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Market Wrap
US CPI data was the pivot in today’s trading. If it had come in under or at expectations, we would have had a different reaction in the US dollar. As it is, we got a bigger number than market analysts’ consensus had predicted but nothing the Fed’s Daly has anything to worry about. The Consumer Price Index (CPI) went up by 5.4% in June in comparison to the same period last year. On a monthly level, the figure grew by 0.9%, which is the largest month-on-month change recorded since June 2008. Used cars and trucks accounted for a 10.5% rise, with food prices going up by 0.8%. Core CPI increased by 0.9%. The transitory inflation narrative remains whilst the largest increases in inflation reside in things like used vehicles.
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The US dollar index is bullish as investors move towards the greenback, which is putting pressure on the US dollar crosses like EURUSD.
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The EURUSD is travelling back down to test the support line around 1.1780, whilst the majority of traders on the ActivTrader platform are still bullish.
We have entered earnings season and earlier today we had earnings reports from Pepsi Co, JP Morgan and Goldman Sachs. Pepsi Co Q2 2021 revenue rose 20.5% compared to the same period a year ago. Earnings per share figures came in above the analysts’ expectations.
“We are pleased with our second quarter results as we delivered very strong double-digit net revenue and earnings per share growth. Given the strength of our results, we now expect our full year organic revenue to increase 6 percent and core constant currency earnings per share to increase 11 percent,” CEO Ramon Laguarta commented.
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Goldman’s revenue came in higher, up 16% to $15.4B in Q2 whilst JPMorgan’s EPS increased by a massive 174% to $3.78 in Q2. At the London close JPM shares were down -2.5%, GS shares were down -1.45% but PEP were up 2.72%. The financials were weighing heavy on the Dow Jones Industrial Average, though the likes of APPL and MSFT along with tech were trying their best to keep the DJIA from closing the day in the red.
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The S&P500 and Nasdaq were making all-time highs again and 15,000 for the NQ futures is in withing touching distance now and could be reached this session.
Oil prices have found a trading range around $74 per barrel as traders try and second guess whether the COVID waves that are emerging due to the Delta variant will amount to severe economic disruptions or whether the vaccinations are going to prevent anything major from occurring to the developed economies.
News from with regards to Iranian nuclear talks are to resume in August. Oil traders watching satellite images tracking Iranian oil tankers noticed a 4th tanker in the Red Sea heading for Syria. The rising oil prices will get a boost if the US inventories show another draw this week.
A report last week detailed how US shale companies had hedged their oil output at levels below current price, meaning that each barrel they sell at current prices are at a massive discount to spot. Some 53 oil producers tracked by consultancy Wood Mackenzie have hedged about 32% of expected 2021 production volumes, less than the same time a year ago. That group currently has combined losses of $3.2 billion in the first quarter on hedge contracts.
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The USDCAD is rising on the back of inflating US dollar prices across the board and sentiment on the ActivTrader platform shows that 66% of traders are bullish the pair. Currently the first roadblock for traders that are long comes in the form of the daily 200 ema which has proven a solid ceiling so far.
This week we hear from Fed Chair Powell as he testifies to the US congress, though tonight we hear from Fed’s Bostic and Rosengren who are both voters.
