The Pressure Continues: Week Ahead

A very good morning and Happy Monday to all traders and market participants as we kick-off the European AM session. Plenty to look forward to this week from multiple streams on the macro front so let’s dig in.

Macros: Monetary Policy & Global Demand

The US PCE Price Index (PPI) is likely to show price pressures have eased slightly in May and a miss will further support further tightening from the Fed following its pause, spurring the DXY further. The health of the US banking system will be monitored closely this week as the Fed is set to report stress test results this Wednesday. It will be pertinent to keep a close eye for comments from Fed Chair Powell & ECB President Lagarde as they speak at the ECB Forum on Central Banking in Portugal from the 26th – 28th. ??

Preliminary inflation readings are set to come out of the Eurozone with CPI figures of the bloc expected to ease to its lowest level since January 2022. This while fears of a persistent China slowdown takes on another notch as Consumer Spending data missed expectations, worsening the global demand picture.

Price Action: Risk Assets Pressured (Cont.)

Risk assets continue to be under pressure as global rates path remain uncertain. The S&P500 continues in its bearish channel from the previous week of trading, while spot crude continues to trade weak as traders failed to hold off the break of last week’s support TL. From the looks of it, the $70 mark will be a key inflection in the near term.

My Opinion: The Yen Short

The Yen’s slide did not come as surprise as the Fed’s Hawkish Pause coupled with the Bank of Japan’s commitment to keep rates favorable as per with their mandate to stoke demand. The short from a Macro standpoint seemed rather obvious considering the global rate hiking cycle and a BoJ that is persistent in its mandate to keep inflation alive and well. Not much can stop the Dollar’s climb as it trades against the Yen into August-November 2022 inflection around 144.974.

That is it from me today, this was - Your Morning Reed for the week ahead.

_ON VANTAGE___________________________________________________

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