Earnings season continues to be very bullish for the individual stocks, but investors are always wary ahead of the Tier 1 data event from the FOMC. We should get a directional move from tomorrow and if the Fed keeps the status-quo equities will be going higher again. The risk is that there is a tantrum at the mention of any type of taper.
The US stock market is subdued which is to be expected before the FOMC. The S&P500 especially has been in a tight range and has been leaning on the VWAP all session in the futures markets.
The US dollar has retraced today moves higher and is now resting at the daily 20 exponential moving average (ema) ahead of the FOMC. A second close at these levels will encourage the bears to test the 50 ema below, but the Feds monetary policy will be the catalyst for a directional move. Anything Hawkish, even a muttering of the word Hawk, will be dollar positive.
Other than the FOMC tonight the US Senate may pass the Infrastructure Bill. Senate Majority Leader Chuck Schumer indicated that a procedural vote on the infrastructure bill could come "as early as tonight." Republicans had blocked the passing of the $1.2 trillion infrastructure bill last week voting 49-51. However, since then, the GOP and Democrats have been in negotiations on the legislation. The size of the Bill is a bit of an unknown with Bloomberg reporting it could be $550bln, with others reporting an investment amount of $1trln. US House Speaker has warned that she could still scupper the deal though it has been said that President Biden is ready to sign off.
US EIA weekly crude production data showed a slight draw on production figures down -1.75%, Stocks were down below estimates to -4.089M which is bullish for WTI. Crude oil imports averaged 6.5 million barrels per day last week, down by 600,000 barrels compared to the previous week. Gasoline production averaged 9.8 million barrels per day.
Oil is doing well to keep above the daily 20-period ema and looks to be ready to break out of this 4-day range and get back above the $73 per barrel level.
Canadian CPI data out today showed a dip in inflation, which will no doubt please the Fed, who were the ones to start the narrative of inflation being transitory. The lower readings were off Mays 10-year high of 3.6% and now down to 3.1%
The daily USDCAD chart looks like it is preparing to drop below the rising trend line. The oil price stability will do a lot of good for the Canadian dollar. The down move in USDCAD will be reliant on the Fed being dovish in their near-term outlook for the US dollar.
US Retail Inventories came in below expectations, as did the Wholesale figures. The Advanced Goods Trade Balance number grew wider too -$91.21bln.
The British pound is reflecting the bullishness of the UK government who has made the decision to allow US and European travellers access to the UK without the need for quarantine if they are fully vaccinated. I had heard from personal acquaintances residing in France, that even though they were vaccinated, the fact that they were vaccinated in Europe had previously prevented them from traveling to the UK as the government had required them to quarantine. This new turn in policy should see a lot of people re-entering the UK on business and pleasure.
The positive tests are continuing to fall, and the deaths are not rising in any dramatic way. Fingers crossed the hospitalisations begin to fall. 71.15% of the adult population in the UK has now been double vaccinated.