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Morning Brew July 27 2021
Erik Schafhauser
Senior Relationship Manager
Résumé: Heading into the most uncertain US rate decision in a decade
Good morning.
Yesterday`s trading session was nothing to write home about in terms of market moves, volumes were surprisingly high though given the fact that Dow and S&P moved less than 0.1% and the NASDAQ 0.2%. 10.2 million shares were traded against an expectation of 10.7.
Defense stocks were under pressure with Rheinmetall ending the day 6.5% lower, after a Bloomberg article there may be a ceasefire in Ukraine.
US Retail Sales yesterday were stronger than expected at +0.1% while a decline had been expected, the Canadian CPI turned negative, making a strong case for a 50 basis point cut by the Royal Bank of Canada and Japanese trade data came much lower than expected over night. Exports rose by 5.6% vs an expectation of 10% and imports rose 2.3% vs 13.4% expected.
A busy day lies ahead with the most undecided Rate Decision in 10 years the highlight
The Benchmark for the FOMC is:
- current probability of a 50 BPS cut is 65%, 35% in Favor of 25 Basis points
- by Yearend traders are pricing in 116 basis point cuts
- the September 2025 rate is seen at 243 basis points lower.
Over the next year, rate traders are expecting 10 cuts of 25 Basis points and any shift in this scenario will have a market impact. The rate will be announced at 20:00 CET and the press conference will occur 30 minutes later.
The rate decision hits markets at interesting levels, many Indexes are trading near their highs and many financial instruments are at or near interesting technical levels. Todays decision may well be the catalyst to either break key levels or cause them to hold. It will be an interesting and likely volatile day. Check your positions and your risk and consider not only what you gain when you are right but also what happens when you are wrong.
Besides the US Rate decision, we are expecting the UK CPI at 8:00 which will shed some light on tomorrows Bank of England and the EU`s harmonized inflation at 11:00, expected at 2.2%.
Ahead of the FOMC Gold and Silver are showing some nerves and retreat to 2568 and 30.40. EURUSD is little moved at 1.1120 and GBP is trading at 1.3160. USDJPY remains volatile at 141.35. The Dollar Index rose to 100.87 from 100.70 yesterday.$10 Year Yields are at 3.64 – near the years low.
In other news:
- Microsoft, Blackrock plan $30 bln fund for AI infrastructure t
- the Financial Times reports, Meta is facing a fine in Europe
- After the attack against Hezbollah yesterday, the middle east will come back into focus again, Large Airlines like Lufthansa and Air France have lasted flights to Israel and Iran.
Trade safely
Wednesday
UK CPI, EU HICP US Rate Decision
Thursday
- Data Australia GDP & Unemployment, UK & Turkey Rate decision, US Initial Jobless Rate,
Earnings: Fedex
Friday
- Data Japan CPI, UK Retail Sales, China & Japan Rate decision.
Physically Settled Futures (times GMT)
CLU4 will expire on 20/aug 1830 hrs
KCU4 will expire on 21/aug 1500 hrs
PAU4 will expire on 22/aug 1500 hrs
ZOU4 will expire on 22/aug 1500 hrs
VXQ4 will expire on 21/aug 1300 hrs
CCU4 will expire on 23/aug 1500 hrs
OJU4 will expire on 26/aug 1215 hrs
RCU4 will expire on 23/aug 0900 hrs
Expiring CFDs(times GMT)
COFFEENYSEP24 will expire on 20/aug 1500 hrs
COCOANYSEP24 will expire on 22/aug 1500 hrs
NATGASUSSEP24 will expire on 26/aug 1500 hrs