Markets Report - 06 June 2022

A daily breakdown of the markets for the 6th June 2022, provided to you by Sterlex.

🇪🇺💶Renewed selling of the greenback has also contributed as investors appear to have already priced in a couple of 50 bps rate hikes at the Fed’s June and July gatherings. The recent upside momentum in EUR/USD has been capped by the 3-month resistance line around 1.0770. EUR/USD is still far from exiting the woods, however, and it is expected to remain at the mercy of dollar dynamics, geopolitical concerns and the Fed-ECB divergence, nevertheless, higher German yields, persistent elevated inflation in the euro area and a decent pace of the economic recovery in the region are also supportive of an improvement in the mood around the euro. The pair’s recovery since mid-May has been on the back of supportive ECB-speak, which continued to point at an initial rate hike as soon as in July, while the consensus view that the bond-purchase programme should end at some point in early Q3 has also lent legs to the European currency.

🇬🇧💷A spokesperson for Johnson's Downing Street office said, "the PM welcomes the opportunity to make his case to MPs (members of parliament) and will remind them that when they're united and focused on the issues that matter to voters there is no more formidable political force." Markets believe that the vote will end months of speculation and allow the Johnson government to focus on other political and economic priorities if Johnson wins the vote of confidence. Meanwhile, a public holiday in most of the major European economies and a data-light US calendar will keep the focus on this UK political in the day ahead. GBP/USD is trading strongly bid above 1.2550 so far this Monday, looking to retest the 1.2600 level ahead of the UK’s vote of confidence in PM Boris Johnson.

🇺🇸 🏦Recent fresh geopolitical effervescence remained unnoticed for the FX galaxy, while market participants appear focused on the release of inflation figures tracked by the CPI later in the week as well as usual chatter around the Fed’s probable next moves on rates for the remainder of the year. In the US cash markets, the risk-on tone favours the intense selling pressure around bonds and collaborates with the underlying upside bias in yields along the curve. The index extends the erratic performance seen in past sessions and revisits the 102.00 area on the back of the better mood in the risk complex and further upside in US yields. Nothing scheduled data wise in the US calendar but short-term bill auctions on Monday.

US Nonfarm Payrolls (NFP) came in 390K for May, more than 325K expected but lesser than the upwardly revised 428K previous readouts. Further, the Unemployment Rate remained unchanged at 3.6% versus expectations of a slight decline to 3.5%. Additionally, the US ISM Services PMI fell to 55.9 in May, versus 56.4 market consensus and 57.1 flashed in April.