European Open: UK data dump, BOC meeting and US inflation on tap

Asian Indices:

Australia's ASX 200 index fell by -0.7 points (-0.01%) and currently trades at 6,605.60
Japan's Nikkei 225 index has risen by 128.12 points (0.5%) and currently trades at 26,468.55
Hong Kong's Hang Seng index has risen by 150.51 points (0.72%) and currently trades at 20,995.25
China's A50 Index has risen by 66.5 points (0.46%) and currently trades at 14,397.06

UK and Europe:
UK's FTSE 100 futures are currently down -8.5 points (-0.12%), the cash market is currently estimated to open at 7,201.36
Euro STOXX 50 futures are currently down -11 points (-0.32%), the cash market is currently estimated to open at 3,476.05
Germany's DAX futures are currently down -45 points (-0.35%), the cash market is currently estimated to open at 12,860.48

US Futures:
DJI futures are currently up 48 points (0.16%)
S&P 500 futures are currently up 26.25 points (0.22%)
Nasdaq 100 futures are currently up 6 points (0.16%)

100-bp of hikes in Asia, BOC up next

The BOK (Bank of Korea) hiked by 50-bps to a near-8-year high of 2.25%. Core inflation is expected to remain above 4% for a “considerable period”. And this matters because, if inflation remains higher for key export nations, import costs for their trade partners and within key sectors (such as semiconductors) are likely to remain elevated.

The RBNZ (Reserve Bank of New Zealand) hikes by 50bp as widely expected, making it their third such hike – with a fourth 50-bp hike expected next month on the 17^th August. Rates were last at 2.5% in December 2015 during their previous cutting cycle.

The BOC (Bank of Canada) are up next, and I suspect a 75-bps hike is on the cards, which would be their largest hike since the 100-bp hike in 1998 and help them close the gap with RBNZ to just -25 bp. But with oil on the ropes with a 7% decline yesterday and expectations for a hike, it may not be such a bullish outcome for the Canadian dollar without the BOC suggesting a series of aggressive hikes remain on the table going forward.

US inflation in focus at 13:30 BST

Inflation is forecast to rise to 8.8% y/y (from 8.6%) which would it its highest level since December 1981. However, core CPI – which excludes food and energy – is expected to soften to 5.8% y/y from 6%. I doubt very much today’s inflation report will deter the Fed from raising interest rates by 75-bp at their next meeting, but any sighs of softer inflation could lower expectations for such aggressive hikes further out and weigh on the US dollar. And that could be beneficial for markets such as gold, which are showing a slight resilience to US dollar strength of late.

Gold 4-hour chart:

Gold is currently within its 4^th consecutive bearish month and fell to a 9-month lows yesterday. It trades within a bearish channel and, until we see signs that the dollar’s rally has topped, gold could fall further. However, bearish momentum is waning and a bullish divergence has formed on the 4-hour chart. Prices are also trying to form a base above the 1720 support zone, and even if prices are to break lower then the 2018 trendline and 1700 levels are likely to provide support. I am therefor seeking an opportunity for a countertrend rally, and a bullish engulfing candle around a key support level could provide an early clue of an inflection point.

How to start gold trading

FTSE 350 – Market Internals:

FTSE 350: 3999.81 (0.18%) 12 July 2022

194 (55.43%) stocks advanced and 140 (40.00%) declined
5 stocks rose to a new 52-week high, 11 fell to new lows
18.29% of stocks closed above their 200-day average
49.43% of stocks closed above their 50-day average
7.71% of stocks closed above their 20-day average

Outperformers:

+ 6.50% - International Consolidated Airlines Group SA (ICAG.L)
+ 4.58% - Wizz Air Holdings PLC (WIZZ.L)
+ 4.09% - Carnival PLC (CCL.L)

Underperformers:

-7.20% - Aston Martin Lagonda Global Holdings PLC (AML.L)
-4.16% - Chrysalis Investments Ltd (CHRY.L)
-4.05% - Petrofac Ltd (PFC.L)

Economic events up next (Times in BST)

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