Eurozone Interest Rate Decision
9 June 2022
The most important development of the day is the ECB meeting. We know the end of QE, new economic forecasts and the signal for a rate hike are coming. But the number and size of the rate hikes that will be priced in after that moment. While the market expects an increase in every meeting from now on this year, it sees an increase of 50 basis points in one meeting. Like Powell, Lagarde may want to give himself room to maneuver about the size of the stride. But a sign as to whether he's standing close to hawks or pigeons will be important. An increase in the probability of a 50 basis point increase will trigger a rise towards 1.09, while a more cautious stance will bring sales to the Euro before the CPI. Another point we should follow is the reaction of the spreads to the ECB decisions, as I always emphasize. The increase in the spread of the bonds of the surrounding countries with the Bunds should be read as a negative development for the Euro. On the other hand, JPY hit 134.5 and approached critical resistance.
The US 10-year yields rose to 3.05% due to inflation anxiety, pulling shares down and the S&P losing 1.08% to close the 4100 support level. There is also a weak course in futures markets and Asia. There is news in China that Sunac, the country's fourth-largest construction company, will not be able to pay off $345 million in onshore bonds due Monday and is looking to restructure payments. In this case, at least the short-term direction of the indices seems to depend on the CPI data to be announced tomorrow. The continuation of the rise in the data will be reflected in the shares as buying, with the loss of selling momentum. Gold, silver and Bitcoin continue to oscillate around familiar levels yesterday. Silver does not want to move away from the technical level of $ 22, while the price of gold continues to trade in the band of 1.840-1.850, just below the uptrend line, which is around $ 1,860 an ounce. In both commodities, the weekly closing will be important.
Although there was no significant movement in cryptos, the update on Ethreum's most negative testnet, Robsten, was completed successfully. This raises the possibility that the entire network will switch from PoW to PoS in August. We see that Bitcoin continues to gather strength above the danger zone at $ 28,800 and generally around $ 30,000. PayPal announced that they will offer a feature that allow users move their crypto assets to external wallets and crypto exchanges.
China's trade surplus stood at $78.7bn in May, thanks to exports, which rose 16.9%. The expectation was $57.7k. We can say that this is a positive development as imports increased by 4.1%, above the expected 2.8%. A recovery was expected due to the partial openings in Shanghai, the trade performance of the surrounding countries and the base effect, but a performance far above the expectations. As a result of the easing of the embargo by the USA, Eni and Repsol are buying Venezuelan oil after 2 years. However, since the country's infrastructure has collapsed, it is not possible for the oil industry to recover and close the gap left by Russia. Therefore , we see the continuation of the upward movement in prices . GS yesterday naturally suggested oil producing countries against importers in pair trades. However, the problem is not between the manufacturer and the importer. As many analysts have pointed out recently, the "normal" of this business is that the dollar, namely DXY, is low during periods of high oil demand. Because these are the periods when the economy is lively and the risk appetite is high. However, this time, we see that both demand is high and the dollar appreciates.
Events to Watch : • ECB interest rate decision and press conference could increase volatility in the EURUSD. In terms of technicals, 1.0640 is a support and 1.0780 is a resistance to watch. • US jobless claims are expected at 210k (last: 200k). However, CPI data on Friday is set to dominate headlines for the week.