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ActionForex reports that analysts at TD Bank Financial Group discuss Canada's June CPI data. 

"The Consumer Price Index (CPI) rose 3.1% year-over-year in June, down from 3.6% in May and a touch below the median forecast of 3.2%."

"Gasoline prices were again considerably higher than what they were a year ago (+32%), but were down from May (+43.4%) due to the recovery in prices in 2020. Food price inflation edged down to 1.3% (from 1.5% in May) as prices for fresh vegetables continued to trend lower. Excluding food and energy, inflation was 2.2% in June, down from 2.4% in May."

"On a seasonally adjusted basis, CPI increase 0.1% in June, slowing from the 0.4% gain in May."

"Despite the cooling in June, price pressures are likely to rise in the months ahead. Further reopening of the economy is likely to fuel gains in categories that had seen muted inflation throughout the last year. At the same time, strains to the supply chain have not been fully alleviated and will continue to exert upward pressure on price growth. Firms have indicated an increased willingness to pass on higher input costs to consumers and with consumers able to absorb them, there is good reason to expect them to do so."

"As consumers settle into more stable spending-saving patterns and supply chain constraints are ironed out, price pressures should moderate. That said, there is a non-negligible risk that supply constraints prove longer lasting and demand runs hotter than expected. In that case, inflation expectations could rise meaningfully, presenting greater upside risk to the inflation outlook. The Bank of Canada will be monitoring signs on this front closely as it charts next steps for monetary policy."

The U.S. Energy Information Administration (EIA) reported on Wednesday that crude inventories fell by 4.089 million barrels in the week ended July 23, following a build of 2.108 million barrels in the previous week. Economists had forecast a draw of 2.928 million barrels.

At the same time, gasoline stocks declined by 2.253 million barrels, while analysts had expected a fall of 0.916 million barrels. Distillate stocks dropped by 3.088 million barrels, while analysts had forecast a decrease of 0.435 million barrels.

Meanwhile, oil production in the U.S. reduced by 200,000 barrels a day to 11,200 million barrels a day.

U.S. crude oil imports averaged 6.5 million barrels per day last week, decreased by 0.6 million barrels per day from the previous week.

eFXdata reports that analysts at Credit Agricole CIB Research offer their expectations for today's FOMC policy meeting.

"We think that the bigger risk on the day would be a ‘hawkish surprise’ similar to the June policy meeting. Indeed, evidence that the recent economic data releases have started to shift the balance of risks at the FOMC in favour of policy normalization in coming months could encourage the front-loading of rate hike expectations and boost UST yields. The USD could regain some ground on back of growing rate and yields advantage." 

"Depending on how resilient risk appetite is in the face of tightening US financial conditions, any USD gains would manifest themselves vs low-yielders like the JPY (under risk on) or risk-correlated currencies like the GBP (under risk off)."

The Commerce Department announced on Wednesday its preliminary estimate showed that the U.S. wholesale inventories rose 0.8 percent m-o-m in June after a revised 1.3 percent m-o-m advance in May (originally a 1.1 percent m-o-m gain).

According to the report, durable goods inventories increased 1.2 percent m-o-m in June, following a 1.4 percent m-o-m climb in the previous month. Meanwhile, nondurable goods inventories edged up 0.1 percent m-o-m after a 1.2 percent m-o-m jump in May.

In y-o-y terms, wholesale inventories surged 10.2 percent in June.

U.S. stock-index futures rose on Wednesday, as investors digested the latest batch of Q2 earnings reports from the U.S. companies, including tech giants such as Apple (AAPL), Alphabet (GOOG) and Microsoft  (MSFT), while awaiting the Fed’s policy statement (18:00 GMT). 

Global Stocks:

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Statistics Canada reported on Wednesday the country’s consumer price index (CPI) rose 0.3 percent m-o-m in June, following a 0.5 percent m-o-m advance in the previous month.

On the y-o-y basis, Canada’s inflation rate increased 3.1 percent last month, decelerating from 3.6 percent in May. This was the lowest rate in three months.

Economists had predicted inflation would increase 0.4 m-o-m and 3.2 percent y-o-y in June.

According to the report, prices rose at a slower pace in four of the eight major components on a y-o-y basis in June, with clothing and footwear component recording the largest deceleration (+1.1 percent y-o-y in June vs. +3.9 percent y-o-y in May), reflecting a decline in prices for women's clothing.

Meanwhile, the closely watched the Bank of Canada's core index rose 2.7 percent y-o-y in June, following a 2.8 percent y-o-y climb in May. 

Boeing (BA) reported Q2 FY 2021 earnings of $0.40 per share (versus -$4.79 per share in Q2 FY 2020), much better than analysts’ consensus estimate of -$0.72 per share.

The company’s quarterly revenues amounted to $16.998 bln (+44.0% y/y), roughly in line with analysts’ consensus estimate of $16.913 bln.

BA rose to $234.66 (+5.57%) in pre-market trading.

USD strengthened against other major currencies in the European session on Wednesday, as investors awaited a policy update from the U.S. Federal Reserve. The U.S. Dollar Index (DXY), measuring the U.S. currency's value relative to a basket of foreign currencies, rose 0.13% to 92.55.

The outcomes of the Fed’s July monetary policy meeting will be announced today at 18:00 GMT, and the Fed's Chairman Jerome Powell will follow with a press conference a half-hour later.

Market participants hope to get hints on the Fed’s outlook for stimulus, given that inflation has been growing steeply in recent months. However, most do not expect that the Fed policymakers will make any changes to the central bank’s accommodative policy stance, given the reassurances from them that the recent rise in prices will be temporary and concerns that rising Delta-variant infections could derail the economic recovery. It is of great interest to investors to know the views of the Fed’s officials on the timing of slowing their $120 billion-a-month in bond purchases.

FXStreet reports that FX Strategists at UOB Group suggest that AUD/USD could now trade within the 0.7320-0.7450 range in the next weeks.

24-hour view: “For today, AUD is likely to trade sideways between 0.7340 and 0.7390.”

Next 1-3 weeks: “Our view from last Friday (23 Jul, spot at 0.7385) still stands. As highlighted, AUD could trade between 0.7320 and 0.7450 for period of time. Looking ahead, the downside risk appears to be greater but AUD has to break below last week’s low at 0.7290 before a sustained decline can be expected.”

McDonald's (MCD) reported Q2 FY 2021 earnings of $2.37 per share (versus $0.66 per share in Q2 FY 2020), beating analysts’ consensus estimate of $2.12 per share.

The company’s quarterly revenues amounted to $5.888 bln (+56.5% y/y), beating analysts’ consensus estimate of $5.575 bln.

MCD traded at $246.35 (0.00%) in pre-market trading.

The Mortgage Bankers Association (MBA) reported on Wednesday the mortgage application volume in the U.S. surged 5.7 percent in the week ended July 23, following a 4.0 percent plunge in the previous week. 

According to the report, refinance applications climbed 9.3 percent, while applications to purchase a home declined 1.6 percent.

Meanwhile, the average fixed 30-year mortgage rate decreased from 3.11 percent to 3.01 percent, the lowest level since February 2021.

“The 10-year Treasury yield fell last week, as investors grew concerned about increasing Covid-19 case counts and the downside risks to the current economic recovery, noted Joel Kan, MBA’s associate vice president of economist and industry forecasting.

Pfizer (PFE) reported Q2 FY 2021 earnings of $1.07 per share (versus $0.78 per share in Q2 FY 2020), beating analysts’ consensus estimate of $0.98 per share.

The company’s quarterly revenues amounted to $18.977 bln (+60.8% y/y), beating analysts’ consensus estimate of $18.725 bln.

PFE rose to $42.14 (+0.10%) in pre-market trading.

FXStreet reports that FX Strategists at UOB Group note that USD/JPY is still forecast to maintain the consolidation between the 109.20/110.60 band in the next weeks.

24-hour view: “The sharp drop in USD to 109.57 came as a surprise (we were expecting sideway-trading). The rapid decline appears to be overdone and USD is unlikely to weaken much further. For today, USD is more likely to consolidate and trade between 109.50 and 110.10.”

Next 1-3 weeks: “The build-up in momentum fizzled out quickly as USD dropped sharply to 109.57 yesterday (27 Jul). The recent price actions have resulted in a mixed outlook and USD could trade within a 109.20/110.60 range for now.”

Visa (V) reported Q3 FY 2021 earnings of $1.49 per share (versus $1.07 per share in Q3 FY 2020), beating analysts’ consensus estimate of $1.35 per share.

The company’s quarterly revenues amounted to $6.130 bln (+26.7% y/y), beating analysts’ consensus estimate of $5.857 bln.

V fell to $248.00 (-1.17%) in pre-market trading.

Starbucks (SBUX) reported Q3 FY 2021 earnings of $1.01 per share (versus -$0.46 per share in Q3 FY 2020), beating analysts’ consensus estimate of $0.78 per share.

The company’s quarterly revenues amounted to $7.497 bln (+77.6% y/y), beating analysts’ consensus estimate of $7.264 bln.

SBUX fell to $122.98 (-2.42%) in pre-market trading.

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, suggests that in the light of the recent price action, USD/CHF could slip back to the 0.9117 level.

“USD/CHF has failed at the 4-month downtrend at .9219 and is under pressure near term. We would allow for slippage back to the .9117 recent low and even the .9100/.9075 55 and 200-day ma. These should hold, and we should eventually see recovery.”

“Below the 200-day ma would allow for a slide to the .9054/46 late May and early June highs as well as the early February high.”

Alphabet (GOOG) reported Q2 FY 2021 earnings of $27.26 per share (versus $10.13 per share in Q2 FY 2020), beating analysts’ consensus estimate of $19.08 per share.

The company’s quarterly revenues amounted to $61.880 bln (+61.6% y/y), beating analysts’ consensus estimate of $56.076 bln.

GOOGL rose to $2,740.00 (+3.87%) in pre-market trading.

Microsoft (MSFT) reported Q4 FY 2021 earnings of $2.17 per share (versus $1.46 per share in Q4 FY 2020), beating analysts’ consensus estimate of $1.92 per share.

The company’s quarterly revenues amounted to $46.152 bln (+21.3% y/y), beating analysts’ consensus estimate of $44.301 bln.

MSFT rose to $287.50 (+0 34%) in pre-market trading.

FXStreet reports that UOB Group’s FX Strategists suggest that the positive momentum in USD/CNH could extend to the 6.5500 level and beyond in the next weeks.

24-hour view: “We did not anticipate the sudden and impulsive surge in USD that sent it rocketing to a 3-1/2 month high of 6.5289. The outsized and rapid rally appears to be overdone and USD is unlikely to strengthen much further. On the other hand, it is too soon to expect a sizeable pullback. All in, USD is more likely to trade between 6.5000 and 6.5330.”

Next 1-3 weeks: “... we did not anticipate the sudden surge in USD during Asian session and the subsequent strong daily closing of +0.71% (its biggest 1-day advance in 9-1/2 months). The strong boost in momentum suggests that USD is likely to strengthen further to 6.5500, possibly 6.5880. The positive outlook for USD is deemed intact as long as USD does not move below the ‘strong support’ level (currently at 6.4820).”

Apple (AAPL) reported Q3 FY 2021 earnings of $1.30 per share (versus $2.58 per share in Q3 FY 2020), beating analysts’ consensus estimate of $1.01 per share.

The company’s quarterly revenues amounted to $81.400 bln (+36.4% y/y), beating analysts’ consensus estimate of $73.476 bln.

AAPL fell to $145.30 (-1.00%) in pre-market trading.

Advanced Micro (AMD) reported Q2 FY 2021 earnings of $0.63 per share (versus $0.18 per share in Q2 FY 2020), beating analysts’ consensus estimate of $0.54 per share.

The company’s quarterly revenues amounted to $3.850 bln (+99.3% y/y), beating analysts’ consensus estimate of $3.612 bln.

AMD rose to $92.45 (+1.56%) in pre-market trading.

FXStreet reports that Andreas Steno Larsen, Chief Global FX/FI Strategist at Nordea said that the Fed meeting tonight will likely not lead to a decision on tapering, but a lot of technical issues are on the table.

“On USD liquidity: Liquidity has already effectively peaked as the 5 bps hike to the ON RRP facility incentivized further usage of the facility. We may be in for an additional 200bn USD in liquidity.”

“On the Fed funds rate: The effective fed funds rate prints at 10 bps, which is still 2.5 bps below the mid-point, so there is absolutely no reason to think that the Fed regrets hiking the ON RPP and IOER rates by 5 bps before summer.”

“On QE: The Fed has recently started “stealth-twisting” it’s QE program with an increasing WAM of the SOMA-portfolio. The increasing WAM of the SOMA-portfolio could be an early sign that the Fed intends to maturity-sugarcoat a tapering process that arrives EARLIER than anticipated.”

CNBC reports that UBS Global Wealth Management’s Kelvin Tay warns that investors looking for bargains in the Chinese market should beware as stocks there could see further losses.

“I think there’s actually more room for this to actually run,” Tay, regional chief investment officer at the firm. I certainly don’t think this is the bottom,” - Kelvin Tay said.

Following a rout that started late last week and accelerated as the Hang Seng index in Hong Kong plunged more than 8% in just two days, China’s markets are now among the worst-performing in Asia-Pacific year to date.

Tay said many institutional funds are currently reassessing risks as Chinese regulations target industries such as technology and private education. He explained the process is likely to take a few weeks before funds come to a final decision on whether they should liquidate or accumulate more stocks in the Chinese markets.

“I think the decision is probably going to sway towards the liquidating side,” Tay warned. “I don’t think this is actually time to bottom fish.”

Tay said Beijing’s regulatory crackdown coincides with a “window of opportunity” as the global economy bounces back from the pandemic.

FXStreet reports that Karen Jones, Team Head FICC Technical Analysis Research at Commerzbank, said that gold prices face prospects of extra gains if $1,834.16 is cleared.

“Gold really needs to overcome the 1834.16 mid-July high to regenerate upside interest and at currently levels we are relatively neutral. The daily Elliott wave count remains negative and below 1790 will target the 1752 2019-2021 uptrend line. While above there we will retain our longer term upside bias, however the lack of a sustained bounce is worrying. Above 1834.16 lies the 1857.25 4 th June low. This guards the June high at 1916.91 and Fibo at 1921.”

“Longer term we still target the 1959/65 November 2020 high and the 2021 high. These guard the 1989/78.6% retracement and the 2072 2020 peak.”

eFXdata reports that Barclays Research discusses its expectations for today’s FOMC policy meeting.

"We expect the July meeting to be focused on strategy, including how to taper when the time comes and finalizing the design of the standing repo facility. On the “how” of tapering, we continue to believe that the committee will taper its purchases mortgage-backed securities and Treasuries simultaneously and proportionately. While we strongly doubt that participants have seen enough progress to signal tapering is forthcoming, we think the Fed’s communication will become incrementally more hawkish in the assessment of the balance of risks," Barclays notes.

FXStreet reports that FX Strategists at UOB Group said that USD/JPY is still forecast to maintain the consolidation between the 109.20/110.60 band in the next weeks.

Next 1-3 weeks: “On Tuesday, we highlighted that ‘upward momentum is beginning to improve but USD has close above 110.90 before a sustained advance can be expected’. We added, ‘the prospect for USD to close above 110.90 is not high for now but it would remain intact as long as USD does not move below 109.90 within these few days’. The build-up in momentum fizzled out quickly as USD dropped sharply to 109.57 yesterday (27 Jul). The recent price actions have resulted in a mixed outlook and USD could trade within a 109.20/110.60 range for now.”

According to the report from Istat, in July 2021, the consumer confidence index improved from 115.1 to 116.6. The improvement was due, in particular, to the rise of the economic, personal and current components (from 126.9 to 129.6, the first from 111.1 to 112.2, the second and from 126.9 to 129.6 the third). On the contrary, less favourable signals came from the future climate index. The latter showed a reduction from 125.5 to 123.5.

With reference to the business confidence climate, the index (IESI, Istat Economic Sentiment Indicator) increased from 112.8 to 116.3.

The confidence index in manufacturing improved from 114.8 to 115.7. The confidence index in construction rose from 153.6 to 158.6. The market services confidence index got on from 107.0 to 112.3. The retail trade confidence index further increased from 107.2 to 111.0. The improvement in confidence extended to both distribution channels: the index went up from 109.0 to 112.8 in the large scale distribution and from 101.7 to 104.6 in the small and medium scale one.

FXStreet reports that analysts at Danske Bank note that the FOMC decision is the main event risk for Wednesday.

“Today's main event is the FOMC meeting. It is one of the interim meetings without updated projections (including Fed dots). We do not expect the Fed to send any new policy signals. We expect the Fed to repeat that high inflation is mostly transitory and that the labour market recovery has further to go still. Fed Chair Powell's press conference begins at 18:30 GMT.”

During today's Asian trading, the US dollar rose against the euro, the yen and the australian dollar, but traded steadily against the pound.

The market is waiting for the results of the two-day meeting of the Federal Reserve System, ending on Wednesday. Experts believe that the leaders of the Federal Reserve at the July meeting will actively discuss the issue of curtailing the asset repurchase program, since the American economy is recovering from the consequences of the pandemic faster than expected, and the inflation rate exceeds forecasts.

Investors will be waiting for signals from the Fed about when the Central Bank intends to start reducing the monthly volume of asset repurchases, currently amounting to $120 billion.

The ICE index, which tracks the dynamics of the dollar against six currencies (euro, swiss franc, yen, canadian dollar, pound sterling and swedish krona), rose by 0.1%.

The Australian dollar declined slightly against the US dollar. The Australian currency has been hovering around the $0.74 mark - the lowest since November 2020 - for 4 weeks in a row, which is due to the general strengthening of the US dollar against the background of a new wave of COVID-19 cases in the world. The Australian Bureau of Statistics released data today that showed a jump in inflation in the second quarter to 3.8%, the highest since the 3rd quarter of 2008.

According to the report from Insee, in July 2021, households’ confidence in the economic situation has decreased a little. At 101, the indicator that summaries it has lost two points but remains above its long-term average (100). Economists had expected a decrease to 101.

In July, the share of households considering it is a suitable time to make major purchases has decreased markedly, after a sharp increase in June. The corresponding balance has lost five points but remains above its long term average.

The households’ opinion balance related to their future financial situation has decreased by three points. The one relative to their personal past financial situation has lost one point. Both balances stay well above their long-term averages.

In July, the share of households considering it is a suitable time to save has fallen for the third consecutive month. The corresponding balance has lost four points but remains well above its average.

In the same way, households’ opinion balance related to their current saving capacity has decreased by three points. The one relative to their future saving capacity has lost two points. Both balances stay well above their long-term averages.

Households' fears about unemployment trend have increased a little in July after a series of declines in the first half of the year. The corresponding balance has gained three points but remains below its long-term average.

EUR/USD

Resistance levels (open interest**, contracts)

$1.1891 (1708)

$1.1867 (1137)

$1.1852 (106)

Price at time of writing this review: $1.1812

Support levels (open interest**, contracts):

$1.1793 (2434)

$1.1767 (2220)

$1.1732 (5430)

Comments:

- Overall open interest on the CALL options and PUT options with the expiration date August, 6 is 64585 contracts (according to data from July, 27) with the maximum number of contracts with strike price $1,1700 (10539);

GBP/USD

$1.4031 (1760)

$1.3968 (1193)

$1.3927 (1006)

Price at time of writing this review: $1.3873

Support levels (open interest**, contracts):

$1.3762 (687)

$1.3725 (936)

$1.3684 (518)

Comments:

- Overall open interest on the CALL options with the expiration date August, 6 is 15481 contracts, with the maximum number of contracts with strike price $1,4000 (1760);

- Overall open interest on the PUT options with the expiration date August, 6 is 18234 contracts, with the maximum number of contracts with strike price $1,3400 (1683);

- The ratio of PUT/CALL was 1.18 versus 1.17 from the previous trading day according to data from July, 27

* - The Chicago Mercantile Exchange bulletin (CME) is used for the calculation.

** - Open interest takes into account the total number of option contracts that are open at the moment.

According to the report from Nationwide Building Society, annual house price growth remained in double digits, but fell back to 10.5% from 13.4% in June. Economists had expected a 12.1% increase. On a monthly basis, house prices fell by 0.5%. Economists had expected a 0.6% increase.

Commenting on the figures, Robert Gardner, Nationwide's Chief Economist, said: “Annual house price growth slowed to 10.5% in July, from the 17-year high of 13.4% recorded the previous month. In month-on-month terms, house prices fell by 0.5%, after taking account of seasonal effects, following a 0.7% rise in June. The modest fallback in July was unsurprising given the significant gains recorded in recent months. Indeed, house prices increased by an average of 1.6% a month over the April to June period – more than six times the average monthly gain recorded in the five years before the pandemic. The tapering of stamp duty relief in England is also likely to have taken some of the heat out of the market. The nil rate band threshold decreased from £500,000 to £250,000 at the end of June (it will revert to £125,000 at the end of September. This provided a strong incentive to complete house purchases before the end of June, especially for higher priced properties. For those purchasing a property above £250,000, the maximum stamp duty saving reduced from £15,000 to £2,500 after the end of June".

According to the GfK Consumer Climate Study, after the recent uptick in interest, consumer confidence is taking a breather in July. Both economic and income expectations show moderate losses, while the propensity to buy may again be increasing slightly. As a result, GfK forecasts a -0.3 point change in consumer sentiment in August, the same value as in July of this year. 

Although the economic and income outlooks are having to give up a small part of these gains after the strong increase in the previous month, the economic expectations are still showing to be at a rather extremely high level. In contrast, there was a slight increase recorded in the propensity to buy in July. 

Rolf Bürkl, a GfK consumer expert commented on this observation: "The phase where the decrease of COVID-19 incidence of infection has come to an end and those figures are again on the rise. In addition, the momentum for vaccination has recently slowed down considerably, despite there being sufficient quantities of the vaccine available. This is currently preventing any further significant increase as it pertains to consumer sentiment." 

In addition, the topic of inflation is once again moving more into consumer focus. Experience shows that rising prices have a negative effect on consumer sentiment, a fact that is easily observable right now.