Yellen calls for Further Government Action to Fight Inflation

USD slipped yesterday as Treasury secretary Yellen called on government to expand supply side of the economy in order to bring down inflation. Equities mixed ahead of tomorrow’s ECB meeting. CAD leading FX on oil gains while JPY remains weakest. Gold and silver rangebound. Oil higher ahead of today’s EIA release with a further drawdown expected. 

Key Factors for Today

• USD higher today on better consumer credit data

• Treasury secretary Yellen called on government to do more to fight inflation 

• Equities mixed ahead of tomorrow’s ECB meeting and US CPI Friday

• CAD leading in FX as oil rebounds

• JPY remains weakest currency

• Oil prices grinding higher ahead of EIA release today

Coming Up

• EUR Eurozone final employment change

• EUR Eurozone revised GDP Q/Q

• Oil EIA crude oil inventories 

USD Stabilises on Better Consumer Credit Data

The US Dollar is back in demand across the European open on Wednesday following yesterday’s US consumer credit data which came in above expectations, keeping the case for continued Fed tightening in good health. USD softened a little yesterday as we heard from US Treasury Secretary Yellen calling on the need for the government to do more in the face of rampant inflation. Yellen recently admitted that she was wrong last year when she judged that the inflationary spike would be transitory and urged the government to boost the supply side of the economy to bring down prices and stabilise growth. 

Equities Remain Choppy Ahead of Key Event Risk

Equities prices have seen a mixed open on Wednesday. US, UK and European asset prices have been under pressure while Asian stocks continue to rally. The ASX200 remains weak today following yesterday’s RBA rate hike. The Nikkei is being supported by continued weakness in JPY. The reopening of Shanghai at the start of the month has created a broadly positive backdrop for stocks. However, in the face of expected ECB tightening tomorrow and Fed tightening next month, traders appear hesitant. 

CAD Leading on Oil Gains

In FX, CAD has been the strongest performer across late Asian and early European trading on Wednesday. The uptick in oil prices as well as the recent BOC rate hike is helping boost CAD here. JPY continues to be the weakest performer. The negative impacts of elevated energy import prices, as well as the BOJ’s continued commitment to easing, puts JPY at a disadvantage against its G10 peers. Overnight, GDP was seen printing -0.1% last quarter, while the GDP price index Y/Y was seen falling to -0.5%.

Metals Markets Remain Rangebound

Gold and silver prices remain highly congested here. Both metals have lost a great deal of momentum recently. Given that Friday’s US jobs data was unable to cause a shift, there seems little we can expect to impact price until Friday’s US CPI number. That said, if the ECB is seen taking a more hawkish than expected stance at tomorrow’s meeting that might help drive some movement in gold prices. 

Oil Prices Higher as Further EIA Drawdown Expected

Oil prices have been grinding steadily higher this week following the initial drop on Monday. Prices are back under bid once again on Wednesday as the market awaits the latest update from the EIA. Last week’s massive 5 million barrel drawdown helped steady sinking prices and the market is forecasting a further 2.6 million barrel drawdown to be recorded this week.