Wants to refrain from commenting on FX levelsJust the typical light jawboning by Japanese officials. The yen is still keeping on the softer side after the break to fresh highs in over two decades this week. USD/JPY is up 0.6% to 132.70 at the moment, after having briefly closed in on the 133.00 handle earlier in the day.

The pair dropped to a low of 1.2430 earlier as the dollar also firmed across the board, with USD/JPY came close to touching 133.00 for a brief period. But since then, the greenback has seen gains ease up as Treasury yields slip back a little and USD/JPY also coming down from 132.99 to 132.69 at the moment.In turn, cable has produced a notable bounce from 1.2430 to 1.2533 in the past hour. The bounce is being stalled by familiar resistance from the 100-hour moving average (red line) at 1.2531 currently. The 200-hour moving average (blue line) will add to another layer of defense for sellers, seen at 1.2573 – as evident in the past few sessions.There is a slight improvement in risk tones even if equities are keeping lower across the board. S&P 500 futures have trimmed losses from 0.6% to be down 0.3% now, with Nasdaq futures also seen down 0.4% from around 0.8% earlier. European indices are still lower across the board, with losses ranging around 0.4% to 0.7% mostly.But the greenback’s firmness is being contested as bond yields pull back a little on the session. 10-year Treasury yields are now down 1.7 bps to 3.02% after being just above 3.05% earlier in the day.Going back to cable, it is tough to see much momentum for a break higher as long as risk tones remain sluggish and the dollar is steadying itself over the past few sessions. The defense of the key hourly moving averages only serves to reaffirm that sellers are in near-term control at the moment – going by the technical perspective at least.Looking at the fundamentals, the Fed also remains more hawkish than the BOE and the UK’s economic struggle will be a real test of resolve for Bailey & co. in the months ahead – even with surging inflation.

Prior -22.6

Euro area investor morale rose more than expected – the first increase since the Russia-Ukraine conflict – but the dour economic tone continues to reverberate for the time being amid supply issues and inflation. The current conditions index was seen at -7.3 in June, a slight improvement from the -10.5 reading in May.
Sentix notes that:
„As impressive as the improvement in the situation and expectations values may appear at first glance, this is unlikely to mark a turnaround. While consumers are already suffering from rising prices, many companies have been able to pass on their sharply rising costs to their customers and benefited from people rushing to buy goods and services before price increases. However, this phase looks set to finish as end consumers will have to cut back at some point, and monetary policy could become more restrictive from July.“

Primer: UK PM Johnson no-confidence vote at 18:00-20:00BST/13:00-15:00EDT today – Link Courtesy of my friends at NewsquawkOverviewUK PM Johnson is expected to survive the no-confidence vote, according to current betting odds, which gives him a 12-month pass from being subject to such proceedings again.
However, surviving the vote is not always enough; previous PMs, including Johnson’s predecessor, were out of office shortly after such a vote, despite attracting the support of a Conservative majority.
To recap, at least 54 Conservative MPs had to write to the 1922 Chair for a vote to take place. To remove Johnson, a majority of 180 Tory MPs is required from a secret ballot.
Voting on the ballot occurs between 18:00-20:00BST/13:00-15:00EDT today, votes will be immediately counted though the announcement time is TBC; but likely within an hour or so of voting concluding.
Majority in favour of Johnson

If Johnson secures the support of 180/359 or more Conservative MPs then he will remain as PM and is exempt from being subject to a formal no-confidence vote for a one-year period.
Note, it is theoretically possible for the 1922 Committee to change this rule, though the mechanics/feasibility of them doing so is unclear.However, precedent shows that PMs who survive confidence votes are sometimes irreparably weakened. With Johnson’s predecessor May, a prime example. Additionally, the divisions generated within the party – even though voting is via a secret ballot – can substantially complicate the intra-party politics, to the detriment of the existing cabinet/government.
As a side note, recent reports indicated that Johnson was mulling a cabinet reshuffle, following the May local elections, with indications that it would occur prior to the July 21st recess.
Majority against Johnson/he resigns

If Johnson does not secure the support of 180 or more Tory MPs, then he is no longer able to remain as leader of the party and by extension PM.
At this point, Johnson would essentially serve as a caretaker until a replacement is determined.
A process which commences with candidates putting their name(s) forwards, and requiring the backing of eight MPs to do so. Assuming there are more than two candidates, sequential rounds of voting occur with 5% of the party (18 MPs) initially needed to move forward, then 10% and so on.
Generally, during this stage, candidates will tactically drop out and give their endorsement to ‘rivals’ in exchange for a high-ranking Cabinet position, or similar.
Once the field whittles down to two candidates, an eventual winner is then determined by a postal ballot of all Conservative party members. A winner that then leads the Tory party and, by extension, becomes UK PM.
Note, any replacement would not be required to call a snap general election to cement their position, though they may be placed under pressure to do so; the next scheduled election is before December 2024.

The guys at Newsquawk, with the always awesome US Market OpenFull note: US Market Open: Risk-on with fresh catalysts thin and focused on APAC developments and UK politics

6
Things You Need to Know

 

European bourses are
bolstered in limited newsflow as participants recoup from post-NFP pressure
amid multiple China-related developments

US futures in-fitting with this performance and aided by the
incremental China COVID developments alongside a pick-up in the regions PMIs

GBP is bid, but off highs, going into the no-confidence vote for
PM Johnson between 18:00-20:00BST/13:00-15:00ET today

DXY downbeat as such, to the broad benefit of peers, but still
holding above a cluster of recent lows

Core debt is pressured, with Bund downside lifting EUR, though
BTPs outperform on FT source reports while the US curve flattens incrementally

Crude is contained with gains of circa. USD 1.00/bbl, caught between
Saudi lifting OSPs, El Sharara’s partial resumption and above China-related
factors

Worth flagging the odds on Boris Johnson still being PM when the Tory Party Conference starts (2nd of October) have increased since news of the Vote of No Confidence broke.

– Was 1.90s this AM, now 1.5s choice.A classic of the ‚Buy the rumour – Sell the fact‘ genre. 

I wonder how much of the £650k matched in this is Brady (the only fella that really knows what’s going on Re the vote etc)

As has become (nearly) traditional, when I’m on the ForexLive desk, I get my good friend and Nat Gas expert Andrea Paltry to give us a little report.So here you go…Henry Hub natural gas prices are currently trading up almost 30 cents with the most traded July ’22 contract (N) at $8.82 MMBTU. The entire forward curve is strongly up, with two different trends to stress (see the graph below): (1) the strong backwardation we have, if we consider all the Cal’22 (calendar’22) compared to the Cal’23. Indeed, April’ 23 trades at $5.64, with a huge ‘widow maker premium’ (March’23/April’23 spread of around $1.82; (2) the backwardation we have within the Cal’22, with July’22 contract currently trading over November (X), that is at $8.754

In the Henry Hub market, those conditions have not been present since the pre-shale era, with the prices skyrocketing each week passing (last update here, one month ago, we were $1.5 below the current price), and the Supply/Demand balance overall not changing a lot.

During last couple weeks, we had a US lower 48 production increase, up to reach year to date high readings around 96 bcf, but it seems like we are not able to keep these levels, since at the start of this week we are again 1 bcf below these highs. What’s impressive, though, is the demand side. Indeed, power burns last months reached ‘off the charts’ value for the period and, even last week, with peaks around 36 bcf, the weather adjusted reading was astonishing. If we keep this path, we can easily see well over 50 bcf/d power burns during the peak of summer demand. This pattern clearly shows the fact that the classic gas to coal switching is not a factor anymore, even at prices close to double digit.

Then, finally the exports. Indeed, last week we touched LNG exports record, at 13.6 bcf, before falling into the classic spring maintenance (right now we are below 12 bcf).This is important for several factors, but here I want to highlight 2 points: (1) if we keep an average of 13 bcf/d for the summer, this will have a huge impact on End of Season storage number; (2) the potential issue of TTF cap in Europe.

About the first point, even if last week EIA printed a relatively looser (and personally unexpected) injection of 90 bcf, the trajectory of storage in my model is not safe at all, pointing to a relatively dangerous level of 3.18 tcf EOS (with the market being comfortable around 3.6 tcf). Obviously, it’s pretty important the weather, and below we can see that during the weekend we gained some demand (3-6 cooling degrees, CCDs) in both most important models, GFS and Euro Ensembles, with a hot upper ridge building in South-Central in the 8-14 day period. Moreover, we need to carefully watch at the start of the hurricane season (see below as well the first tropical storm, Alex, not affecting Henry Hub market).

About the second point, it’s even more important for worldwide natural gas market. Indeed if we watch the charts below (the sources are NGI, EIA ICE and ACCC), LNG exports have a lot of implications, for Asia and Europe. On the one had, we can easily see the path of LNG exports for the next couple years (we will almost reach 20 bcf/d in 2025, more or less 1/5 of the overall US production). On the other hand, we see that for now there is an aggressive delivery to Europe, where TTF price trades around $27-28 MM BTU, compared to the ASIA JKM trading $4-5 below.Right now the spread TTF-JKM favors the former rather than the latter. What if Europe decides to put a cap on TTF? Let’s say at $13-14 MM BTU?….

Andrea Paltrinieri
Associate Professor of Banking and Finance, Università Cattolica del Sacro Cuore
Natgasweather and Energy Working analyst

Bitcoin rose 3.1%
over the past week, finishing near $30,000. Ethereum added 0.9%, while other
leading altcoins in the top 10 showed mixed dynamics, ranging from a 10.7%
decline (Solana) to a 23.2% rise (Cardano).

 

The new week is off
to a promising start. BTCUSD has added 4.6% in the last 24 hours, more than 4%
since the start of the day and is again testing the $31.0K mark. Cryptocurrency
investors were not spooked by Friday’s market decline, as key stock indices
were above the recent local lows and had been adding in recent hours.

 

The total
capitalisation of the crypto market, according to CoinMarketCap, rose 3.8% in
24 hours to $1.28 trillion, with the Bitcoin Dominance Index adding 0.2% over
the same period to Friday’s 46.5%. By Monday, the cryptocurrency fear and greed
index rose from 10 to 13 points. For about a month now, this indicator has been
steadily below 20 – in a state of extreme fear. While at current levels, BTCUSD
remains below the consolidation area at the lows of the middle of last year. It
is worth paying attention to the change in the trend seen in the weekly
candlesticks. Last week’s lows and highs were higher than the week before. The
intraday charts show that the price is being pushed up in the absence of
investors in the USA.

 

However, one must
make sure that this demand is global. Retail investors may try to promote the
start of the rise by feeding them an abundant supply. BTC was climbing to
three-week highs but lost almost all its gains by the end of the week. The
first cryptocurrency has been trading in a sideways range around the $30,000
level for more than three weeks. The bearish trend in the market has caused
long-term investors to capitulate. This factor signals that the price has
reached a multi-year bottom, according to CryptoQuant. Reserve Bank of India
Deputy Governor T. Rabi Sankar believes central banks‘ digital currencies could
completely displace private virtual currencies, including bitcoin.

 

May proved to be a
bad month for BTC and ETH miners. Bitcoin miners‘ earnings fell 21.9% for the
month, while miners of the second cryptocurrency fell 24.1%. The market will
draw its attention to The annual Consensus 2022 this week. This year’s Crypto
Industry Excellence Expo will be hosted in Austin, Texas, in June 9-12.

 

This article was written by FxPro’s Senior Market Analyst Alex
Kuptsikevich.

MON: Chinese Services PMI Final (May).TUE: RBA Announcement; EZ Sentix (Jun); EIA
STEO.WED: RBI Announcement; NBP Announcement;
Japanese GDP Final (Q1); EZ Employment Final (Q1) and GDP (Q1 Revisions).THU: ECB Announcement; Chinese Trade Balance
(May).FRI: CBR Announcement; Chinese Inflation (May);
Norwegian CPI (May); US CPI (May); Canadian Labor Market Report (May);
University of Michigan Prelim (Jun).

NOTE:
Previews are listed in day-order

RBA Announcement
(Tue):

The RBA is expected
to continue hiking rates, and analysts expect a 25bps increase to the Cash Rate
Target, taking it to 0.60% from the current level of 0.35%; OIS fully priced in
a 25bps hike, and imply that there is probability for a more aggressive move.
As a reminder, the central bank surprised markets at its last meeting by
delivering a larger-than-expected increase of 25bps (exp. 15bps), and stated
that further rises in interest rates would be required in the period ahead,
adding that it was committed to doing what is necessary to ensure that
Australian inflation returns to target over time. Minutes from that policy
meeting noted that the Board considered three options: a 15bps, a 25bps and a
40bps rate rise, ultimately coming to the conclusion that a 15bps increase
would have been inconsistent with the historical practice of changing the Cash
Rate in 25bps increments, while an argument for a 40bps increase could be made
given the upside risks to inflation and current very low level of interest
rates. Governor Lowe has also kept the door open regarding the pace of rate
increases, recently stating that he does not preclude bigger or smaller rate
moves in the future, and that the Board was not on a pre-set path. As such,
there are varied expectations for the upcoming meeting. Goldman Sachs anticipates
the RBA will lift rates by 50bps at its next two meetings; Westpac has upgraded
its call for June to a 40bps hike from a prior view of 25bps; AMP Capital
expects the RBA to stick with a 25bps move; ANZ Bank suggested that a 40bps RBA
hike in June will likely be discussed, but caveated that a Wage Price Index of
+1.0% would be needed to trigger a 40bps move, and this failed to materialise
with the Wage Price Index softer than expected at 0.7% vs. Exp. 0.8%.

RBI Announcement
(Wed):

Although India’s central
bank is expected to lift rates, there are a wide range of views regarding how
far the MPC will increase its Repurchase Rate (currently at 4.40%, Reverse Repo
Rate at 3.35%, Cash Reserve Ratio at 4.50%). The RBI surprised markets with a
rate hike during an off-cycle meeting last month, raising the Repurchase Rate
by 40bps via a unanimous decision, and also increased its Cash Reserve Ratio by
50bps. MPC members unanimously decided to remain accommodative, while focusing
on the withdrawal of accommodation, to ensure that inflation remains within the
target going forward, while supporting growth. Since that decision,
policymakers have made clear that rates will continue moving higher. Governor
Das noted that it broadly wants to increase rates in the next few meetings, and
that “the expectation of a hike is a no-brainer”. The Governor also said that a
reason for the off-schedule meeting last month was to avoid a much stronger
move at the upcoming meeting, while MPC member Varma said more than a 100bps
rate increase is needed very soon. These intentions to tighten policy by the
central bank are not too surprising given the surging inflationary environment;
the latest CPI data rose to 7.79% vs. Exp. 7.5% (Prev. 6.95%), for instance, a
level above the central bank’s 2-6% tolerance range, and has divided analysts’
forecasts between hikes of 25bps-75bps for next week.

ECB Announcement
(Thu):

Since its previous
meeting, Eurozone inflation has continued to pick up, with the headline rising
from 5.9% Y/Y to 7.4% Y/Y in April, and then extending to 8.1% in May. This has
struck a sense of alarm at the central bank, which has resulted in an
increasingly hawkish tone from members of the Governing Council. A blog post in
May penned by President Lagarde deviated from her usually non-committal stance;
she now expects “net purchases under the APP to end very early in the third
quarter. This would allow us a rate lift-off at our meeting in July”.
Furthermore, she added that “we are likely to be in a position to exit negative
interest rates by the end of the third quarter”, going on to state that “even
when supply shocks fade, the disinflationary dynamics of the past decade are
unlikely to return”. This was viewed as giving the green light for purchases
under APP to cease as of July 1st, paving the way for rate hikes at the July
and September meetings, analysts said. Note, despite the pressing need to move
on rates, the current sequencing between asset purchases and rate hikes means
that a hike to the deposit rate will not take place at the June confab. For
some of the more hawkish voices on the GC, such as Austria’s Holzmann, the
recent inflation metrics emphasise the need for a 50bps hike. However, this is
an issue that is unlikely to be resolved at the upcoming meeting given that the
discussion around the magnitude of a hike will likely be a feature of the July
gathering. In terms of market pricing, at the time of writing, the market looks
for around 120bps of tightening this year, which would imply 25bps hikes at the
four meetings after June, with an increasing likelihood of a 50bps hike at one
of those meetings. Given the need for flexibility and lack of certainty
surrounding the Eurozone outlook, it is hard to see how much vindication market
participants will get for the aforementioned rate path. We will also be
presented with the latest batch of macro projections from the Bank which will
inevitably see an upgrade to the current 5.1% forecast for 2022 inflation. Of
potentially greater interest will be the more medium-term forecasts and how
they align with the Bank’s 2% target. Finally, reporters will likely use the
Q&A segment to question Lagarde on reports over a “new tool” designed to
combat fragmentation in the Eurozone as the ECB begins to normalise policy.
That said, it is unlikely that Lagarde will give much away on this front and
instead stress the flexibility of existing tools.

Chinese Trade
Balance (Thu):

May’s trade balance
is expected to have contracted modestly to a surplus of USD 50.65bln (prev. USD
51.12bln). Lockdowns and port backlogs during the month are likely to have
adversely affected the data. Since then, however, China has taken measures to
stabilise the headwinds caused by its COVID situation on supply chains,
cautiously lifting restrictions into June. Ahead, analysts will also be eyeing
trade developments between the US and China; Deputy US Treasury Secretary
Adeyemo this week said that the Biden Administration was considering whether to
cut some tariffs on Chinese goods, whilst this sentiment was also echoed by
Deputy US Trade Representative Bianchi, who suggested that all options were on
the table regarding tariff decisions on Chinese imports, while the USTR is
seeking strategic realignment with China and a tariff structure that makes
sense.

Chinese
Inflation (Fri):

Inflation is
expected to have eased in May, with the annual rate of consumer prices forecast
at 1.8% Y/Y (prev. 2.1%), while annual PPI is seen at 7.7% Y/Y (prev. 8.0%).
The month was restricted by lockdowns in Beijing and Shanghai, which have eased
since. Further, the expected downside also comes alongside reports that China
has been purchasing Russian oil at a discount – thus addressing one of the main
drivers of the cost-of-living increases across almost all nations. On the flip
side, desks have been flagging that the rally in pork prices that began in
mid-March may continue.

CBR Announcement (Fri):

Some believe that
less hawkish policy from Russia’s central bank has helped to stabilise the
growth outlook. A Reuters poll saw economic forecasts improve in May despite
the sanctions being slapped on the country in wake of its aggression against
Ukraine. On the prices front, the Reuters poll suggested that inflation is seen
rising from 8.4% in 2021 to 16.4% by the end of this year, with analysts
cutting their view from forecasts made in April, when the consensus expected
inflation would rise to above 20% this year. The poll said that this should
continue to give the CBR space to lower rates further; it cut its key rate by
300bps to 11.00 in an unscheduled May meeting, and analysts think that rates
could fall to 8.00% by the end of this year (in April, there was an expectation
that rates would eventually fall to 10.5% this year).

US CPI (Fri):

As seen by the
market’s response to the April data, slowing annual rates of inflation may not
be enough to fuel ‘peak inflation’ narratives, with traders seemingly wanting
to see downside in the monthly metrics too. For the May report, the street
looks for core CPI prices to rise 0.5% M/M, slowing from the +0.6% pace in
April; the headline measure of CPI is seen picking up, however, to +0.7% M/M
from the +0.3% seen in April, buoyed by food and energy components as gasoline
prices continue to rise, and amid supply chain disruptions brought on by Russia’s
aggression in Ukraine. Credit Suisse writes “the gap between CPI and PCE
airfares (which is based on PPI) has now closed,” and the bank expects “strong
summer travel and a continued shift from goods to services spending to support
an elevated level of airfares, but growth should slow sharply from its elevated
readings in the past two months.” Analysts will also continue to monitor the
component for used vehicle prices; CS notes that the Manheim data for wholesale
prices in May picked up, which could suggest that the declines seen in the last
three CPI reports are unlikely to be repeated in May. CS also thinks that
shelter prices will remain firm, while risks for goods inflation are tilted
towards the upside given supply chain disruptions due to lockdowns in China.
“Overall, we expect YoY inflation likely peaked in March, but monthly inflation
readings are likely to stay uncomfortably above the Fed’s target in coming
months,” the bank writes, “the Fed is set on raising rates by 50bps at the June
and July meetings, but is looking for signs of deceleration in inflation to
support shifting to 25bps in September.”

This article
originally appeared on Newsquawk.

Austria is opening up part of its reserves of fuel. Releasing 
112,000 tons of diesel & 56,000 tons of gasoline to cover loss of production at a key refinery. The plant was hit by whats described as a ‚mechanical incident‘ on Friday.  
Info comes via Reuters, adding:

release should be enough to cover the loss of production at the refinery for 14 days, the government said.
Austrian Chancellor Karl Nehammer: 

„Despite this incident, the security of fuel supply is assured, so no one need worry. There are still enough reserves available if the need arises.“

More at O&G Journal