📈 Macro-News round-up
#MarketNews
🇯🇵 In the last few hours of Asian trading we have seen a strong move in the yen against the dollar. We suspect that it is motivated by direct actions from the Bank of Japan, although it could also be fuelled by a weaker dollar following yesterday’s industrial data, which showed factory orders at 3 year lows. The USDJPY, which was slowly approaching 158 levels again, has pulled back sharply in the last few hours and is now at 155 and falling.
🇯🇵 In any case, the news coming out of Japan is that the BOJ does not seem to be worried about the exchange rate, or at least that is what they are trying to show.
🇯🇵 BOJ Deputy Governor Himino said the central bank must be “very vigilant” to the yen’s impact on the economy and prices when considering its next rate hike timing. However, central banks should not directly target exchange rates in monetary policy decisions, as other factors need weighing. The BOJ shouldn’t automatically respond to exchange rates but consider the overall economic and price outlooks as well. Governor Ueda has ruled out direct currency intervention but signaled higher rates if inflation exceeds projections. Markets await the June policy meeting for potential full reduction in JGB purchases to further normalize policy.
🇺🇸 As we said, US industrial activity seems to be weakening. Yesterday’s data showed that industrial goods orders have fallen to a 2-year low. Production costs are rising, which could feed back into inflation. This was not the idea of a soft landing, what the Fed was looking for, it was hoping for economic weakness, but in the service sector, which is the main inflationary factor.
🇬🇧 UK: Total retail sales rose a modest 0.7% in May vs 3.9% a year ago, though up from a 4% drop in April. However, with inflation falling near 2%, analysts see signs of growing consumer confidence. Real income growth and low unemployment point to gradual spending acceleration over the next year. Retailers will hope for better weather and consumer sentiment to boost summer sales. The pound has momentarily traded above 1.28 against the dollar. Possibly benefiting from the dollar’s falls in the last hours after the industrial goods data. It is currently retreating towards 1.2750 GBPUSD.
📈 Markets:
📈 The SP500 has again lost 5300 points, but remains above 5250. The Nasdaq 100 has also retreated towards 18,500 points, losing the momentum that took it to 18,700 during yesterday’s session.
📈 In the European session, the Dax 40 has again pierced the 18,400 support level it fell to last week, and is currently trying to maintain its price above that level, avoiding a new fall that could lead it towards 18,200 – 18,100 points.
🛢️ Crude oil falls sharply on the back of three factors. OPEC+ announced that it is extending its production cut until at least September this year. Disappointing those who were expecting more restrictive actions on crude oil. On the other hand, the supply of crude oil from the US is increasing in the market. And as a final factor, the IEA has given weaker than expected global demand estimates, mainly from Western countries, in particular Europe.
🛢️ Brent crude oil is currently at $76.97 a barrel, losing support at $81 – $80.75 a barrel.
🌎 Geopolitics:
🇬🇧 British Conservative politician Nigel Farage made a surprise announcement yesterday during a television interview that he would run for Prime Minister in the next British elections. This could generate certain distortions in the market, as expectations were for a Labour party versus a Conservative party, with a very similar fiscal programme and, therefore, continuity with the current economic situation. But Farage’s alternative will undoubtedly detract from the strength of the current Prime Minister Rishi Sunak’s candidacy.
🇪🇺 The first internal discussions begin to emerge within the EU on how to manage the funds and the budget. EU Commissioner Ferreira warned new priorities like defense should not come at the cost of cohesion funds helping poorer regions. The Commission aims to boost defense industry but regions refused reassigning cohesion funds for this. The challenge now is, how to move towards a war economy, in a Europe with a highly demilitarised society more focused on social stability than on the remote wars of the US military industry?
