Markets Report - 13 June 2022

A daily breakdown of the markets for the 13th June 2022, provided to you by Sterlex.

🇪🇺💶The EUR/USD pair extended last week's post-ECB bearish breakdown momentum below the 1.0650 support zone and remained under some selling pressure for the third straight day on Monday. Acceptance below the said handle might have set the stage for additional losses amid the absence of relevant market-moving economic releases, either from the Eurozone or the US. The shared currency was further pressured by the European Central Bank's conditional outlook for a jumbo rate hike in September. In fact, the ECB did not specify the size of the rate hike and said that it will be dependent on the inflation forecasts at that time. The downward trajectory dragged spot prices below the 1.0500 psychological mark, to a three-and-half-week low during the early European session and was sponsored by broad-based US dollar strength. Apart from this, the downfall could further be attributed to some technical selling below the 1.0500 mark.

🇬🇧💷The BOE could elevate its interest rates further amid soaring price pressures in the UK economy. 1.8% expected. The Gross Domestic Product (GDP) has slipped to -0.3% against the expectation of 0.2%. Also, the Bank of England (BOE) will announce its monetary policy on Thursday. However, the Industrial Production data has jumped to 0.7% from the estimates of 0.5% on annual basis. Also, the annual Manufacturing Production figure has tumbled to 0.5 vs. The US agency has reported the annual US Consumer Price Index (CPI) figure at 8.6%, much higher than the estimates and the prior print of 8.3%. The pound bulls have remained in the grip of bears on solid performance by the US dollar index (DXY). Advancing oil and commodity prices have pushed the inflation figure to a 40-year high of 9%. The DXY is oscillating around 104.50 after a juggernaut rally as higher US Inflation has bolstered the odds of a 75 basis point (bps) interest rate hike by the Federal Reserve (Fed) on Monday. Considering the pace of inflation in the UK economy, it would be fit to state that the price pressures could soar to a two-digit figure.

🇺🇸 🏦The latest US consumer inflation figures released on Friday reaffirmed bets that the Federal Reserve will get more aggressive to cool price pressures. Aggressive Fed rate hike bets, the risk-off mood boosted demand for the safe-haven buck. Retreating oil prices undermined the loonie and remained supportive amid a stronger USD. As economists at MUFG Bank note, USD strength is reinforced by expectations for an even more active Federal Reserve. In fact, the markets are now pricing in about 215 bps of cumulative hikes in 2022 and Fed funds futures reflect rising odds of a 75 bps rate hike by July, which pushed the US Treasury bond yields higher. David Kostin, Equity Strategist at Goldman Sachs outline various scenarios for the S&P 500 index, predicting it to fall further to 3,150 levels. The US labor agency also reported upbeat Nonfarm Payrolls (NFP), which has provided more liberty to the Fed to tighten their policy. The US dollar’s bullish momentum has been reinforced by the release of the much stronger than expected US CPI report on Friday.