BOND MARKET TANTRUM: Advances markets finally listen to the noise that the bond market have been making, however, the Fed are still not listening. Quite the movement on as the US 10yr reach the milestone of yielding 1.50%, moving above the S&P 500 dividend yield of 1.48%. Afterward, this puts a TINA (There Is No Alternative) headwind for the stock market, which has up till now, enjoyed the very low speed environment. The tech industry endured most of the selling pressure with all the Nasdaq decreasing over 3%, especially after the worst 7yr auction ever, which kickstarted a bid at the greenback and sent EM FX heavily lower.
As I’m sure many had noticed, the Pound’s evaluation had become exceptionally extended on the upside with the RSI on several GBP crosses trading considerably from overbought territory. Nevertheless, in response to this deleveraging in danger assets, the Pound had felt much of the brunt of the in G10s, but for circumstance, GBP/USD is only back to levels that we were trading last week and also let’s not forgetthe Pound has been the best actress in 2021. On the technical front, GBP/USD stays in an uptrend with the pair holding over the 20 and 50DMAs.
A sizeable dip back in EUR/GBP throughout the past couple of sessions as positioning gets washed out. But with all the cross taken from climatic conditions as well as the RSI staying below 50, this may see traders reengage with fading the uptick. As such, risks remain for a move back towards 0.86 and 0.8540 below.
BOE INFLATION THREAT: Maybe the most notable comments I have heard from a central banker in in some time is from BoE’s Haldane. The BoE Chief Economist said that says there is a real risk inflation inflation proves more difficult to tame, including that he sees a much better and more sustained rise in inflation than anticipated. But it is necessary to be aware that Haldane is the most hawkish member on the MPC, which in turn puts focus on other MPC members as to if they share the very same concerns.
NEXT WEEK: Looking forward to the next week, there is hardly any on the national front, apart from this UK Budget. But a point to make on the budget is the fact that it is typically more significant for UK stocks compared to FX, although a lot of the details of the budget are inclined to be released months before and thus nullifying the surprise element for markets. That said, on the financial calendar, focus will be on the US data releases with ISM PMIs and NFP expected out.
