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Morning Brief
The markets are fairly subdued to the lack of Tier 1 data in the calendar today. Which leaves traders having to pick through the headline news that comes over the wires.
Last night it was reported that the UK could delay the June 21st date for easing of coronavirus restrictions as the government becomes increasingly concerned about new variants of the virus.
The US administration is still negotiating a bipartisan deal for the next round of stimulus which will target infrastructure projects among other things. Without clarity on how much money will be injected into the system it is hard for the market to price assets accordingly. $4 trillion could be pushed into the markets through the fiscal policies which would keep the equities buoyed for a good while longer.
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Japan’s GDP was less of a contraction than market analysts had predicted, with the revised quarter on quarter Q1 results coming in at -1.0% versus the expected -1.2%. The Nikkei did settle flat as the global equities were generally mixed but holding levels near their all-time highs. The USDJPY is benefitting from a stronger dollar today and is continuing to trade within a very controlled rising channel. With higher highs and higher lows, the breakdown in price below the channel would signal the start of a trend reversal or larger correction at least.
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Apple’s WWDC gave the company’s share price a boost from the US open, and this helped prop up the Nasdaq and tech sector. The Nasdaq has rallied 300 points since last week’s lows and is currently trading 200 points below the all-time highs. Traders will be wary of the CPI data coming this week from the USA, but should CPI be less than expected this could trigger the final push higher for the inflation sensitive stock indices.
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The EURUSD is trading back and forth through the 1.2150-1.2200 zone and is falling on the back of some bad news out of Germany this morning. Industrial production in Germany unexpectedly dropped 1% month on month in April, with market analysts expecting a 0.5% rise. The disappointing data is being attributed to semiconductor shortages and other supply chain disruptions.
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The US dollar index found support this morning once again at the $90 which is the middle ground within this trading range that has been carved out since mid-May between $89.50-$90.50.
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Gold is also capped by $1900 currently as the US dollar is making it hard for the precious metals to rise when the greenback refuses to fall any further. Global gold ETFs added 61.3t (US$3.4bn, 1.7% AUM) in May, reversing three straight months of net outflows. Demand is increasing as the price of gold trends higher, and this will increase if the CPI print this week is adding to inflation concerns.
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In the energy markets, Oil is struggling to keep the uptrend momentum going, but as yet, has not taken out any significant swing lows. The WTI contract remains above the $68 per barrel price and is firmly above the previous trading ranges highs. A fall back into the range below $67 may give traders a bit of concern but increasing demand in a tight market should be supportive for the commodity.
