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Navigate Global Payments – Markets Today 14th July 2022 – A Hot CPI

 

MARKET WRAP – 14th July 2022

SNAPSHOT

  • Market pricing leans towards 100bp Fed hike in wake of hot CPI and hawkish BOC. Equities down, Treasuries flatten, Crude flat/up, Dollar down.  Hot US CPI print; BOC surprises with 100bps hike; Fed Bostic says everything is in play when asked about 100bps hike; Nomura ups Fed hiking path post-June; RBNZ hiked by 50bps, as expected; Strong UK May GDP estimate.

 

  • CPI: US CPI was hot, with headline and core MIM and Y/ Y all printing above expectations. Headline MIM rose 1.3% (exp. 1.1%, prev. 1.0%), while Y/ Y jumped 9.1% (exp. 8.8%, prev. 8.6%) which is the fastest since November 1981. Core MIM printed 0.7% (exp. 0.6%, prev. 0.6%) and Y/Y eased slightly to 5.9% (exp. 5.7%, prev. 6.0%).

 

  • Markets were volatile in wake of the hotter-than-expected CPI report which saw markets ramp up hawkish pricing from the Fed at the July meeting. Fed funds futures now imply over a 75% chance of a 100bp hike, which is heavily up from the near 0% chance before the data, while Feds Bostic said “everything is on the table’ when asked about such a move.

 

  • The hot CPI was entailed by a hawkish BOC who surprised markets with a 100bp move in an effort to front-load rate hikes and prevent the need for even higher rates down the road, which advanced hawkish market pricing for the Fed even further.

 

  • The hot CPI saw a typical hawkish reaction where almost everything was sold, other than the Dollar. However, as trade progressed moves had reversed with equities still closing lower but well off their lows, while the pronounced flattening in the Treasury curve remained, longer-ended notes and bonds had caught a bid seeing the 2s10s yield inversion widen to its largest point since 2000

 

  • The Dollar Index saw a high of 108.59 which coincided with EUR/USD testing parity, once again, in wake of the hot CPI report although EUR/USD was met with bidders at that level before reversing and strengthening against the buck throughout the afternoon.

 

  • The hot CPI saw markets price in a terminal rate of 3.6% in December (implying a FFR of 3.5-3.75%, +200bps from the current FFR), showing markets expect the Fed to front load their rate hikes before easing next year, providing inflation also starts to cool.

 

  • FED Bostic spoke after the data where he suggested everything is in play for the July meeting when asked about a 100bps move, while he also was disappointed in the June report. White House officials reiterated the memo on Monday that the recent decline in gas prices will be felt in July’s inflation report.

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TODAY’S KEY RISK EVENTS

  • Australian Employment, Swedish CPIF, US IJC Speakers: Feds Waller
  • Earnings: JPMorgan, Morgan Stanley.
  • CURRENCY/INDICIES RANGES
Currency Pair Low High
AUD/USD 0.67255 0.6803
EUR/USD 0.9998 1.0122
GBP/USD 1.1828 1.19675
USD/JPY 136.69 137.875
NZD/USD 0.6081 0.6171
USD/CAD 1.2938 1.306
USD/CNH 6.71 6.748
AUD/JPY 92.18 93.37
AUD/NZD 1.1016 1.1059
DXY 107.477 108.583

 

Equity Index Daily % Change Closing Level
ASX 0.2% 6622
SHANGHAI COMP 0.1% 3284
NIKKEI 0.5% 26479
FTSE -0.7% 7156
DAX -1.2% 12756
CAC -0.7% 6000
DOW JONES -0.7% 30773
S&P 500 -0.4% 3802
NASDAQ -0.2% 11248
VIX -1.9% 26.77
     
     
Commodity Daily % Change Closing Level
CRUDE OIL 0.3% 96.1
ICE NAT GAS 4.5% 405.7
GOLD -0.3% 1733.5
SILVER -0.2% 19.2
SGX IRON ORE -1.5% 107.2
CMX COPPER 0.8% 331.5
ICE SUGAR 2.4% 19.1
ICE COTTON -3.4% 405.7
CBT WHEAT 0.0% 814.0
BITCOIN 0.3% 19670.0
     
     
Rates Markets Yield Daily Change
US 2 YEAR 3.14% 8.6
US 10 YEAR 2.92% -5.4
AUST 2 YEAR 2.49% -2.0
AUST 10 YEAR 3.39% -2.9

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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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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