Good morning and welcome to episode 629 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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Jamie was 1.68R onside on HS50. Joe and Steve were stopped out on EURUSD and Oil.
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 138.06% collectively since we began recording Talking Bull on the 30th October 2019.
Hawkish Fed rhetoric continues
In comments on Friday, Minneapolis Fed President Kashkari stated that he could back a further 75 basis-point increase in rates at the July meeting and it might then be prudent to continue with 50 basis-point hikes after the July meeting.
He added that the Fed might need to raise rates beyond what is currently forecasted if inflation drifts higher or the supply side does not improve.
The overall stance continues to be a notable shift from the dovish rhetoric that dominated his rhetoric previously
Over the weekend, Fed Governor Waller stated that he will support a further 75 basis-point rate hike at the July policy meeting if the data comes in as he expects.
Longer-term US yields stabilise
Markets expect an aggressive Fed stance on interest rates, but there was a slight decline in longer-term bond yields with hopes that inflation would peak more quickly and that aggressive action now would allow a slightly lower peak in rates..
The 10-year yield traded around 3.23% on Monday.
Euro-zone peripheral concerns ease slightly
The Euro has drawn an element of support from a narrowing of Italian-German yield spreads to below 200 basis points as immediate fears surrounding fragmentation in Euro-Zone bond markets eased slightly.
ECB council member Knot stated that several 50 basis-point rate hikes are possible if inflation worsens.
Trades switch to short Euro position
CFTC data recorded a sharp reversal in Euro positioning with a net short position of 6,000 contracts from longs above 50,000 the previous week. This big shift in positioning will limit the potential for further Euro selling.
USD/JPY consolidates below 24-year highs
The dollar posted a strong recovery on Friday with the primary reason for sharp selling after the Federal Reserve policy decision seen as related to position adjustment rather than an underlying shift in sentiment.
The dollar overall failed to regain peak levels seen on Wednesday and lost some ground on Monday as global central banks maintained a hawkish stance.
BoE’s Pill emphasises conditionality
In comments on Friday, Bank of England chief economist Pill stated that the bank was looking at the persistence of inflationary pressures and price pressures becoming embedded in the economy would be a trigger for more aggressive action. In this context, he noted that the message that it may have to act forcefully is not unconditional
He also noted that increasing rates too aggressively would not stop short-term inflation pressures, but would add to the risks of an undesirable slowdown in the economy. He also stated that it was up to markets to decide whether the bank was signalling a 50 basis-point rate hike for August.
16.00: ECB President Lagarde speech
01.00 (Tues): RBA Governor Lowe speech
Key events over the next week
June 22nd: UK CPI inflation data
June 22nd: Fed Chair Powell congressional testimony
Gun to head challenge – Update
Today’s trade idea
Have a great week everyone.