Morning Brew July 27 2021

Good Morning

Traders are certainly at a loss about the current direction and what to look for. The Rate hike cycle seems to be done but the path forward seems unclear. While Goldman Sachs sees no significant rate cuts in 2024, UBS is expecting quite a few.

Economists polled by Reuters see a rate cut by the ECB only in July while Rate traders price in more than a full cut by June, almost full 2 by July and three in December

Today we are awaiting EU GDP, the German ZEW and the US CPI as the key releases, the annual CPI is expected at 3.3% and the Core at 4.1%.  Lisa Cook will speak at 14:50

US Indexes hardly moved yesterday with tiny volumes 20% below average. Boeing was the stock of the day after receiving an order for 100 planes from Emirates. Tesla added 4%.  This morning, Apple supplier Foxconn reported a surprise 11% increase in third-quarter profit hinting at good Apple sales.

FX was also fairly calm yesterday, the Yen remains worth watching as it is clearly in intervention territory. It After hitting a new high, Option trades pushed USDJPY lower and it is now holding at 151.65. If you are looking to bet on action by the BoJ, it might be a good idea to use options rather than outright exposure. You can try the FX functionality in the Option Strategy window  - you receive a choice price on one of the legs when you trade a call or put spread but feel free to get in touch to discuss that with us,  The EUR is back above 1.07 and GBPUSD 1.2290. Gold and Silver recovered to 1945 and 22.35. 

US Yields decline slightly but the Bloomberg US Treasury Index broke above the Bloomberg Global Emerging Market one for the first time in my memory.

The war in Israel caused the first major political fallout in Europe with a cabinet reshuffle in the UK. Rishi Sunak sacked the Home Secretary Suella Braverman and replaced her with James Cleverly who in turn will be replaced by James Cameron as Foreign Secretary. Especially countries with a high percentage of Muslim populations seem to be tested .

Fledgling U.S. House of Representatives Speaker Mike Johnson faces his first big legislative battle this week as his tries to marshal his fractious Republican majority into supporting an unconventional plan to avert a partial government shutdown beginning on Saturday.

Ole Hansen Commented on Commodities yesterday: https://www.home.saxo/content/articles/commodities/crude-tumble-drives-worst-week-since-march-13112023 as Goldman Sachs lowers its oil price forecast for next year.

Key Events

Tuesday
- Data:  UK Unemployment, Sweden CPI, EU GDP, De ZEW, US CPI

- Earnings Meituan, SMC, RWE, Mitsubishi UJF, Alcon, Home Depot,

Wednesday
- Data  Japan GDP, China Retail Sales, UK, IT & FR  CPI, US Retail Sales, PPI,
- Earnings Tencent, TJX, Cisco, Palo Alto, Target, Infineon, JD,

Thusday
- Data Japan Trade Balance, Philly Fed Business Index, Initial Jobless Claim
- Earnings Siemens, Copart, Walmart, Ross Stores, Applied Materials, Alibaba.

Friday
- Data UK Retail Sales, EU HICP Final

- Earnings Johnson Controls International, Assicurazioni Generali, Tokio Marine