1st day of the month – Fears over slowing growth and expectations for moderation in Fed rate hikes overshadowed still hot inflation prints.
USDIndex sinks again to 105.50, while against the Yen it extended to 6-week lows, i.e. 131.96. US data out Friday showed stubbornly high inflation and wages growth. Corporate earnings have mostly beaten lowered forecasts. The China PMI reports missed miserably and flagged risks to the overall outlook as the country’s zero-Covid policy continues to bite. Hong Kong’s benchmark underperformed and lost -0.2%. US Stocks are steady. Nikkei and ASX gained 0.6% and 0.7%, GER40 and UK100 futures are narrowly mixed in opening trade.
Overnight: China’s property developers in focus and Alibaba still weighed down after the US included the company in the delisting watchlist. Evergrande failed to deliver a restructuring plan; Alibaba added to SEC List of Chinese Firms Facing Delisting, along with another 200 companies. German Retail Sales plunged -1.6% m/m in June – flags ongoing cost pressures that coupled with the threat of energy rationing means recession risks are palpable now. HSBC posted a higher profitability target and bullish dividends outlook.
- USDIndex weakens & YEN outperforms.
- Equities – USA500 closed higher +48.8 pts (+1.21%) (4072), US500FUTS at 4105 now. Fed’s Kashkari affirmed the bank’s commitment to bring inflation down, which acted as a reminder that the Fed will continue to hike rates, even if the path of the tightening cycle may not be quite as aggressive as markets had feared at one point.
- Yields 10-year Treasury rate lifted 1.6 bp to 2.665 (after sliding to the lowest since early April at 2.618% at the end of last week).
- Oil – drifted back to 97.60, as OPEC+ meeting on Thursday and is expected to produce an increase in supply, even if only minor.
- Gold – steady at 2-week highs at $1764.
- Bitcoin at 23,170.
- FX Markets – Yen remains the main beneficiary of the correction in haven flows into the USD and USDJPY slipped to 131.96. The USDCHF also caught a bid, i.e. 0.9500 and Sterling rose against both USD and EUR – with GBPUSD now at 1.2196, while EURUSD is lingering at 1.0240.
Today – UK, Australian central banks expected to hike this week, while it is NFP week as well.
Biggest FX Mover @ (06:30 GMT) USDJPY (-0.79%). Broke 132.00 low. 1Hour-MAs flattened, but MACD histogram negative & falling, RSI sideways 34.50. H1 ATR 0.305, Daily ATR 1.354.
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