Daily Market Outlook, July 18, 2022

Overnight Headlines

Following Friday’s gains across US and European exchanges, stocks have continued to rally across Asian markets. Equities across China have risen in response to PBoC Governor Yi’s comments that the central bank will step up monetary policy support to the economy, following the weaker-than-expected Q2 GDP report. China equities, however, lag the broad pick-up across Asia as elevated Covid cases continue to weigh on sentiment.

The prospect of aggressive monetary policy tightening by the world’s major central banks continues to be a dominant feature for global financial markets. Last week, US annual consumer price inflation increased to a fresh forty-year high of 9.1%, a stronger outturn than predicted. That boosted speculation that the US Federal Reserve could follow the Bank of Canada’s example by lifting rates by a full percentage point despite signs of moderating economic activity. The Fed will provide a policy update on 27 July, ahead of which there a few bits of data in the coming week, primarily housing- market related, that should provide some food for thought. Later today, the National Association of Home Builders (NAHB) survey for July is expected to show a further softening in sentiment. The headline index is forecast to drop to a fresh two-year low of 66 from 67 previously, perhaps weighing against the FOMC hiking rates by 100bp at its meeting next week.

In the UK, a similar debate continues to rage with sterling money markets speculating that the Bank of England come start delivering 50bp increases in Bank Rate at its upcoming meetings, starting with the one on the 4th August. This morning, MPC member Michael Saunders – who departs the committee shortly after the August meeting – is due to speak at an event hosted by the Resolution Foundation. He is likely to reaffirm his desire for a 50bp hike at his final meeting.

Early tomorrow morning, the latest labour market report kicks off a busy week for key UK data releases, which could prove crucial in determining whether the MPC step up their rate increases from 25bp to 50bp. Despite the slight rise in the unemployment rate in last month’s release, the UK labour market remains tight with the focus on high inactivity rates among the working-age population and unfilled vacancies at a new peak. For the three months to May, expect the unemployment rate to stay at 3.8% and underlying annual pay growth (excluding bonuses) to edge up to 4.3% from 4.2%.

EURUSD Bias: Bearish below 1.0350

GBPUSD Bias: Bearish below 1.2150

USDJPY Bias: Bullish above 134

AUDUSD Bias: Bearish below .7050

BTCUSD Bias: Bearish below 22k

BTC recovers 22K
Testing trend channel resistance, bargain hunting scene in nascent rally
BTC bulls take solace from FED tempering hawkishness
Support seen at 19k then 18300 the base of the daily VWAP bands failure here opens a retest of lows
Concerns regarding increasing Crypto player forced liquidations leave BTC vulnerable
Additional pressure seen from BTC miners liquidating positions on declining profitability
20 Day VWAP is bullish, 5 Day bearish