Spreadex Market Update
All Eyes on Today’s US GDP Following Hawkish FOMC Minutes
FOMC minutes confirm June & July rate hikes. Muted market action as no new information given. Focus now on USD GDP today. Softer start for equities with USD bid. GBP rallies ahead of expected fiscal announcement. ECB’s Knot echoes Lagarde call for July rate hike. Gold and silver slip back as USD correction pauses. Oil prices flat following EIA drawdown report.
Key Factors for Today
- FOMC minutes confirm June & July rate hikes
- Muted market reaction in USD and equities
- GBP firmer ahead of expected fiscal stimulus announcement
- ECB’s Knot echoes Lagarde’s support for summer rate hike
- Gold and silver fall on USD demand
- EIA reports further crude inventories drawdown last week
Coming Up
- CAD retail sales
- USD Prelim GDP
- USD unemployment claims
US Dollar Muted following FOMC Minutes
The US Dollar has been lightly bid across the European open on Thursday following last night’s FOMC minutes. We saw limited market reaction to the release given that very little was disclosed in the way of new information. Additionally, with Fed commentary having turned even more hawkish since that meeting, the minutes have lost a little relevance. Nonetheless, the minutes confirmed the Fed’s broad commitment to tightening, paving the way for hikes in June and July, along with the potential for lifting rates above neutral if necessary. The only issue is there doesn’t seem to be a firm consensus over what the neutral level should be. Attention now shifts to today’s US GDP number which will be the main directional catalyst for USD.
Softer Start for Equities
We’ve seen muted action in equities markets this morning also. Index movements were fairly constrained across the board yesterday as traders waited on the FOMC minutes. With those minutes passing without fireworks, we’re seeing some stagnation today though US, UK, European and Asian markets are all looking a little softer at the European open. Looking across today’s trading, US GDP will likely set the tone for equities into the end of the week.
NZD Strength Fades, GBP Rallies
In FX, yesterday’s initial NZD strength on the back of the RBNZ rate hike has died down for now. CHF and JPY have been better performers, benefitting from the ongoing market uncertainty we’re seeing. GBP has had a better start today also with markets expecting UK chancellor Sunak to announce a new £10 billion fiscal stimulus plan aimed at boosting the economy and mitigating the expected downturn. Such a move would also create more room for the BOE to push ahead with rate hikes in coming months. ECB’s Knot yesterday spoke in support for Lagarde’s comments this week calling for a rate hike in July, bolstering rate hike expectations further.
Gold & Silver Slip Back
Precious metals have seen rather lacklustre trading this week, ebbing and flowing around the current USD moves. Gold prices are now roughly around where they opened the week, having retraced initial gains with silver prices describing a similar arc. Today’s US GDP figure might create some better momentum on any surprise result.
Oil Flat Following EIA Drawdown Report
Crude prices are broadly flat at the European open on Thursday. Yesterday’s EIA inventories release saw the group recording a 1-million-barrel drawdown last week. The big focus for oil traders now is next week’s EU summit where leaders will once again try to push through an agreement to ban Russian oil by year end. If such a move fails again, oil prices will likely weaken near-term.
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