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Market Wrap – 28th July 2022

 

MARKET WRAP – 28th July 2022

  • AUD/USD has gained nearly 100 pips and touched its highest level since mid-June above 0.7000 on Wednesday. Following the Fed’s decision to hike the policy rate by 75 bps, FOMC Chairman Powell said they will abandon guidance after a dovish tilt.

 

  • The FOMC raised rates by 75bp as generally expected and made few changes to the accompanying statement. They noted that inflation remained elevated and it was “highly attentive” to inflationary risks with further hikes likely to be appropriate as the Fed was “strongly committed” to bring inflation back to target. Currencies briefly volatile but quickly settling essentially unchanged ahead of Powell’s press conference.

 

  • The Dow Jones Industrial Average rose 1.4% to 32,197.59, the S&P 500 climbed 2.6% to 4,023.61, and the Nasdaq Composite jumped 4.1% to 12,032.42.

 

  • European equities opened higher across the board with Eurostoxx 50, FTSE100 and DAX all +0.5. The yield on 10-year US Treasuries declined 2bps to 2.79%. WTI crude rose 0.3% to $95.25 a barrel.

 

  • President Biden will speak with Chinese leader Xi tomorrow, amid fresh tensions over Taiwan. The White House is also considering whether to lift some tariffs on Chinese imports to stem inflation.

 

  • US Durable Goods Orders for June rose by 1.9% to come in much higher than expectations of -0.4% though the ex-transport measure was only modestly higher, up 0.3% compared to expectations of 0.2%. Also released and June Wholesale Inventories rose 1.9% to beat estimates of 1.5%. released later in the NY morning, June Pending Home Sales fell by 8.6% MoM and 19.8% YoY, much lower than respective expectations of -1.0% and -13.4%.

 

  • Powell began his press conference by repeating the statement though sounded a little more hawkish in stressing the tightness of the labour market and inflation as “much too high”. However this was soon reversed as he said that the Fed would look for compelling evidence that inflation was coming down, that it would likely to be appropriate to sloe rate hikes and another larger than usual hike would depend on incoming data. He went on to add that rates were now in the range of what the Fed though was neutral, that the effects of earlier rate hikes had not yet been felt and there was evidence of the slowdown that was required to bring inflation down to target. When asked about a US recession, he said that he did not believe the US was there and aim was to avoid one though the path to doing so was narrow.

 

FX

  • DXY gave away part of its weekly advance and returns to the sub-107.00 area after dovish comments from the Fed.

 

  • EUR/USD gathered bullish momentum and climbed to a fresh daily high above 1.0200. FOMC Chairman Powell’s cautious comments on future rate hikes triggered a dollar selloff during the American session.

 

  • GBP/USD has extended its rally to a fresh three-week high above 1.2170 during the American session on Wednesday. Following the Fed’s decision to hike the policy rate by 75 bps, FOMC Chairman Powell’s relatively dovish remarks weighed heavily on the dollar.

 

  • USD/JPY edges higher for the third straight day on Wednesday and climbs to a fresh weekly high. The emergence of fresh USD selling holds back bulls from placing fresh bets and caps the upside. Investors now await the outcome of a two-day FOMC meeting before placing fresh directional bets.

 


                                   TODAY’S KEY RISK EVENTS

  • Retail sales data in Australia, US GDP and CPI data in Europe will be the focus for markets today.  We expect significant volatility off the back of these events and will be keeping a close eye on all major currencies.

 

 

                                                                                                          

CURRENCY/INDICIES RANGES

Currency Pair Low High
AUD/USD 0.69205 0.6984
EUR/USD 1.0108 1.025
GBP/USD 1.19645 1.209
USD/JPY 136.265 136.87
NZD/USD 0.6225 0.62805
USD/CAD 1.2816 1.2901
USD/CNH 6.7466 6.7716
AUD/JPY 94.52 95.26
AUD/NZD 1.111 1.1141
DXY 106.201 107.283

 

Equity Index Daily % Change Closing Level
ASX 0.3% 6807
SHANGHAI COMP 0.8% 3277
NIKKEI -0.2% 27655
FTSE 0.0% 7306
DAX -0.9% 13097
CAC -0.4% 6211
DOW JONES -0.7% 31762
S&P 500 -1.2% 3921
NASDAQ -1.9% 11563
VIX 6.1% 24.79
 
     
Commodity Daily % Change Closing Level
CRUDE OIL -1.5% 95.2
ICE NAT GAS 9.1% 404.2
GOLD -0.1% 1717.6
SILVER -0.1% 18.6
SGX IRON ORE -1.7% 110.3
CMX COPPER 1.0% 338.7
ICE SUGAR 0.0% 17.5
ICE COTTON 3.8% 404.2
CBT WHEAT 4.5% 804.8
BITCOIN -0.3% 20877.1
 
     
Rates Markets Yield Daily Change
US 2 YEAR 3.06% 4.1
US 10 YEAR 2.80% 0.6
AUST 2 YEAR 2.71% 3.0
AUST 10 YEAR 3.34% -1.4

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.

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