Daily Market Outlook, July 7, 2022

Overnight Headlines

Concerns about global recession risks and inflation remained elevated, although tech stocks led a more constructive tone in equity markets overnight in the Asia-Pacific region. Last night, the minutes of the Fed’s 14/15 June meeting reaffirmed that ‘even more restrictive policy could be appropriate’ to tackle inflation. Following June’s 75bp increase, markets have almost priced in a further 75bp rise by the Fed later this month. In the UK, PM Johnson remains in power despite a wave of government resignations yesterday and more this morning. A new executive of the 1922 committee, representing backbench Conservative MPs, will be elected next week and could decide to amend the rules on leadership changes.

The Bank of England’s ‘Decision Maker Panel’ survey of businesses due at 09:30BST could draw some attention today. The results, particularly around inflation expectations, may have a significant impact on the Monetary Policy Committee’s deliberations in August, as speculation mounts on whether they deliver a larger 50bp hike rather than a 25bp increase. Policymakers will be looking for signs that inflation expectations remain well anchored and indications that pressures may be easing. The last survey in May showed an expectation that inflationary pressures would eventually ease. Speeches from MPC’s Pill and Mann may provide further insights into the outlook for monetary policy. At the last meeting, Mann voted in the minority for a 50bp hike while Pill voted for 25bp. Both have emphasised the need to lean against the risk of inflationary pressures becoming embedded.

In the Eurozone, the ECB will release the ‘account’ (minutes) of its 8-9 June policy meeting. Officials have given strong hints that interest rate lift-off – the first increase since 2011 – will occur later this month with a 25bp rise expected. The ‘account’ will be parsed for indications of a potential 50bp increase in September and discussions on measures to counter fragmentation in the Eurozone. Figures earlier this morning revealed a small rise of 0.2% in German industrial production, but significant concerns remain around supply bottlenecks and restrictions in energy.

US economic data include the May trade balance and weekly jobless claims. The trade data should support expectations for net exports to contribute positively to Q2 GDP growth. There are indications, however, of some softening of the labour market. Initial jobless claims remain low but have ticked higher in June. The June labour market report on Friday is this week’s key release. Fed speakers include Governor Waller and St Louis Fed President Bullard.

EUR/USD: 1.0100 (1.08BLN), 1.0185 (408M), 1.0215-25 1.46BLN)
1.0275 (830M), 1.0290-00 (1.14BLN), 1.0325 (578M)
1.0350 (1.1BLN)
USD/JPY: 133.95-05 (1.64BLN), 134.15 (220M), 135.00 (1.07BLN)
136.00 (1.07BLN) 136.15-20 (433M), 137.00 (760M)
EUR/JPY: 144.00 (1.65BLN), 146.00 (1.6BLN)
GBP/USD: 1.1800 (203M), 1.1950 (316M), 1.2000 (850M)
EUR/GBP: 0.8575-85 (300M), 0.8600 (333M)
AUD/USD: 0.6800 (363M), 0.6845-50 (670M), 0.6920 (305M)
NZD/USD: 0.6270-80 (632M)
USD/CAD: 1.2915 (200M), 1.2950 (390M), 1.3000 (681M)
USD/CHF: 0.9700 (450M)

EURUSD Bias: Bearish below 1.05

GBPUSD Bias: Bearish below 1.2150

USDJPY Bias: Bullish above 134

AUDUSD Bias: Bearish below .7050

BTCUSD Bias: Bearish below 22k

BTC continues to rotate around 20K weighing by recession fears
Testing air above the 20 day VWAP which has flipped bullish
20 VWAP band contracting ready for next directional drive
Trend remains down as within broader bearish channel beckons
Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows
Genesis Exchange said Wednesday it had been exposed to 3AC but mitigated losses
Additional pressure seen from BTC miners liquidating positions on declining profitability
20 Day VWAP is bullish, 5 Day bullish