00 barrier, in the run up to today’s US inflation report and with investors betting on more aggressive tightening moves from the Fed, non-interest-bearing bullion continues to underperform.
- Yields: 10-year yield fell 10 bps richer into the open to 2.90%, though closed at 2.965% after a poor 10-year sale.
- Stocks: USA100 tumbled -0.92%. The USA500 is off -0.92%, and the USA30 has slid -0.62%. Nikkei and ASX managing gains of 0.5% and 0.2% respectively. PepsiCo (-0.57%) announced “strength and resilience of our categories and consumer demand trends” as it lifted its full year revenue guidance for a second time, although the EPS outlook was unchanged. American Airlines (+9.98%) maintained its outlook on Q2 sales as lower oil prices offset increases in other costs.
- USOIL drifted to $93.56 on worries that aggressive rate hikes could hit oil demand & also due to warnings from the IEA that nations are experiencing the first global energy crisis so far not had much of an impact on prices. Prices fell by more than 7% yesterday.
- Gold at $1,722.
- FX Markets: EURUSD at 1.0039, USDJPY retests to 137.18 & Cable at 1.1940
- Today – Focus is on the US inflation, which is expected to hit a 4-year high, the data will bolster expectations for more aggressive rate hikes from the Fed. Earnings: Fastenal, Delta Air lines.
Biggest FX Mover @ (06:30 GMT) EURGBP(-0.34%) extends declines for a 7th day. MA’s aligned lower, MACD histogram & signal line lower & declining, RSI 31 & falling. H1 ATR 0.00097, Daily ATR 0.00575.
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Andria Pichidi
Market Analyst
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