Daily Market Outlook, June 17, 2022

Overnight Headlines

Asian equity markets are mostly lower this morning, although Chinese indices are up. That follows another day of big declines in European and US markets. US President Biden said a recession isn’t inevitable but Americans are “really, really down”. European Central Bank President Lagarde is reported to have told EU finance ministers that the central bank's new anti-crisis tool will kick in if borrowing costs of weaker nations rise too far or too fast.

In contrast to the tightening actions of other central banks, the Bank of Japan, as expected, left monetary policy unchanged. It noted that it needs to watch the impact that the yen weakening had but otherwise showed no inclination to tighten policy.

With all of this week’s monetary policy updates now out of the way, it could be a relatively quiet end to a fraught week in markets. Today’s data calendar is relatively light, particularly in the UK, and there are only a few central bank speakers. Markets will be looking for further clarification on the thinking behind some of this week’s central bank moves but they are more likely to get that next week when there is a plethora of speeches by policymakers, particularly in the US.

Today’s May Eurozone CPI reading is a second estimate and domestic prints for component countries suggest that it is unlikely to be revised. The first reading showed another larger-than-expected rise in both headline and core inflation as both hit their highest levels in the history of the single currency area. That news probably helped prompt the European Central Bank’s announcement that several interest rises are now likely in the second half of this year.

US May industrial production data is forecast to post a solid increase of 0.5%. Several other US economic releases including retail sales and housing starts surprised on the downside this week. However, despite that Federal Reserve Chair Powell said that he thinks the majority of evidence still points to activity remaining robust. That leaves the Fed still much more concerned about upside inflation risks.

A couple of Bank of England policymakers are scheduled to speak today at a workshop on household finances. This may provide insight into the hit to consumer spending power from the current rise in inflation but possibly not into their current thinking about current economic conditions more generally or on the outlook for monetary policy.

Over the weekend the second round of elections to the French National Assembly will determine how much leeway President Macron has to further his policy agenda. Polls point to his party achieving only a slim majority, at best.

EURUSD Bias: Bearish below 1.07 Bullish above

GBPUSD Bias: Bearish below 1.26 Bullish above.

USDJPY Bias: Bullish above 127 Bearish below

AUDUSD Bias: Bullish above .7200 Bearish below

AUD/USD dunked below 0.7000 watermark again, last 0.6998
Teases entry into VWAP downtrend channel at 0.7008
Fri close below cements near-term bearish bias
AUD/USD might head for May low 0.6829 if signal confirmed
USD broadly stronger as UST yields recover from risk-off
S&P futures rising modestly, last +0.5%, after Thurs wipeout
Offers seen towards.7100, support sited towards 0.6850 and current cycle low at 0.6829