A quiet day in the markets today which started off with the Australian RBA meeting minutes and will be bookended by some FOMC members talking. We did also have the Bank of England Governor speaking at a climate issue conference following on from his speech last Sunday which signalled the central bank is approaching a time in which they will raise interest rates.
Market Wrap
The NZD remains the strongest of the currencies today whereas the US dollar is showing that is relatively weak against its peers at the London close. The important weekly low of $93 was tagged today on the DXY which is signalling a more bearish tone.
Today’s low could be the start of a new swing high from the resistance level of $94.50 and if so the most logical target would be the bottom of the consolidation period and the $92.00-$91.00 levels. If we were to breach this zone, we would have traded through the rising trend line, which again has a higher probability than a continued rise without a significant correction. As investors analyzed remarks from ECB officials about the economy, the EURUSD caught a bid, adding to the downside pressure on the DXY. ECB's Rehn said longer inflation might alter expectations, while Lane said conditions for a hike in interest rates have not yet been met.
The US Housing data out today came in under market analysts’ expectations. US building permits were down from 1.721 million coming in at 1.589 million. The US housing starts came in at 1.555 million under the 1.62 million expected.
The FTSE100 has followed most European bourses higher as well as the US indices who continue to push on with good earnings data. UK Business leaders warned lawmakers that the supply chain crisis will continue through 2023 and cause inflation to rise.
"Six months ago, our businesses all thought this was transitory, now every business I know expects this to last into 2023 and 2024. Every single one," Food and Drink Federation CEO Ian Wright noted while speaking before the House of Commons Business, Energy and Industrial Strategy Committee. The FT went on to say that with the UK and global supply chain disruptions there could be a significant impact on Prime Minister Boris Johnson's manifesto plans to level up the British economy.
Both the GBP and the FTSE100 are obviously pricing in some better outcomes than today’s warnings would suggest ahead of tomorrow’s UK CPI y/y data.
Later on this evening we get the US API Weekly stock report.
Brent crude has rallied to undo most of yesterday’s price action but is still under the crucial $85 per barrel level. A significant drop in the US dollar will continue to support the energy markets which in itself is keeping inflation high.
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