Commodities pick up some bids into the London close after durable goods data from the USA rose again. This data is going to cause the inflation story to be prolonged. Not that the ECB seems too worried about their inflation running high. The Bank of England will look to a rate increase to deflate the pressures caused by inflation.
Market Wrap
7112 on the UK FTSE100 looks to be acting as solid resistance currently and without a major move higher across all risk assets, it is unlikely the FTSE100 will make new highs whilst there is so much negativity around the state of the economy with backlogs, supply chain disruptions, high energy costs and petrol stations running dry. This could be an ideal opportunity for the FTSE100 to fall back and collect buyers from a value area below. A sweep of the lows around 6790 to take some stops would be my preferred entry for a long currently. With the exception of if the major indices all started trading higher.
The UK FTSE 100 remains extremely bullish on the ActivTrader sentiment indicator, which is a contrarian indicator at the best of times.
In a speech delivered at the Society of Professional Economists Annual Dinner, Bank of England governor Bailey emphasized that an accurate answer "to the inflation pressure" should include a change in the central bank's interest rate, rather than quantitative easing.
"The rate of recovery has slowed over recent months, and that slowing is continuing," Bailey cautioned.
During the speech from the bank of England governor the pound gave back a few of its bullish moves from the start of the London open but looks set to close the session in the green.
This week is a very central bank focused with the ECB, Fed, and BoE all talking today.
European Central Bank (ECB) President Christine Lagarde emphasized inflation is expected to remain above its target for the rest of 2021 but noted the expectations on the matter are leaning towards "where we want them to be." The ECB President also said the central bank will take necessary measures to alleviate "[COVID-19] pandemic-caused price pressure" and maintain "favourable financial conditions for all economic players."
New orders for manufactured durable goods in the United States increased 1.8% month-on-month. The better-than-expected August figure rose $4.6 billion in August to $263.5 billion.
Transportation equipment led the increase, rising 5.5% and shipments of manufactured durable goods dropped by 0.5% to 256.1 billion. A rise in the durable goods data is not really what the Fed would have wanted to see if they are to maintain their transitory inflation stance.
The forex heatmap has become a bit more risk-on into the London close, having started off mixed. The Australian, New Zealand, and Canadian dollars have all picked up a bid.
Even with a higher US dollar today the commodities are still bullish for the day. Notably gold is up by 0.23% and Brent oil is up 1.88%. From the forex heat map, the Australian dollar is doing well into the London close and the AUDJPY which is a good risk-on leading indicator appears to be in an AB=CD pattern. A break above the swing high of 81.80 could open up prices to 82.70 and 85.00 quite easily.
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