Dollar Weakness Fuels Market Rebound

Markets are on the upswing as the dollar weakens, with US equities and earnings growth showing promising signs, despite mixed economic indicators globally.

Key Factors for Today

• US equities rise as dollar weakens, earnings expected to grow by 4.3%
• BOJ disappoints but tweaks Yield Curve Control language
• WTI oil prices slump 3% amid easing Mid-East tensions and China's contracting PMI
• Euro gains despite mixed German data
• UK mortgage approvals at lowest since January

Market Movers

• USDJPY down 0.30% to 149, expected to rise past 150
• WTI oil next support at $80, resistance at $83.50
• EURUSD attempts $1.065, support at $1.056
• AUDUSD falling towards 0.6330
• GBPUSD under pressure below $1.22, exposing $1.21

Economic Calendar

• French Inflation Rate
• Euro Area GDP Growth
• Euro Area Inflation Rate
• Canada GDP
• CB Consumer Confidence
• API Crude Oil Stock Change
• Jibun Bank Manufacturing PMI
• OPEC 2022 World Oil Outlook

The Big News

BOJ's Policy Shift Raises Eyebrows

The Bank of Japan (BOJ) took an unexpected turn, surprising market participants by altering its stance on bond yields. Previously committed to keeping bond yields within a 1% band, the BOJ has now redefined this as a "loose upper bound." This nuanced shift effectively removes the bank's earlier pledge to defend this limit with unlimited bond purchases. The move has not only exerted downward pressure on the Japanese yen but also introduced a new layer of complexity to the monetary policy landscape. Market analysts are now keenly watching how this change could influence future policy adjustments and its potential ripple effects on global markets.

Oil Prices Take a Hit

West Texas Intermediate (WTI) oil prices have seen a significant drop, falling around 3%. This decline is attributed to a combination of factors, including easing geopolitical tensions in the Middle East and softening global demand. Particularly noteworthy is China's manufacturing Purchasing Managers' Index (PMI), which has fallen into contraction territory. Additionally, the International Energy Agency (IEA) has projected that Germany's oil consumption will decrease by about 90,000 barrels per day this year, marking a 4% reduction for 2023. With these developments, market participants are closely watching the $80 level as the next support, with resistance expected at $83.50 a barrel.

Mixed Signals from the Eurozone

The Euro has managed to reverse its recent losing streak, gaining 0.52% to reach $1.0617. This comes despite Germany's economic indicators showing signs of a slowdown. Consumer Price Index (CPI) inflation in Germany has eased more than expected, and its Gross Domestic Product (GDP) has also contracted. However, the currency seems to be defying these economic headwinds, and if the current rally sustains, the EURUSD pair could potentially reclaim the $1.065 level. This offers a glimmer of hope for investors amid a backdrop of economic uncertainty.

UK Property Market Stagnates

The United Kingdom is witnessing a sluggish property market, evidenced by the lowest mortgage approvals since January of this year. This has reinforced market expectations that the Bank of England will maintain its current interest rate. The stagnation in the property market is not just a domestic concern; it could very well influence the central bank's policy decisions in the near future. With net approvals for remortgaging also hitting lows not seen since January 1999, analysts are suggesting that we may be nearing a peak rate, with a more dovish stance likely going forward.