Spreadex Market Update
Majors Maintain Winning Streak Amid Disinflationary Signals
Major currencies continued their winning streak as the US June Producer Price Index (PPI) fell below expectations, driving stock indices higher on the back of a weakening dollar. Additionally, the short end of the yield curve declined, allowing key markets and major currency pairs to extend their winning streak.
Key Factors for Today
- US June PPI disappoints, leading to stock and major currency gains due to dollar weakness.
- ECB minutes impact EUR/USD, supporting a move above the $1.12 handle.
- OPEC raises its demand forecast for 2023, contributing to the winning streak of WTI oil.
Market Movers
- Stock indices advance on a weakening dollar.
- EUR/USD climbs above $1.12 handle due to ECB minutes impact.
- UK GDP beats forecast, bolstering Cable (GBP/USD) despite weaker industrial production.
- Speculation of BOJ's YCC tweak weakens USD/JPY below the ¥140.00 handle.
Economic Calendar
- EU Trade Balance
- US Trade Balance
- Michigan Consumer Sentiment Preliminary
- ECOFIN Meeting
- G20 Meeting
The Big News
Poor PPI Sends S&P 500 to 15-Month High
The US June PPI figures reinforced the disinflationary narrative following Wednesday's CPI data release. The annualized PPI Final Demand came in at 0.1%, falling below the expected 0.4% and marking the first time it dipped below 1.0% since the end of 2020. Furthermore, initial jobless claims were below estimates at 273K, compared to the expected 250K, providing hope that a hard landing might be avoided.
ECB Minutes Bolster EUR/USD Past $1.12 Handle
During its recent meeting, the European Central Bank (ECB) expressed a broad consensus in support of a rate hike while acknowledging that core inflation has yet to show signs of improvement. Uncertainty loomed regarding the upcoming July meeting, with some members expressing doubts about solely focusing on core inflation. The minutes emphasized the ECB's data-dependent approach and its consideration of rate hikes on a meeting-by-meeting basis. It was also noted that inflation is expected to remain elevated for a prolonged period. As a result, EUR/USD continued its ascent above the $1.12 handle, rising 2% since Wednesday and potentially opening up the path to $1.13, unless profit-taking is triggered by the 6-day winning streak.
Cable 1.15% Higher on Better GDP, Despite Weaker Industrial Production
Despite industrial production falling short of expectations, the UK's May monthly GDP performed better than forecasted. The GDP contraction of -0.1% surpassed the projected -0.3%, while the rolling three-month growth remained flat compared to the anticipated -0.1%. Industrial production, however, declined by -0.6% instead of the forecasted -0.4%. Nevertheless, Cable (GBP/USD) rose to $1.3140, finding support above $1.30 and potentially paving the way for further gains towards $1.32 and $1.33.
Rumours of YCC Tweak Support Yen, Pushing USD/JPY Below ¥140.00
Press reports suggested that the Bank of Japan (BOJ) might tweak its Yield Curve Control (YCC) this month, potentially widening the band to 1.0% due to higher inflation. Japan's May industrial production was revised downward to -2.2% from the preliminary reading of -1.6%. As a result, USD/JPY experienced further declines, dropping to ¥137.23 early on Friday, while eyes were on potential resistance at ¥139.23.
OPEC Raises Forecast for 2023 Demand, Extending WTI Oil Winning Streak In its monthly report
OPEC revised its global oil demand forecast for this year, projecting an increase of 2.44 million barrels per day, up from the previous forecast of a 2.33 million barrels per day rise. Supply projections remained unchanged, while the outlook for next year was affirmed. Crude oil received an additional boost from a weaker dollar, pushing WTI oil to a three-month high of $77.30 per barrel, marking a 5% increase for the week.
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