Equities

European equities open lower to begin the day. Stocks are on the defensive as the session begins

Eurostoxx -0.4%, Germany DAX -0.6%, France CAC 40 -0.4%, UK FTSE flat & Spain IBEX -0.3%

Europe has had a softer start to the day, owing to weaker sentiment from US trading yesterday.

The gloomy mood is exacerbated today by a drag in US futures.

S&P 500 futures are currently down 0.5 percent, Nasdaq futures are down 0.8 percent, and Dow futures are down 0.4 percent.

As a result, the dollar is starting the day on a slightly stronger footing.

RBA rate hike

Goldman Sachs and the CBA predict another 50 basis point hike in July, with the cash rate now at 0.85 percent.

According to Goldman Sachs, the RBA will raise rates by 50 basis points in July, eventually reaching a terminal rate of 2.60 percent by December.

Furthermore, risks point to a faster rate of tightening, with another 50 basis point rate hike possible in August.

Meanwhile, the CBA has issued a straightforward statement stating that they expect the RBA to raise rates by another 50 basis points in July.

ANZ, on the other hand, sees the RBA raising rates by 25 basis points in July and then by 50 basis points in August, which is a somewhat surprising view all things considered.

NAB is more divided because they expect the RBA to raise interest rates by 75 basis points to 100 basis points in the next two months, in July and August. They anticipate the cash rate reaching 1.60 percent to 1.85 percent and returning to 2.00 percent by December (previous forecast was for 1.35 percent by year-end).

According to the firm, the RBA’s terminal rate will be around 2.00 percent to 2.50 percent, with market pricing of more than 3.00 percent now considered “excessive.”

GBP/USD

• GBP/USD pares some losses but stalls at the 100-hour moving average in a choppy start to European trading
• The pair fell to a low of 1.2430 earlier as the dollar strengthened across the board, with USD/JPY briefly approaching 133.00. However, the greenback’s gains have slowed as Treasury yields have fallen slightly, and the USD/JPY has fallen from 132.99 to 132.69 at the moment. As a result, cable has risen from 1.2430 to 1.2533 in the last hour.
• The current bounce is being stymied by familiar resistance from the 100-hour moving average at 1.2531.
• The 200-hour moving average, seen at 1.2573 in recent sessions, will add another layer of defence for sellers.
• Even though equities remain broadly lower, risk sentiment has improved slightly. S& P 500 futures have reduced losses from 0.6 percent to 0.3 percent, while Nasdaq futures are down 0.4 percent from around 0.8 percent earlier.
• European indices are still broadly lower, with losses ranging from 0.4 percent to 0.7 percent.
• However, the greenback’s strength is being questioned as bond yields retreat slightly on the session. 10-year Treasury yields have fallen 1.7 basis points to 3.02 percent, from just above 3.05 percent earlier in the day.
• Returning to cable, it is difficult to see much momentum for a break higher as long as risk tones remain sluggish and the dollar has been steadying itself in recent sessions.
• In terms of fundamentals, the Fed remains more hawkish than the BOE, and the UK’s economic struggle will be a real test of resolve for Bailey and co. in the months ahead – even with surging inflation.

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