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Sterling hit as UK inflation hits new 40-year high

 

 

“Diligence is the mother of good luck.” — Benjamin Franklin 

 

HEADLINES

 

 

  • Sterling hit as UK inflation hits new 40-year high
  • EU leaders to keep sanction pressure on Russia, gold flagged as new target
  • Oil slumps nearly 3% as investors eye U.S. Fed rate hikes
  • Wall Street gains led by defensives after Powell remarks
  • Bitcoin could plunge even further to a low of $13,000, one strategist warns
  • USD/JPY to skyrocket towards the 147.62/153.01 zone – Credit Suisse
  • GBPUSD Near Term: Upside favored

 

 

Sterling hit as UK inflation hits new 40-year high 

 

The British pound eased on Wednesday after hot UK consumer inflation data raised new worries over an economic slowdown, just as the Bank of England looks set for more interest rate hikes in the coming months. 

Soaring food prices pushed consumer inflation to a new 40-year high of 9.1% in May, the highest rate in the Group of Seven countries and underlining the severity of the cost-of-living crunch in the world's fifth-largest economy.

The figure matched market expectations and following its release money markets continued to fully price in a 25 basis point (bps) BoE rate hike in August. The odds of a 50 bps hike however fell to around 60% from 74%, even though some analysts said such a move was still on the cards.

 

 

COMMODITIES

 

 

EU leaders to keep sanction pressure on Russia, gold flagged as new target 

 

European Union leaders aim to maintain pressure on Russia at their summit this week by committing to further work on sanctions, a draft document showed, with gold among assets that may be targeted in a possible next round of measures. 

Gold is one of the possible next targets, according to officials familiar with the discussions.

Gold is a crucial asset for the Russian Central Bank, which has faced restrictions on accessing some of its assets held abroad because of Western sanctions.

 

 

ENERGY

 

 

Oil slumps nearly 3% as investors eye U.S. Fed rate hikes 

 

Oil prices tumbled about 3% on Wednesday as investors worried that rate hikes by the Federal Reserve could push the U.S. economy into recession, dampening demand for fuel.

Brent crude futures were down $2.95, or 2.6%, to $111.70 a barrel by 12:43 p.m. EDT (1643 GMT). It hit a session low of $107.03 a barrel, lowest since May 19.

U.S. West Texas Intermediate (WTI) fell $3.15, or 2.9%, to $106.37 a barrel. The session low was $101.53 a barrel, lowest since May 11.

 

 

STOCKS

 

 

Wall Street gains led by defensives after Powell remarks 

 

Wall Street's main indexes gained in choppy trading on Wednesday led higher by defensive shares, after Federal Reserve Chair Jerome Powell spoke to the central bank's aim to bring down inflation. 

After opening lower, major U.S. indexes erased losses following Powell's testimony before a Senate committee. He said the Fed is "strongly committed" to bringing down inflation that is running at a 40-year high while policymakers are not trying to cause a recession in the process.

Investors are trying to assess how far stocks can fall as they weigh risks to the economy with the Fed hiking rates to tamp down surging inflation. The S&P 500 earlier this month fell over 20% from its January all-time high, confirming the common definition of a bear market, with the benchmark index last week logging its biggest weekly percentage drop since March 2020.

 

 

Bitcoin could plunge even further to a low of $13,000, one strategist warns 

 

If crypto’s past bubbles are anything to go by, bitcoin could be about to fall much further. 

That’s according to one strategist, who warns the world’s top cryptocurrency is likely to tank as low as $13,000 — an almost 40% drop from current levels.

Explaining his bearish call, Harnett said past crypto rallies show bitcoin tends to fall roughly 80% from all-time highs. In 2018, for instance, the cryptocurrency plummeted close to $3,000 after hitting a peak of nearly $20,000 in late 2017.

 

 

ANALYSIS

 

 

USD/JPY to skyrocket towards the 147.62/153.01 zone – Credit Suisse

 

“We maintain our core positive outlook, with resistance seen at 136.81/84 ahead of the 137.21 high of September 1998. We would look for this to cap at first ahead of further strength to the trend channel and price resistance at 139.00/10 next and eventually our ultimate objective in the 147.62/153.01 zone – the 1998 high itself and the 38.2% retracement of the entire fall from the 1982 high.” 

“Support is seen at 135.96 initially, then 135.60/43, which we look to try and hold. Below 134.55 though is needed to ease the immediate upside bias to raise the prospect of a fresh consolidation phase, with support then seen next at 134.03.” 

 

 

CHART

 

 

GBPUSD Near Term: Upside favored

Technical View: Long position above 1.22. Target 1.234. Conversely, break below 1.22, to open 1.216.

Comments: The pair breaks above the resistance.

 

 

 

 

Source: Trading Central 



 

CALENDAR

 

 

*Times in GMT

 

 

 

 

Source: FX Street Economic Calendar


 

Footnotes
https://www.reuters.com/markets/currencies/sterling-extends-losses-after-uk-inflation-hits-new-40-year-high-2022-06-22/
https://www.reuters.com/world/europe/eu-leaders-keep-sanction-pressure-russia-gold-flagged-new-target-2022-06-21/
https://www.reuters.com/business/energy/oil-prices-slide-biden-pushes-us-fuel-cost-cuts-2022-06-22/
https://www.reuters.com/markets/europe/futures-slide-ahead-powells-congressional-testimony-2022-06-22/
https://www.cnbc.com/2022/06/22/bitcoin-btc-price-may-tank-as-low-as-13000-strategist-warns.html
https://www.fxstreet.com/news/usd-jpy-to-skyrocket-towards-the-14762-15301-zone-credit-suisse-202206221332
 

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