Market Update – July 13 – Eyes on US Inflation

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.

Click here to access our Economic Calendar

Andria Pichidi

Market Analyst

Disclaimer: This material is provided as a general marketing communication for information purposes only and does not constitute an independent investment research. Nothing in this communication contains, or should be considered as containing, an investment advice or an investment recommendation or a solicitation for the purpose of buying or selling of any financial instrument. All information provided is gathered from reputable sources and any information containing an indication of past performance is not a guarantee or reliable indicator of future performance. Users acknowledge that any investment in Leveraged Products is characterized by a certain degree of uncertainty and that any investment of this nature involves a high level of risk for which the users are solely responsible and liable. We assume no liability for any loss arising from any investment made based on the information provided in this communication. This communication must not be reproduced or further distributed without our prior written permission.