Oil slips amid rumors of federal tax suspension on gasoline. Inflation continues to rise :: InvestMacro

by just forex

Federal Reserve Chairman Jerome Powell visited the Senate Banking Committee yesterday and will visit the House today. Mr. Powell noted that the Fed is “strongly committed” to curbing inflation and noted that the economy at this point is strong enough to withstand the interest rate increases used as a tool to achieve this goal. Powell also said that the pace of future rate hikes will depend on the inflation numbers they see. But the possibility of a recession due to high interest rates remains. At the same time, a Fed rate hike is unlikely to lower gas or food prices.

Fed spokesman Evans indicated yesterday that a 75 basis point rate hike in July is reasonable for discussion and does not see a need for a 100 basis point rate hike. The odds that the Fed will raise 0.75% again at its next meeting are now close to 100%. And this scenario has not yet been estimated, so analysts expect another wave of declines in stock indices.

With the stock market closed yesterday, the Dow Jones (US30) lost 0.15%, while the S&P 500 (US500) lost 0.13%. The Nasdaq Tech Index (US100) is down 0.15% on Wednesday.

Canadian CPI rose 1.4% last month (expected +1%, previous +0.6%). Thus, Canada’s inflation rate was 7.7% year on year, a record high since 1983. Core inflation (which does not include food and fuel prices) rose from 5.8% to 6.3% annually. Analysts believe that the sharp rise in inflation in Canada will boost investors’ expectations of further interest rate hikes by the Bank of Canada.

Yesterday, most European stock markets were trading lower. Germany’s DAX (DE30) lost 1.11%, France’s CAC 40 (FR 40) shed 0.81%, Spain’s IBEX 35 (ES35) lost 1.10%, and Britain’s FTSE 100 (UK100) closed 0.88%.

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The European Central Bank and Europe’s national central banks spent three months on the tool needed to prevent the fragmentation that would accompany the slow normalization of European interest rates in response to the rapid rise in inflation, caused in part by the Russian invasion of Ukraine. For now, analysts believe the ECB’s current approach is working. But the ECB’s freedom of decision-making is very narrow, not least because of the increased political pressure in Germany, France and Italy.

UK CPI rose to 9.1% YoY (expected 9.1%, previous 9.0%). Monthly, the inflation rate increased by 0.7%. The last time such a level of inflation was seen was in 1982. Analysts believe that the central bank will have to take tougher measures at its next meetings.

Swiss National Bank President Thomas Jordan indicated yesterday that inflation data shows the need for further monetary tightening, but it is unclear when.

Oil fell yesterday as the US plans a gasoline tax holiday. On Wednesday, Biden said he had asked Congress to consider a three-month suspension of the federal gasoline tax of 18.4 cents per gallon, and urged states to suspend fuel taxes. The president called on the refineries to ensure that all savings are transferred to the American people. US Energy Secretary Jennifer Granholm will meet with the oil industry today to find ways to bring down oil and fuel prices.

Yesterday Asian markets closed in negative territory. Japan’s Nikkei 225 (JP225) is down 0.37%, Hong Kong’s Hang Seng (HK50) is down 2.56%, and Australia’s S&P/ASX 200 (AU200) is down 0.23%.

Chinese President Xi Jinping held a summit on Wednesday that endorsed a plan for the healthy development of big Chinese payments companies and the financial technology sector. It could give a boost to technology companies.

Japanese manufacturing activity growth slowed in June as strict restrictions imposed by China on COVID-19 weighed on manufacturing demand, even as service sector sentiment reached its highest level in nearly nine years. China’s COVID-19 quarantine has disrupted supply chains, severely impacting trade-dependent economies such as Japan.

According to S&P Global, the global manufacturing PMI in Australia rose to 55.8 in June from 55.7 in May. Services business activity decreased to 52.6 from 53.2.

Singapore CPI came in at 5.6% y/y (5.5% expected, previous 5.4%). Core CPI, excluding private fuel and food costs, rose to 3.6% y/y (3.5% forecast, previously 3.3%).

The South Korean won fell below the psychological level of 1,300 per dollar for the first time in 13 years amid fears of a global economic slowdown.

Main market prices:

S&P 500 (F) (US500) 3,759.89 − 4.90 (−0.13%)

Dow Jones (US 30) 30,483.13 −47.12 (−0.15%)

DAX (DE40) 13,144.28 −148.12 (−1.11%)

FTSE 100 (UK100) 7,089.22 −62.83 (−0.88%)

US dollar index 104.20 -0.24 (-0.23%)

Important events for today:

  • – Australian Manufacturing PMI (m / m) at 02:00 (GMT + 3);
  • – Australia Services PMI (m/m) at 02:00 (GMT +3);
  • – Japanese Manufacturing PMI (MoM) at 03:30 (GMT +3);
  • – Japanese Services PMI (MoM) at 03:30 (GMT +3);
  • – Singapore CPI (m / m) at 08:00 (GMT + 3);
  • – French Manufacturing PMI in the Eurozone (MoM) at 10:15 (GMT +3);
  • – PMI for French services in the eurozone (monthly) at 10:15 (GMT +3);
  • – German Manufacturing PMI for the Eurozone (MoM) at 10:30 (GMT +3);
  • – German PMI for services in the Eurozone (monthly) at 10:30 (GMT +3);
  • – Economic Bulletin of the European Central Bank in the Eurozone at 11:00 (GMT +3);
  • – Eurozone Manufacturing PMI (m / m) at 11:00 (GMT +3);
  • – Eurozone Services PMI (m / m) at 11:00 (GMT + 3);
  • – UK Manufacturing PMI (MoM) at 11:30 (GMT +3);
  • – UK Services PMI (month / month) at 11:30 (GMT +3);
  • – EU leaders summit in the eurozone at 13:00 (GMT +3);
  • – US Initial Jobless Claims (w/s) at 15:30 (GMT +3);
  • – US Manufacturing PMI (m / m) at 16:45 (GMT +3);
  • – US Services PMI (MoM) at 16:45 (GMT +3);
  • – US Federal Reserve Chairman Powell testifies at 17:00 (GMT +3);
  • – US natural gas storage (w/w) at 17:30 (GMT +3);
  • – US crude oil reserves (w / s) at 18:30 (GMT +3).

by just forex

This article reflects a personal opinion and should not be construed as investment advice and/or a continuing offer and/or solicitation to carry out financial transactions and/or guarantee and/or anticipation of future events.

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