Daily Market Outlook, June 13, 2022

Daily Market Outlook, June 13, 2022 Overnight Headlines US Recession Expected For Next Year, Economists Forecast China Alarm US In Private Warnings To Avoid Taiwan Strait China Walking Back Loosening Just Weeks After Reopening Rate Hike Hopes Raise Worries Amid Debt-Laden Eurozone BoE Forecasted To Hike Interest Rates To New 13-Year High UK Faces Stagnation And Recession Risk, CBI Officials Warn Tory MPs Attack Over Plans To Rip Up N Ireland Brexit Deal Macron Majority Threatened After Parliament First-Round Vote Yen Hits Key 135 Level Amid BoJ's Increasingly Isolated Plans Bitcoin Sinks To 18-Month Low As US Inflation Impact Spreads SEC Regulator Investigating Goldman Sachs Over ESG Fund DHL Warns Supply Chain Won’t Recover To Pre-Covid DaysThe Day Ahead Equity markets across the Asia-Pacific region have started the week noticeably lower, reflecting a broad deterioration in risk sentiment. Markets remain challenged by the prospect of aggressive policy tightening, particularly by the US Federal Reserve, which risk driving a material slowdown in economic growth. Market sentiment has also been knocked by the re-emergence of Covid outbreaks in Beijing and Shanghai leading to some targeted curbs being imposed, with concerns rising that widespread restrictions could be put in place. The release of UK April GDP figures this morning showed the economy contract for a second-consecutive month. Declines were registered across all three broad sectors, industrial production, construction and services, which means that the Bank of England’s forecast of a 0.1% rise in GDP in Q2 overall, now looks ambitious. Over the remainder of the week, the focus will be on several central bank policy updates with potentially the most significant for markets being those by the Bank of England and the US Federal Reserve. The Fed seems set to add to the recent spate of aggressive tightening moves by central banks. In contrast, while financial markets expect the Bank of England to deliver another 25bp rate rise, its message and also the Bank of Japan and Swiss National Bank, may continue to be more cautious stressing the need to balance inflation concerns against downside growth risks. Later today, ECB officials Simkus, Holzmann and Guindos are due to speak. Last Thursday, the European Central Bank confirmed that it will probably raise interest rates by 25bp on 21 July. In addition, it indicated that rates could be hiked by a further 50bp in September with further rises expected to follow. Those announcements continued the recent trend of central banks surprising markets with more aggressive than expected tightening moves. While markets have largely priced in 75bp of policy rate increases over the next two meetings, comments from these officials will be closely watched for signs over how widely the ECB’s broad message is shared across the council members. Elsewhere there is a dearth of economic data with no releases due in the UK, US or Europe. Early tomorrow the Office for National Statistics (ONS) will release the latest UK labour market report, primarily covering the three months to April. Expect the latest read to show that the market remains tight with a solid 220k rise in employment and a drop in the unemployment rate to 3.6%. Headline wage growth is also forecast to rise further above the 7% (3m/year) mark.FX Options Expiring 10am New York Cut EUR/USD: 1.0475 (237M), 1.0550 (250M), 1.0575 (359M) GBP/USD: 1.2500 (224M). AUD/USD: 0.7150 (462M) USD/CAD: 1.2850 (200M) EUR/JPY: 140.00 (632M), 143.00 (1.69BLN)Technical & Trade ViewsEURUSD Bias: Bearish below 1.07 Bullish above EUR/USD's big two day slump broke and closed under the 1.0516 Fibo on Friday 1.0516 Fibo is a 61.8% retrace of the 1.0349 to 1.0787 May (EBS) rise That is increasing the scope for a much bigger slide well under 1.0452 Fibo 1.0452 Fibo is a 76.4% retrace of the same gain Fourteen-day momentum also turned negative on Friday FX traders have a negligible bet on dollar rising This is the case at the start of a major tightening in U.S. policy Currently traders are long of just 12.5 billion dollars (incl EM bets) At beginning of last Fed tightening cycle in 2015 they owned 48 billionGBPUSD Bias: Bearish below 1.26 Bullish above. GBP/USD falls to fresh four week low on negative UK April GDP Cable drops to 1.2255 on unexpectedly negative UK April GDP number Down 0.3% vs +0.1% f/c - 1.2255 lowest level since May 16 1.2264 was Asia low, as risk aversion hurt GBP and buoyed safe-haven USD Asian stocks slump; Nikkei down 3%. European/U.S. equity futures negative 1.2302 was Friday's low, after USD jumped on hot U.S. CPI data UK to unveil new N.Ireland trade rules today, risking EU clashUSDJPY Bias: Bullish above 127 Bearish below USD/JPY's bullish cycle has marginally breached the 2002 135.20 peak That has unmasked the October 1998 136.90 high 14-day momentum is positive, reinforcing the overall bullish market Market is stretched near-term, with traders looking to get long on dips Bids at the 133.25 level, which is ahead of last Thursday's 133.19 lowAUDUSD Bias: Bullish above .7200 Bearish below AUD/USD stabilizes near 0.7024, marks 4th straight drop Recovers from low of 0.7001 after blip up to 0.7072 Bollinger downtrend channel confirmed on close below 0.7043 Sea of red in Asia stocks following Friday's Wall St cue Investor anxiety heightened heading toward FOMC Wed Australia financial markets closed Monday

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