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Wall St slides, Dow set for worst first-half since 1962

You Are Never Too Old To Set Another Goal Or To Dream A New Dream.” – C.S. Lewis 

 

 

HEADLINES

 

 

  • Pound gains, but focus stays on struggling UK economy
  • Gold set for quarterly fall on central banks’ aggressive tilt, dollar strength
  • Oil falls 2% on uncertainty over future OPEC+ output, recession fears
  • Wall St slides, Dow set for worst first-half since 1962
  • Natural gas drops 10%, on track for worst month in more than three years
  • GBP/USD seen around 1.1700 in mid-2023 – Wells Fargo
  • GBPUSD Near Term: Downside favored

 

Pound gains, but focus stays on struggling UK economy 

 

 

The British pound rose against the dollar and euro on Thursday, as investors shrugged off official data revealing a record shortfall in the United Kingdom’s current account deficit in early 2022.

Despite the bounce, the pound has rounded off its biggest six-month drop since 2016 in the first half of 2022, down over 10% versus the dollar this year.

A weakening euro saw the pound strengthen against the single currency, rising 0.23% to 85.940 pence, earlier touching its highest level since June 17.

Inflation hit a 40-year high of 9.1% last month, the fastest pace among the Group of Seven wealthy nations.

 

 

COMMODITIES

 

 

Gold set for quarterly fall on central banks’ aggressive tilt, dollar strength 

 

 

Gold fell on Thursday and was bound for its worst quarter in five as the dollar’s strength and a hawkish rhetoric from central banks eroded the appeal of the non-yielding asset. 

Spot gold fell 0.3% to $1,811.10 per ounce, en route to post a more than 6% fall for the quarter, and a third straight monthly fall. U.S. gold futures dipped 0.3% to $1,812.2.

Normally, gold tends to do well in times of high inflation, but investors will be worried about parking their capital in something that doesn’t yield anything, Evangelista added.

 

 

ENERGY

 

 

Oil falls 2% on uncertainty over future OPEC+ output, recession fears 

 

 

Oil prices sank over 2% on Thursday as OPEC+ confirmed it would only increase output in August as much as previously announced despite tight global supplies, but left the market wondering about future output.

Brent crude futures for September delivery fell $2.62, or 2.3%, to $109.83 per barrel by 1:10 p.m. EDT (1710 GMT). The August contract, which expires on Thursday, fell $1.36, or 1.2%, to $114.90 a barrel.

Previously, OPEC+ decided to increase output each month by 648,000 barrels per day (bpd) in July and August.

 

 

STOCKS

 

 

Wall St slides, Dow set for worst first-half since 1962 

 

 

U.S. stocks slipped on Thursday, setting the Dow up for its worst first six months since 1962, on concerns that a dogged pursuit by central banks to tame inflation would hamper global economic growth. 

Fears over slowing growth and surging prices have rippled through markets, with recession worries taking center stage as monetary policymakers across the world look to aggressively raise borrowing costs.

Federal Reserve Chair Jerome Powell on Wednesday vowed to not let the U.S. economy slip into a "higher inflation regime", even if it means raising interest rates to levels that put growth at risk.

 

 

Natural gas drops 10%, on track for worst month in more than three years 

 

 

U.S. natural gas futures plunged below $6 per million British thermal units on Thursday, after an inventory report showed a larger-than-expected storage build, sparking fears of an oversupplied market.

Henry Hub futures declined 12.5% to $5.68 per million British thermal units. The contract is now down roughly 30% for June, putting it on track for the worst month since December 2018.

The U.S. Energy Information Administration said Thursday that inventory for the week ending June 24 rose by 82 billion cubic feet.

 

 

ANALYSIS

 

 

GBP/USD seen around 1.1700 in mid-2023 – Wells Fargo 

 

 

“We expect the U.K. central bank to begin lowering its policy interest rate during the second half of 2023, by a cumulative 50 bps to 1.50% by the end of next year.”

“Overall, this mix of gradual monetary tightening and rapid inflation (meaning that real U.K. policy interest rates will remain substantially in negative territory), combined with a U.K. economic downturn, provides an underwhelming backdrop for the U.K. currency. We have revised our forecast for the pound lower, and now see a trough in the GBP/USD exchange rate around $1.1700 in mid-2023.”

“Even as the U.S. economy falls into its own recession and the Fed begins to lower interest rates by late next year, we believe that headwinds facing the U.K. economy will mean only a modest rebound for the pound, and we target a GBP/USD exchange rate of $1.1900 by the end of 2023.”

 

 

CHART

 

 

GBPUSD Near Term: Downside favored

Technical View: Short position below 1.219. Target 1.208. Conversely, break above 1.219, to open 1.2235.

Comments: The pair breaks below support.

 

Source: Trading Central 




 

CALENDAR

 

 

*Times in GMT

Source: FX Street Economic Calendar


Footnotes
https://www.reuters.com/article/britain-sterling/update-1-pound-gains-but-focus-stays-on-struggling-uk-economy-idUSL1N2YH0ZW
https://www.cnbc.com/2022/06/30/gold-markets-dollar-treasury-yield-inflation-interest-rate-.html
https://www.reuters.com/markets/commodities/oil-prices-stable-market-weighs-fuel-stocks-build-amid-supply-concerns-2022-06-30/
https://www.reuters.com/markets/europe/futures-tumble-last-day-torrid-first-half-growth-fears-2022-06-30/
https://www.cnbc.com/2022/06/30/natural-gas-drops-10percent-on-track-for-worst-month-in-more-than-three-years.html
https://www.fxstreet.com/news/gbp-usd-seen-around-11700-in-mid-2023-wells-fargo-202206301812

 

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