Good morning and welcome to episode 627 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 stopped out on EURGBP & Steve was stopped out on USDJPY.
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 125.07% collectively since we began recording Talking Bull on the 30th October 2019.
US producer price inflation marginally lower
US producer prices increased 0.8% for June, in line with expectations while the year-on-year rate edged lower to 10.8% from 10.9%. Underlying prices increased 0.5% on the month with a retreat in the annual rate to 8.3% from 8.6%. The data did not have a significant impact in shifting the market narrative.
Markets still expecting a very hawkish Fed
Following reported guidance within the Wall Street Journal, there were still strong market expectations that the Federal Reserve would hike rates by 75 basis points to 1.75% at Wednesday’s policy meeting with Powell also expected to deliver a hawkish stance given the need to control inflation.
Markets also expect that there will be further upward revisions to the interest-rate projections of interest rates by individual Fed members.
Fed guidance will be a crucial element for all asset classes.
US yields continue to increase
Treasuries attempted to rally early in the New York session, but there was quick selling on rallies and there were steady losses into the European close with the 10-year yield increasing to near 3.45% and the highest level for over 10 years with only a slight correction.
Dollar hits fresh 19-year high
Higher yields and the shift in Fed expectations continued to boost the dollar as yields continued to increase.
The dollar index posted a new 19-year high with a key break above 105.00 on the dollar index despite some resilience in the Euro.
USD/JPY also posted a 23-year high above 135.50 before a limited correction.
Risk appetite remains vulnerable
Equity markets continued to retreat on Tuesday with further concerns over the impact of global monetary tightening and stagflation.
There was a tentative recovery on Wednesday as US futures ticked higher.
Limited Chinese data relief
Chinese industrial production increased 0.7% in the year to May after a 2.9% contraction previously and above expectations of a further decline while the decline in retail sales was less severe than expected which provided an element of relief.
Sterling on the rocks
The SNP outlined plans for a second Scottish independence referendum which contributed to a further slide in confidence in the UK outlook.
Sterling came under further pressure with GBP/USD sliding to below 1.2000 for the first time since March 2020.
Ad hoc ECB meeting
At the European open on Wednesday, the ECB announced that it will hold an ad-hoc council meeting to discuss current market conditions.
There was a rally in peripheral bonds which also supported the Euro.
13.30: US retail sales
13.30: US New York Empire manufacturing survey
19.00: US Federal Reserve policy decision
19.30: Fed Chair Powell press conference
02.30 (Turs): Australia labour-market report
Key events over the next week
June 16th: Swiss National Bank policy decision
June 16th: Bank of England policy decision
June 17th: Bank of Japan policy decision
Gun to head challenge – Update
Today’s trade idea
Have a great week everyone.