Spreadex Market Update
GBP Roars back on Hawkish BOE Comments – Further BOE Speakers Due Today
USD remains muted ahead of Powell’s testimony tomorrow. Equities recovering for now, though downside risks into tomorrow’s event. GBP rallies on hawkish BOE comments, further BOE speakers today. RBA minutes firmly bullish. Metals rangebound. Oil stabilises following sharp drop yesterday on China-Russian imports news.
Key Factors for Today
- USD muted ahead of Powell testimony tomorrow
- Equities recovering amidst softer USD
- GBP leads FX on hawkish BOE comments
- Hawkish RBA minutes lift Aussie, CAD retail sales on watch
- Metals muted as equities take the lead
- Oil falls on China/Russia oil news
Coming Up
- CAD Canadian retail sales
- USD US existing home sales
- USD Fed’s Mester speaks
USD Weaker Again on Tuesday
The US Dollar starts the European session on Tuesday with a weaker tone again, following losses yesterday. We saw very light flows on Monday with US markets offline for the bank holiday there. Today might be more of the same with little in the way of key data for the US, bar existing home sales for May. Fed’s Bullard offered a more optimistic view yesterday, citing his projection for US economic growth to continue this year despite Fed tightening. Bullard said that while the bank has some work to do to bring inflation under control, a recession isn’t investable and GDP growth is still viable over coming quarters. Focus now shift to Powell’s testimony tomorrow.
Risk Sentiment Rebounds on Softer USD
Equities markets are seeing a broad-based recovery on Tuesday. While action was limited yesterday, we are seeing better buying kicking in today as traders take advantage of the lull in USD strength. The Nikkei has been up around 4% off the week’s lows, following a sharp reversal in sentiment yesterday. The ASX is fighting back also while the FTSE is currently around 3% off the week’s lows.
GBP Higher on Hawkish BOE Comments
In FX, we’ve seen a reversal of recent themes with GBP taking the lead as the strongest performer over late Asian and early European trading on Tuesday. Yesterday, we heard BOE’s Mann saying that the BOE’s failure to match the Fed in its level of tightening was sleaving the UK vulnerable to further inflationary increases. These comments suggest a growing hawkish view within the BOE, adding weight to the prospects of a larger .5% BOE hike in August. Today we hear from BOE’s Pill and Tenreyro.
Aussie higher on Hawkish RBA Minutes, CAD Retail Sales on Watch
The RBA minutes released overnight were firmly hawkish. The bank cited the need for more rate hikes over the remainder of the year and a willingness to do whatever necessary to bring inflation under control. Data wise today, CAD retail sales will be the main event. We also heard from Fed’s Mester.
Metals Still Range-Bound
Despite the softer action in USD this week, the metals markets have been unable to capitalise. Gold prices have turned lower once again on Tuesday, dragged down by higher equities prices. Silver has been equally soggy, with both metals continuing to trade within recent ranges.
Oil Plunges on China Imports News
Oil prices have stabilised today following heavy losses yesterday. Crude futures fell by around 9% on news of a huge increase in Chinese oil imports from Russia. In a bid to help alleviate the impact of war sanctions, China has ramped up purchases from Russia with the country now overtaking Saudi Arabia as the leading supplier to China.
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