Good morning and welcome to episode 631 of ‘Talking Bull’. In this video/podcast we cover the main headlines and what to expect from the day ahead.
We take a technical look at key markets that are likely to be impacted by today’s events. Also, we participate in a ‘Gun to the head’ challenge where each of us calls a live trade. These will expire at 9pm tonight and we will keep track of the progress over time.
We hope you enjoy it!
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Show notes:
Steve was onside 0.45R on Gold. Joe was offside 0.59R on EURUSD and Jamie was offside 0.42R on GBPCAD.
We have included an illustration based on a £1000 account. This will follow the combined return of our morning trades by risking 1% of the trading capital per trade. The 1% risk is a variable monetary amount and will rise and fall based on the success of the calls.
We are currently up 129.47% collectively since we began recording Talking Bull on the 30th October 2019.
News
Fed watching inflation expectations closely
In comments on Tuesday, Richmond Fed President Barkin stated that he had thought that a 75 basis-point rate hike was possible at the June meeting after the latest University of Michigan consumer confidence index recorded an increase in long-term inflation expectations to 3.3% from 3.0%.
He added that there was not much reason to stop raising interest rates if inflation keeps escalating. He added that the Fed will do what it takes to reduce inflation and it should come down, but it will take some time.
Risk appetite dips again
US equities posted strong gains on Tuesday, but there was a fresh decline in confidence on Wednesday with futures moving lower.
Weaker risk appetite triggered fresh dollar support on Wednesday with commodity currencies under pressure.
Yen recovers slightly from 24-year lows
The yen remained under pressure on Tuesday with USD/JPY posting fresh 24-year highs around 136.70 as the Bank of Japan remained committed to an ultra-loose monetary policy.
Weaker risk appetite and lower oil prices triggered limited yen relief on Wednesday.
Chair Powell back on the stage
Markets will be watching Fed Chair Powell’s testimony to Congress closely on Wednesday with his rhetoric and guidance having an important impact on rate expectations and moves across all asset classes.
Fiscal policy will also be important with President Biden expected to confirm a cut in gasoline taxes.
UK inflation hits fresh 40-year high
The headline UK CPI inflation rate increased to 9.1% for May from 9.0% previously which was in line with market expectations.
There was a slightly larger than expected decline in the underlying rate to 5.9% from 6.2% and below consensus forecasts of 6.0%.
Pill wary over targeting Sterling
Bank of England Chief Economist Pill stated that he sees further policy tightening in monetary policy with the bank ready to act if there is evidence of persistent price pressures, although he added that the bank faces a narrow path between persistent inflation pressure and recession.
As far as Sterling is concerned, Pill stated that he was worried that using monetary policy to stabilise the exchange rate in the short term would distract the bank from its goals.
Data Today
13.30: Canada Consumer prices
14.30: Fed Chair Powell testimony
08.30 (Thurs): Germany PMI index (flash reading)
Key events over the next week
June 30th: US PCE prices index
Gun to head challenge – Update
Today’s trade idea
Have a great week everyone.