Rail strike caps Sterling rally

 

“Don’t be cocky. Don’t be flashy. There’s always someone better than you.” — Tony Hsieh

 

 

HEADLINES

 

 

• Britain's major rail strike caps sterling rally
• Gold stuck in a range as yields rise, rate hike bets increase
• Oil ticks higher on strong demand, tight supply
• Wall St jumps early after recent selloff; yen drops vs dollar
• U.S. Treasury yields rise to start the week
• USD/CAD: Dips are likely hard to sustain – TD Securities
• EURUSD Short Term: Upside favored

 

 

Britain's major rail strike caps sterling rally

 

The pound rose against a weakening dollar but fell versus the euro on Tuesday, with an equity rally helping risk-sensitive sterling while Britain's biggest rail strike in decades added to growth concerns. 

After a three-week losing streak versus the dollar, the British pound rose 0.3% against a weakening greenback to $1.2282, moving away from a March 2020 low of $1.1934 touched last week.

Against the euro, sterling fell 0.2% to 85.99 pence, after touching a 13-month low of 87.21 pence versus the single currency last week.

 

 

COMMODITIES

 

 

Gold stuck in a range as yields rise, rate hike bets increase 

 

Gold prices were hemmed into a range on Tuesday as rising U.S. Treasury yields and aggressive rate hike bets dimmed bullion’s appeal despite a pullback in the dollar.

 Spot gold slipped 0.2% to $1,834.72 per ounce by 12:46 p.m. ET (1646 GMT). U.S. gold futures dipped 0.2% to $1,837.50.

Earlier this month, the U.S. Federal Reserve announced its biggest interest rate hike since 1994. Following suit, other major central banks are also leaning towards aggressive monetary policy tightening to tame soaring inflation.

 

 

ENERGY

 

 

Oil ticks higher on strong demand, tight supply 

 

Oil rose about 1% on Tuesday on high summer fuel demand while supplies remained tight because of sanctions on Russian oil after its invasion of Ukraine. 

Brent crude rose 68 cents, or 0.6%, to $114.77 a barrel by 12:10 p.m. ET (1610 GMT). The U.S. West Texas Intermediate (WTI) crude contract for July, which expires on Tuesday, rose $1.34, or 1.2%, to $110.90. The more active August contract was up $1.50 at $109.09.

Both benchmarks posted a weekly loss last week. For WTI it was the first weekly loss in eight weeks, for Brent the first in five.

The 50-day simple moving average of U.S. front month futures touched its highest since 2008, and Brent's touched its highest since 2013.

 

 

STOCKS

 

 

Wall St jumps early after recent selloff; yen drops vs dollar 

 

Stocks on global indexes rose sharply on Tuesday, with Wall Street bouncing following its recent selloff, while the Japanese yen fell against the U.S. dollar to its lowest level since October 1998. 

U.S. stock indexes climbed as investors returned from a long weekend, with mega-cap growth and energy companies up sharply.

Expectations of interest rate hikes from major central banks and worries about a global recession have kept investors on edge. Central banks are expected to tighten policy to combat high inflation.

 

 

U.S. Treasury yields rise to start the week 

 

U.S. Treasury yields rose Tuesday as traders weighed a fresh batch of economic data as central banks around the world tighten monetary policy. 

The yield on the benchmark 10-year Treasury note was 6 basis points higher at 3.3%, while the yield on the 30-year Treasury bond traded 7 basis points higher at 3.368%. Yields move inversely to prices.

The Philadelphia Federal Reserve non manufacturing survey showed activity expanded in the region this month. However, expectations for future growth declined, the Philadelphia Fed said.

 

 

ANALYSIS

 

 

USD/CAD: Dips are likely hard to sustain – TD Securities 

 

“We look for CPI to strengthen to 7.2% y/y in May, fueled by another large contribution from gasoline and food prices. Core components should also see another strong gain, led by shelter and airfares/travel services. The BoC's core measures should firm by 0.1pp on average (to 4.3%) and we do not anticipate a significant impact from new basket weights.”

“Despite inflation, the BOC (Bank of Canada) will struggle to keep up with the Fed on tightening. Dips in USD/CAD are likely hard to sustain, especially as the impact of higher rates begins to filter into the data in the coming weeks. 1.2860/00 key support and 1.3080 notable resistance in USD/CAD.”

 

 

CHART

 

 

EURUSD Short Term: Upside favored

Technical View: Long position above 1.047. Target 1.0585. Conversely, break below 1.047, to open 1.043.

Comments: The pair remains supported. Further advance favored.

 

 

 

 

Source: Trading Central 

 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar

Footnotes
https://www.reuters.com/markets/europe/sterling-rises-boes-pill-sees-further-rate-rises-ahead-2022-06-21/
https://www.cnbc.com/2022/06/21/gold-markets-dollar-interest-rate-treasury-yield-federal-reserve-.html
https://www.reuters.com/business/energy/oil-rises-market-caution-over-supply-concerns-2022-06-21/
https://www.reuters.com/markets/europe/global-markets-wrapup-1-2022-06-21/
https://www.cnbc.com/2022/06/21/us-bonds-treasury-yields-in-focus-amid-economic-data-auctions.html
https://www.fxstreet.com/news/usd-cad-dips-are-likely-hard-to-sustain-td-securities-202206211647