Global: It is of course very quiet, thanks to the US holiday yesterday, so there is nothing on the equity front to report, or Treasuries either. For what it is worth, which may not be very much, US equity futures are currently positive, and 10Y bond futures negative, though it’s anyone’s guess if that’s how it looks tomorrow morning after a day’s trading. Asian equity futures look cautiously optimistic this morning in anticipation. The US holiday may have helped the EUR to make gains, and EURUSD is back up at 1.0518 this morning, though elsewhere in the G-10, there hasn’t been much change. The AUD is still below 0.70, Cable is still in the mid-1.22s, and the JPY is just above 135. Asian FX yesterday was a mixed bag. USDCNH moved sharply lower and is now at just under 6.69. But there were also losses, led by the PHP, which has pushed above 54.0, and also the KRW, which is now at 1291.
On the Macro calendar, the May US existing home sales release will be worth a look. The pace of sales has dipped sharply since the 2021 peak and is expected to fall further in the face of rapid mortgage yield increases.
And in Fed news, St Louis Fed President, James Bullard, said at an event yesterday that he expected the economy to continue expanding this year (what about next year though?) and that the Fed needed to hike so inflation expectations didn’t become unanchored. Richmond Fed President, Thomas Barkin, speaks at a NABE event today.
Australia: At 0930SGT, minutes of the Reserve Bank of Australia’s June policy meeting will be released. As ever, this will be scrutinised for clues about the pace of future tightening.
Korea: The Bank of Korea issued a statement this morning predicting 2022 inflation to be above the current projection of 4.5%, and possibly to record the highest level in 14 years (4.7% in 2008) and added “Going forward, CPI will likely remain over 5% for the time being". Governor Rhee said last week that the BoK would make a data-dependent decision when asked whether the BoK will consider a “big step”. Thus, today’s statement can be interpreted as indicating that the big step decision is getting closer. Also, we expect the annual CPI inflation rate to be 5.2% and June CPI 6.0%YoY (vs 5.4% in May). Thus, if we are right about our June CPI forecast, then a 50bp hike at the July MPC is highly likely. We then expect the BoK to deliver 25bp hikes in August and October. Governor Rhee will talk about the current inflation situation at 10:00 am today, so the market will closely listen to him.
Korea's 20-day exports for June recorded a -3.4%YoY fall, mostly due to unfavourable calendar effects (2 days less than the previous year) combined with the trucker’s strike earlier this month. Semiconductors and petroleum rose by 1.9% and 88.3% while auto and auto parts fell sharply. Meanwhile, imports for the same period rose 21.1% YoY.