Quarterly Outlook
Macro outlook: Trump 2.0: Can the US have its cake and eat it, too?
John J. Hardy
Global Head of Trader Strategy
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Morning Brew June 22 2022
Erik Schafhauser
Senior Relationship Manager
Summary: Risk Off due due to Rate differential UK data at 8:00
Good Morning,
Risk off sentiment is prevailing the market today, Index futures are trading lower, yields are rising and the USD Index gains.
The GER40 fell back to 13140, the US 500 is trading at 3728 and the USTech 100 at 11435. Please find at technical comment here
EURUSD fell back to 1.0497 and GBPUSD to 1.2234. The Yen hit a new 24-year low at 136.71 before recovering to 136.18 the government calls rapid FX moves undesirable. Technically there is room to the upside as Kim points out in his note: USDJPY experienced a ”Flash correction” Thursday before bouncing back strongly and has now broken above resistance at 135.60.
There is still divergence on RSI, but trend is up and remember the trend is your friend.
To reverse the bullish picture USDJPY needs to break below 131.40.
Gold and Silver are under pressure on the strong USD at 1826 and 22.40. and other commodities are also under pressure. December Wheat has fallen from 436 in May to 364 and UK Crude fell to 111
An Analyst poll conducted by Reuters shows an expectation for a 0.75 BPS by the Fed in July by 75% of the 91 analysts. Rate futures show a probability of 85%. This drives interest differentials higher and strengthens the USD
If Russian gas deliveries were to stop, the country would certainly enter a recession the BDI stated yesterday as is also cut its growth forecast to 1.5% from 3.5%.
Peter Kazimir and Olli Rehn stated that Euro countries should not expect unconditional support from the Central Bank's new tool to stop borrowing costs from rising too far.
At 8 this morning the UK releases inflation data with the PPI as well as the CPI, the PPI is expected at 19.4% for the input prices and 14.7% output, the CPI at 9.1% on an annual level.
At 14:30 the Canadian CPI will follow expected at 7.4% and Jerome Powell delivers his testimony to the to the Senate Banking Committee from 15:30
Employ strict risk management in all positions and consider using options. It could also be a good idea to park some assets in funds or ETFs and trade actively with a reduced amount. Higher Volatility means you experience higher gains and losses with your capital.
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