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
AI: The good, the bad, and the bubble
While a deep recession may not be iminent thanks to central bank policy, interest rates will have to stay high for longer, and this will be accompanied by volatility risk from the unwinding of bubbles, especially within AI.
Steen Jakobsen,
Chief Investment Officer
The emergence of advanced AI systems is by far the most surprising event this year, turning everything upside down, while risks and benefits are debated. AI will also become an arms race between the US and China.
Peter Garnry,
Head of Equity Strategy
As China navigates global fragmentation, its cycle of technology application, productivity enhancement, and growth is threatened by US breakthroughs in generative AI, limited computing power, and geopolitical tensions.
Redmond Wong,
Market Strategist
Japan’s expertise in semiconductors and robotic integration could be the foundation of AI dominance. Combining two of this year's themes, Japanese equities and artificial intelligence, brings a wave of opportunities.
Charu Chanana,
Market Strategist
The AI fever has turned the technology into a darling, pushing crypto further into no-man’s-land. There are striking similarities between AI and crypto, and if these are to come full circle, AI won't be spared for bubbles.
Mads Eberhardt,
Cryptocurrency Analyst
Stocks related to artificial intelligence (AI) have appeared on investors' radars. Expectations are high, but it may be necessary to consider how to get exposure to AI in a diversified way.
Hans Oudshoorn,
Trainer Academy
The USD is on its back foot as markets celebrate an eventual Fed rate peak and steady long US yields. The stakes are even higher for the Japanese yen if longer major sovereign yield curves have to price in economic acceleration.
John J. Hardy,
Head of FX Strategy
While commodities, broadly speaking, have faced some tough months, a partial reversal during June could signal that the asset class is getting back on its feet with energy holding up and precious metals with upside potential.
Ole S. Hansen,
Head of Commodity Strategy
As inflation remains high central banks face hard decisions about whether they should keep hiking interest rates or stop. Meanwhile, the rise of AI creates bubble-like conditions that only make the decision harder.
Althea Spinozzi,
Senior Fixed Income Strategist