DAILY MARKET ANALYSIS 21-07-2022

Investors remain on the sidelines and the market mood remains cautious early Thursday ahead of the European Central Bank's (ECB) highly-anticipated policy announcements. Later in the day, the US economic docket will feature the weekly Initial Jobless Claims data and the Federal Reserve Bank of Philadelphia's Manufacturing Survey. Meanwhile, the US Dollar Index stays relatively quiet near 107.00 and US stock index futures post modest losses.

Stocks

European stocks retreated on Wednesday, as investors continued to digest corporate earnings, economic data and the potential path of monetary policy. U.S. stocks rallied Tuesday, however, with the market resuming a bounce from last month’s lows, as traders bet on strong corporate earnings reports and wagered that markets have found a bottom.

Currencies

•  The shared currency strengthened across the board after the European Central Bank announced its policy decision, lifting the EUR/GBP cross to over a two-week high. The cross was last seen trading around the 0.8575-0.8580 region, up nearly 1% for the day.As was expected, the ECB's governing council took a larger first step on its policy rate normalisation path than signalled and opted to hike key interest rates by 50 bps vs. 25 bps expected. Policymakers judged that the frontloading to exit the negative interest rates regime was appropriate because of higher-than-expected inflation.

• EUR/USD EURUSD price gained some positive traction in the last hour and shot to a fresh daily high, beyond mid-1.0200s after the European Central Bank (ECB) announced its monetary policy decision.As was widely expected and pre-committed, the ECB followed the global tightening trend and raised its official rates for the first time since 2011. The landmark decision to hike rates by 50 bps, as against the broader consensus for a 25 bps increase, underpinned the shared currency and provided a modest lift to the EURUSD pair.

•  USD/JPY rises on Thursday, confirming reversal signalled by a hammer candle on Tuesday, after Wednesday’s Doji questioned fresh bulls. Bounce from correction low at 137.38 so far retraced over 61.8% of a shallow 139.39/137.38 pullback, signalling that bulls regained control and will look for a continuation of larger uptrend.

•  The AUD/USD pair attracts sellers for the second straight day on Thursday and retreats further from over a three-week high, around the 0.6930 region touched the previous day. The downfall dragged spot prices to a fresh daily low, around the 0.6860 area during the first half of the European session.

Bonds

Treasury yields rose Tuesday as Wall Street assessed better-than-expected corporate earnings reports, and wagered whether stocks have found a bottom.The yield on the benchmark 10-year Treasury note was up at 3.008%, while the yield on the 30-year Treasury bond climbed to 3.166%. Yields move inversely to prices.

Commodities

Gold staged a goodish intraday bounce from the $1,680 region, or its lowest level since March 2021 touched earlier this Thursday and shot to a fresh daily high in the last hour. The XAUUSD was last seen trading around the $1,710 region, up nearly 0.50% for the day, though any meaningful upside still seems elusive.

Up Ahead –Tuesday 19-07-2022

•          EUR     S&P Global Composite PMI(Jul) PREL 

•          CAD     Retail Sales (MoM)(May)

*The information presented above is intended for informative and educational purposes, should not be considered as investment advice, or an offer or solicitation for a transaction in any financial instrument and thus should not be treated as such. Past performance is not a reliable indicator of future results.