The USDIndex was the only real casualty of the day, especially after the BoC’s expected 25 bp increase and expectations for ECB and BoE tightening. The cooler than projected CPI propelled bonds sharply higher as the markets perceived the upcoming 25 bp rate hike from the Fed would be the last. The rally picked up steam as shorts scrambled to cover and as technical buying picked up. Yields closed at two-week lows. The $1.35tn US junk bond market has shrunk by almost $200bn since its all-time peak in late 2021. US 30-year mortgage costs top 7%.
Wall Street cheered the implications of the data too and the tumble in rates further supported the US100. However today, stock markets continued to rally overnight, buoyed by stimulus hopes for China and optimism that the Fed is nearing the peak of the current tightening cycle.
UK: GDP held up better than anticipated, with activity contracted. As in the Eurozone, the industrial sector is struggling, and the sharp rise in interest rates since the end of 2021 is starting to hit the sector hard. These numbers don’t signal a marked rebound, but at least don’t marke a slide back into recession either.
- FX – The USDIndex slipped to 100. USDJPY holds at 138, Sterling strengthened to $1.30 for the first time since April 2022 and EURUSD broke 16-month resistance and 200-WMA at 1.1100.
- Stocks – The US100 (+1.10%) was up to its highest level in 15 months, the US500 was up 0.7%. #Salesforce (+2.76%) notched its biggest 1-day gain in four months after the software group announced price rises for some of its products, the first increase in seven years. #Microsoft (+1.42%) and #Activision (-1.09%) exploring changes to $75bn deal.
- Commodities – USOil spiked to 75.88 after the new data showed rising Chinese imports of the fuel and traders reacted to softening inflation in the US.
- Gold – extended to $1962 as the US Dollar and Treasury yields corrected.
Today – ECB releases accounts of its June meeting monetary policy discussions, US PPI report.
Biggest Mover @ (06:30 GMT) XAUUSD(-0.54%) rallied to 1962.66.
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Andria Pichidi
Market Analyst
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