Morning Brew July 27 2021

Good Morning,

Hopes US Inflation may have peaked lets US rates decline, weigh on the USD and boosts shares ahead of the ECB meeting and press conference. 10 Year yields fell by 20 Basis points letting the USD Index fall to below 1 again, EURUSD rose to 1.0913, GBPUSD to 1.3130 and USDJPY fell to 125.40 after rising above 126 yesterday. Gold and Silver rise to 1973 and 25.75. USDCAD fell 100 BPS after the BoC hikes rates by 0.5% yesterday.

US PPI grew by 11.2% as announced yesterday but it seems the market had expected worse, Equities can close friendly with the S&P and the Dow up 1% and the Nasdaq 2%.  Overnight, gains can continue by app. 0.3%.

For the ECB the most likely stance is no hike with a probability or 82% and a 0.1% hike with 18%, the main expectation is a firmer roadmap for the end of QE and beginning hikes. Inflation is at 7.54% but eh war in Ukraine has eaten up economic growth – putting the ECB in a tough spot. According to the Taylor Rule, the Central Bank rate is almost 7% too low.

Today there are 3 important data points, the ECB, the Turkish Central Bank Rate and US Retail Sales. We are also heading into the long Easter Weekend and could see some position reduction before, over the Easter Weekend many markets are closed and where trading is open, liquidity can be expected to be worse than usual.

Please find our holiday schedule on this page, just scroll down to the “Holiday Overview”. We will be back in the office on Tuesday.

China's race to stop the spread of COVID-19 is putting strain on global supply chains but it seems markets are more focused on the Chinese effort to stabilize markets.

Germany continues to struggle with the handling of the Ukraine war and is forcing unwelcome decisions on politicians. Several  Greens are willing to extend Coal usage for energy and supplying heavy weaponry to Ukraine and the SPD is forced to confront the Russia dependency  it allowed Germany to run into.

The Korean and Singaporean central banks tightened monetary conditions.

JP Morgan reported a 42% drop in profits, investment banking driving an overall revenue decline of 5%.

• Thursday: China Northern Rare Earth Group, Fast Retailing, Ericsson, UnitedHealth, Wells Fargo, Morgan Stanley, Goldman Sachs, Citigroup, US Bancorp, PNC Financial Services, Coinbase, State Street
• Friday: Hangzhou Hikvision Digital

Economic data:

• Thursday: Sweden CPI, Turkey Rate decision, EU Rate decision and US retail sales
• Friday: French and Italian CPI , NY Fed and Industrial Production

Trade safely