FOMC hints at rate hikes

BY Janne Muta

|July 6, 2023

The FOMC meeting minutes revealed yesterday that, several Federal Reserve policymakers hinted at potential rate hikes due to stronger-than-expected economic activity and no evidence of inflation coming down to the Fed's target. The Federal Open Market Committee maintained steady rates though, with Fed Chair Jerome Powell stating that further economic resilience might necessitate continued rate increases. The US inflation remains high, with core goods inflation and housing services inflation moderating slower than anticipated.

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Equities remain weak as investors are fearing a new trade war between the US and China. The US Commerce Department has strongly opposed China's sudden imposition of export controls on gallium and germanium, vital for semiconductor and electronics production. The controls are likely to cause supply disruptions and price hikes in sectors like electric vehicles and fibre optic cables. China’s move comes after the US restricts chip exports to China.

Traders are closely watching US policymakers' actions and Treasury Secretary Janet Yellen's visit to China, amidst rising tensions between the countries. This could turn into a major trade war but it seems that the stakes are so high on both sides that the parties are likely to find common ground. Neither side can afford to grind their key industries to a halt. The key risk events today include the US reports on initial jobless claims, ADP employment, JOLTS job openings and ISM Services PMI.

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DAX keeps breaking support levels and has created a lower swing high in the daily chart. This increases the probability of the next key support (15 700) breaking. In the 4h chart, the market remains bearish below 15 900. Above the level, the market could move to 16 020.

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EURAUD is bearish below 1.6353. Above the level, the market could move to 1.6420. The market is trending lower in the 4h timeframe after creating a bearish weekly candle (shooting star) last week. If the last week’s low (1.6325) is violated decisively look for further weakness in this currency pair.

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GBPNZD is bearish below 2.0590. Above the level the market could move to 2.0645.

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FDX rallied strongly after the company reported earnings that exceeded analyst expectations last week. The market remains bullish above 237.90 with the nearest support level at 245.50. Below 237.90, look for a move to 228.

The Next Main Risk Events

  • USD ADP Non-Farm Employment Change
  • USD Unemployment Claims
  • USD ISM Services PMI
  • USD JOLTS Job Openings
  • CHF Foreign Currency Reserves
  • GBP BOE Gov Bailey Speaks
  • CAD Employment Change
  • CAD Unemployment Rate
  • USD Average Hourly Earnings m/m
  • USD Non-Farm Employment Change
  • USD Unemployment Rate
  • CAD Ivey PMI
  • EUR ECB President Lagarde Speaks

For more information and details see the TIOmarkets economic calendar.

Trade Safe!

Janne Muta
Chief Market Analyst

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Janne Muta

Janne Muta holds an M.Sc in finance and has over 20 years experience in analysing and trading the financial markets.

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