The CAD is the strongest and the AUD is the weakest as the NA session begins

The CAD is the strongest and the AUD is the weakest as the North American session begins. The GBP is also weaker despite higher CPI data. PPI in the UK was lower. The GBP initially moved higher on the news but then reversed lower as traders focused on the potential central bank reaction to the elevated inflation data. The Canadian dollar is stronger ahead of retail sales which are expected to rise by 0.4% versus -1.4% last month.

Looking at the UK Producer Price Index (PPI), the Input index fell significantly to -1.5% against the estimated -0.5%, showing a deflationary tendency in the cost of materials and fuels purchased by manufacturers. The PPI Output also decreased to -0.5%, which is slightly more deflationary than the estimated -0.1%. Looking at the CPI, however, the numbers were less friendly. The CPI year-on-year (y/y) came in at 8.7%, higher than the expected 8.4%, suggesting inflation pressures remain way too strong. Core CPI, which excludes volatile items like food and energy, also exceeded expectations at 7.1% (vs 6.8% est and 6.8% last), indicating broad-based price increases. Later the House Price Index (HPI) y/y reported prices YoY rising by 3.5% which was higher than the estimate of 2.6% but lower than the previous month at 4.1%. These figures point to continued inflationary pressures which will keep the BOE firmly in play. The BOE meets on Thursday and is expected to increase rates by 25 basis points to 4.75%, but the data brings in the possibility of a 50 basis point hike.

In early US data, the Mortgage Bankers Association (MBA) reported US mortgage applications increased by 0.5% in the week ending on June 16, 2023. This follows a previous surge of 7.2% last week. The market index rose to 209.8 from 208.8 in the previous week. The purchase index also saw a slight increase to 165.6 from 163.2, while the refinance index decreased to 425.1 from 434.1. The 30-year mortgage rate dropped slightly to 6.73% compared to the previous rate of 6.77%. Yesterday, US housing starts and building permits both increased higher than expectations.

Today, in the US, the market will turn focus to the Federal Reserve Chair Powell’s testimony on Capitol Hill. Powell is set to begin his two-day testimony at 10 AM ET, where he will first address the House Financial Services Committee (tomorrow he will be in the Senate). Last week, the Fed paused rate increases but hinted at the possibility of raising rates again this year. Investors are eager to hear Powell’s stance on the need to resume rate hikes and the potential timing of such increases. The Fed projected through the dot plot, that the benchmark rate could reach 5.6% by the end of the year, implying at least two additional 25 basis point hikes. In the premarket for stocks in the US, futures are trading modestly lower ahead of Powell’s testimony. The major indices fell yesterday with the Dow industrial average leading the way with a decline of -0.72%. The NASDAQ index fell -0.16% yesterday. The weekly win streaks in stocks is in jeopardy of being broken. The Nasdaq is up 9 weeks, S&P up 5 weeks.

Oil prices are little changed. Yields are higher in the US.

A snapshot of the markets currently shows:

  • Crude oil is trading down $0.08 at $71.11
  • Spot gold is trading down -$0.71 or -0.04% at $1934.42
  • Silver is down -$0.09 or -0.40% $23.04
  • Bitcoin is trading at $28,944. The high price extended to $29,257 which is the highest level since May 6

In the premarket for US stocks, the major indices are trading modestly lower after declined yesterday

  • Dow Industrial Average is trading -14 points after yesterday’s -245.25 point decline
  • S&P index is trading down -3 points after yesterday’s -20.88 point decline
  • NASDAQ index is trading down -23 points after yesterday’s -22.28 point decline

In the European equity markets, the major indices are trading mixed

  • German DAX down -0.22%
  • France’s CAC down -0.31%
  • UK’s FTSE 100 down -0.23%
  • Spain’s Ibex up 0.12%
  • Italy’s FTSE MIB up 0.32% (delayed)

In the Asian Pacific market today :

  • Japan’s Nikkei rose 0.56%
  • Hang Seng index fell -1.98%
  • Shanghai composite index fell -1.31%
  • Australia’s S&P/ASX 200 index fell -0.58%

In the US debt market yields mostly higher

  • 2-year yield 4.713% +1.5 basis points
  • 5-year yield 3.977% +2.0 basis points
  • 10-year yield 3.751% +2.5 basis points
  • 30-year yield 3.40% +2.3 basis points

In the European debt market, benchmark 10 year yields are mixed:

This article was written by Greg Michalowski at Source