Inflation in OECD countries is expected to be structurally higher in the future due to the combination of several factors. If inflation is structurally higher, it will be necessary to consider raising central banks’ inflation targets to prevent them from having to conduct a perpetually restrictive monetary policy, in the view of analysts at Natixis

“With the unemployment rate remaining historically low and with labour shortages continuing to persist according to the latest figures by the CFIB, we still see enough resilience in the Canadian domestic economy to justify higher interest rates.”  

“Given our expectation that WTI oil prices should stabilize around $90 per barrel, we still see USD/CAD converging to 1.22 in the coming quarters as the oil/loonie correlation turns positive again.”

 

“I can’t think of any good reasons why EUR/USD should break out of its current 1.00-1.04 range at present. The US labour market report did not manage to do that. The US CPI data due for publication tomorrow is unlikely to succeed either.”

“There is uncertainty as to the extent to which the ECB will continue tightening its key rate. At present the market expects rates to peak at 1.25%, there is no convincing reason to change this expectation at present.”

“It seems that EUR/USD is starting its summer break, even though it no doubt makes sense to keep an eye on the geopolitical and energy situation. However, while there is no surprise news on that front (the central banks are unlikely to provide any right now) the market can no doubt get used to EUR/USD trading sideways.”

 

GBP/USD remains sluggish inside a one-week-old bearish megaphone bearish chart pattern. RSI backs lower high on prices to keep sellers hopeful. More volatility likely ahead of directing bears to yearly low. 200-HMA adds to the upside filters, taming bull’s chances of entry.

The British pound was little changed on the announcement of a larger-than-usual rate hike by the Bank of England (BOE) as economic projections were significantly downgraded. Economists at the National Bank of Canada expect the GBP to struggle in the near-term.

EUR/USD is displaying back and forth moves in a tight range around 1.0200, as investors await US inflation data for a fresh direction. Subdued US dollar and yields offset the European gas crisis and recession fears. 

“The market has now priced in the restrictive monetary policy – a reason why SEK has retraced its losses and has recovered once again. But also, a reason why SEK does not have much more upside potential against the euro.”

“If we really were to see a recession in the eurozone due to the energy crisis the Swedish economy is unlikely to be able to decouple from that due to the close ties with the eurozone and would also have to expect negative effects, which in turn might affect Riksbank’s monetary policy.”

“I consider EUR/SEK levels below the 10.30 mark to be unlikely and not justified at present.”

 

The euro traded below the US dollar on the 14th of July, a first in nearly 20 years. Economists at the National Bank of Canada continue to see some lingering euro weakness in the short term with the potential for a little appreciation of the common-area currency further out on the forecast horizon.

“The BOT still has three more MPC meetings scheduled for 2022 (Aug, Sep, Nov), and we are of the view that it will hike only in Nov by 25bps to continue entrenching the negative real rates in support of the economic recovery.”

“However, we are not ruling out a rate hike in Aug or Sep, should economic growth continue to show steady momentum and especially if inflationary pressure remains stubbornly high.”

EUR/GBP is eyeing an establishment above 0.8440 ahead of German inflation. As per the estimates, the UK economy shrunk by 0.2% in July. The odds of a rate hike by the ECB will remain elevated.

CME Group’s flash data for crude oil futures markets noted traders trimmed their open interest positions by almost 15K contracts at the beginning of the week, reaching the third consecutive daily drop. Volume followed suit and reversed the previous daily build, shrinking by around 61.5K contracts.

More likely than not that we will have to raise bank rate further.

Not ruling out need to start lowering bank rate quite quickly at some point.

Inflation expectations remain anchored.

We had to act forcefully last week to ensure inflation doesn't become embedded.

Boe might be in situation of cutting rates and selling assets at same time.

USD/TRY grinds higher around yearly top, mildly bid of late. Inflation woes are stronger in Turkey as CBRT resists rate hike. Sluggish session, light calendar limit immediate moves ahead of US CPI.

“A softer US inflation reading could offer the much-needed impetus to gold bulls for crossing the $1,800 threshold, as it would pour cold water on super-sized Fed rate hike expectations.”

“A failure to sustain above the 50 DMA at $1,787 will open up a renewed downside towards the previous day’s low of $1,771, below which the $1,765 demand area will come into play. The August 3 high of $1,754 and the $1,750 psychological level will be on sellers’ radars.”

“Buyers need acceptance above the $1,800 mark to continue with its recovery momentum. Bulls will then guard the July 5 high at $1,812 should the upbeat momentum pick up steam.”

 

Oil prices are aiming for a break above $90.00 to trigger a bullish reversal. An upbeat US NFP has infused fresh blood into the oil bulls. The demand for oil is recovering in China as Covid-19 concerns fade.

EUR/USD is displaying back and forth moves in a 1.0188-1.0194 range as investors await US CPI. Fed policymakers need a series of declines in inflation rates rather than a one-time slowdown. The German HICP is expected to remain unchanged at 8.5%.

EUR/USD remains sidelined inside one-week-old symmetrical triangle, slowly pares Friday’s losses. 200-SMA, monthly horizontal support add to the trading filters. Steady RSI hints at further grinding, monthly peak appears last defense for bears.

“Indonesia’s economy expanded by 5.4% y/y in 2Q22, the fastest increase in a year compared to the previous quarter which grew by 5.0%. This is due to further loosening of COVID-19 curbs, amid rising exports boosted by higher commodity prices. On a sequential basis, Indonesia’s economy advanced by 3.7% q/q in 2Q22, beating market consensus of 3.4%, marking the strongest quarterly rebound since 3Q20.”

“Household consumption and investment spending continued to grow, with household consumption in particular registering accelerated growth of 5.5% y/y in 2Q22 vs 4.3% 1Q22. On the other hand, government expenditure sustained its contractionary momentum seen since 1Q22, continuing to shrink in line with fiscal consolidation policies, albeit at a slower rate. Both exports and imports continued their double-digit growth, with exports rising at an increased rate compared to Q1.”

“With headwinds remaining in place on the back of elevated global uncertainty, especially...

Bitcoin price shows a lack of directional bias as it approaches the $24,655 resistance level. A lack of buying pressure could send BTC down to the immediate support level at $21,430. A daily candlestick close that flips the $24,655 level into a support floor will invalidate the bearish thesis. 

Open interest in gold futures markets remained choppy and went up by nearly 1.1K contracts on Monday according to preliminary readings from CME Group. Volume, instead, shrank by around 69.7K contracts, reversing the previous day’s build.

A Bullish Flag formation is hinting a continuation of the upside journey. The asset has entered into a time correction after facing long liquidations around 0.7000. Aussie bulls have established above the 200-EMA firmly.

Bitcoin price shows a lack of directional bias as it approaches the $24,655 resistance level. A lack of buying pressure could send BTC down to the immediate support level at $21,430. A daily candlestick close that flips the $24,655 level into a support floor will invalidate the bearish thesis. 

USD/IDR pares Monday’s heavy losses even after strong Indonesia Retail Sales growth for June. Indonesia cuts export tax threshold for crude palm oil, government expected 5.00-5.2% GDP growth for 2022. Sluggish yields, cautious mood keeps the US dollar on the front foot ahead of Wednesday’s US inflation data.