MARKET WRAP – 29 June 2022
- US equities gave up recent gains with the Nasdaq 3% lower. Oil continued its march higher, as did Iron Ore to now be up 11% in the last week. The USD was stronger against most comers, with the NZD among the worst performers trading down to 0.6238. AUD also making new daily lows at 0.69045 late in the NY session. The ASX closed 0.86% higher, with energy leading the gains while materials and utilities also climbed.
- The ECB’s Kazaks said that it’s worth looking at a 50bp hike in July, with this week’s Eurozone CPI possibly helping his case. Shortly after, Lagarde reaffirmed the ECB’s intention to raise by 25bps in July and said the supply shock could linger for longer. Lagarde also mentioned that inflation in the Eurozone would be undesirably high for some time and that the size of the September rate hike will be higher if needed. European equities were higher on the open, with the FTSE 100 up 1.04% and CAC +1.08%. US 10-year treasuries climbed sharply to 3.21. Brent Crude rebounded from the day’s lows, reaching $116.83. Little in the way of meaningful US data early in the session. Released later in the NY morning and US June Consumer Confidence fell to 98.7, down from 103.2 and below expectations of 100.0.
- Wall St opened in positive territory with the Dow and S&P up around 1% while gains on the Nasdaq were around half this though all slipped into the red over the NY morning. Across the Atlantic, European markets paring gains though still closing in positive territory with the FTSE up 0.9% at the closing bell while the CAC and DAX were up either side of 0.5%. Fed’s Governor Daly hit the wires saying that the Fed can reduce inflation by reducing demand and suggested a soft landing was possible due to the strength of the US economy. She predicted that the unemployment rate would rise slightly, and growth would fall to below 2% though a recession would be avoided.
- AUD/USD traded sideways between 0.6916 and 0.6938 before climbing to a high of 0.6965 later in the session. EUR/USD initially fell from a high of 1.0606 towards 1.0576 on Lagarde’s comments but rebounded back towards 1.0585. Into London Lunch and AUD/USD traded sideways around 0.6950 having drifted off 0.6965 highs while NZD/USD slipped to lows near 0.6270. Having printed above 1.0600 early in the European session, EUR/USD fell under 1.0560 while GBP/USD fell to the 1.2220 area having printed at 1.2291 highs hours earlier. USD/JPY climbed steadily, hitting a high of 136.295 and USD/CAD fell back to 1.28195 lows before recovering slightly.
- Little reaction to any of the US data points with the USD firming across the board over the NY morning and into the London rate set. The local unit fell to lows of 0.69145 while NZD/USD fell to 0.6245, EUR/USD dipped to 1.05025 and GBP/USD made lows under 1.2200.USD/JPY moved modestly higher to reach 136.32 while USD/CAD made highs of 1.2878. Markets were fairly subdued over the NY afternoon though the USD remained firm with the commodity currencies under the most pressure. AUD/USD fell to 0.6906 lows ahead of the Sydney open with NZD/USD down to 0.62385 while USD/CAD moved modestly higher. GBP/USD fell to 1.2181 lows while USD/JPY moved up to 136.38. AUD/USD sits at 0.6905 at the time of writing.
- Equities continue to set the risk tone with the retreat on Wall Street coinciding with new lows in the antipodeans. Interesting Oil and Iron Ore continue to rally, which along with coal continue to provide robust revenue numbers for producers.
- Month and financial year end flows have been mixed so far, with the risk sentiment in the driving seat as to directional flows. AUD/USD now resting right on its support at 0.6900, and likely to find sellers ahead of 0.7000 as the week goes on.
Overnight Currency Ranges