JASPER’S MARKET SQUAWK 22-06-2023
<h2>Powell Sets the Record Straight</h2>
<p>The testimony of Fed Chair Jerome Powell seemed to align with hawkish views, leading to the interpretation that keeping rates unchanged corresponded more to a “skip”, denting risk appetite and supporting yields. UK Inflation came in well above expectations, raising the possibility of a 50bps hike by the BOE.</p>
<p><img decoding="async" loading="lazy" class="alignnone wp-image-23803 size-full" src="https://www.keytomarkets.com/blog/wp-content/uploads/2023/06/Untitled-design-30.png" alt="" width="1917" height="910" srcset="https://www.keytomarkets.com/blog/wp-content/uploads/2023/06/Untitled-design-30.png 1917w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/06/Untitled-design-30-300×142.png 300w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/06/Untitled-design-30-1024×486.png 1024w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/06/Untitled-design-30-768×365.png 768w, https://www.keytomarkets.com/blog/wp-content/uploads/2023/06/Untitled-design-30-1536×729.png 1536w" sizes="(max-width: 1917px) 100vw, 1917px" /><em><strong>Chart: USDCAD</strong></em></p>
<h2>Key Factors For Today</h2>
<ul>
<li>Fed Chair Jerome Powell’s testimony before House reiterates the stance from the FOMC’s last policy statement, suggesting two more rate hikes but potentially at a slower pace</li>
<li>UK Inflation well above expectations ahead of BOE rate decision, with markets pricing in a higher chance of a half-point rate hike, higher terminal rate</li>
<li>US crude inventories unexpectedly fell</li>
<li>BOC saw convincing evidence that more tightening might be needed</li>
</ul>
<h2>“A Long Way To Go” to Bring Inflation Down</h2>
<p>In his testimony before the House on Wednesday, the Fed Chair agreed with the dot-plot matrix from the recent FOMC meeting, which had given markets a hawkish impression. Powell said the job market is very tight and that the Fed has “a long way to go” to bring down inflation, adding that rates will be “somewhat” higher by the end of the year. He also emphasised that the speed of the rate hikes was less important than the final rate. Following Powell’s testimony, other Fed officials remarked on the “prudence” of having taken a meeting to reassess the situation, after which Treasury yields slipped, and the dollar weakened on expectations that the pace of rate hikes might not be as intense in the future. EUR/USD rose to a 7-week high of $1.0990, opening up $1.11 above $1.10, with support at $1.0960.</p>
<h2>UK CPI Overshoots Expectations Ahead of BOE</h2>
<p>UK Inflation was unchanged at an annual rate of 8.7% compared to an expected drop of 8.5%. Core inflation, closely followed by the BOE, rose to 7.1% from 6.8% and far above the 6.6% rate expected, hitting a 1990 high. In the aftermath of the data, markets moved to price in a terminal rate of 6.0%, with economists saying there was a 50-50 chance the BOE could hike by half a percentage point when it meets later today. But fears of a mortgage crisis pulled the pound back into a range. GBP/USD swang between $1.27 and $1.28, managing a $1.2770 close ahead of today’s BOE meeting. The Times Shadow MPC called for a 50bps hike, but the consensus is for a 25 bps hike, with two dissenting votes again calling for no hike. However, some analysts point to the probability of a “three-way” vote, with some members potentially voting for a “double” hike.</p>
<h2>WTI Higher After US Crude Inventories Fall</h2>
<p>The weekly API survey of inventories showed a drawdown of 1.2M bbl compared to a build of 1.0M bbl. Gasoline saw another 2.9M bbl build on top of the 2.1M bbl reported the prior week. Analysts had been expecting a 0.4M bbl drawdown. Meanwhile, another 1.7M bbls were sold from the SPR during the week. WTI moved further above $70/bbl, reaching a 2-week high of $72.70/bbl and remains biased to the upside so long bulls defend the round support. $74/bbl is the next resistance.</p>
<h2>Loonie Hits 9-Month High on BOC Outlook</h2>
<p>In its Summary of Deliberations, the BOC suggested that enough data had accumulated to convince members that a more restrictive policy would be needed. It saw Q2 growth stronger than initially anticipated and was concerned that core inflation no longer showed a downward trend. USD/CAD fell to a 9-month low of $1.3160, exposing $1.31 with resistance at $1.32.</p>
<h2>On The Docket</h2>
<ul>
<li>Fed Waller Speech</li>
<li>TCMB Interest Rate Decision</li>
<li>BoE Interest Rate Decision</li>
<li>Initial Jobless Claims</li>
<li>Fed Bowman Speech</li>
<li>Fed Chair Powell’s Testimony</li>
<li>Fed Mester Speech</li>
<li>US Existing Home Sales</li>
<li>EIA Crude Oil Stocks Change</li>
<li>Fed Barkin Speech</li>
<li>Gfk Consumer Confidence</li>
<li>Japan’s Inflation Rate</li>
</ul>
<h2>FX 1-Day Relative Performance (USD)</h2>
<ul>
<li>Aussie down 0.49%, Kiwi at -0.20%</li>
<li>Euro is marginally up, while the pound is down 0.11%</li>
<li>Yen up 0.05%, Franc at + 0.01%</li>
<li>Canadian dollar is down by 0.02%</li>
<li>Gold is down 0.30%, silver is down 1.18%</li>
<li>WTI and Brent are down 0.54% and 0.56%</li>
<li>Natural gas is 0.23% lower</li>
</ul>
<p>The post <a rel="nofollow" href="https://www.keytomarkets.com/blog/analysis/jaspers-market-squawk-22-06-2023-23802/">JASPER’S MARKET SQUAWK 22-06-2023</a> appeared first on <a rel="nofollow" href="https://www.keytomarkets.com/blog">Key To Markets Blog</a>.</p>
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