Macro: It’s all about elections and keeping status quo
Markets are driven by election optimism, overshadowing growing debt and liquidity concerns. The 2024 elections loom large, but economic fundamentals and debt issues warrant cautious investment.
Senior Relationship Manager
Summary: Testing Parity
Good Morning,
Key News is that after the elevated US CPI number yesterday at 9.1% vs 8.8% expected, the Fed is now expected to hike a full percentage point on July 27. The probability calculated on the interest rate futures is 54%. The ECB next week is only seen to go with 0.3% with 95% probability. The 9.1% is the highest reported number since 1981.
Todays US PP at 14:30 will give the next confirmation.
The spread between the 2 and the 10 year yield rose to the highest level since 2000 raising worries about inflation. Markets seems to have expected a high CPI number as they have taken it in stride, US indexes all fell less than 1%. The USD Index gains 0.5% to trade at 108.45 and EURUSD at 1.0015, GBPUSD at 1.1835 and USDJPY at 138.56. Gold and Silver are at 1725 and 19.05, having defended key levels . Bitcoin is just above the 20k level.
The key item on the agenda today is if EURUSD breaks below parity. On Tuesday we saw a lot of defense at that level and there could be a large number of orders below the level, if broken. It would be an interesting coincidence if parity was broken on the French National Holiday.
Italy’s government risks break as coalition party ready to quit, raising prospect of early elections.
The Bank of Canada later surprised s with a percentage-point rate hike yesterday, during the night, the Singaporean and the Philippine central banks hiked surprisingly.
Delta fell 4.5% on missing earnings yesterday.
We are entering earning season in earnest today, with JPMorgan Chase & Co and Morgan Stanley are delivering results, followed by Citigroup and Wells Fargo tomorrow.
Hindenburg research took a long position in Twitter, pulling the price up by 8% with their announcement.
Russia, Ukraine, Turkey and the United Nations are negotiating a deal to allow grain exports, but have not yet reached an agreement.
Expiries