Inflation

Japan’s Prime Minister, Yoshihiko Kishida, expects BOJ to continue efforts to meet the price target.

Kishida reiterates that the Bank of Japan is in charge of monetary policy.

Kishida’s material is pretty much the same as before. The BOJ is more concerned about 10-year JGB rates deviating from its implicit cap of 0.25 percent at the moment.

The yen may be getting some relief on the day as the dollar loses some of its gains and Treasury yields fall ahead of the Fed meeting. However, if the BOJ continues to throw everything at the yield curve in order to keep it under control, it’s hard to see yen advances as much more than a blip on the radar.

Covid-19

Shanghai will conduct community COVID-19 testing exercises every weekend till the end of July.

The testing exercises will cover all of Shanghai’s districts Expect nothing to return to normal in Shanghai as long as these kinds of laws and restrictions remain in place.

The severe constraints continue to cast a pall over the global picture, and rising inflationary pressures aren’t helping to clear the air.

Oil

• President Biden of the United States has called on oil firms to explain why there isn’t enough gasoline despite rising prices.
• Biden is pressuring oil corporations to explain why they aren’t pumping more fuel.
• According to a copy of a letter obtained by Reuters, US President Joe Biden wrote to executives from Marathon Petroleum, Valero Energy, Chevron, BP, Shell, and Exxon Mobil to express his displeasure with their decision to cut back on oil refining in order to pad their wallets. If you’re looking for a “Refinery profit margins considerably above average that are pushed directly onto American families are unacceptable during a time of war.
• The shortage of refining capacity – and the resultant extraordinary refinery profit margins – is dampening the impact of my Administration’s historic efforts in response to Putin’s price hike and driving up customer costs.”
• Jennifer Granholm, the US energy secretary, will convene an emergency conference to discuss how refiners can respond to increasing pricing, but only after Biden demands an answer from oil firms first.

Dollar

• The dollar leads in trade today as the attention is on the Fed. In the run-up to the Fed, dollar bulls and bond sellers are taking their foot off the gas pedal on the day.
• In European morning trade, the dollar is trading lower across the board, with the euro benefiting particularly as the ECB prepares to convene in an emergency meeting to discuss the bond rout. The euro is currently trading at 1.0485, up by 0.7 percent on the day, as it encounters some slight resistance from the 23.6 Fib retracement level indicated previously. In the meantime, after hitting a low of 1.1985 earlier in the day, the cable is rebounding to 1.2080.
• The pound continues to suffer as the UK leads the recession race, and there are mounting questions about the Bank of England’s willingness to raise rates.
• Elsewhere, the USD/JPY fell 0.6 percent to 134.65 from 135.10 at the close of Asian trading, with 10-year Treasury rates falling 7 basis points to 3.415 percent. Treasury yields are being dragged down by a drop in European bond yields as traders await the outcome of the ECB meeting at the top of the hour.
• In terms of stocks, overall optimism is holding up, with European indices gaining more than 1%, with Italy’s FTSE MIB leading the way, up more than 3% on the day. S&P 500 futures are also up 0.7 percent, which is boosting commodities currency sentiment.
• The AUD/USD is currently up 0.9 percent to 0.6930, while the NZD/USD is up 0.4 percent to 0.6240. Regardless, the Fed’s decision will determine what happens next for the rest of the week.

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