Morning Minutes

Euro Tests Par as Jittery Investors Await Interest Rate and Inflation News




Capital has continued to exit risk markets and move toward defensive havens. Stock markets around the world have extended yesterday’s downward momentum from North America with the Nikkei sliding 1.7%, the Hang Seng losing 1.3%, the Dax dropping 0.7% and the FTSE falling 0.4%. US index futures are trading flat to down 0.7%.

The US Dollar is soaring again, pushing the Euro down closer to par, the Pound down 0.2% and the Yen down 0.5%. The US 10-year treasury note yield has dropped back under 3.00% apparently driven more by capital flowing in US bonds and pushing up bond prices, than changes in inflation expectations. Gold is also having a good day, gaining 0.2%.

Commodities and cryptocurrencies, on the other hand are getting crushed again for the most part. WTI Crude oil, Brent Crude and Gasoline are all down approximately 4.5% with WTI dropping back under $100.00/bbl. In metals action, copper is down 2.2% while Platinum is down 2.3%. Bitcoin is down 3.0% and has dropped back under $20,000, while Ethereum is down 6.1%.

While awaiting the start of US bank earnings season on Thursday, investors appear to mainly be focused on upcoming central bank decisions and inflation reports. This evening, the Reserve Bank of New Zealand is expected to hike its overnight rate by 0.50% to 2.50%, then tomorrow morning, the Bank of Canada is widely expected to raise its benchmark rate by 0.75% to 2.25%. This would continue the recent trend of central bank tightening heading toward the next Fed meeting. Investors may also look to the statements for signs as to whether central bankers are more concerned about high inflation or a slowing economy. Tomorrow morning, the US June consumer price inflation report is due (street 8.8% vs previous 8.6%) which may provide more colour on how much pressure central bankers are under to keep tightening.

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Colin Cieszynski, Chief Market Strategist

Colin Cieszynski, CFA, CMT
Chief Market Strategist
+1 (647) 282-4428

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