Market News Report:
📈 Yesterday we had statements from members of the BoE. Catherine Mann, the rate-setter for the Bank of England, highlighted the intensity of pricing pressures in the British economy on Wednesday, sending a strong message that she is not likely to support a rate decrease in August. When asked how the BoE’s 2% inflation target had affected her policy decisions, Mann responded that it was just “touch and go” and that inflation would probably continue to increase above that level for the remainder of the year. She also stated that price increases for services and wages were still out of line with the BoE’s aim.
🇬🇧 Today, UK gross domestic product again came out above expectations, with year-on-year growth of 0.4%, up from the expected 0.2% and better than the previous period’s figures. However, May’s published industrial production came out weaker than expected at 0.2% versus 0.3%. Regarding its trade balance, the deficit is improving, but at a slower pace than expected. Let’s remember that the UK is a net importing economy.
📊 Related Markets:
With the above data, the pound has reacted strongly. The GBPUSD has overcome resistance and is trading close to the 1.29 area. The UK’s FTSE 100 index is also showing strength, and after falling to 8100 support last week, is now above 8225.
🇺🇸 In the US today we will have inflation data. The case for a September rate cut by the Federal Reserve is strengthened by the prediction that consumer prices will exhibit the least consecutive increases in underlying inflation since last summer. Fed Chair Powell told Congress the central bank doesn’t need inflation below 2% to cut rates, noting a significant cooling in the labor market. Traders await reassurance that two Fed rate cuts are warranted in 2024.
📊 Related Markets:
As we forecast, the Mini SP500 futures are about to reach 5700 points, currently trading at 5680 points. The Nasdaq100 is also approaching 20,700 points. On the other hand, Dow Jones Industrials, DowJones30, is about 400 points off its all-time high, which could lead to a technical triple top if it fails to break above it.
US bond yields continue to retreat, reflecting confidence in Powell’s words and the upcoming rate cuts. The 2-year bond is moving away from 4.75% and is now trading near 4.60%.
🇹🇼 In Asia, following the announcement that second-quarter sales climbed at their quickest pace since 2022, Taiwan Semiconductor Manufacturing—the exclusive provider of Nvidia and Apple’s most advanced chips—saw unprecedented levels of trading in Asia.
🌎 Geopolitics:
🇺🇸 Biden faced doubts from Pelosi, Clooney and two Senate Democrats about his re-election chances after his poor debate performance. Pelosi declined to say she wants Biden to run, saying time is running short, while Clooney withdrew his support in a NYT article. Senator Peter Welch called on Biden to withdraw in an op-ed, the first Democratic senator to do so. Biden’s campaign will brief Senate Democrats on Thursday as dissent within the party grows. Kamala Harris spoke to 19,000 people at an event, fueling speculation she could replace Biden.
🇺🇸 Chaos erupted at a press conference with the White House representative on Monday. Journalists speculated that Biden might have Parkinson’s disease. Dr Kevin Cannard, a neurologist specialising in the disease, has met with Biden’s doctor and has been to the White House nine times this year, according to records. The White House has denied that Biden is undergoing any medical tests and said he is fit to perform his duties.
🇺🇸 US Secretary of State Antony Blinken said F-16 fighter jets and additional air defense systems from the US and allies are on their way to Ukraine and expected to be operational this summer. The transfer of the F-16s, which Ukraine has long requested, is now underway according to Blinken. Their pilots have been undergoing training. Dutch defense minister Ruben Brekelmans, leading the F-16 coalition, did not give a timeline but said the jets and ammunition will have no operational limitations. A senior NATO official said the jets, if able to call in close air support, could significantly impact battles and allow advances at the front. Ahead of the NATO summit, the US, Germany and Romania pledged five more air defense systems including Patriot missiles. NATO also announced an order for 940 Stinger surface-to-air missiles worth €700 million to further boost Ukraine’s defenses.
🇭🇺 Meanwhile, many Western political leaders criticise the stance taken by Hungary’s Prime Minister Victor Orban and his tour of the last 10 days trying to establish peace negotiations. It seems that the decision for a world war has already been made, and all that remains is to justify it to the citizens.
