Markets Await US CPI and Earnings Season as Equities Close in the Green

Global equities closed on a positive note as the anticipation builds up for the release of US CPI figures and the unofficial start of earnings season. Lower bond yields put pressure on the dollar, setting the stage for an intriguing day in the financial markets.

Key factors for today

• Global equities closed in the green, with the dollar facing downward pressure due to lower bond yields.
• The eagerly awaited US CPI figures are set to be released today, offering insights into inflation trends.
• The unofficial start of earnings season at the end of the week adds to the market anticipation.

Market movers

• UK unemployment rate rises while wages increase, boosting the chances of a Bank of England (BOE) hike.
• RBA Governor expresses openness to further tightening, but no announcement on the new governor yet.
• Disappointing Japan data contributes to USD/JPY losing streak.
• WTI prices surge on speculation of production cuts and EIA demand revision.
• RBNZ leaves rates unchanged, and Kiwi swings despite USD impact.

Economic calendar

• Spain CPI Inflation
• MBA 3-Year Mortgage Rate
• US CPI Inflation
• BOC Interest Rate Decision
• EIA Crude Oil Stock Change
• BOC Goc Rogers Speech
• BOC Gov Macklem Speech
• WASDE Report
• Fed Bostic Speech
• Fed Mester Book
• NZ Food Inflation
• RICS House Price Balance

The big news

UK Wages Increase Boosts Chance of BOE Hike In May

The UK's unemployment rate rose to 4.0%, while the claimant count increased by a positive 25.7K—a detrimental figure for the economy. However, average weekly earnings surpassed expectations, reaching 6.9% and keeping labor markets tight. This development raises concerns about the "second-level" effects of inflation. The probability of a 50bps hike from the BOE at the upcoming meeting rose to 74%, up from 66% prior to the data release. The pound, edging closer to the $1.30 level, displayed a 4-day winning streak, settling at $1.2933 the previous day, and even reaching as high as $1.2971. As the pound encounters major support at $1.2850, critical resistance awaits at $1.3160.

RBA Open to Further Tightening, No News on New Governor

RBA Governor Philip Lowe highlighted the possibility of additional tightening measures, noting that the full effects of the tightening implemented so far have yet to be fully experienced. The decision regarding a new RBA governor remains undisclosed, with Australia Treasurer Jim Chalmers mentioning that the Cabinet will meet soon to discuss reappointment. The Australian dollar ended the session with marginal gains, struggling to surpass $0.67. However, it experienced a breakout to $0.6743 early on Wednesday.

Japan Data Disappoints, USD/JPY Continues Losing Streak

June's Japan PPI Change fell short of expectations, slowing to 4.1% compared to the projected 4.4%. Furthermore, May's core manage orders witnessed a decline of -7.6% rather than the expected 1.0% growth. Consequently, USD/JPY remained shy above 140.00, marking its lowest level since mid-June. However, it broke through this barrier early on Wednesday, extending the downtrend to 139.40. This development potentially sets the stage for a 5-day losing streak.

WTI Prices Surge on Speculation of Production Cuts and EIA Demand Revision

The American Petroleum Institute (API) reported a surprising jump of 3.0 million barrels in US inventories, exceeding the forecasted growth of 0.2 million barrels. Additionally, the Department of Energy (DOE) released 0.4 million barrels from the Strategic Petroleum Reserve (SPR), marking the 15th consecutive week of releases. JPMorgan issued a note suggesting that OPEC+ might further cut production by 700,000 barrels per day throughout the rest of the year.

RBNZ Leaves Rates Unchanged, Kiwi Swings Amid USD Impact in Line

With near-unanimous consensus the Reserve Bank of New Zealand (RBNZ) opted to maintain interest rates at their current levels. The accompanying statement adopted a dovish tone, shifting from the expectation of core inflation remaining under pressure to anticipating its decline. As a result, the Kiwi experienced fluctuation, reaching a 3-week high of $0.6240 on its ascent and maintaining support at $0.6190. The weakening dollar played a significant role in these movements. Should the Kiwi lose the 62-cent handle, further declines towards $0.6162 may be observed.