Gold Price Or FX - What's More Volatile Now? What's Ahead EURCHF And USDCHF After SNB Decision? Price Of Crude Oil Dropped. Awaiting Powell's (Fed) Testimony | Saxo Bank

Inflation In Philippines Hit 6.1%, Its Pace Is Record-Breaking. What Are The Predictions Of BSP (Bangko Sentral ng Pilipinas) Monetary Policy?

Summary:  Equity markets tried to end last week’s grueling sell-off with a positive flourish on Friday, as oil prices dropped by the most in several weeks and firmness in safe haven bond markets kept bond yields at the low end of the week’s range. But are those developments down to investor concern that a recession is incoming? The week ahead features semi-annual testimony from Fed Chair Powell before Congress and global preliminary June PMI surveys.


What is our trading focus?

Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I)

Despite extreme volatility in cryptocurrencies and another “stablecoin (USDD)” losing its peg to the USD, US equities futures are starting the week on mild positive note. S&P 500 futures are trading slightly higher at the 3,690 level and will likely try to test the opening price from last Wednesday’s session at around the 3,743 level if risk sentiment remains positive today. There are no important macro events today so trading will be light, also due to today being a holiday in the US so cash equity markets are closed, and potentially take their lead from cryptocurrencies, although we expect the correlation to begin to decline with cryptocurrencies reducing itself to a small and isolated pocket of the market again.

Hong Kong’s Hang Seng and China’s CSI300

Hong Kong’s Hang Seng (HSI.I) and China’s CSI300 (000300.I) were fluctuating between modest gains and losses. Chinese property names surged with COLI (00688) and CR Land (01109) rising 9% and 8% respectively. According to Beke Research, secondary market home sales volume in China’s top 50 cities rose more than 20% in the first 10 days of June from last month. June Emerging Industries PMI came at 52.5, 3.6pp higher than May. With COVID outbreak, Macao gaming stocks fell. China’s 1-year and 5-year Loan Prime Rate remain unchanged.


The Swiss franc was in for a positive shock last week after a surprise hike – and a large 50-basis point one – from the Swiss National Bank altered the landscape for CHF traders, suggesting the central bank is less concerned with always lagging the ECB in its policy move and a moderating of concerns about the CHF level versus EUR, as a strong franc is potentially one tool that can help ease inflationary pressures. EURCHF reset lower to sub-1.0200 levels after trading between 1.04-1.05 before last week’s meeting. Focus now is on the parity level that was briefly touched in the wake of the Russian invasion of Ukraine. USDCHF is another focus, trading below 0.9700 after trading as high as parity before the decision. The 0.9500-0.9550 area is the next technical focus area there.

USDJPY and JPY pairs

A very challenging backdrop here for JPY traders, as the Bank of Japan’s insistence on maintaining its negative 0.10% policy rate and more importantly, the yield-curve-control policy by which it caps 10-year Japanese government bond yields at 0.25%, was seen as very JPY negative last week in the wake of a US Fed hiking the most since 1994 and the SNB executing a surprise large hike etc. At the same time, global bond markets rallied hard to close the week, particularly in the dominant US treasury market, with oil markets in a nosedive on Friday, both supportive developments for the Japanese yen. Focus for USDJPY traders remains on the 135.00+ cycle top, which may hold as long as US longer treasury yields are capped below cycle highs. To the downside, last week’s low near 131.50 was close to the prior major pivot high of 131.35.

Crude oil

Crude oil (OILUKAUG22 & OILUSJUL22) plunged almost 7% on Friday after growth worries signaled by the FOMC aggressive action to bring down inflation spread from the stock market and industrial metals to fortress oil and fuel. A sector which up until now has seen limited contagion risks given the tight supply outlook amid Russian sanction, OPEC+ producers struggling to raise production and lack of refinery capacity. Speculators turned net sellers of WTI in the week to June 14 following several failed attempts to break higher, potentially a signal we have entered another period of consolidation, but still with the underlying risk of eventually moving higher. 


Gold (XAUUSD) remains rangebound following a week of high drama that saw dramatic yield spikes being offset by growing unease about the economic outlook with recession worries on the rise as central banks step up their efforts to curb inflation. Focus on the dollar and Fed Chair Powell’s semi-annual testimony before the Senate Banking Committee on Wednesday (see below). Speculators cut bullish futures to a nine-month low ahead of last week’s FOMC rate hike announcement while total bullion-backed ETF holdings on Friday dropped to three months low, both highlighting the current uncertainty about the short-term direction.


HG Copper (COPPERUSSEP22) has returned to the key $4/lb support area after falling around 10% during the past two weeks on China and global growth worries. Iron ore (SCON2) traded in Singapore and metallurgical coal in Shanghai, both key inputs to the production of steel have lost around 20% during the same period. China’s slumping property market and the country’s inability to put the coronavirus behind it remain a major headwind, and one that inadvertently is supporting the efforts to curb inflation through lower input costs. Copper, rangebound for more than a year, is in the short-term at risk of breaking lower with the next level of support at $3.86 before $3.50.

US Treasuries

US treasuries (TLT, IEF) remained firm on Friday, keeping yields at the lower end of the week’s range and near the important tipping point around 3.20% for the 10-year Treasury yield benchmark, which was the prior yield high on the way up. US data surprises have tilted increasingly negative of late and a huge sell-off in crude oil on Friday may drive slightly lower inflation expectations if the lower prices stick. US Fed Chair Powell is up this week with semi-annual testimony before Senate and House committees on Wednesday and Thursday, respectively.

Crypto rout extends with Bitcoin

The largest and one of the more stable crypto assets, plunging below the critical 20k level over the weekend after it slid 15% on Saturday. This signals not just further stress in the crypto space but also broader stress in financial markets as liquidity conditions tighten.

What is going on?

French President Macron loses absolute majority in Parliament

After the second round of parliamentary elections completed yesterday, President Macron’s centrist coalition will only win about 245 of of the 277 seats, with a leftist coalition headed by Jean-Luc Melenchon taking 131, and Marine Le Pen’s right populist National Rally at 89 seats.  The euro is taking the news in stride, but this result will hamper President Macron’s reform agenda, including his intent to raise the retirement age and reform the pension system.

The tug of war between inflation and recession means room for policy error

With the central banks bucking up on the tightening bandwagon last week, we are seeing a more serious fight against inflation which is set to rise further above 9% levels in the UK this week and remains in the 8% range for the US. However, this historic tightening pace following the Fed’s 75bps rate hike last week has meant further fears of an economic slowdown. A slew of weak US data reported last week also aggravated those concerns. Markets will continue to be choppy as investors weigh inflation/recession concerns, but the long-term bear trend is here to stay. The abrupt policy turn also means an increasing scope of policy error.

Keeping an eye on corporate credit markets...

... after at least one measure of US high yield corporate spreads rose to a new cycle high last week above 500 basis points above US Treasury yields, above the mid-May high of 482 basis points and up over 100 basis points from the lows in early June. The two most widely tracked high yield ETF’s, HYG and JNK, closed sharply lower last week and are down around 15% (less in total return terms) from their late 2021 highs.

What are we watching next?

US Fed Chair Powell semi-annual testimony this week before House and Senate committees

The Fed Chair will be in the hot seat this week in the required semi-annual testimony before Congress, where politicians on the committees often take a chance to grandstand on their own political positions and observations, but after several months of decades-high inflation and record gasoline prices, will this week’s testimony show that the political pressure on the Fed is mounting? The market will also watch for any new comments from the Fed Chair, although we are just a few days removed from the FOMC press conference.

U.S. housing data are out on Tuesday

The housing market is in a vulnerable position. Prices are up almost 40 % since the outbreak, mostly reflecting stimulus-fueled demand. But with high inflation across the board pushing consumer confidence downward and mortgage rates surging following the U.S. Federal Reserve’s tightening cycle, the risks of hard landing are tilted on the upside. Over the past few weeks, several large real estate firms such as Redfin Corporation have warned against the risk of slowdown. Expect a drop in May’s existing home sales and perhaps a new plunge in the number of new home sales after disappointing data in April (minus 16.6 %). The U.S. housing market is certainly the most vulnerable segment of the U.S. economy at the moment. It will be key to monitor the upcoming data in order to assess whether there is a material risk of recession or not.

May UK CPI is out on Wednesday

This will be painful. Expect a new increase to 9.1 % year-over-year in May against 9.0 % in April. Last week, the Bank of England (BoE) hiked rates by 25 basis points. This was expected. But political pressure is increasing on the central bank to do more while other developed market central banks have embraced a more hawkish tone (U.S. Federal Reserve, Reserve Bank of Australia, National Bank of Hungary, for instance). If inflation continues to rise (which is our baseline), we would not be surprised if we see the BoE go for an inter-meeting 25 basis points hike before the 4 August meet. Other central banks have done it recently, such as the National Bank of Hungary which decided a surprise 50 basis point hike to support the HUF last week. This only eased temporarily downward pressure on HUF.

Earnings Watch

This week’s earnings calendar is light but there are three important earnings releases to watch and those are Lennar, FedEx, and Accenture providing insights into the US housing market, logistics, and business spending dynamics (if you believe management consultancy is part of business spending).

  • Today: Kanzhun
  • Tuesday: Lennar
  • Thursday: FedEx, Accenture, Darden Restaurants, FactSet
  • Friday: Carnival, China Gas, CarMax

Economic calendar highlights for today (times GMT)

  • 0800 – Switzerland Weekly Sight Deposits
  • 0800 – UK BoE’s Haskel to speak
  • 1300 – ECB President Lagarde to speak
  • 1500 – ECB President Lagarde to speak
  • 1645 – US Fed’s Bullard to speak
  • 1930 – ECB Chief Economist Lane to speak
  • 0000 – Australia RBA Governor Lowe to speak
  • 0130 – Australia RBA Meeting Minutes

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Source: Financial Markets Today: Quick Take – June 20, 2022 | Saxo Group (

Inflation In Philippines Hit 6.1%, Its Pace Is Record-Breaking. What Are The Predictions Of BSP (Bangko Sentral ng Pilipinas) Monetary Policy?

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