UPCOMING EVENTS:

• Monday: Japan
  Wage data.
• Tuesday: US
  NFIB Small Business Optimism Index, Fed Chair Powell Testimony.
• Wednesday: Japan
  PPI, China CPI, RBNZ Policy Decision, Fed Chair Powell Testimony.
• Thursday: UK
  GDP, US CPI, US Jobless Claims.
• Friday: New
  Zealand Manufacturing PMI, US PPI, US University of Michigan Consumer
  Sentiment.

Tuesday

Fed Chair Powell will testify to the
Senate Banking Committee on Tuesday and the House Financial Services Committee
on Wednesday. The market participants will be attentive to any view or hint
about the monetary policy trajectory after the recent NFP
report.

The text is generally released before
the testimony so that will be scanned for clues or “bias”,
but the market will also be focused on the Q&A session following the
opening remarks. Given the recent data, Powell will likely lean on the dovish
side.

Wednesday

The RBNZ is expected to keep interest
rates unchanged at 5.5%. As a reminder, the central bank delivered a hawkish
hold at the last
meeting as they raised the Official Cash
Rate forecasts and pushed back the first rate cut to late 2025. The market
continues to expect 41 bps of easing by the end of the year.

Thursday

The US CPI Y/Y is expected at 3.1% vs.
3.3% prior, while the M/M measure is seen at 0.1% vs. 0.0% prior. The Core CPI
Y/Y is expected at 3.4% vs. 3.4% prior, while the M/M figure is seen at 0.2%
vs. 0.2% prior.

This is going to be an important release.
I think the Fed will be more dovish at the next meeting if we get a good
report. Then, if we get some more benign figures in August, Fed Chair Powell
will likely pre-commit to a rate cut in September at the Jackson Hole
Symposium.

The US Jobless Claims continue to be one
of the most important releases to follow every week as it’s a timelier
indicator on the state of the labour market.

Initial Claims remain pretty much stable
around cycle lows and inside the 200K-260K range created since 2022. Continuing
Claims, on the other hand, have been on a sustained rise recently with the data
printing new cycle highs every week.

This shows that layoffs are not
accelerating and remain at low levels while hiring is more subdued. This is
something to keep an eye on. This week Initial
Claims are expected at 240K vs. 238K prior,
while Continuing Claims are seen at 1860K vs. 1858K prior.

Friday

The US PPI Y/Y is expected at 2.3% vs.
2.2% prior, while the M/M measure is seen at 0.1% vs. -0.2% prior. The Core PPI
Y/Y is expected at 2.5% vs. 2.3% prior, while the M/M figures is seen at 0.2%
vs. 0.0% prior. I don’t expect this data to influence the market much given
that the sentiment will be set by the CPI report the day before.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

I believe that global central bankers are on the verge of making a growth-wrecking mistake.

Generals always fight the last war and central bankers are going to continue to fight the ghost of inflation, even as it becomes increasingly clear that the inflationary threat is over and the bigger risk is recession.

On Thursday, ECB chief economist Phillip Lane noted that firms are telling them that wage pressures are coming down. Their wage tracker also shows much slower wage growth in 2025 and 2026. There won’t be any second-round effects.

With the benefit of hindsight, it will soon be clear that the past-pandemic inflation was a one-off perfect storm caused by:

1. Ultra-low rates, including irresponsible forward guidance
2. Out of control fiscal spending
3. Supply shock

We combined all three and all it got was 9% inflation. All it took to quell it were 5% rates.

Does that sound like a new inflationary normal, or a blip in a long disinflationary cycle?

To illustrate how insane the monetary policy was. This is what the Reserve Bank of Australia did:

1. Cut the Cash Rate to 0.10%,
2. Bought $100b via QE over six months
3. Pledged to buy $5 billion of government bonds a week with a commitment to continue until Feb 2022
4. Targeted 3-year note yields at 0.10%
5. Guided to not hiking rates until ‚at least‘ 2024

They certainly weren’t alone as central banks the world over were caught in an easing mania — they went ‚full nuclear‘. Ten-year US note yields were below 2% for two years and below 1% for much of that. It was free money.

It was the same with governments. The US Paycheck Protection Program scam gave away $800 billion with minimal oversight. Much of that went straight into the pockets of small business owners. There were $850 billion in stimulus checks, followed by another $900 dose, enhanced unemployment benefits cost $680 billion. Compare that to the financial crisis, which authorized $700 billion in loans that actually had to paid back.

Finally, a great source of inflation via supply chains. All this money and low-interest lending was going to consumers who did things like decide to renovate, build fence and decks. Lumber prices went parabolic.

Supply chains were wrecked in autos, computer chips, consumer goods, meat, steel and dozens of other places.

Yet still: Just 9% inflation.

I’m not saying it wasn’t painful and I think the lags in measuring things like housing mean that inflation was more in the 12-15% range but it was a once-in-a-lifetime event.

Yet somehow central bankers are treating it like it was the start of a new normal. Compounding that insanity is that we’ve seen the dawn of generative AI in the past 20 months. That’s undoubtedly deflationary, something I talked about yesterday with BNNBloomberg (near the end):

I also wrote about it here.

When the economic history of the pandemic is definitively written, it will emphasize that it was a one-off event in a long, disinflatioary cycle that was worsened by central banks keeping rates too high for too long.

I believe this is a rare moment to lock in investments with high rates for a long duration in the same way that the pandemic was a once-in-a-lifetime to lock in low borrowing rates.

This article was written by Adam Button at www.forexlive.com.

• NASDAQ closed at new record levels each day of this trading week
• US Sen Warren seeks to assemble a group of Democratic senators to ask Biden to exit race
• Key events and releases for traders in the upcoming trading week
• Crude oil futures settle at $83.16
• Geopolitics: Head of Israel’s Mossad returned from Doha after initial cease-fire meetings
• Baker Hughes oil rig count 479 unchanged on the current week 101
• New York Fed Nowcast growth estimate for Q2 falls to 1.8% down from 1.93% last week
• European equity close: French stocks cautious ahead of Sunday’s vote
• SNB’s Jordan „relatively comfortable“ with inflation
• Fed mon pol report: Labor supply-demand balance resembles pre-pandemic period
• Rachel Reeves becomes Britain’s first female Chancellor
• Timiraos: The Fed may start the debate about a Sept cut at the upcoming meeting
• Putin: We see Orban’s visit as an attempt to restore the dialogue
• Canada June PMI 62.5 vs 52.0 expected
• The gold market may have found a second leg
• Kickstart the FX trading day for July 5 w/a technical look at the EURUSD, USDJPY & GBPUSD
• US dollar chops after non-farm payrolls
• Canada June employment change by -1.4K versus 22.5K estimate
• US May non-farm payrolls +206K vs +190K expected
• The JPY is the strongest and the USD is the weakest as the NA session begins
• What are the Fed odds saying ahead of the jobs report later?
• ForexLive European FX news wrap: On to the NFP next

The US jobs report showed Non-Farm Payroll up a greater than expected 206K vs 190K estimate. However, the details of the report were less than stellar.

• Revisions to prior 2 months was -111K. That more than offset the above expected growth this month.
• The unemployment rate moved to 4.1%. The highest rate since November 2021
• Average hourly earnings YoY came in at 3.9% which is the lowest level June 2021
• The gain in Non-farm payroll was helped by a large 70 K rise in government jobs private education and health also added 82K. The two sectors accounted for 74% of the total gain for the month
• Temporary help fell -48K which is indicative of a slowing job market
• Professional and business services fell -17 K
• Leisure and hospitality – a strong job grower in the post pandemic recovery and indicative of discretionary spending – rose only 7K .

Below is a summary of the jobs data:

The initial reaction in the forex market was the dollar moving higher, but those gains were quickly reversed as yields also reversed to the downside.

The USD is ending the day as the 2nd weakest of the major currencies behind the CAD. The largest declines were versus the GBP (-0.45%), the CHF (-0.49%) and the NZD (-0.48%).

In the US debt market, yields moved lower with the shorter end moving the most as traders increased the expectations for rate cuts in September and through the end of the year.

Looking at the yield curve, a snapshot shows:

• 2-year yield 4.605%, -8.7 basis points
• 5-year yield 4.226%, -8.3 basis points
• 10-year yield 4.278%, -6.9 basis points
• 30-year yield 4.475%, -4.4 basis points

For the trading week yields were solidly lower as well with :

• 2-year yield down -14.8 basis points
• 5-year yield down -14.9 basis points
• 10-year yield down -11.8 basis points
• The 30-year yield down -8.0 basis points

The declining yields also helped to push stocks higher and complete a week that saw the NASDAQ index close at record levels for each day the holiday shortened week.

• Dow Industrial Average average rose 0.17%.
• S&P index rose 0.55%.
• NASDAQ index rose 3.5%, its best week since April 22

Despite the sharp rise in broader stock indices, bitcoin had a horrible week on by nearly $6000 to -$56,718 currently.

Crude oil prices did rise by $1.62 or 1.99% despite being lower today by $0.72 for -0.86%.

This article was written by Greg Michalowski at www.forexlive.com.

All three major indices closed higher today. For the NASDAQ it closed higher for the fourth consecutive day. Each of those days was a new record close. The S&P index has higher for its fourth consecutive day with three of those closes being at new record levels.

A snapshot of the closing levels shows:

• Dow Industrial Average average rose 67.87 points or 0.17% at 39375.86
• S&P index rose 30.19 points or 0.55% at 5567.20.
• NASDAQ index rose 164.46 points or 0.90% at 18352.76

The small-cap Russell 2000 fell -9.89 points or -0.49% at 2026.72

For the trading week:

• Dow Industrial Average average +0.66%
• S&P index +1.95%
• NASDAQ index rose 3.5%
• Russell 2000-1.02%

For the trading year:

• Dow Industrial Average average of 4.47%
• S&P index +16.72%
• NASDAQ index plus a 22.26%
• Russell 2000 is unchanged this year

Some of the record highs today included Alphabet, Meta Platforms,, Amazon, Microsoft, Oracle, and Apple.

Tesla closed higher for its seventh consecutive day. For the trading week, shares rose by 27.12%. For the trading year, Netflix has erased all his losses and trade up 1.22% on the year. At session lows this year the price was down -109.68 points or -43%.

In comparison to the other 6 of the Magnificent 7

• Nvidia rose 1.85%, and is up 154.09% this year
• Meta Platforms rose 7.08%, and is up 52.53% this year
• Amazon rose 3.49%, and is up 31.63% this year
• Alphabet rose 4.64%, and is up 36.44% this year
• Apple rose 7.46%, and is up 17.56% this year
• Microsoft rose 4.61%, and is up 24.34% this year

Shares of Netflix are closing just below its record high close of $691.69 from November 17, 2021. The closing level today was $690.65, up 2.34% on the week.

Oracle shares closed higher by 2.57%, and is up 37.37% for the year

This article was written by Greg Michalowski at www.forexlive.com.

US Sen. Mark Warren is seeking to eight symbol a group of Democratic senators to ask Pres. Biden to exit the race for president. Biden has been losing support on Capitol Hill and also amongst his financial supporters according to sources..

This article was written by Greg Michalowski at www.forexlive.com.

Next week will events and key releases include the US CPI and PPI, U.S. Treasury auctions (three year, 10 year, 30-year). Reserve Bank of New Zealand interest-rate decision, and Fed Chair Powell’s testimony on Capitol Hill on Tuesday and repeated on Wednesday.

Sun, Jul 7

• All Day: EUR – French Parliamentary Elections

Mon, Jul 8

• No major events listed

Tue, Jul 9

• 10:00 am: USD – Fed Chair Powell Testifies on Capital Hill
• 1:01 PM ET: U.S. Treasury sells 3-year notes
• 9:30 pm ET: CNY – CPI y/y. Estimate 0.4% versus 0.3% last month
• 9:30 pm ET: CNY – PPI y/y. Estimate -0.8% versus -1.4% last month
• 10:00 pm ET: NZD – Official Cash Rate. No Change expected
• 10:00 pm ET: NZD – RBNZ Rate Statement

Wed, Jul 10

• 10:00 am ET: USD – Fed Chair Powell Testifies on Capital Hill
• 1:01 pm ET: USD – 10-y Bond Auction

Thu, Jul 11

• 2:00 am ET: GBP – GDP m/m. 0.2% versus 0.0% last month
• 8:30 am ET: USD – Core CPI m/m. 0.2% versus 0.2% last month
• 8:30 am ET: USD – CPI m/m. 0.1% versus 0.0% last month
• 8:30 am ET USD – CPI y/y. 3.1% versus 3.3% last month
• 8:30 am ET: USD – Unemployment Claims. Estimate 236K
• 1:01 pm ET: USD – 30-y Bond Auction

Fri, Jul 12

• 8:30 am ET: USD – Core PPI m/m. Estimate 0.1% versus 0.0% last month
• 8:30 am ET: USD – PPI m/m. Estimate 0.1% versus -0.2% last month
• 10:00 am ET: USD – Prelim UoM Consumer Sentiment. 67.0 versus 68.2 last month
• 10:00 am ET: USD – Prelim UoM Inflation Expectations. Last month 3.0%

This article was written by Greg Michalowski at www.forexlive.com.

A July move is a non-starter but the odds of a September rate cut are currently at ~80%. As for the year itself (four meetings left), a total of ~48 bps of rate cuts are being priced in. In other words, traders are seeing roughly two rate cuts by the Fed before year-end.

Looking at the balance of risks, I would argue that there is a strong sense that we could lean closer towards pricing in one rate cut rather than three rate cuts moving forward. Inflation developments still need to mark better progress, otherwise the Fed might continue to play down softness in other areas of the economy.

Meanwhile, I would say that the bar for the Fed to cut three times this year looks a little high. But one can argue that once they do get the ball rolling, there is a case to be made that they could continue to keep cutting in back-to-back meetings.

For now though, we’re not quite anywhere near that yet. It’s all about taking one data set at a time so let’s see what the jobs report today has to offer.

This article was written by Justin Low at www.forexlive.com.

Headlines:

• What NFP data could surprise the market?
• Labour party wins UK general election, beating 326-seat majority threshold in the Commons
• Bitcoin tumbles to its lowest since February as downside momentum intensifies
• Fed’s Williams: Still a way to go to reach our 2% target
• Germany May industrial production -2.5% vs +0.2% m/m expected
• Eurozone May retail sales +0.1% vs +0.2% m/m expected
• UK June Halifax house prices -0.2% vs -0.1% m/m prior

Markets:

• JPY leads, USD lags on the day
• European equities higher; S&P 500 futures flat
• US 10-year yields down 1.2 bps to 4.335%
• Gold up 0.3% to $2,364.04
• WTI crude flat at $83.85
• Bitcoin down 5.4% to $55,185

It wasn’t an exciting session as markets are caught waiting on the US jobs report later today.

The hangover from the US holiday yesterday isn’t helping, with a largely more tentative mood seen among FX as well during the session. The dollar is hanging in there after the more sluggish showing from the softer US ISM services PMI earlier in the week.

EUR/USD is marginally higher by 0.1% to 1.0820 while USD/JPY is down 0.3% to 160.80 on the day.

The pound barely reacted to the results of the UK general election, which went very much as expected. It was a complete domination by Labour and GBP/USD held steady at around 1.2770-80 levels for the most part.

Meanwhile, commodity currencies also barely moved with a range of 15 pips locking in USD/CAD, AUD/USD, and NZD/USD respectively.

It’s all on to the non-farm payrolls data next to see how that will shake things up before the weekend. Will we see a continuation to the flows after the US ISM services PMI? Or is the dollar going to have a chance to bounce back?

This article was written by Justin Low at www.forexlive.com.

• We still have a way to go to reach our 2% target on a sustained basis.
• We are committed to getting the job done.
• Uncertainty will continue to be the defining characteristic of the monetary policy landscape for the foreseeable future.

There’s nothing new here that he hasn’t already said recently.

This article was written by Giuseppe Dellamotta at www.forexlive.com.

Fundamental
Overview

After a couple of weeks of
consolidation, the S&P 500 this week found some footing and eventually
extended the rally into a new all-time high following the soft US Jobless Claims and ISM Services PMI reports.

Overall, the data didn’t
change much in terms of interest rates expectations, but it reinforced the view
that the Fed is going to deliver at least two rate cuts by the end of the year.
The soft-landing narrative is still the main driver of the market, and the data
is indeed backing it for now with ongoing disinflation and resilient economy as
we head into the easing cycle.

S&P 500
Technical Analysis – Daily Timeframe

On the daily chart, we can
see that after two weeks of consolidation, the S&P 500 reached a new all-time
high following some soft US data. From a risk management perspective, the
buyers will have a better risk to reward setup around the trendline. At the moment though, it’s hard to
envision such a big pullback unless we get some ugly US data.

S&P 500 Technical
Analysis – 4 hour Timeframe

On the 4 hour chart, we can
see more clearly the rangebound price action of the last couple of weeks with
the recent breakout. This is where the buyers are stepping in with a defined
risk below the resistance
now turned support to position for a rally into new highs. The sellers, on
the other hand, will want to see the price falling back inside the range to
position for a drop into the 5500 support.

S&P 500 Technical
Analysis – 1 hour Timeframe

On the 1 hour chart, we can
see that we have a bit of consolidation now around the 5587 level as the market
awaits the US NFP report. If we get bad data, the market might go into risk-off
and we will likely see the sellers piling in aggressively for a selloff into
the 5500 support.

The buyers will want to see
a good or benign report which could even lead to a dip-buying opportunity on a possible
pullback into the 5560 zone. The red lines define the average daily range for today.

Upcoming
Catalysts

Today we conclude the week with the US NFP report where the data is expected
to show 190K jobs added in June and the Unemployment Rate to remain unchanged
at 4.0%.

This article was written by Giuseppe Dellamotta at www.forexlive.com.