MARKET WRAP – 27 June 2022
US equities finished the week in the black, but risk sentiment was varied as Oil posted its first back-to-back weekly loss since April. Iron Ore rallied off its lows and the July thermal coal contract remains close to $400 USD/t. The Aussie dollar closed the week at 0.6941. Asian equities finished Friday’s session higher with the Hang Seng outperforming up 2.10%. The ASX closed +0.8%, taking its weekly gain to 1.6%, as tech and lithium shares rebounded.
Germany’s economic minister Habeck said that certain industries would have to be shut down if there is not enough gas, adding that the situation will be tight this winter. In the UK, May Retail Sales ex Fuel printed at 0.7% m/m, beating expectations of -0.9%. UK consumer confidence has fallen to a record low, dropping 1 point to -41 in June. European equities opened higher with the Euro Stoxx 50 +0.8% and FTSE100 +0.6. The yield on 10-year Treasures advanced 2bps to 3.11%. Oil’s WTI trading near $105 a barrel. Markets are now wagering on less than 150bps of ECB rate hikes by year-end.
RBA’s Lowe hit the wires saying that the RBA is not expecting there to be any kind of recession, adding that the challenge is to bring inflation down painlessly. We then heard from the Fed’s Bullard who said the US economy has shown tremendous resilience, and from the household side we have not seen signs of pullback. He continued by saying that rate hikes are going to slow the economy to a ‘trend pace’ of growth. We then heard from ECB’s Guindos who said that the Euro-zone may have negative growth in 2023, adding that we will see high inflation next month. EUR/USD continued to fall on the headlines toward 1.0515.
Wall St remaining firm throughout the NY afternoon to close with large gains with the Dow up 2.7% while the S&P gained a little over 3% and the Nasdaq closed 3.3% higher on the day.
AUD/USD had a choppy session, climbing to highs of 0.6919 before falling to 0.6889 lows into the European morning. Into London Lunch, AUDUSD climbed back towards daily highs, just short of 0.6920. NZD/USD continued to edge higher reaching 0.6313. EUR/USD fell from 1.0555 highs back below 1.0535. GBP/USD climbed sharply to 1.23085. USD/CAD traded a range above 1.2959 lows. USD/JPY climbed steadily to trade up to highs of 135.31.
The USD was hit on the weaker Michigan survey with AUD/USD reaching to highs of 0.6952 while NZD/USD reached 0.6325, EUR/USD moved up to 1.0571 and GBP/USD made highs of 1.2319. USD/CAD fell to lows of 1.2900 into the London rate set while USD/JPY initially fell though recovered in quick time.
Markets were fairly subdued over the NY afternoon though the commodity currencies remained bid with further modest gains for the antipodeans. while USD/CAD fell under 1.2900 in late trade. Other majors drifting near the middle of their respective daily ranges to close the week.
A relatively quiet week for economic data. With CPI data out of the Euro-area towards the end of the week helping to shape ECB rhetoric and policy response. In Asia, the key event will be China’s PMI data on Thursday, we have pencilled in a further rebound to above 50 for the indices. We will hear from several FOMC participants through the week, most notable will be comments from voting member Loretta Mester.
AUD/USD continues to follow the whims of risk sentiment. As such, currency markets are watch equity markets for a lead, but markets expect offers to emerge back towards 0.7000. Dips continue to be well bought by the local exporter community, and markets expect that to be the case around 0.6850 again. AUS/USD at .6941 at the time of writing.
Overnight Currency Ranges