FTSE 100 stocks opened flat. IT (-0.63%) and mining stocks (-0.33%) were among the leading losers at the open.
Energy stocks (-0.01%) stayed pat. The decline in energy prices could continue if the weekly EIA data misses the analysts’ expectations for the second consecutive week. According to the consensus, the US crude inventories may have contracted by 2.4 million barrels last week. Any disillusion could send the barrel of WTI crude below the $45 level and weigh on the energy stocks.
The pound could fail to give a hand to the FTSE stocks today. The GBPUSD extended gains to 1.2947 in Asia, as the UK’s services PMI came in line with estimates, somewhat reassuring traders after the slower growth in June manufacturing activity caused worry on Monday. Nonetheless, the GBP-bulls will certainly lack conviction to challenge the critical mid-term resistance at 1.3045 (major 38.2% retracement on post-Brexit sell-off) before Friday’s manufacturing and industrial production data.
Intermediate resistance is eyed at 1.2980/1.3000. The key short-term Fibonacci support to June 20 – 29 rise is seen at 1.2860 (major 38.2% retrace). ECB minutes could disenchant the hawks
The EURUSD extended the downside correction to 1.1312 on Wednesday. The intra-day recovery attempts have been capped by the 50-hour moving average (1.1347 at the time of writing).
The European Central Bank (ECB) meeting minutes will be released today and should help the EUR-bulls realizing that they may have gone well ahead of themselves following President Mario Draghi’s speech in Portugal last week. The ECB hawks could get disillusioned provided that the ECB’s meeting accounts will certainly maintain an emphasis on low inflation and provide little-to-no insight regarding the Quantitative Easing (QE) exit plans. Fed minutes gave rise to confusion
The Federal Reserve’s (Fed) June meeting minutes gave rise to confusion rather than providing a clearer insight on the FOMC’s next policy move. Minutes revealed increasing tensions at the heart of the committee regarding the shortfall in inflation and a lack of understanding regarding the financial conditions that have not tightened following the Fed rate hikes since December.
In summary, the US economy could absorb more rate tightening given that the conditions have not gotten loose enough to compromise the economic activity. Yet, the soft inflation could be a caveat to future rate hikes.
Regarding the balance sheet normalisation, the Fed minutes revealed that some members were in favour of announcing the start date within a 'couple of months’. The lack of further details on the size or the timing of the portfolio normalisation held investors back from taking fresh directional bets. The Dow Jones (-0.01%) and the S&P500 (+0.15%) were flat.
The Dow is called 24 points lower at the US market open.
The US dollar and the US yields were slightly higher in the aftermath of the Fed minutes. The probability of a December rate hike advanced to 53.5%. The US 10-year yields consolidated at 2.32-2.33%.
Gold shortly eased to a fresh two-month low, $1’217, then rebounded to $1'229. Stagnant US yields could attract dip-buyers for a further correction toward the $1’232. Resistance is eyed at this level. The short-term view is neutral. Aussie couldn’t benefit from solid trade data
The Aussie failed to gain positive momentum in Sydney, as the carry traders remained timid following the drop caused by the Fed minutes. The AUDUSD remained capped at 0.7611 in Sydney following the solid Australian trade data. The Australian trade surplus came in two-and-a-half times above estimates in May. Exports rose by 9.0% month-on-month from -8.0% printed a month earlier.
The AUDUSD eased to 0.7570, slightly above 0.7565 Fibonacci support (38.2% retrace on May – June rise) on Wednesday. Surpassing the 0.7620 resistance (minor 23.6% retracement on May – June rise) should encourage a re-test of the mid-term resistance zone 0.7750/0.7800. A break below the 0.7565 would suggest a short-term bearish reversal and an extension of losses to 0.7535 (100-day moving average) and 0.7520 (50% retrace).