FINANCIAL MARKET REVIEW FOR JUL 12, 2018 The ECB will be releasing its monetary policy meeting minutes. The minutes cover the June ECB meeting where policymakers announced a taper to the QE program and an exit from QE by December 2018. The markets were seen trading in a modest risk-off mode on Wednesday. This came after the U.S. administration threatened China with a fresh set of tariffs. The ongoing NATO summit in Brussels was also another cause for concern with President Trump accusing German of being complicit with Russia over the gas pipeline proposal. On the economic front, the data from the U.S. showed that producer prices index rose to a fresh six-year high. On a month over month basis, headline PPI increased 0.3% while core PPI which excludes food and energy prices gained 0.2%. Driving PPI higher was another month of strong gains from the energy prices. The Bank of Canada held its monetary policy meeting where it raised rates by 25 basis points to bring Canada’s interest rates to 1.50%. The BoC also signaled that there was room for further rate hikes. The European trading session today will kick off with the release of the German and French final inflation figures. According to the preliminary inflation reports headline CPI is expected to rise 0.1% respectively. Later in the day, the ECB will be releasing its monetary policy meeting minutes. The minutes cover the June ECB meeting where policymakers announced a taper to the QE program and an exit from QE by December 2018. The U.S. trading session will see the release of the monthly consumer price index data. Economists forecast that headline CPI is expected to rise 0.2% on the month while core CPI is expected to rise 0.2% on the month as well. The WTI Oil price fell from $72.98 to $68.68 yesterday despite the inventories data showing a draw of -12.6M barrels which is the biggest since September 2016. Global stocks recover as investors continue to watch trade war developments. Libya has said it would lift restrictions on exports and production would return to normal levels from close to 0.5M bpd back to 1.3M bpd. Saudi production has also increased by 0.7M bpd to 10.7M bpd in June responding to President Trump’s call for lower prices. Increased production can lead to further pressure on prices. The USD strengthened to reverse much of its declines yesterday from trade war headlines with stronger PPI data and trouble in emerging market currencies adding to the push higher. The market grew tired of waiting for a Chinese response and put a bid under the dollar while US Senators passed a motion to review tariffs based on national security grounds, opening the way for some of the recent tariffs to be repealed in future. USDJPY roared through the 112.000 level and hit a high of 112.376 overnight. Stocks markets have found support and are attempting to rally higher as the risk off mood fades. US president Trump is meeting with NATO again today before he departs Brussels for the UK. US Producer Price Index ex Food and Energy (YoY) (Jun) was 2.8% against an expected 2.6% from a previous reading of 2.4%. This data came above the previous reading for last month, beating the forecast and adding to the push higher in prices. The FED will be analyzing this data for developing trends in consumer inflation, with an increase in prices putting upward pressure on inflation. EURUSD moved higher from 1.17248 to 1.17579 after this data release. Bank of Canada Interest Rate Decision and Rate Statement were released along with the Monetary Policy Report. The Rate Decision came in as it was expected to, with an increase from 1.25% up to 1.50%, the second hike this year after the Bank hiked rates in January.
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FINANCIAL MARKET REVIEW FOR JUL 12, 2018 The Rate Statement confirmed that the Banks would like to continue to hike rates at a gradual pace that is datadriven. They said that higher rates are needed to restrain inflation. The Bank said that they are upbeat about the economic prospects for Canada while cautious on trade. USDCAD fell from 1.31446 to 1.30636 as a result of the releases but moved higher to an overnight high of 1.32175, unwinding the entire reaction move down. This was caused by a combination of factors including comments from BOC Governor Poloz in the press conference and Oil price moves. EURUSD is up 0.07% overnight, trading around 1.16805. USDJPY is up 0.22% in the early session, trading at around 112.255 GBPUSD is down -0.01% this morning trading around 1.32014 Gold is up 0.13% in early morning trading at around $1,243.47 WTI is up 0.23% this morning, trading around $69.68
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