Stock Markets Pull Back Off of Yearly Highs
The US market was closed yesterday but global stocks indices all pulled back from yearly highs ahead of some key risk events in the week ahead. European stock indices showed a sea of red at the end of the trading day as investors look at the testimony of Jerome Powell later in the week and other central bank decisions. As expected, currencies traded in tight ranges with the dollar still on the back foot against most of the majors, the Yen still stand out, now trading above the 142.00 level. Oil dropped back off to lower levels with WTI near $70/b and Gold dropped under $1,950/oz.
Sterling Flying High Ahead of the Bank of England
Sterling has been surging higher in recent weeks both against the greenback and on most of the crosses. Interest rate differentials have helped with this move as very sticky inflation conditions in the UK continue to push the Bank of England’s Monetary Policy Committee to increase rates. The market is strongly backing the fact that the MPC will raise rates to a 15-year high on Thursday with the question really on how much, rather than if they will hike, current money market pricing is showing a 75% chance of 25bps with 25% chance of a 50bps hike. Cable is up just shy of 4% on the month already with short-term resistance sitting at recent highs near 1.2850 but traders are expecting the pair to remain bid over the medium term which could see a move stretch higher to the longer-term TL resistance which is currently around the 1.3370 level.
Another Quiet Calendar Day Ahead, but the US is Back
It is set to be another relatively quiet day ahead for traders in terms of macroeconomic data inputs but expects more moves later in the day as the US returns from its long weekend holiday. Australia will be the main focus early in the day with the release of the RBA’s Monetary Policy Meeting Minutes with investors looking for more hints on the bank’s stance on inflation after the surprise hike last time out. There is not much out in the Euro time zone and just building data to trouble the scorers once the US enters the fray this week. However, expect further market positioning to occur as traders look to some crucial updates later in the week, not least when Fed Chair Jerome Powell testifies in Washington DC on Wednesday and Thursday.
