The US$ holds steady, oil prices are lower, equity markets are down, while US yields rise on hawkish central banks. The combination of hawkish central bank policy across the world's leading central banks, coupled with weakening China's growth prospects is putting pressure on the commodity and equity markets. The battle with inflation is far from over with expectations that the ECB & the Fed will both hike rates again in July, while today, Norway hiked 50bps, Switzerland hiked 25bps Turkey hiked rates to 15%, and the BoE hiked 50bps in its attempt to tackle its stubbornly high inflation levels. In focus today; The US Conference Board Leading Index, Initial Jobless Claims, as well as key Fed's Powell, delivers testimony before the Senate Banking Committee & Mexico Central Bank interest rate decision.
In other news. In France, President Macron hosts the International Summit for a New Global Financing Pact. Russia's gas flows through Ukraine could stop next year, Kyiv says. President Biden rolls out the red carpet for PM Modi today where they are expected to announce a series of defense & trade agreements at the White House. Ukraine strikes bridge to Crimea. Nasdaq expects expanded markets to justify the $10.5bln Adenza merger price tag. Beijing soars above 41 degrees Celsius, smashing the June record.
In currency news. NOK rallies over 1% after its central bank hikes interest rates by 50bps. The US$ holds steady heading into the Fed Chair's 2nd day of testimony. CNY holds at 7-month lows on widening interest rate differentials and a weakening economic outlook. CNY is flat, while Asian currencies slipped 0.1% on average vs US$. Trading currencies are mixed with SEK slipping 0.15%, while ZAR, JPY, MXN, CHF & AUD are flat, NZD gains 0.3%, and NOK rallies 1% vs US$.
Oil prices weaken with increasing global interest rates, but find an underlying support as US inventories fall. C$ continues to edge stronger, testing fresh 9-month highs at 1.3136 as Canadian bond yields rose to 3.391% after Canadian Retail Sales on Wednesday beat expectations rising to 1.1% vs expectations of just 0.2%. The loonie is finding support with the expectation the BoC may continue to hike into summer as Canadian inflation levels remain high. Today's focus will be on the Fed Chair's testimony & US data releases to help provide intraday direction to currency markets.
EURCAD holds steady at June highs as both currencies are benefiting from their respective central bank's hawkish comments.
EUR tests 1.1000, sitting at 2-month highs vs US$. The Euro rallied near 3% in June primarily on the ECB interest rate hike, while the Fed paused its interest rates. The US$ has steadied into the Fed Chair's two days of testimony on Capital Hill where expectations have grown that the Fed will hike two more times in 2023 as it continues to tackle its high-interest rates. Today, the focus will remain on the Fed Chair's testimony, US initial Jobless claims, & Chicago Fed National Activity Index for direction.
GBPEUR edges higher after the BoE hiked 50bps, exceeding market expectations.
GBP gains after the BoE hike surprises markets by hiking 50bps. The bank surprised markets by increasing interest rates by 50bps by a vote of 7/2 to raise rates to 5%. The Bank of England said inflation is persistent and would require further tightening within 2023. The hawkish tone from the Bank of England sets the tone that the UK is likely to enter a recession within 2023 as the Bank continues to fight stubbornly high inflation levels. Economists are forecasting that the Bank of England will take its bank rate to 6% by the end of the year. Alongside the BoE surprise interest rate hike, the focus will switch to the Fed Chair's testimony which is expected to take a more hawkish tone after the UK, Norway & Switzerland all hiked interest rates today.