Bank of England & Fed Speaker Preview

Okay, very good morning. It's Thursday, 24th of June. Hope you're doing well. And before I begin, if you are watching this on YouTube, don't forget to like and subscribe to the channel. I really appreciate it. But getting straight into things, I'm going to get you up to speed on, as you can see here, the kind of decision guide for the Bank of England interest rate announcement coming out at midday London time today. Also going to talk a little bit about Fed comments because we've got another batch of Fed speakers coming out today, and it's been pretty relentless this week. So what is the latest and what can we expect? And then there's a few other updates, a little bit on COVID, both in the UK and also on the vaccine front for Pfizer, uh, and Moderna. And then US infrastructure bill. And then the day ahead, we do have some US data coming out, the Q1 GDP figure, that's the final in the US coming out 1:30. So not perhaps too important given how dated that is now. But we do get the latest weekly jobless claims and durable goods coming out at the same point in time later today. So first off, let's just have a look at the charts. And one thing I would say is it's pretty quiet at the moment in terms of price action. Everything is fairly confined to range-bound trade for the moment. In terms of the close on Wall Street, we actually finished fairly flat. In fact, pretty much exactly unchanged in the case of the Nasdaq. The S&P was down just 0.1%. The Dow down 0.2%. There's two kind of charts I think that, that look quite interesting on a daily perspective. And looking at the NASDAQ, this was one we were looking at yesterday, and we're talking about that strategic kind of key area between that trendline going back from February and the test in April, to which we breached coinciding with that double top to print the new all-time high. Not yesterday, the day before. And so yesterday you can see perfect test back onto that trendline into that support zone, and we continue to remain elevated at the moment. So things still looking, um, in a, in a more supportive setup for the moment for the NASDAQ to stay up at these levels, barring anything unexpected. But a nice technical, um, support reaction to that level we were talking about yesterday. And then cable, 140 is such a big level, and again, putting it on the daily continuation, you can see here pretty much to the tick. We got up to 140 yesterday amid some of the initial run lower we saw in the dollar, which has recovered, and the Dixie is trading flat this morning. And we saw a perfect test on 140 before a move back down, you know, of a good 50+ pips. So nice opportunity there on the shorts, a very strategic area of resistance from yesterday's session. And of course, we look out for the Bank of England to dictate potentially a little bit of sterling volatility later today. Otherwise, things pretty quiet. Oil still remaining up at its elevated ranges. The S&P is pretty sideways, having already recaptured and moved up and above where we were prior to last week's hawkish tilt from the Fed and Bullard. And T-notes, pretty flat, very quiet overnight range of about 2 ticks, and nothing really too much for me to talk of there. So Gonna delve right into the Bank of England. Let's talk about that first and what can we expect today and subsequent market reaction intraday. First off, not expecting any policy changes. This isn't a meeting to be looking out for, say, rate rises or any kind of definitive kind of clarity that yes, they're going to rise here or there, but we certainly will be looking for hints in that regard. So One of the things here as well in terms of policy is that they did reduce the pace of their gilt purchases from £4.4 billion a week to £3.4 billion, and that only happened in, in May, so very recently. So hence the reason why as well, you know, this isn't a decision to talk about rate changes now, um, perhaps then to talk about the reduction of bond buying. But the point being, they've already really just done that And so they probably need to just wait a little bit before taking the next maneuver on that front. UK central bankers have been a little bit hawkish of late. I was going to share this. This is kind of the spectrum, if you like, of the most uber dovish members going to the outlying and outgoing. It's his final meeting today, the chief economist Andy Haldane, who's a bit of a solo character who sits there thinking that, look, we should stop active QE right now. In fact, he voted that last time, so he was a dissenter from the pack. So he definitely is an outlier. But, uh, Gerten Flieger was— who is typically a dove— did come out with some pretty hawkish comments before. Some of the other members have also kind of followed suit to a certain extent. And so hinting at rate hikes in, in 2022 which are partially priced in. So any suggestions, if there were to be any today, about a possible move earlier than that, say the first half of 2022, certainly could create some positive forces for the pound to appreciate, given that that's not fully priced in to be that soon at this point in time. I think it's pricing in about 15 basis points by the summer as a rough kind of pricing in position. Um, a couple of things that ING were noting which I thought were quite interesting. They said the run of economic data has been encouraging over recent weeks, and indeed it's clear the economy is now outperforming last summer when restrictions were also very low. But the bank's view on growth has already been towards the more optimistic end of the spectrum. And as well, given the spread of the now Delta variant adds an extra dimension of uncertainty. So despite kind of like with the US, there's, there's reason to be optimistic, it also needs to be put into context, particularly I think in the UK's case where I've got the stat here. We had the UK reported more than 16,000 new cases of COVID yesterday. That's the most since the 6th of February. And of course, given the transmissibility of this new Delta variant, The number of people hospitalized stood at 1,500 yesterday in the UK for the first time since the end of April, albeit with fatalities still remaining very low at this point in time. So the Bank of England is not in a position, given that situation, to really make any radical changes right now. The other thing is unemployment. What's that going to look like later this year is another source of uncertainty. And the reason for that is because it's not clear really how the jobs market is going to fare when ultimately the government stops providing the support that it has done in things like furlough and so on. So again, you can see the rationale why they kind of want to talk a little bit optimistic and perhaps sound a little bit more hawkish, but the actuality of changing policy drastically is probably not going to come anytime soon, and any rate hike hints have got to come when they've got clarity on those issues, and so therefore going to be well out into 2022, for example. Um, the majority of economists expect the meeting then to be very much a kind of holding pattern until at least we get to August, because then in August there's a couple of things that are happening. For one, the extension of 4 weeks that we've recently had from June 21st to the end of July for the current and last phase of lockdown touch wood, would have ended. And so they'll have a bit more kind of insight as to how the economy is performing and how confidence levels are and what the COVID situation is. And then also in August, of course, we get the latest monetary policy report. So as you guys know, February, May, August, November is when we get the similar to what we have in the US with the Fed projections. We get the Bank of England version of, and we know that central banks typically like to drop potentially historically hints at those meetings because there's an opportunity for it to be more robust in terms of its transparency to the market given the fact that they'll outline the Bank of England's case, their medium-term horizon for the likes of growth, inflation, and so on. So overall, um, not expecting this to be a huge event today from the Bank of England. Definitely has the propensity to move sterling for sure. I guess the delicate balance here is kind of sounding optimistic without sounding too overtly hawkish. Probably you're going to get a vote split on rates that will be unanimous, and the chief economist Andy Haldane will depart on a hawkish note and so will probably dissent again. As far as comments are concerned, I think they'll be relatively balanced in a way that's not really going to deviate too much from what Bank of England officials have said of late. Again, very much a base case of a holding-type meeting this time around. Okay, the other thing I did mention was Fed rhetoric, and this is Fed's Bostic, who is a voter. And I'm going to go over Bostic and Kaplan comments from yesterday, and then we'll talk about the speakers for today. So Bostic said the bank could decide to slow its asset purchases in the next few months, and he favored lifting interest rates in 2022 in response to a faster than expected recovery from COVID-19 pandemic. Kaplan, who is a non-voting member, much more punchy, said the US economy will likely meet the Fed's threshold for tapering its asset purchases sooner than people think. However, just like we did with the Bank of England on this graphic, don't forget your hawk-dove scale as well. And if we talk about Kaplan Kaplan is right down here as the uber hawk, and he doesn't vote this year, he doesn't vote next year, he doesn't actually come until 2023. So he's got, for me, license to really be out there on the much more hawkish end of the spectrum. And so, so far the market has been relatively willing to look through some of these latest noises now that we've readjusted to this new slightly more hawkish tilt from the central bank. So it hasn't had— hasn't spooked the market this time round. However, from a Fed comms point of view, this is what the calendar looks like for today. So you've got Fed's Barkin, who is a voter, speaking at 2:00. You've got Bostic and Harker speaking at 2:30. You've then got Fed's Williams at 4:00, and you've got Fed's James Bullard, which of course was quite a focal point last week. Speaking alongside the Uber Hawk Kaplan at 6 PM. So yeah, a lot more Fed commentary. And the interesting one here is that for Bullard, he is going to be speaking on current monetary policy, so right on topic. And so that could be quite influential, and I'll be looking at that in regards to does he reverse a little bit for what he said last week and the most recently to kind of try and be a little bit more passive, or does he just really just bang the drum in a much more hawkish fashion to really hit home the point? So given the fact that he has done the latter, anything less than that could well act as a bit of reprieve for the market short term to be like, okay, he's obviously— someone internally at the Fed, Powell, has had words and he's kind of reined it back in. But I don't actually think that that's the case. I think he'll probably just stick to that message. And probably the one that you'll hear, um, that will be a lot more neutral is Williams. We heard from Williams, and Williams has been very much aligned with Jerome Powell. So for me, a strategic way to perhaps look at this is, you know, between Bostic, Harker, Bullard, and Kaplan, and Barkin to an extent, you can already expect to hear fairly hawkish tones. If Williams moves hawkish, that to me is a key signal, um, that the center board is also moving and it's not just an outlying contingent of hawks on their own in isolation. So that could be a good way to think of it. And if that were the case, if Williams was to shift a little bit, um, on that trajectory of becoming more hawkish, again, I'd be looking for a similar type reaction we had to last Friday where yields might rise, dollar increase, might put a bit of weight in US equities. But I must stress, I don't think Williams is going to do that. I think he's just going to hold the line, and I don't think the Fed are in any rush. And I think this is all just part of a strategy to acclimatize markets to the eventual tightening of policy to come, first with tapering and then with rates later on down the line. Okay, other headlines. I mentioned the UK situation already with COVID and so forth. Um, And so that continues to be something we are monitoring. We're also monitoring the ongoing situation with the Delta spread in mainland Europe, which at the moment is still continuing to increase. This was something else that came out yesterday, but I thought I'd wrap into that conversation, which is the CDC in the US advisory panel has found a likely association between a rare heart inflammation and the mRNA COVID-19 vaccines in adolescents. Although importantly, kind of like to a degree with the blood clot issue, they have said the benefits of the jabs far outweigh the risks. So just to be aware of, I think Moderna shares did move a little lower yesterday. At the time I'd heard the squawk go, I didn't actually look at the time because I was on a call. But yeah, I don't think that this is particularly going to be— it's going to jeopardize the market's confidence over the vaccine rollout or the ability for, for these countries to do so, because as per the medical recommendations, the benefits far outweigh the risks. The other thing that's kind of ticking over has been incredibly boring to monitor, to be quite frank, and it's almost like the markets have lost a bit of interest. But it's, it's the Biden infrastructure plan. So the latest here is that he's going to meet with bipartisan group of US senators today to discuss their proposed framework for the infrastructure bill. And a member of a group of 21 senators being dubbed the G21 instead of the G20 announced an agreement on a framework, and talks have focused on a $1.2 trillion, 8-year spending plan with a mix of new and repurposed funding. So that's where the middle ground is at the moment, and you could be looking out for some more comments later on this afternoon. Not that I think they'll be particularly that impactful for markets, to be quite honest. I think the market's lost a bit of interest now that momentum has kind of stuttered a little bit behind these latest talks. So definitely main events really looking out for today is going to be the Bank of England at midday, the Fed speakers throughout the afternoon, US-centric of course. And then when we actually look at the calendar, there is a batch of economic data of course coming out at 1:30. But before I get to that, you've got the German IFO numbers as well as something else you should be mindful of. Um, IFO is expected to further build on the headline on business morale, which was already at 99.2, tracking its highest level since May of 2019 last month. However, as I mentioned before and earlier this week, now that the Delta variant is present in clusters within Germany as well as other European nations is probably going to moderate if it does increase this time around going further forward for next month, I would anticipate. However, these numbers are still relatively high in consideration. Um, then yeah, in the afternoon we've got US durable goods at 1:30, the Q1 final GDP out the US. Again, just to reiterate, expected to be unrevised at 6.4%. Uh, you know, we are coming to the end of June. So, uh, final GDP data for Q1 is, is redundant at this point in time, as everyone will be eagerly anticipating then the Q2 reading that we'll get in the near future, where GDP is expected to be up in the 10%+ region. And then we've got weekly jobless, which did surprise last week, popped up to 412. It's expected to come back down to 380, back on trend of generally positive developments on that front. And then that's it. So gonna leave it there, let you guys get on with the day, and I will catch everyone else in the Discord room, the Amplify Live community. If you're watching this on YouTube, feel free to drop a comment if there's any questions, and take care.