“European Central Bank President Christine Lagarde stated that policymakers anticipate further action to be required to tackle soaring inflation, as she restated plans for an initial quarter-point increase in interest rates in July.”
Main Headlines
Two top OPEC oil producers, Saudi Arabia and the United Arab Emirates, can barely increase oil production, French President Emmanuel Macron on Monday said he had been told by the UAE’s president. Saudi Arabia and the UAE had been perceived as the only two countries in the Organization of the Petroleum Exporting Countries (OPEC) with spare capacity to boost global deliveries that could reduce prices, but now doubt has been cast on this notion. Europe is looking for ways to replace as much as 2 million bpd of Russian crude and some 2 million bpd of refined products it had been importing from Moscow before the Ukraine war. Saudi Arabia is producing 10.5 million bpd and has a nameplate capacity of 12.0 million-12.5 million bpd, which in theory should allow it to raise production by 2 million. The UAE, which is producing some 3 million bpd, has capacity of 3.4 million and has been working on raising it to 4 million bpd.
UK’s FTSE 100 index hit its highest level in more than two weeks, with commodity stocks leading the gains, as China’s decision to ease some COVID-19 restrictions boosted risk sentiment. Lifting investor appetite, China authorities said the country will halve to seven days its COVID-19 quarantine period for visitors from overseas, with a further three days spent at home. The British public’s expectations for inflation in future years receded this month to the lowest level since January, a survey showed on Monday in good news for Bank of England officials who fear price pressures are becoming embedded. US bank Citi and pollsters YouGov said the expectations for inflation in five to 10 years fell to 4.0% in June from 4.2% in May, a move Citi described as encouraging. Inflation expectations for 12 months’ time were steady at 6.1%, whilst Citi economist Benjamin Nabarro said inflation expectations were still elevated.
Markets
Stocks rose today after China softened its strict Covid protocols, easing investor concerns about global growth. Mining and energy shares led gains in Europe’s Stoxx 600, while US equity futures advanced about 0.6%. Iron ore and copper reversed losses, while oil gained for a third session amid risks of supply disruptions. Treasuries stabilized, a dollar gauge dipped, and commodity-linked currencies strengthened. Still, rallies in risk assets have proved fleeting this year as higher borrowing costs to fight inflation restrain economic activity in a range of nations. European Central Bank President Christine Lagarde affirmed plans for an initial quarter-point increase in interest rates in July but said policy makers are ready to step up action to tackle record inflation if warranted. Some analysts also argue still-bullish earnings estimates are too optimistic. Earnings revisions are a risk with the US economy set to slow next year, though China emerging from Covid strictures could act as a global buffer, according to Lorraine Tan, Morningstar director of equity research.
GBP
Sterling is well bid against most major currencies overnight. Boris Johnson is expected this week to set out more extensive tariffs on steel imports to protect jobs in Britain, even though the move risks breaking international law. The prime minister last week announced provisional plans to extend existing steel tariffs — largely on developed countries and China — by a further two years, with a final decision expected before some of them expire on Thursday. He is also set to expand import limits to other, mostly developing, countries to prevent a flood of steel imports, saying that doing the opposite and lifting restrictions was not “the right way forward”. Britain is providing technology to ensure that any wheat stolen from Ukraine by Russia does not make it to the global market, Britain’s environment minister George Eustice has said. Russia’s invasion of Ukraine and blockade of its Black Sea ports has prevented the country, traditionally one of the world’s top food producers, from exporting much of the more than 20 million tonnes of grain stored in its silos.
EUR
The euro is weaker than most major currencies in the early morning trade. German consumer sentiment is projected to fall to another record low in July, as the Ukraine war and interrupted supply chains push up energy and food prices even further. This follows the news that in May, German inflation rose to 8.7% – its highest level in nearly half a century – as the fallout of Russia’s invasion of Ukraine built on existing bottlenecks caused by the pandemic. Russia’s first major international debt default in over a century, which Washington said became a fact yesterday, follows months of co-ordinated Western sanctions that left Moscow with cash but no access to the international financial network. Ukrainian President Volodymyr Zelensky said in a statement today that he had told NATO chief Jens Stoltenberg by telephone that his country needs missile defence systems to prevent Russian attacks.
USD
The dollar is stronger against the euro and weaker against sterling this morning. Yesterday, President Joe Biden a national security memorandum to fight illegal fishing, part of pledged efforts to help countries combat alleged violations by fishing fleets, including those of China. White House officials are losing confidence that Ukraine will ever be able to take back all of the land it has lost to Russia over the past four months of war, even with the heavier and more sophisticated weaponry the US and its allies plan to send. Biden plans to announce an extension of some of the increased US troop presence in Poland and changes to US deployments in several Baltic nations that he authorized ahead of Russia’s invasion of Ukraine. A growing number of large US companies have said they will cover travel costs for employees who must leave their home states to get abortions, but these new policies could expose businesses to lawsuits and even potential criminal liability, legal experts said.
FX Street Morning Report- 28th June 2022
Today’s Rates
GBP>EUR – 1.1591
GBP>USD – 1.2275
EUR>USD – 1.0589
GBP>CAD – 1.5745
GBP>AUD – 1.7661
GBP>SEK – 12.333
GBP>AED – 4.5098
GBP>HKD – 9.6350
GBP>ZAR – 19.509
GBP>CHF – 1.1721
Today’s Calendar
· 8:00 a.m.: Germany July GfK consumer confidence
· 8:00 a.m.: Sweden May trade balance, retail sales
· 8:00 a.m.: Denmark May retail sales
· 8:45 a.m.: France June consumer confidence
· 10:00 a.m.: Italy April industrial sales
· 10:00 a.m.: ECB’s Lagarde speaks
· 10:30 a.m.: ECB’s Lane speaks
· 11:00 a.m.: UK to sell linkers
· 11:30 a.m.: Germany to sell bonds
· 11:30 a.m.: ECB’s Elderson speaks
· 12:00 p.m.: Ireland May retail sales
· 1:00 p.m.: ECB’s Panetta speaks
· 2:00 p.m.: Hungary rate decision
· 2:45 p.m.: ECB’s Lagarde holds press conference
· 3:00 p.m.: Ukraine sells bonds
· 4:00 p.m.: US June Conference Board consumer conference
- NATO Summit
This document has been prepared solely for information and is not intended as an Inducement concerning the purchase or sale of any financial instrument. By its nature market analysis represents the personal view of the author and no warranty can be, or is, offered as to the accuracy of any such analysis, or that predictions provided in any such analysis will prove to be correct. Should you rely on any analysis, information or report provided as part of the Service it does so entirely at its own risk, and Frank eXchange Limited/Manor House Foreign eXchange Limited accepts no responsibility or liability for any loss or damage you may suffer as a result. Information and opinions have been obtained from sources believed to be reliable, but no representation is made as to their accuracy. No copy of this document can be taken without prior written permission.