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Navigate Global Payments – Markets Today 7th June 2022

 

 

MARKET WRAP – June 7th 2022

  • The Australian dollar was indecisive on Monday, with investors split on whether Australia’s central bank will hike interest rates by a “usual’ quarter point at their June meeting or opt for something more dramatic.
  • Stocks made modest gains to start the week (SPX +0.3%, NDX +0.4%, DJIA flat, R2K +0.5%) after bullishness out of APAC/Europe faded through the NY session. The strong sentiment into the NY morning was attributed to some reopening hope in China, namely Beijing, as well as some easing from the CCP on Chinese tech. However, after the NYSE cash open, indices soon hit their peaks before yields and the Dollar started making marks on valuations. Elon Musk’s latest attempt to pull out of the Twitter (TWTR) deal didn’t help sentiment.
  • UK PM Johnson won the confidence vote through votes of 211 vs 148, although the result showed a large division within the party as 41.2% of Tory MPs had voted against him which was worse than former PM May in 2018.
  • Consensus looks for a quarter point hike to 0.60%, but Nomura notes that “by returning the cash rate to 0.75%, the RBA would be completing an unwind of the emergency rate cuts it delivered in 2020. This would fit with a narrative that the emergency has passed and might be a relatively easy message to convey:.

FX

  • The Dollar Index was firmer on Monday, hitting a peak of 102.470 in contrast to a trough of 101.840 in the European morning, as the Buck took on a range of impulses albeit in a quiet, thin day of trading.
  • Nonetheless, sentiment improved amid the positive reports out of China regarding its COVID situation, as Beijing eases COVID requirements for restaurants and schools amid reports of zero COVID cases on top of none of the top 50 districts having widespread restrictions.
  • Looking ahead, the calendar is quiet amid Fed blackout ahead of the FOMC rate decision next Wednesday, but the key risk event resides around US CPI on Friday, where Credit Suisse “expects YOY inflation likely peaked in March, but monthly inflation readings are likely to stay uncomfortably above the Fed’s target in coming months,” and as such “the Fed is set on raising rates by 50bps at the June and July meetings, but is looking for signs of deceleration in inflation to support shifting to 25bps in September.”.


TODAY’S KEY RISK EVENT – RBA Interest Rate Decision

  • The Reserve Bank Board meets this afternoon at 2:30pm. By lifting the cash rate by 40 basis points from 0.35% to 0.75%, the Board would be fully unwinding the emergency rate cuts we saw in 2020 during the Covid crisis. Reuters has 22 of 35 respondents (i.e. 63%) expecting a 25bps increase tomorrow, with 11 forecasting a 40bpsincrease. In contrast, Bloomberg’s survey has 3 of 22 respondents forecasting a 50bps hike, 11 expecting a 40bps hike while 8 anticipate a 25bps increase (36%); Journalists: Kehoe (AFR) calling 25bps, McCrann (The Australian) 40- 65bps. OIS is priced 80% for a 40bps hike.
  • We lean towards the RBA lifting the cash rate by 40-50bps while markets are pricing a 90% probability of a +40bps hike. There is clear evidence that inflation is everywhere and the RBA is behind the curve

Source FX Street

CURRENCY/INDICIES RANGES

Currency Pair Low High
AUD/USD 0.71865 0.72315
EUR/USD 1.0684 1.0752
GBP/USD 1.2477 1.2577
USD/JPY 130.43 132.015
NZD/USD 0.6485 0.6536
USD/CAD 1.2535 1.2597
USD/CNH 6.6365 6.6642
AUD/JPY 93.73 94.98
AUD/NZD 1.106 1.109
DXY 101.848 102.469

 

Equity Index Daily % Change Closing Level
ASX -0.4% 7206
SHANGHAI COMP 1.3% 3236
NIKKEI 0.6% 27916
FTSE 1.0% 7608
DAX 1.3% 14654
CAC 1.0% 6549
DOW JONES 0.0% 32916
S&P 500 0.3% 4121
NASDAQ 0.4% 12061
VIX 1.1% 25.07
Commodity Daily % Change Closing Level
CRUDE OIL 0.0% 118.9
ICE NAT GAS -5.7% 150.7
GOLD 0.0% 1842.2
SILVER 0.0% 22.1
SGX IRON ORE 0.5% 144.6
CMX COPPER -0.9% 443.2
ICE SUGAR 1.4% 19.6
ICE COTTON 1.6% 150.7
CBT WHEAT 5.5% 1097.0
BITCOIN 0.5% 31437.2
Rates Markets Yield Daily Change
US 2 YEAR 2.73% 7.6
US 10 YEAR 3.04% 10.2
AUST 2 YEAR 2.62% 1.5
AUST 10 YEAR 3.48% 0.0

Source Bloomberg

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Disclaimer: This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711. The material contains general commentary only and does not constitute investment or any other advice. Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors. This information has been prepared without considering your objectives, financial situation or needs. Please seek your own independent legal or financial advice before proceeding with any investment decision. The information is believed to be accurate at the time of compilation and is provided in good faith. Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract. This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change. Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.

 

 

 

 

 

Disclaimer:This material is provided by Navigate Global Payments (Navigate) ACN 615 699 888, AFSL 502711.  The material contains general commentary only and does not constitute investment or any other advice.  Certain types of transactions, like futures, options and high yield securities can be risky, and not suitable for all investors.  This information has been prepared without considering your objectives, financial situation or needs.  Please seek your own independent legal or financial advice before proceeding with any investment decision. The information is believed to be accurate at the time of compilation and is provided in good faith.  Navigate does not warrant the accuracy or completeness of any information contributed by a third party. The information is subject to change without notice and Navigate is under no obligation to update the information. The information contained in this material are opinions of the author at the time of writing and does not constitute an offer, recommendation to act, a solicitation of an offer, or an inducement to subscribe for, purchase or sell any financial instrument or to enter a legally binding contract.  This information, including any assumptions and conclusions is not intended to be a comprehensive statement of relevant practise or law that is often complex and can change.  Past performance is not a reliable indicator of future performance. Any forecasts given in this material are predictive in character.

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