Navigate Global Payments – Markets Today 21st June 2022

• The AUD/USD retreated from its early high but retains gains and trades around 0.6950. Attention shifts to the Reserve Bank of Australia after the central bank surprised markets by hiking the cash rate by 50 bps to 0.85% in its June meeting.

• European equities traded higher and US equity index futures also gained with price action steady amid the thinned liquidity conditions as US cash markets were closed for the Juneteenth holiday.

• DXY softened but with price action contained in holiday-quietened trade, while EUR was slightly firmer as participants digested a slew of central bank rhetoric including from ECB’s Lagarde who expects to raise the key interest rates again in September after a 25bp hike in July and noted the calibration of the September hike will depend on the updated medium- term inflation outlook.

• Fed’s Bullard (2022 voter) said he expects the economic expansion to continue this year and that the Fed must meet market expectations for rate hikes, while he added that effects of Fed guidance on the economy and CPI are taking hold.

• Bullard also stated that high inflation has come up like a storm and the economy is slowing to the trend rate of growth, as well as noted that the current balance sheet reduction is a good place to begin with and they may not need to go as far on QT as it might seem, according to Reuters.

• Equities rallied to end the week after a gruesome performance Monday-Thursday to see stocks still close lower for the sixth consecutive week. Gains were led by the Nasdaq, which was up over 4% at the highs underpinned by strong gains in Consumer Discretionary and Technology. All sectors closed in the green, with the “underperformers” being the defensive Health Care and Utility names, but still closed with gains above 1%. The broad equity upside saw the S&P 500 reclaim 4k.

TODAY’S KEY RISK EVENTS

• In Australia, RBA Governor Lowe will speak today on the Economic Outlook and Monetary Policy just before the June RBA Board Minutes are released. Lowe is likely to reiterate the key message from his recent TV interview where he highlighted that emergency policy settings were no longer appropriate, and it is time to shift to more normal monetary policy settings.

• Lowe noted that inflation is too high but does not need to be returned to target straight away. He also said that a cash rate of at least 2.5% would be ‘reasonable’ at some point.

• Lowe will give his speech against the backdrop of high inflation, a tight labour market, rising wages growth and hawkish central banks globally. We expect a hawkish tone. The Bank will also release a Review of the Yield Target this morning.

CURRENCYI/NDICIES RANGES

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