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Sterling rallies as dollar sellers emerge, UK growth beats forecasts

 

 

“Success is the sum of small efforts – repeated day in and day out.” — Robert Collier 

 

 

HEADLINES

 

  • Sterling rallies as dollar sellers emerge, UK growth beats forecasts
  • Gold rebounds sharply from 1-year low as dollar slips
  • Oil mixed after U.S. stock build, big inflation figure
  • Wall St slips as hot inflation data rattles investors
  • Yield curve inversion between 10-year and 2-year rates reaches biggest point since 2000
  • EUR/USD: Parity to hold, consolidation phase to emerge – Credit Suisse
  • GBPJPY Near Term: Upside favored

 

 

Sterling rallies as dollar sellers emerge, UK growth beats forecasts

 

The British pound rose on Wednesday, helped by a broadly weaker dollar and after data showed the UK economy grew unexpectedly in May.

Economic output expanded by 0.5% in May, although consumer services fell as the surge in inflation hit shoppers. A Reuters poll of economists had pointed to zero growth in May from April.

The pound's fortunes on Wednesday were largely tied to moves in the dollar, however, with sterling weakening to as low as $1.1828 - near a two-year low - shortly after forecast-beating U.S. inflation data was released.

 

 

COMMODITIES

 

 

Gold rebounds sharply from 1-year low as dollar slips

 

Gold rebounded from a near one-year low on Wednesday as the dollar retreated following an initial rally, helping bullion stave off pressure from prospects of steep rate hikes after U.S. consumer prices surged.

Spot gold rose 0.7% to $1,737.69 per ounce by 11:58 a.m. ET (1558 GMT), clambering from its lowest since August 2021 at $1,707.09 after the U.S. data powered the dollar to a fresh multi-decade peak.

U.S. gold futures was up 0.7% at $1,737.00.

 

 

ENERGY

 

 

Oil mixed after U.S. stock build, big inflation figure

 

Oil prices were little changed on Wednesday after U.S. oil inventories rose and after U.S. inflation figures bolstered the case for another big Federal Reserve interest rate increase.

Brent crude was down 39 cents to $99.10 a barrel as of 1:18 p.m. ET (1718 GMT), while U.S. West Texas Intermediate crude fell 10 cents to $96.74 a barrel.

Investors have been selling oil of late on worries that aggressive rate hikes to stem inflation will slow economic growth and hit oil demand. Prices fell by more than 7% on Tuesday in volatile trade to settle below $100 for the first time since April.



 

 

STOCKS

 

Wall St slips as hot inflation data rattles investors

 

U.S. stocks slipped on Wednesday after hotter-than-expected inflation data fanned fears that the Federal Reserve might take a more aggressive stance on interest rate hikes, potentially tipping the economy into a recession.

The main indexes, however, bounced off session lows as investors looked for signs that inflation had peaked amid a broad retreat in commodity prices, with Brent and U.S. crude now trading below $100 a barrel.

 

Yield curve inversion between 10-year and 2-year rates reaches biggest point since 2000

 

U.S. Treasury yields dipped Wednesday on the back of much hotter-than-expected inflation data.

The 10-year Treasury yield traded 2 basis points lower at 2.935%. The 2-year rate was up more than 5 basis points at 3.097%. The 30-year bond rate rose 1 basis point to 3.128%. Yields move inversely to prices, and a basis point is equal to 0.01%.

Yields popped after the consumer price index rose 9.1% on a year-over-year basis in June, adding to growing concerns of a looming recession. That’s well above a Dow Jones estimate of 8.8% and marked the fastest pace for inflation since November 1981.

 

 

ANALYSIS

 

EUR/USD: Parity to hold, consolidation phase to emerge – Credit Suisse 

 

“Our base case remains that parity/0.99 will essentially remain a floor for now and a consolidation/recovery phase can emerge, with the market also at the lower end of its 5-month channel and also oversold (right-hand chart below). 

“Resistance for recovery is seen at 1.0185/92 initially, with tougher resistance seen starting at 1.0350 and stretching up to the 55-day average, currently at 1.0520.” 

“We continue to identify the broader trend as lower and we thus look to fade a consolidation/recovery (if indeed seen) and our bias is for an eventual sustained break of 0.99 to be eventually achieved. This would then clear the way for further weakness, with support seen next at 0.9750 and with the next meaningful support seen at 0.9609/0.9592 – September 2002 low and high of 2001.”

“Whilst we would look for a fresh consolidation phase at 0.9609/0.9592, a direct break can see support next at 0.9331.”

 

 

CHART

 

GBPJPY Near Term: Upside favored

 

Technical View: Long position above 161.3. Target 164.45. Conversely, break below 161.3, to open 160.25.

Comments: The pair breaks above the resistance.

 

 

Source: Trading Central 

 

 

CALENDAR

 

*Times in GMT

 

 

Source: FX Street Economic Calendar

 

 

SOURCES

 

https://www.reuters.com/markets/europe/sterling-edges-higher-uk-growth-beats-forecasts-2022-07-13/
https://www.reuters.com/article/global-precious/precious-gold-rebounds-sharply-from-1-year-low-as-dollar-slips-idUSL4N2YU2NU
https://www.reuters.com/business/energy/oil-prices-slip-anticipated-us-inventory-build-amid-demand-worries-2022-07-13/
https://www.reuters.com/markets/europe/futures-edge-higher-ahead-inflation-data-2022-07-13/
https://www.cnbc.com/2022/07/13/us-bonds-treasury-yields-tick-higher-as-traders-prepare-for-inflation.html
https://www.fxstreet.com/news/eur-usd-parity-to-hold-consolidation-phase-to-emerge-credit-suisse-202207131233