European Session June 22
- FTSE +0.22%
- Euro Stoxx -0.3%%
- Italian FTSE -0.43%
- Dax +0.05%
- CAC +0.05%
Oil was further supported on demand recovery hopes & OPEC+ is making sure supply is tight. Private inventory data out tonight. The drag on inventories and the pushing out of the time spreads as Adam pointed out alongside raising bullish forecasts have all supported the crude complex. The pressure is now going to rise on OPEC+ to bring more supply on line. Expect oil to find buyers on dips, especially as the hype over the Fed’s latest hawkish shift fades a little. We flagged that we would expect OPEC+ to start to flag production rises with oil rising. Right on cue Russia and an OPEC+ sources reported that August looks good for supply increases.
The USD’s pull back yesterday is just helping investors think whether it is likely the Fed really will hike in 2022 or not. The USD was pretty flat for the session hanging around its daily pivot point and keeping the majors quiet too, Expect cooler heads to rein for now, but one thing the latest shift from the fed has taught us is that the fed will change their mind very quickly if they want to. That’s their prerogative, but our lesson. Fed’s Powell to speak later, so that will be instructive for near term USD direction. Will he stick to his usual dovish ways? Most likely.
The bond yield spread took a dip lower in the AU10y-NZ10y and that looks like a major drag on the AUDNZD pair from here. Finally, a bit of NZD strength coming back in relative to the AUD. Been a puzzle why the NZD has been so weak over the last couple of weeks despite a hawkish tilt from the RBNZ.
The GBP was pretty unmoved, but CBI trends for May came in strong. The CBI readings are a survey on manufacturers to rate the level of volume for orders expected during the next 3 months. Factory output expectations the strongest since 1982 and order books strongest since 2019. Output volumes growing the fastest since 1975 when records began. This adds to the narrative that the second half of the year for the UK looks pretty good for both the GBP and the undervalued FTSE 100. EURGBP shorts into the BoE look constructive with markets too complacent on a BoE hawkish twist if SONIA futures are anything to go by.