Bank of Canada news

Today there are no major economic events than the result of the US CPI report. In addition, there will be important speeches by members of the FOMC and other central banks, including the Bank of England of Canada. RICS House Price Balance The Royal Institution of Chartered Surveyors (RICS) House Price Balance was published early in the day. The result showed that the index fell sharply below zero. The current reading is at -2%. A drop from 30% to 20% was forecast, but the current figure has turned out to be more drastic. This means that house prices in the designated area have dropped drastically. There has been a decline in prices since May, and the present one signifies a significant deepening of this trend. The first speeches The first speech of the day took place at 2:45 CET. The speaker was Michele Bullock serves as an Assistant Governor of the Reserve Bank of Australia (RBA). The next speech was from America. Fed member Christopher J. Waller spoke at 9:00 CET More speeches Ahead Today also representatives of European banks will take the floor. Andrea Maechler serves as Governing Board Member of the Swiss National Bank (SNB) is set to speak at 14:30 CET. At the same time will be speak Andrea Enria, Chair of Supervisory Board of the European Central Bank. Speech by representatives of the Bank of England is scheduled for 15:00 CET and 15:10 CET. Speakers in turn: David Ramsden, Deputy Governor of the Bank of England and Silvana Tenreyro, a member of the Monetary Policy Committee (MPC). Another Fed speech and one from the Bank of Canada are also planned. Bank of Canada Member Governor Tiff Macklem will speak at 6:50 PM CET. After the published reports, the following will speak: Federal Reserve Bank of Philadelphia President Patrick Harker, Federal Open Market Committee (FOMC) Member Mester and Federal Reserve Bank of Kansas City President Esther George. All speeches can provide valuable information about the future of monetary policy actions of the banks concerned. ECB Economic Bulletin At 11:00 CET the ECB published a Bulletin. The Economic Bulletin provides a comprehensive analysis of economic and monetary developments and interim updates on key indicators. Which can help investors to assess the future development of this region, as well as summarize the effectiveness of ECB's work South Africa Manufacturing Production Today, South Africa will also publish a report on Manufacturing Production. The shift from Y / Y of output produced by manufacturers is forecast to decline from 1.4% to -2.4%. A smaller index in this sector may indicate serious problems which the country's economy is struggling with, which will hinder the growth. Brazil CPI Brazil as well as the United States will publish inflation data. In South America's largest economy, Y/Y inflation is expected to decline from 7.17% to 6.34%. It is very likely as the CPI has been in a downward trend since July. Meanwhile, the CPI m/m is expected to increase from -0.29% to 0.48%. US CPI Expectations for US inflation are positive. Slightly dropping is expected. Read more: Inflation In The USA Has A Chance Of Cooler| FXMAG.COM Initial Jobless Claims The number of individuals who filed for unemployment insurance for the first time during the past week is expected to increase by 3K weekly report. The last reading was at 217K and it was a positive reading as the level persisted for another week and the forecasts will increase to 220K. At 15:30 CET it will turn out if the reading is positive this time. Summary: 2:01 CET RICS House Price Balance 2:45 CET South Africa Assist Gov Bullock Speaks 9:00 CET Fed Waller Speaks 11:00 CET ECB Economic Bulletin 13:00 CET RPA Manufacturing Production 14:00 CET Brazil CPI 14:30 CET SNB Gov Board Member Maechler Speaks 14:30 CET ECB's Enria Speaks 15:00 CET MPC Member Ramsden Speaks 15:10 CET MPC Member Tenreyro Speaks 15:30 CET US CPI 15:30 CET Initial Jobless Claims 16:00 CET FOMC Member Harker Speaks 18:50 CET BoC Gov Macklem Speaks 19:30 CET FOMC Member Mester Speaks 20:30 CET FOMC Member George Speaks Source: https://www.investing.com/economic-calendar/

USDCAD has witnessed barricades around 1.3350 amid positive market sentiment. Loonie bulls are supported by BOC’s hawkish commentary and a recovery in oil prices. Going forward, US long-term inflation report will be of utmost importance. The USDCAD pair has sensed selling pressure around 1.3350 in the Tokyo session after attempting a pullback move around 1.3300. The asset has turned sideways which indicates further inventory distribution, which will deliver more weakness in the counter. Meanwhile, the risk profile has strengthened further as S&P500 futures are extending their gains post a bumper rally on Thursday. The US dollar index (DXY) has refreshed its day’s low at 108.00 and is expected to display more downside ahead. A sheer decline in US inflation brought a bloodbath in US government bonds. The 10-year US Treasury yields dropped to 3.8% as chances from the CME FedWatch tool claim that 75 basis points (bps) rate hike is losing its stream now. Going forward, investors will focus on long-term US inflation expectations. The US economy is needed to pass this test too as an increment in the longer-term inflation indicator may spoil the party for risk-perceived assets. The Fed has been continuously reiterating that their long-term inflation expectations are well-anchored at around 2%. And, previously the economic data landed at 2.9%. Meanwhile, Loonie bulls are supported by a hawkish commentary from the Bank of Canada (BOC) Governor Tiff Macklem and a decent recovery in the oil prices. BOC Governor cited that “Canadians should expect even more rate hikes to come on top of six that have already happened this year,” during an interview with CBC News in the late New York session. He further added that layoffs will increase, the growth rate may come to zero in the next few quarters, and the central bank is fine with a mild recession as a price to bring down inflation to desired levels. Oil prices have rebounded as a decline in US inflation has trimmed the risk of recession. A slowdown in the rate hike pace by the Fed may bring a recovery in the scale of economic activities, which will eventually accelerate oil demand ahead.

Although markets are sluggish ahead of the upcoming holiday and long weekend in the US, stock indices are rising, while Treasury yields and dollar are falling. This is mainly due to the slightly less hawkish comments from Fed speakers this week, which is in contrast with the statement of St. Louis Fed President James Bullard last week that stressed that interest rates should reach at least 5-5.25%. San Francisco Fed chief Mary Daly also pointed out the need to be mindful of delays in the transmission of policy changes, and Atlanta Fed President Raphael Bostic stated that an additional tightening of 75-100p would be justified. So far, the rate forecast is stable. There is a 75% chance of a 50p increase, another 50p in February, and a peak to 5.06% by June. This is the benchmark that is currently guiding the markets. Today is packed with important statistics from the US. The first one will be the report on orders for durable goods, which will reflect the state of the industrial sector and consumer demand. Next is the consumer confidence indices from the University of Michigan, followed by the Fed minutes, where players will be looking for signals of a dovish reversal by the Fed. There are no signs that the dollar will resume rising. USD/CAD The slowing Canadian economy has not yet led to any noticeable deflationary pressure. The labor market is strong, with employment and wage growth being higher than that of the US. Retail sales also rose 1.5% m/m in October, which means that the Bank of Canada has more room to maneuver than the Fed and so far can implement a policy of containing inflation without looking at the rate of economic growth. Bank of Canada Governor Tiff Macklem will be giving a speech today, where markets expect to see a similar position to that of the Fed. However, this is likely to rule out strong moves. Regarding the loonie, the latest CFTC report showed that cumulative short positions declined by 402 million to -973 million, which means that there is a slow shift in sentiment. But overall the loonie remains bearish, with the settlement price pointing downwards and below the long-term average. It has a chance to strengthen. The possible rise of USD/CAD will end in the resistance area of 1.3500/30, followed by an attempt to test the local low of 1.3224. Chances for a deeper decline have become higher, with the target being the technical support at 1.30. USD/JPY Core CPI rose 3.6% y/y in October, 0.6% higher than that of September's. The data has risen for the 14th consecutive month, and the rate of growth is already higher than in 2014, when the sales tax was introduced to break out of the deflationary squeeze. By all indications, the time for deciding whether to end the stimulus programs is approaching. Last November 10, Prime Minister Fumio Kishida met with Bank of Japan Governor Haruhiko Kuroda, which resulted in new signals. Kuroda expressed the BoJ's position that a unilateral sharp depreciation of the yen is not welcome. This means that raising the yield ceiling for 10-year bonds from the current 0.25% is rejected, as is the ending of QQE. The rising inflation and ruling out of the BOJ of rate cuts for the time being sends a clear signal to investors who are selling the yen. As a result, the net short positions continued to decline, falling by 548 million to -5.909 billion during the reporting period. The settlement price is also reversed downward. For now, there is less reason for USD/JPY to resume its record rise as trading is highly likely to be sideways. There is also little chance that it will move beyond the technical resistance at 143.12, unless there are clearer signals from the Bank of Japan.     Relevance up to 07:00 2022-11-28 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/327882

The loonie's fate is in the hands of the Canadian central bank. There are increasing speculations that the Bank of Canada will slow the pace of its rate hike again at the next meeting, raising it only by 25 points. Such rumors of a dovish nature are not absolute, but very persistent. In particular, last week currency strategists of RBC Capital Markets voiced a corresponding forecast. Moreover, in their opinion, the central bank as a whole is already close to the end of the cycle of interest rate hikes. Judging by the pair's dynamics, the loonie is not in a hurry to draw conclusions, although such conversations have stopped the downtrend. Thus, in the first half of November, the bears tried to stay under the support level of 1.3260 (at that time it corresponded to the bottom lines of the Bollinger Bands indicator on the D1 and H4 time frames) several times. But after the bears impulsively broke through this limit, they got stuck near the level of 1.3230. The downward momentum faded, the price returned to its previous positions. After several unsuccessful attempts, the USD/CAD bears intercepted the initiative, but the controversial FOMC minutes did not allow them to launch a bullish counter-offensive. The pair finished the previous trading week at 1.3376. This week the pair's traders will focus not only on Friday's reports (the U.S. and Canada will release key labor market data on December 2). The main "test" for the loonie will be the Canadian economic growth data which will be released on Tuesday (November 29). According to preliminary projections, Canada's GDP will only grow by 1.5%. Even if the figure comes out at the forecasted level, we could talk about a significant slowdown in the growth rate of the economy (3.1% growth in the first quarter, and 3.3% in the second quarter). If the release is in the red zone, the Canadian dollar will be under considerable pressure. Because in this case the dovish rumors about further actions of the Bank of Canada will only strengthen. The official comments of the central bank's representatives so far have been contradictory. For example, Bank of Canada Governor Tiff Macklem has recently sounded very vague about how Canadians should be prepared for further rate hikes "in addition to the six that have already occurred this year". He lamented the tight labor market ("demand exceeds supply") and suggested that economic growth will be "minimal" over the next few quarters, until about the middle of next year. But he did not talk about the expected pace of rate hikes or the final point in the current cycle. At the same time as the senior deputy governor of the Bank of Canada Carolyn Rogers reported that the end of the cycle of tightening of monetary policy is "already close". She added, however, that "in the near future" there is still a need to raise interest rates to reduce inflation. I would like to point out that the Bank of Canada disappointed the USD/CAD bears at its last meeting in October: contrary to expectations of most experts, it did not raise the interest rate by 75 points, limiting itself to a 50-point hike. According to Macklem, the decision to slow the pace of policy tightening was made "amid growing fears of a deepening global economic downturn". He added that the central bank is trying to balance the risks of "under- and over-tightening". Macklem said in passing that the central bank was "nearing the end of its rate-hike cycle". And although he immediately clarified that the process of raising the rate has not yet been completed, the message itself was perceived by the market accordingly. Thus, this week's key releases (especially Canadian GDP growth) will decide the fate of the USD/CAD pair in the medium term, as the Bank of Canada will be guided by them on December 7. The slowdown in economic growth, the decline in the labor market amid the first signs of easing inflationary pressures in recent months will create an appropriate springboard for a further slowdown in the pace of monetary tightening by the central bank. These circumstances will also support the view that the Bank of Canada may be nearing the end of its current interest rate hike cycle. A 25-point rate hike at the December meeting would then be the "first swallow" announcing the unwinding of the hawkish course. The U.S. Federal Reserve, for its part, remains hawkish despite a planned slowdown in the pace of rate hikes. Moreover, some Fed officials, most notably Fed Chairman Jerome Powell, allow the possibility that the upper limit of the current cycle could exceed the 5% level. In particular, not so long ago James Bullard spoke about an indicative target of 5.25%. At the same time, many members of the Committee are actively voicing the message that inflation is still high (despite the first signs of slowing growth), and therefore the Fed has "a lot of work to do". All this suggests that the fundamental picture on the pair is gradually progressing in favor of the bullish scenario. If the major macroeconomic releases disappoint the loonie, the bulls may retest the nearest resistance level of 1.3450 (middle line of the Bollinger Bands indicator on the daily chart). Last week, the USD/CAD bulls already tried to take this price barrier by storm, but in vain. The next (main) resistance level is located at 1.3700 (the upper line of the Bollinger Bands on the same timeframe). However, it is too early to talk about reaching this target.     search   g_translate     Relevance up to 22:00 2022-11-28 UTC+00 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/328240

While macro factors continue to point at dollar resilience in our view, markets are fully buying into the Fed's pivot story, and have turned more structurally bearish on the dollar. Today's US payrolls may fall short of triggering an inversion of this trend, and USD downside risks persist. Keep an eye on Canadian numbers too ahead of next week's BoC meeting USD: Payrolls may not offer lifeline to the dollar With the DXY index correcting by more than 7% since the early November peak, and trading below 105.00 for the first time since July, it is now evident that markets have operated a structural shift towards a bearish dollar narrative. It’s also evident that such a shift is primarily due to expectations that the Fed is nearing the end of its tightening cycle. As explained by our US economist here, investors have called Fed Chair Jerome Powell’s higher-for-longer “bluff”, applying a larger weight on four indicators (CPI, PPI, import prices and yesterday’s PCE) that are pointing to abating price pressures. Fed Funds futures show peak rate expectations have dropped below 4.90%, after having priced in 5.25% less than a month ago. In our view, this radical shift in the market’s reaction function is premature, and may not be sustainable if the Fed increases the volume of its rate protest by sounding more stubbornly hawkish and the next inflation readings argue against a rapid descent in inflation. Incidentally, the global macro picture remains challenging – especially in Europe (where colder weather may push gas prices higher) and China – which also points to dollar resilience. However, we must acknowledge that markets are approaching today’s US payrolls with a strong bearish rhetoric on the dollar, and would likely jump on more risk-on (USD-negative) bets unless we see a convincingly strong payroll read. The consensus is centred around 200k, and we forecast 220k, with the unemployment rate staying at 3.7%. Those numbers would be quite respectable and indicate that the jobs market has indeed remained extremely tight, but while it may halt the dollar’s trend, it could fail to invert it. All in all, the balance of risks appears slightly tilted to the downside for the dollar today. A contraction in payrolls to 150k could generate a fresh round of large USD selling.    The yen should be exceptionally sensitive to the jobs figures today. The main risk for USD/JPY is that UST 10Y yields fail to find extra support at 3.50%: a further bond rally could force a break below the 134.50 200-d MA and unlock additional downside potential for USD/JPY. Still, markets may struggle to live with sub-3.50% rates for long in the current environment. Francesco Pesole EUR: Ignoring some warning signs EUR/USD moves should only be a function of the market’s reaction to US payrolls today. There is a non-negligible risk we explore 1.0600, with the pair not having any clear resistance levels until the 1.0780 6-month highs. We are, however, getting the feeling that markets are ignoring at least one warning sign for the euro. The recovery in business sentiment in the eurozone has undoubtedly been the result of lower gas prices, which have benefitted from mild weather in Europe. TTF contracts are trading at one-month highs now and may see further upside volatility in the near term as temperatures in northern Europe are expected to fall. A significant recovery in gas prices would likely make the recent rally in EUR/USD unsustainable. On the domestic side, we’ll see PPI numbers in the eurozone today, and hear from ECB president Christine Lagarde again. Yesterday, she sounded quite hawkish, signalling the need to keep inflation expectations anchored and implicitly leaving the door open for a 75bp move in December. Markets currently price in 55bp, and we are calling for a half-point hike. Francesco Pesole GBP: Cable nearing the peak? There are no domestic drivers for the pound today given a light data calendar and no Bank of England speakers. As discussed in the dollar section above, US payrolls may fail to invert the bearish dollar trend and GBP/USD may find a bit more support around 1.2300-1.2350. However, as for EUR/USD, cable is not factoring in the negative implications of rebounding gas prices and weak economic fundamentals. A return to 1.1500 around the turn of the year seems appropriate in our view. Francesco Pesole CAD: Jobs numbers quite key for BoC Payrolls will also be published in Canada today. We must note the employment series has been rather volatile, with the October figures coming in at a very strong 108k, which was entirely driven by full-time hiring. The consensus is centred around a very small 10k increase, and there is a high chance we could see a negative read. This would probably keep markets leaning in favour of a 25bp rate hike by the Bank of Canada next week (currently, 30bp are in the price). However, we see room for some upside surprise today in the jobs numbers and see a higher chance of another 50bp by the BoC. USD/CAD may soon re-test the 1.3290 100-d MA, but would require a more steady rebound in crude prices to keep the bearish momentum going. Francesco Pesole Read this article on THINK TagsPayrolls FX Dollar CAD Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Canadian dollar continues to show limited movement. In the European session, USD/CAD is almost unchanged at 1.3433. We are likely to see stronger movement in the North American session, as both the US and Canada release the November employment reports. US nonfarm payrolls expected to soften Today’s highlight is the US nonfarm employment report, with a consensus of 200,000 for November. This follows a 261,000 gain in October. The US employment market has been surprisingly resilient, considering the sharp rise in interest rates. The employment market has recently started to cool off, but unless today’s NFP release significantly underperforms, it won’t change the Fed’s view that it is still too early to tell if inflation is on its way down. Canada’s economy showed a massive gain in jobs in October, with 108,300. This was ten times the estimate of 10,000. November is expected to show a small gain of 5,000, with the employment rate projected to tick higher to 5.3%, up from 5.2%. Canada’s economy is generally performing well, and today’s employment report is the final key release prior to the Bank of Canada’s rate meeting on December 7th. The Bank of Canada has been aggressive in its tightening, in order to curb inflation which is running at a 6.9% clip. Like the Fed, the BoC is looking for signs that inflation has peaked, but until then we can expect oversize rate hikes to continue, with a 50-bp hike likely next week. Jerome Powell’s speech on Wednesday sent the US dollar sharply lower, as Powell’s comments were not as hawkish as feared. Powell said that more evidence was needed to show that inflation was falling, and reiterated that rates would likely rise higher than the Fed has projected in September. Still, investors chose to focus on Powell’s broad hint that the Fed would ease the pace of rates next week with a 50-bp move, after four straight hikes of 75 bp.   USD/CAD Technical USD/CAD has support at 1.3398 and 1.3300 There is resistance at 1.3478 and 1.3576 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The Bank of Canada's policy meeting will be the highlight of next week, and it's a very close call on whether to expect a 25bp or 50bp hike. For now, we favour the latter given robust third-quarter GDP data, ongoing elevated inflation readings and a tight jobs market In this article US: Recession fears remain elevated Canada: Favour 50bp however a very close call   Shutterstock US: Recession fears remain elevated We are rapidly heading towards the 14 December FOMC meeting where a 50bp interest rate hike looks likely after four consecutive 75bp moves. Nonetheless, the Federal Reserve will not be pleased with the recent sharp falls in Treasury yields and the dollar, which are loosening financial conditions and undermining the Fed’s efforts to beat inflation down. Consequently, we are likely to see strong messaging in the press conference and the accompanying forecast update that the rate rises are not finished and that the policy rate is set to stay high for a prolonged period of time. Markets are likely to remain sceptical given that recession fears remain elevated. Softening consumer confidence, weaker ISM services and a relatively subdued PPI report are unlikely to do the Fed many favours next week in this regard. Canada: Favour 50bp however a very close call In Canada, the highlight will be the central bank policy meeting for which both markets and economists are split down the middle on whether it will be a 25bp or 50bp hike. We favour the latter given a robust 3Q GDP outcome, the tight jobs market and the ongoing elevated inflation readings. But we acknowledge there are signs of softening in the economy. The housing market is looking vulnerable and Canadian households are more exposed to higher rates than elsewhere due to high borrowing levels so we recognise this is a very close call. We are getting very close to the peak though, which we think will be 4.5% in 1Q 2023. Key events in developed markets next week Refinitiv, ING This article is part of Our view on next week’s key events   View 3 articles TagsUS Canada Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

On Wednesday, two goposaraku may catch the attention of investors. The Bank of Canada will announce its monetary policy decisions and Japan will announce its GDP data. Bank Of Canada’s decision The Bank of Canada is expected to conclude a historic year marked by high inflation and aggressive monetary policy tightening with one more interest rate hike on Wednesday. In the wake of inflation soaring this year, the Bank of Canada has raised its key rate six times in a row since March in a race to curb inflation expectations before they are no longer anchored. After raising the main interest rate by a historical full percentage point in July, the Bank of Canada limited the scale of interest rate hikes. Forecasts call for the central bank to raise its key interest rate, which is currently 3.75 percent, by a quarter or a half of a percentage point. After raising its key rate by a historic full percentage point in July, the Bank of Canada has tapered the size of its rate hikes. In September, it announced a three-quarter percentage point rate hike, followed by half a percentage point in October. Now, the end of the rate hike cycle appears to be near. Canada’s economy grew more quickly than expected in the third quarter. Statistics Canada announced that Canada’s gross domestic product grew at an annualized rate of 2.9 per cent in the quarter. But preliminary October data released by Statistics Canada at the same time showed that the economy didn’t grow at all that month. That could give the Bank of Canada a reason to dial back its rate-raising campaign. That shows the Bank of Canada’s rate hikes are already having a significant impact on Canadian households ability to spend money. Japan GDP The world’s third biggest economy has struggled to motor on despite the recent lifting of Covid curbs, and has faced intensifying pressure from red-hot global inflation, sweeping interest rate increases worldwide and the Ukraine war. The unexpected decline reflects the impact of the Japanese currency on the economy and shows that the road to a sustainable post-pandemic recovery is long, with further risks clouding the outlook. Politicians will be hoping the government's latest economic stimulus package will help boost growth in the coming months. The reopening of Japan's borders also creates the prospect of a renewed increase in the spending of foreign tourists attracted by a country that has become much cheaper to travel around. The Bank of Japan maintains the view that the economy needs further support and that inflationary pressures require robust wage growth for price increases to be sustainable and beneficial to the economy. To ease the impact on households and businesses, Prime Minister Fumio Kishida last month proposed an economic stimulus package that includes help to cut energy costs and cash benefits for childcare. Japan's gross domestic product quarter-on-quarter in Q3 is expected to be the same as November's reading, i.e. it will stay at -0.3% Source: investing.com The economy fell in the third quarter for the first time in a year. GDP fell by 1.2% y/y. Typical suspects were the factors driving the decline in GDP - weak global growth and rising inflation, plus a weak yen. The GDP Y/Y result is now expected to reach a horizontal -1.1%. Source: investing.com, boc.com

USD/CAD is at a make or a break near the round-levels support of 1.3400. Upbeat US Nonfarm Payrolls have failed to provide a cushion to the US Dollar. The Bank of Canada is set to hike its interest rates by 50 bps consecutively for the second time. USD/CAD is expected to deliver more losses on a breakdown of the Ascending Triangle pattern. USD/CAD has witnessed a sheer downside after surrendering the critical support of 1.3442 in the Asian session. The loonie asset has dropped firmly below the round-level support of 1.3400 in the Tokyo session as a significant improvement in risk appetite has impacted the US Dollar. The US Dollar Index (DXY) has turned sideways after registering a fresh five-month low at 104.14. The USD Index is expected to extend its losses ahead as the risk-on impulse has strengthened dramatically. The US Dollar is facing immense pressure as the Federal Reserve (Fed) is shifting its mindset towards a slow rate hike culture to safeguard the United States economy from financial risks. S&P500 futures are displaying a lackluster performance as investors are awaiting the release of US ISM Services PMI data for fresh impetus. Meanwhile, the 10-year US Treasury yields have recovered firmly to near 3.53% on upbeat US Nonfarm Payrolls (NFP) data. Also, hawkish commentary from the Federal Reserve policymaker about interest rate peak has weakened US Treasury bonds. Chicago Fed President Charles Evans said on Friday, "We are probably going to have a slightly higher peak to Fed policy rate even as we slow pace of rate hikes," reported Reuters. Upbeat US Nonfarm Payrolls failed to provide cushion to the US Dollar Markets participants were expecting that only better-than-projected US labor market data could add life to the US Dollar. The Greenback has been facing immense pressure from investors after Federal Reserve policymakers started sounding ‘less hawkish’ on interest rate guidance. On the labor front, the United States economy added 261K fresh jobs against the projections of 200K. The jobless rate remained unchanged at 3.7%. The catalyst that could support the US Dollar ahead is the improvement in Average earnings data. The labor cost index has improved to 5.1%. Robust labor demand along with higher wage rates possess the capability of accelerating inflation as higher wages would force households to more spending on durables. This could refresh troubles for Federal Reserve chair Jerome Powell. Recovery in oil prices and upbeat Canadian employment data supported the Canadian Dollar The Canadian Dollar has been supported by a recovery in oil prices and better-than-projected payroll data.  Oil prices recovered sharply amid multiple tailwinds. Easing lockdown curbs in China and upbeats US Nonfarm Payrolls (NFP) data strengthened global economic projections. It is worth noting that Canada is a leading oil exporter to the United States economy and solid oil prices support the Canadian Dollar.   The Canadian economy added 10.1K jobs in November vs. the projections of 5K. Also, the Unemployment Rate has eased to 5.1% against the projections of 5.3%. This is going to delight the Bank of Canada (BOC) to announce a higher rate hike in its mission of bringing price stability. Bank of Canada is set to hike interest rates further Canada’s inflation rate remained unchanged in October at 6.9%, which indicates that the Bank of Canada is required to continue its policy tightening measures further to curtail inflationary pressures. In October’s monetary policy, Bank of Canada Governor Tiff Macklem hiked interest rates by 50 basis points (bps). As per the estimates from CIBC, the Canada central bank will continue its 50 bps rate hike regime. Analysts at CIBC point out that the Bank of Canada will increase rates by 50 bps on Wednesday, before pausing in 2023. A 50 bps rate hike by the Bank of Canada will accelerate the interest rate to 4.25%. This is going to widen the BOC-Fed policy divergence, which is impacting the Loonie asset for now. USD/CAD technical outlook USD/CAD is at a make or a break near the edge of the upward-sloping trendline of the Ascending Triangle chart pattern on a four-hour scale. The upward-sloping trendline of the chart pattern is placed from November 16 low at 1.3228 while the horizontal resistance is plotted from November 10 high at 1.3571. The Loonie asset has dropped below the 50-and 200-period Exponential Moving Averages (EMAs) at 1.3436 and 1.3459 respectively, which indicates that the short-term and long-term trend is bearish. Meanwhile, the Relative Strength Index (RSI) (14) is hovering around 40.00.  A breakdown of the same will trigger a bearish momentum.     search   g_translate    

USD/CAD struggles for a firm intraday direction and remains confined in a range on Tuesday. A modest uptick in crude oil prices underpins the Loonie and acts as a headwind for the pair. The downside remains cushioned amid the emergence of some buying around the US Dollar. The USD/CAD pair oscillates in a narrow band on Tuesday and consolidates the overnight strong rally of around 220 pips from sub-1.3400 levels. The pair holds steady near a one-week high through the early European session, with bulls now awaiting a sustained strength beyond the 1.3600 round-figure mark. Crude oil prices edge high and recover a part of the previous day's slump of nearly 6.5% amid hopes for a recovery in fuel demand amid the easing of COVID-19 curbs in China. This, in turn, underpins the commodity-linked Loonie and acts as a headwind for the USD/CAD pair. The downside, however, remains cushioned amid the emergence of some US Dollar buying, bolstered by bets that the Federal Reserve may raise interest rates more than projected. The Institute for Supply Management (ISM) reported that the US Service PMI unexpectedly increased to 56.5 in November from 54.4 in the previous month. This comes on the back of the upbeat US monthly jobs report released on Friday and suggests that the economy remained resilient despite rising borrowing costs. The incoming strong US macro data validates Fed Chair Jerome Powell's forecast that the peak interest rate will be higher than expected. The mixed fundamental backdrop, meanwhile, warrants some caution before placing aggressive directional bets around the USD/CAD pair. Traders might also prefer to move to the sidelines and await the latest monetary policy update by the Bank of Canada (BoC) on Wednesday. In the meantime, traders on Tuesday might take cues from the release of Trade Balance data from the US and Canada. Apart from this, the USD and oil price dynamics should provide some impetus.

Elevated inflation, robust economic activity and a super-tight jobs market argue for another 50bp rate hike. However, recession fears are rising and policy is in restrictive territory, meaning that the top in rates looks close. Markets are pricing in only 32bp at the moment, so a 50bp would likely send CAD higher, but the FX reaction should be short-lived. The Bank of Canada hiked rates by 100bp in July with more expected by year-end A very close call The Bank of Canada has raised interest rates a cumulative 350bp since the first move in early March and we look for a further 50bp hike on Wednesday. 3Q GDP came in at 2.9% annualized, nearly double the consensus forecast rate, while inflation at 6.9% continues to run at more than three times the 2% target. Then we had last Friday’s 108,300 increase in Canadian employment, meaning that there are now 523,000 more Canadians in work than there were before the pandemic struck in February 2020. Inflation is lower in Canada than in the US Source: Refinitiv, ING   At its latest meeting the BoC acknowledged that some effects of tighter policy were being seen, citing softer housing while weak external demand is also impacting the Canadian economy. But with demand continuing to outstrip the economy’s supply capacity, inflation pressures show little sign of softening as quickly as the Bank of Canada would like. They also warned that “price pressures remain broadly based, with two-thirds of CPI components increasing more than 5% over the past year”. That story has not changed and with central banks globally warning that the risk of doing too little to fight inflation outweighs the risk of doing too much the BoC are likely to signal further tightening remains possible.   For now we expect a final 25bp rate hike in early 2023, but this is not a strong call. The housing market is particularly vulnerable, with the mortgage market structure meaning Canadians are more impacted by rising rates than American home owners. We are also seeing signs in Europe and the US that inflation is showing more signs of softening and if replicated in Canada this may argue against that final hike. FX: Not many long-term implications for CAD Markets are pricing in only 32bp for tomorrow’s BoC announcement, so a 50bp rate hike would be received as a hawkish surprise and likely trigger a CAD rally. However, we expect the post-meeting FX impact to be rather short-lived, as external factors remain more important for CAD. The recent fragility in risk sentiment shows that downside risks for all high-beta currencies remain elevated. At the same time, CAD is considerably less directly exposed to swings in China’s sentiment compared to many other pro-cyclical currencies. The tightening supply picture in the crude market does leave room for a recovery in prices and this should be a positive development for the loonie. We think USD/CAD could end the year around 1.37 as the USD strengthening is partly offset by a potential recovery in oil prices.  Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Heightened fear about a higher-for-longer Fed tightening cycle, recession warnings from top U.S. bankers, and crude oil falling into new lows weighed on U.S. equities and saw bond yields lower. The momentum of China reopening trade seems to have somewhat exhausted despite more signs of easing Covid restrictions coming out from China. What’s happening in markets? S&P 500 (US500.I) pared all its gains since Powell’s Brookings Institution speech   Declining for the fourth day in a row, the S&P500 pared all its gains since Fed Chair Powell delivered a dovish-leaning speech at the Brookings Institution at the end of November. The solid average hourly earnings and the ISM Services Index data released since Powell’s speech have heightened once again concerns about more rate hikes to come. Two consecutive days of sharp falls in the crude oil price to USD74 weighed on energy stocks. Warnings about weakness in the U.S. economy from CEOs of Goldman Sachs, Bank of America, and JPMorgan Chase added fuel to the recession fear. S&P 500 dropped 1.4% and Nasdaq 100 tumbled 2% on Tuesday. All sectors except utilities within the S&P 500 declined, with energy, communication services, and information technology the biggest losers. Meta (META:xnas) tumbled 6.8& after reports saying the EU is targeting the company’s advertising business model. Apple (APPL:xnas) declined 2.5% as the company said it is scaling back its self-driving EV plans. NRG Energy (NRG:xnys) plunged 15.1% after the power plant operator announced to acquire  Vivint Smart Home. Textron (TXT:xnys) gained 5.3% on winning a helicopter contract from the U.S. Army. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) lower as equities retreated As equities declined on the prospects of a higher-for-longer Fed tightening cycle after the recent strong U.S. data, treasuries were well bid with yields falling 2bps to 4bps across the yield curve on Tuesday. The buying came in particularly strongly on the 10-year and 30-year segments. Large curve flatter trades, mainly selling the 5-year versus buying the 10-year took place in the futures pit. The 2-year yield fell 2bps to 4.37% while the 10-year was 4bps richer at 3.53%. Hong Kong’s Hang Seng (HIZ2) pulled back on overseas market weakness; China’s CSI300 (03188:xhkg) Hong Kong stocks pulled back following overnight weakness in the U.S. market and renewed concerns about the Fed’s ability to downshift its pace of hiking interest rates after recent data indicating strength in wage inflation and business activities in the U.S. services sector. The China reopening trade has shown signs of exhaustion as market reactions to the announcement from Beijing to ease PCR test requirements were muted. Hang Seng Index edged down 0.4%. Tech stocks retreated. Hang Seng TECH Index lost 1.8%. Alibaba (09988:xhkg) dropped by 3% and Bilibili (09626:xhkg) plunged by 7%. Ping An Health and Technology pulled back after two days of strong advance, falling 8.9%. Leading EV names dropped by around 2%-6% as profit-taking emerged after recent rallies. Chinese property developers and Macao casino operators were among the top gainers. Logan (03380) soared 32%. In A-shares, CSI 300 gained 0.5%, with the consumer staple, technology, and consumer discretionary sectors outperforming. FX: EURUSD back below 1.05; USDJPY at 137 The US dollar maintained a slight bid tone on Tuesday even as a tech rout spread through equities and recession concerns were highlighted by several bank chiefs. There was little data of note, only October US trade seeing a wider deficit but still better-than-expected. EURUSD fell to sub-1.05 levels as ECB’s Lane said that the bulk of work has been done by the ECB and inflation peak may be near. President Lagarde speaks on Thursday, after which focus turns to the December meeting. Meanwhile USDJPY hovered around 137 with BoJ Governor Kuroda remaining dovish as he said that monetary easing will continue even if wages rise 3%. Crude oil (CLZ2 & LCOF3) plummets to its lowest levels in 2022 Oil prices dipped to their lowest levels since the start of the year as concerns of weaker economic growth offset ongoing supply side issues. Equity markets are now starting to price in recession concerns, as seen from a negative reaction to last week’s ISM manufacturing. Yesterday, a number of bank chiefs hinted at recession possibilities, and there were also reports of further job cuts from the likes of Morgan Stanley and even consumer brands like PepsiCo. However, China reopening continues to gather pace but it will continue to be a slow exit from Zero Covid. The Energy Information Administration released its latest market outlook, with a contraction in US economic activity in Q2 2022 and Q1 2023 weighing on demand. It also raised its forecast for US supply to 12.34mb/d in 2023. Meanwhile, Saudi Arabia also lowered oil prices for its crude into Asia and Europe, suggesting demand weakness concerns. Australia’s iron ore kings roar back to six-month highs; Australian economic growth data ahead The Australian benchmark index, the ASX200 (ASXSP200.1) opened 0.7% lower following Wall Street. However, as the iron ore price advanced, iron ore players are testing six-month highs; Fortescue Metals, Champion Iron, BHP, and RIO shares are all higher, testing new six-month highs. Metal companies such as BlueScope Steel and Sims are also higher. In terms of economic news out today, Australian economic growth is due to be released; expected to show an improvement in the gross domestic product (GPD) in the third quarter of 2022. GPD is expected to show growth rose from 3.6% YoY, to 6.3% YoY. We will be watching the Aussie dollar and how it reacts, which a knee-jerk rally up likely if growth is hotter than expected. Also, remember services are the biggest drivers of GPD in Australia; so watch travel stocks, such as Flight Centre, Corporate Travel Management, Webjet, Auckland International Airport, and Qantas. Also keep an eye on stocks affiliated with dining out such as Endeavour Group, Treasury Wine, and Metcash which owns Celebrations, IGA Liquor, and Bottle-O.   What to consider? Saxo’s Outrageous Predictions 2023 are now out! Saxo's ten Outrageous Predictions for 2023 are now out. The theme revolves around a War Economy, not just in military terms, but in economic, political, and social terms as well. Gone are the days when low interest rates could foster dreams of a harmonious world built on renewable energy, equality, and independent central banks. In 2023, world economies will shift into war economy mode, where sovereign economic gains and self-reliance trump globalisation. Some of the calls include Gold rocketing to $3000, the UK holding an UnBrexit referendum, or even a new reserve currency to replace the dollar. Remember, it’s not about being right. The predictions focus on a series of unlikely but underappreciated events which, if they were to occur, could send shockwaves across financial markets. The APAC strats team, together with our CIO Steen Jakobsen, will be hosting a webinar on December 14 to discuss these predictions. The signup link can be found here. Real wages shrank 2.6% Y/Y in Japan In October, the real cash earnings of Japanese workers declined 2.6% Y/Y (consensus -2.2%; Sep: -1.2% revised), the biggest fall in seven years. Nominal wages slowed to a growth of 1.8% Y/Y (consensus: 2.0%, Sep: 2.1%). Household spending growth slowed to 1.2% Y/Y in October from 2.3% in September. Beijing relaxed PCR test requirements Beijing, joining other cities, announced to lift the requirement for negative PCR test results when entering public venues or taking public transport. Australia’s central bank, the RBA says inflation will continue to cause more pain, validating its hiking path Australia’s central bank, the RBA increased the cash rate by 25bps in the eighth consecutive rate hike, taking the cash rate from 2.85% to 3.1% as expected. However, the RBA toed the line staying on a dovish path, saying the full effects of rates hikes since May have not been felt yet by the economy, while also declaring employment growth had slowed. As such the RBA said its path to achieving a soft landing is narrow, meaning it might be hard to avoid a recession. This also follows news out of Australia today that its current account fell into a deficit for the first time since 2019. The RBA warned it sees inflation increasing over the months ahead, particularly in wages. It conceded inflation is damaging the economy and making life more difficult for people, which traders took as an indication the bank won't pause rate hikes any time soon. China’s Xi is visiting Saudi Arabia from Dec 7 to 9 China President Xi Jinping is expected to fly to Saudi Arabia on Dec 7 to attend a China-Arab summit on Friday. Bank of Canada rate decision due today The Bank of Canada statement is due today and consensus expects another 50bps rate hike taking the overnight rate to 4.25%. However, market pricing points towards a smaller 25bps rate hike. The path of interest rates from here is also very cloudy, with a pause likely coming in early 2023. Therefore, any guidance on rate path will be key to watch for CAD which is lately getting hurt due to the lower oil prices. U.S. leading bank CEOs warned about the possibility of a U.S. recession Jamie Dimon, CEO of JPMorgan Chase, said in a CNBC interview that he saw the possibility of a “mild to hard recession” in the U.S. next year. Likewise, David Solomon, Chairman/CEO of Goldman Sachs, said there is a “very reasonable possibility” that the U.S. enters a recession in 2023. Bank of America’s CEO Brian Moynihan said consumer spending is slowing and the bank is slowing its hiring. EU is targeting Meta’s advertising business model EU privacy regulators are reportedly ruling that Meta, the owner of Facebook should not require Facebook users to agree to personalized ads based on their online activity. The move restraints Facebook’s ability to present targeted ads to users. Apple is postponing its self-driving EV launch to 2026 Apple is said to scale back its self-driving EV plans and is postponing the target launch date to 2026 due to technological hurdles in a self-driving EV without a steering wheel or pedals. Geely is taking its ride-hailing firm to do an IPO in Hong Kong Chinese auto maker Geely is said to be talking to investment banks for a Hong Kong IPO of its Cao Cao Mobility ride-hailing arm. The US and EU are weighing new tariffs on Chinese steel and aluminium According to Bloomberg, citing people familiar with the matter, the U.S. and European Union are considering new tariffs on Chinese steel and aluminum products to reduce global overcapacity and  carbon emissions.   For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Recession concerns hitting markets, WTI at year-lows – 7 December 2022 | Saxo Group (home.saxo)

Equities extend the downside recovery, following the failure to clear an important year-to-date resistance last week, which was the S&P500’s year-to-date descending channel top at around the 4080 level. technology stocks were sold faster than the others, but energy stocks suffered on falling oil prices. Oil The barrel of Brent crude trades below the $80 mark for the first time since the very beginning of this year, and the barrel of American crude came a couple of cents below the late November dip. Even the API data – which showed a 6.4-mio-barrel drop in US oil inventories couldn’t bring the oil bulls in. What’s good about the falling oil prices is that the Russian oil cap becomes somehow meaningless at $60pb. But the fact that the G7, the EU and Australia agreed to cap the price of Russian oil gave a strong message to the rest of the oil producers: they could do the same with OPEC and that would be a big blow for oil prices in the long run.Elsewhere, TSM will invest $40bn in two Arizona plants, and Europeans are frustrated to see the US chipmakers get so much help that they are preparing to do the same! Watch the full episode to find out more! 0:00 Intro 0:34 Equities extend downside correction 1:30 Oil slumps on higher EIA forecast for US oil production 3:52 A ‘buyers’ league’ would be a disaster for OPEC 5:35 US banks’ CEOs see gloom in 2023 6:52 Governments back chip investments 9:10 Hawkish BoC hike may not boost Loonie Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Crude #oil #cap #OPEC #energy #crisis #recession #fear #market #selloff #USD #EUR #Bitcoin #TSM #chipmakers #chip #stocks #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr  _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  Today we note the US market continuing lower and closing near pivotal level, this time with no notable catalyst driving the selling, as US treasury yields actually dropped at the long end of the US yield curve, taking the yield curve inversion to a new cycle- and multi-decade extreme. It also looks like the easing of China's Covid policy is running out of steam as a factor. In commodities, we look at crude oil plunging to new lows despite alarming supply fundamentals, and wheat prices also on the defensive on unusually elevate export activity for the season. A look at today's Bank of Canada meeting, TSMC making even larger investments in the US, Apple postponing its EV plans and much more on today's pod, which features Peter Garnry on equities, Ole S Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source : Podcast: US equity market limping at pivotal levels after sell-off extends | Saxo Group (home.saxo)

On Wednesday, the Bank of Canada announced the results of its final meeting this year. The Canadian central bank has raised its overnight rate by 50 basis points, lamented the high rate of inflation and praised the national economy's growth dynamics in the third quarter. However, despite such unipolar signals, the Canadian dollar did not benefit from the December meeting. On the contrary, the loonie weakened noticeably against the greenback: the USD/CAD pair reached its monthly high at 1.3650. What were the bulls unhappy with? In fact, it's a rare case, when the rally is not caused by strengthening of the greenback - in this case, the loonie is just getting weaker. The US dollar index is still under pressure (ahead of the December FOMC meeting), so the uptrend of USD/CAD only happened because the loonie's pessimistic. As is often the case, "the devil is in the details". For example, behind the loud statement that inflation in Canada is still unacceptably high is an inherently contradictory clarification. The central bank pointed out that three-month rates of change in core inflation have come down - and according to central bank economists, this is "an early indicator that price pressures may be losing momentum." This means that the central bank saw in the latest releases the first signs of slowing inflationary growth, with all the ensuing consequences. Recall that the core CPI (which excludes volatile food and energy prices), on an annualized basis, fell to 5.8% in Canada from the previous 6%. Most experts had expected an increase to 6.3% instead of a decline. However, perhaps in other circumstances market participants would have ignored the central bank's remark about the slowdown in inflation growth. But this thesis was voiced in conjunction with another message, the essence of which boils down to the readiness of the Canadian central bank to suspend the process of tightening monetary policy. On the one hand, Bank of Canada Governor Tiff Macklem said that they will maintain a hawkish course, given the high level of inflation in the country. But on the other hand, the text of the Bank of Canada's accompanying statement voiced the opposite signals. To be more precise, in the published statement the probability of further tightening of the monetary policy is already in question. The document states that the Governing Council "continues to assess how tighter monetary policy is working to slow demand, how supply challenges are resolving, and how inflation and inflation expectations are responding." I suppose that the wording was the direct reason why the Canadian dollar weakened in the whole market. After all, this is not the first time the message has been voiced recently. In particular, the deputy head of the Canadian Central Bank Carolyn Rogers announced recently that the end of the tightening cycle of the monetary policy is "already near". And Macklem himself has repeatedly gestured that the central bank is "approaching the end of its rate hike campaign". Therefore, the wording of the final communique became a kind of "quintessence" of rhetoric of the Bank of Canada representatives. By the way, the 50-point rate hike in this context should not be considered as a hawkish factor. Do recall that some analysts (in particular, RBC Capital Markets) before the meeting said that the Canadian central bank can slow down the rate hike to 25 points, acting, so to speak, "quietly" in the beginning of 2023. But the central bank, on the one hand, decided to keep the 50-point pace, but on the other hand, de facto allowed a pause in the rate hike. Such a strategy was interpreted by the market as a factor that is not in favor of the loonie, due to which the Canadian currency plunged throughout the market. Bulls need to overcome the resistance level of 1.3690 (in this price point, the upper line of the Bollinger Bands indicator coincides with the upper limit of the Kumo cloud on the D1 timeframe) in order to develop an uptrend. The Bank of Canada did not become an ally for the loonie, but now it is important that the Fed does not become an "enemy" of the greenback. In other words - prospects of developing the uptrend now depend on the Federal Reserve. We can suppose that the results of the December meeting of the Bank of Canada will allow the bulls to test the resistance level of 1.3690, and probably, the area of the 37th figure. But the bulls need the support of the US central bank for a large-scale (and most importantly, stable) bullish attack. Thus, taking into account forthcoming events in the US (release of the data on inflation growth in the US and the Fed's December meeting), it is impossible to speak about bullish prospects for USD/CAD now. In the current conditions, "safe longs" should be in the range of 1.3690-1.3700. The nearest support level is 1.3550 (average Bollinger Bands line on H4 and Tenkan-sen line on D1).   Relevance up to 00:00 2022-12-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329237

The bond rally continues and finds more confirmation in the Bank of Canada seeing itself close to the end of its hiking cycle. Against that backdrop the Fed's narrative becomes increasingly hard to sell, but it is especially the European Central Bank that finds itself in an uncomfortable position More competition to the Fed's narrative 10y USTs rallied further towards 3.40% with the 2s10s curve touching -85bp. Some have pointed to the third quarter US unit labor costs being revised to 2.4% from 3.5%, but our economist would downplay the significance of the data. It seems more that the market is not done squaring positions into year-end. At the same time the market is increasingly adding to the rate cut expectations in the second half of 2023, further inverting this part of the money market curve. This goes directly against the messaging of the Fed, which has sought to convey the message that key interest rates will stay elevated for some time. And the northern neighbour is making it even more difficult to sell this narrative. Yesterday the Bank of Canada hiked by 50bp, the second 50bp in a row after previously hiking by 100bp and 75bp. While still a larger hike than some had expected, it was the forward-looking message that proved more market moving. Bank of Canada is "considering whether the policy rate needs to rise further" The Bank’s accompanying statement pointed to "growing evidence that tighter monetary policy is restraining domestic demand", citing softer consumer spending growth and a weakening housing market. The expectation is that "growth will essentially stall through the end of this year and the first half of next year". And as for the key topic, which is inflation, it suggests "price pressures may be losing momentum". All this led the Canadian central bank to suggest that it is now very close to the end of the tightening cycle. The dovish shift was crystallized in the Bank now "considering whether the policy rate needs to rise further" whereas it had expected ”that the policy interest rate will need to rise further" at the October meeting. The dovish mood in financial markets has mostly benefitted the 5Y part of the curve Source: Refinitiv, ING ECB position becoming more uncomfortable EUR rates are largely caught in the global current, pulling 10Y Bund yields below 1.80%. The 1y1y ESTR OIS swap is close to 2.5% again the lower end of its trading range since mid-September. For the ECB this premature loosening of financial conditions seems to become increasingly uncomfortable as well, especially given that it is less advanced into the hiking cycle than its peers. The ECB consumer inflation expectations survey still pointed higher Isabel Schnabel’s speech from late November where she saw little room to slow down the pace of interest rate adjustments still reverberates. Only yesterday the ECB’s consumer inflation expectations survey, one of the measures Schnabel also referenced, pointed to an increase of inflation expectations over the next 12 months. Median expectations for three years ahead were stable at an elevated 3%, though the mean still climbed higher. Chief Economist Lane in his latest interview sounded less convinced about having seen the peak in inflation just yet, and only yesterday Slovakia’s Kazimir – admittedly not the most influential ECB member – stated clearly that 10% inflation was no reason to slow hikes. Markets still think otherwise, having priced the December forward at around 52bp, which reflects only a minor chance for another 75bp hike next week. Measures of future inflation in the Eurozone are not quite back to the ECB's target Source: Refinitiv, ING Today's events and market view There is little data for markets to trade on today with only the US Initial jobless claims of note. Over in the eurozone some ECB official are scheduled to speak, including Lagarde, but given that we have already entered the pre-meeting quiet period we do not expect to hear much on monetary policy.   No government bond supply is scheduled for today. The lack of supply and event points to a continued drift lower in yields. So is the evident bias in market positoning since October. 10Y Treasury yields broke through the key 3.5% level to the downside yesterday although chance of profit-taking on short-term longs increases as next week's US CPI and policy meetings approach. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  U.S. bond yields plunged on a softer revision of the Unit Labor Cost, WSJ Nick Timiraos’ article on decelerating in housing cost inflation, and Putin’s nuclear threat. U.S. equities were modestly lower on their fifth day of decline. Profit-taking selling in Hong Kong and China stocks after the release of the Politburo meeting readout and 10 additional measures to ease pandemic control policy saw the Hang Seng Index down 3.2% What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) skid again. Campbell Soup boils up S&P 500 fell for the fifth session and briefly breached its 100-day moving average again before bouncing off the low to close slightly above it. S&P 500 was 0.2% lower and Nasdaq 100 was down 0.5% on Wednesday. Eight of the 11 sectors within the S&P 500 declined, with healthcare, consumer staples, and real estate the only sectors advancing. Market sentiment was depressed by the recessionary signals sent out from the bond markets and Putin’s warning of the rising threat of nuclear war. Tesla (TSLA:xnas) dropped 3.2% on reports of cutting prices in China and the U.S. markets. Campbell Soup (CPB:xnys) surged 6% after reporting earnings beating analyst estimates due to strong gross margins. State Street (STT:xnys) jumped 8.2% after announcing a share buyback. US treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) fell on a softer unit labor cost print, Putin’s nuclear threat and WSJ Nick Timiraos article U.S. treasuries were well bid throughout the session, with yields falling by around 11bps across most parts of the curve. The 2-year was 11bps richer to settle at 4.26% and the 10-year yield fell 11bps to 3.42%. The Q3 unit labor cost was revised down to 2.4% from the previously reported 3.5%. The softer data provided somewhat of a relief to investors who had been concerned about wage inflation might slow the Fed from downshifting rate hikes in 2023. In addition, in his latest article, the Wall Street Journal’s Nick Timiraos, citing street economists, said the deceleration in rental increases in new apartment leases may mean “the end is in sight for one of the biggest sources of inflation” that Fed Chair Powell specifically pointed out as being important to watch in his recent Brookings Institution speech. Adding fuel to the rally in treasuries was the flight to safety bids following Putin’s threat of nuclear war. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) sold the new Covid-19 containment measures news Buy the rumor and sell the news in play yesterday in the Hong Kong and mainland China equity markets. After a lackluster morning session, Hong Kong and mainland China stocks rallied in the early afternoon after investors took note of the no mention of dynamic zero-Covid and a more balanced tone towards economic growth in the readout of the politburo meeting and the release by the Chinese health authorities of additional 10-measures to further fine-tune and ease China’s Covid-19 containment strategy. The markets nonetheless reversed soon afterward and tanked 3.2% as “sell the news” profit-taking came in. Southbound monies had a net outflow from Hong Kong back to the mainland of over HKD5 billion, of which HKD1.9 billion was selling the Tracker Fund of Hong Kong (02800:xhkg). Chinese developers were among the biggest losers following the second share placement in a month from Country Garden (02007:xhkg), with China Resources Land (01109:xhkg) down 5.3%, COLI (00688:xhkg) down 6.2%, Longfor (00960:xhkg) down 12.1%, and Country Garden down 15.5%. Selling was also aggressive in mega-tech names and saw Alibaba (09988:xhkg) down 5.3%, Tencent (00700:xhkg) down 3.7%, and Meituan (03690:xhkg) down 3.6%. The three leading Chinese airlines listed in Hong Kong, however, outperformed and gained by 2% to 6%. In economic data, China’s exports in November declined 8.7% (in USD terms) in November from a year ago, weaker than expectations. CSI 300 was down 0.3%. Australia’s share market holds six month highs, gold stocks charge, Australia's trade surplus beats expectations The Australian benchmark index, the ASX200 (ASXSP200.1) opened 0.3% on Thursday, but holds six month high territory. As for the best performers in the ASX200, clean metal small cap miner Chalice (CHN) rose 12% after drilling confirmed it found new sulphide minerals in Western Australia. CHN would typically be classed as higher risk company as its doesn’t earn income, which is why its share are suffering while interest rates are rising. CHN shares are down 35% YTD. Gold stocks are looking interesting as recessionary calls get louder- gold generally outperforms in a recession. Evolution Mining (EVN) shares are up 5%, continuing to rally it in uptrend and have gained 61%, moving EVN shares up off their 5-year low. In the larger end of town, BHP shares broke higher but profit taking turned its break higher into loss. BHP shares are up 26% this year, with the major miner, along with RIO and Fortescue doing well of late after the iron ore (SCOA) price picked up 7% this month, with China easing restrictions. On the downside, engineering company Downer (DOW) plunged 31% to $3.31, which is its lowest level since April 2020 after Downer downgrading its outlook and flagging irregularities in utilities business. The AUDUSD slides on AU exports falling more in October, and imports sinking; supporting RBA remaining dovish On the economic news front, Australia’s trade surplus fell in October, but less than expected. This reflects that Australia is earning less income as demand for commodities has fallen from its peak, ahead peak energy season and China easing restrictions. The Australian surplus fell from $12.4 billion to $12.2 billion (when the market expected the surplus to fall to $12 billion flat). In October, exports surprisingly fell 1%, vs market expectations they'd rise 1%, while imports fell 1%. This supports the RBA keeping rates low, as such after the data was released, the AUDUSD immediately fell. FX: USD weakens on lower yields The US dollar weakness extended further on Wednesday as US 10-year yields plunged to fresh lows since mid-September breaking below the 3.50% support. There were some concerns on wage pressures as US Q3 Unit Labor Costs were revised lower to 2.4% (prev. 3.5%, exp. 3.1%), which pushed back on some of the wage-price spiral fears while still remaining elevated. GBPUSD pushed above 1.22 and EURGBP is testing the 0.86 handle. NZDUSD came back in sight of 0.64 even as AUDNZD recovered from 1.0532 lows printed after Australian Q3 GDP data came in beneath expectations. The Japanese yen gained on lower US yields, but gains were restrained by commentary from BoJ's Nakamura who reiterated Governor Kuroda, noting it is premature to tweak policy now as service prices remain low and he is not sure now is the right timing to conduct a review of the policy framework. Crude oil (CLZ2 & LCOF3) prices pressured by demand concerns Oil posted its fourth straight day of losses, erasing all of the gains of this year. While demand concerns are rising with the aggressive global tightening seen this year, supply side has remained volatile. US crude inventories fell by a less-than-expected 5.19 million barrels last week, as exports didn't repeat their prior performance. Distillate stocks rose by more than 6 million barrels and gasoline supplies climbed by 5.3 million barrels amid weak demand. Still, the bigger factor is that the short-term technical traders appear to be in control of the oil market currently. WTI plunged to lows of $72/barrel while Brent went to sub-$78 levels. Gold (XAUUSD) higher on China’s central bank purchases Gold’s safe-haven appeal has come back in focus with China joining the long list of other countries who have been strong buyers of bullion. The PBoC added 32 tons to its holdings in November, the first increase in more than three years. This brings it total gold reserves to 1980 tons. This is also potentially a step towards our outrageous prediction on a new reserve asset, as speculations mount that China, Russia and several other countries could be looking to move away from USD reserves. Gold prices gained over 1%, and helped drag the rest of the sector higher as well. Industrial metals like Copper and Nickel also pushed higher due to the weaker US dollar.   What to consider? Putin’s nuclear threat sours risk sentiment Following drone attacks on three Russian air bases that Moscow blamed on Kyiv, Putin has now warned that the Ukraine conflict could go on for a long time and nuclear tensions have also risen because of it. He also did not clearly stay away from pledging that Russia will not be the first to use nuclear weapons, and rather said that Russia will defend itself and its allies “with all the means we have if necessary. The irresponsible talks on nuclear weapons is a sign that Putin is getting desperate with Ukraine gaining military grounds, and his actions will be key to watch. Risk sentiment likely to be on the back foot today, and food prices as well Uranium will be in focus. Japan Q3 GDP continues to show contraction The final print of Japan’s Q3 GDP was released this morning and it was slightly better than the flash estimate of -1.2%, but still showed a contraction of -0.8% annualized sa q/q. Stronger than expected growth in exports and a build of inventories led to the upward revision, private consumption was slower than previously expected at just 0.1% q/q. Lower oil prices and the return of inbound tourists may further aid the Japanese economy, but slowdown in global demand will continue to underpin a weakness in exports. Eurozone Q3 GDP grew more than initially forecasted The final estimate of the Eurozone Q3 GDP shows an increase to 0.3% versus prior 0.2%. Growth fixed capital formation was the biggest contributor to growth (0.8 percentage point) behind household spending (0.4 percentage point). The contribution from government expenditure was negligible on the period. This shows that households and companies are rather resilient despite the negative economic environment and inflation across the board. Based on the latest PMI for November (the last estimate was published on Monday), we expect a small GDP contraction in the eurozone in Q4. This would be marginal (probably minus 0.1%). Bank of Canada hiked 50bps and signalled the next move will be data dependent Bank of Canada hiked policy rate by 50bps to 4.25%, in line with market expectations but higher than the market pricing of 25bps. The central bank signalled the next move will be data dependent by saying that the “Governing Council will be considering whether the policy needs to rise further to bring supply and demand back into balance and return inflation to target.” Still, there was a slight hawkish tilt as the Bank said that the BoC will consider if future rate hikes are necessary to bring supply and demand back into balance and return inflation to target, which means there is potential for more rate hikes after a temporary pause. The Politburo says China will continue to “optimize” its pandemic control measures The Chinese Communist Party ended a politburo meeting that focused on economic policies for 2023 and anti-corruption works in the party on Tuesday. The readout of the meeting released on Wednesday makes no mention of the “dynamic zero-Covid” policy. Instead, it says that China will strive to better coordinate pandemic prevention and control with socioeconomic development and continue to optimize the country’s pandemic control measures. The readout does not reiterate the warning on the property sector and the rhetoric of “housing is for living in, not for speculation” but instead pledges to “be vigilant of large economic and financial risks and strive to prevent systemic risks.” Overall, the readout from the Politburo meeting seems to confirm the policy shift to gradually easing pandemic control measures and supporting the property to the extent of preventing it from causing systemic risks to the financial system and the economy. The readout emphasises stability by the utmost important priority for 2023 and the leadership of the Chinese Communist Party over economic policies as well as economic activities of the country. The readout also pledges to continue the anti-corruption campaign and enhance the governance of  the Chinese Communist Party. China issued 10 additional measures to ease Covid-19 containment practices China’s National Health Commission issued 10 additional measures to further fine-tune and relax the country’s pandemic prevention and control practices. The crux of these new measures are to further reduce the scope and length of lockdowns and quarantines and restrict the use of PCR tests. While these are important relaxation to the current practices, especially in reducing the unit of movement restriction to as narrow as floor or even apartment as opposing to the whole block or community and making quarantine-at-home the default option instead of centralised quarantine. Nonetheless, in comparison with the high expectations in recent days, these measures may be considered a bit underwhelming and do not provide a more definite roadmap of exiting the use of lockdown.  China’s exports shrank 8.7% Y/Y in November In USD terms, China’s exports declined 8.7% Y/Y in November, much weaker than the -3.9% consensus estimate and -0.3% in October. The fall in exports was broad-based across destinations, U.S.  down 3.8% Y/Y, European Union down 9.3% Y/Y, and Japan down 4.6%. Exports to ASEAN slowed to a 7.7% growth in November from 19.7% in October. Imports, falling by 10.6% Y/Y, also below expectations. Some outperforming stocks to watch Generally, there are always outperformers in markets, even when times are tough. A hot scoop for you is that that Campbell Soup shares popped 6% higher on Wednesday, gapping up to $56.18. Its shares are now 15% off their record high that it hit in 2016. That year, the Syrian war escalated, Trump was elected, and there was a string of terror attacks around the world. And amid war talks now escalating this year Campbell Soup shares entered an uptrend, gaining 45% from last November. If recessionary talks and Russia war concerns linger, you might expect this company to continue to benefit. It has free cash flow, and consistent rising profit growth. Another stock that did well overnight was General Mills, rising 2% to an all time high, $87.50 after the wheat price jumped 3% overnight on supply concerns returning. We mentioned General Mills as a company to watch in our Five Stocks to Watch video. Despite the wheat price falling 19% from September after supply returned to the market, General Mills has been able to grow its quarterly profit and free cash flows.      For our look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Market Insights Today: Putin’s nuclear warning; China reopening trade is fading – 8 December 2022 | Saxo Group (home.saxo)

Summary:  Risk sentiment steadied in the US yesterday as US treasury yields fell further, with the market seemingly increasingly convinced that inflation is set to roll over quickly next year, allowing the Fed to begin cutting rates in the second half of the year and beyond. The 10-year treasury yield fell below the important 3.50% level while gold rose. Sentiment in Europe is a bit more downbeat as frigid weather spikes energy prices.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures closed right on the 100-day moving average yesterday to the lowest close since 10 November washing away most of the gains delivered post the surprise inflation report back in November. The equity market is finding itself in limbo for the rest of the year with no clear narrative to build a direction on. Downside risks are related to the war in Ukraine and higher interest rates if the market begins to doubt itself on the Fed pivot. Upside risks are mostly related to momentum building in Chinese equities and the government seems to strengthen the policy trajectory of reopening society. The 3,900 level in S&P 500 futures is still the key level to watch on the downside. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hang Seng Index rallied strongly, up 2.8% and recovering most of the loss from yesterday. The 10 additional fine-tuning measures to ease pandemic containment may be underwhelming relative to the high expectations. However, when reading together with the readout of the Politburo, an overall direction of a gradual and now seemingly determined loosening of restrictions seems to have taken hold. Omitting the language of “housing is for living in, not for speculation” and pledging to “be vigilant of large economic and financial risks and strive to prevent systemic risks” point to conditional support to the property sector when socioeconomic and financial stability are at stake. Technology names led the advance. Hang Seng TECH Index surged 5.6% with Bilibili being the top gainer within the index. Alibaba, Meituan, and Tencent climbed 5%-6%. Shares of China online healthcare platforms, China education services providers, China consumption, and Macao casino operators were other top performers. USD slightly lower again on steady risk sentiment and decline in treasury yields The USD softened yesterday as risk sentiment trade sideways and, more importantly, as US treasury yields fell all along the curve, taking the 10-year Treasury benchmark yield below the important 3.50% chart point. The USD will likely struggle unless the market begins to reprice its rising conviction that inflation will allow a significantly lower Fed Funds rate in 2024 and beyond and/or risk sentiment rolls over badly as the market prices an incoming recession and not a soft landing. The key event risks for the balance of this calendar year are next Tuesday’s US November CPI print and the FOMC meeting the following day. Somewhat surprisingly, the new lows in US yields have yet to drive USDJPY to new lows: that pair recently traded below 134.00 but trades this morning well clear of 136.00. Gold (XAUUSD) bounces with focus on recession and PBoC buying Gold traded higher on Wednesday as the dollar weakened and US Treasury yields slumped (see below) and the yield curve inversion reached a new extreme on rising recession fears, and after China joined the lengthy list of other countries who have been strong buyers of bullion. The PBoC added 32 tons to its holdings in November, the first increase in more than three years. This brings its total gold reserves to 1980 tons. This is also potentially a step towards our outrageous prediction on a new reserve asset, as speculations mount that China, Russia and several other countries could be looking to move away from USD reserves. Friday’s US producer price report may provide the next round of price volatility. Key resistance at $1808 with support below $1765 and $1735. Crude oil (CLF3 & LCOG3) pressured by demand concerns Oil posted its fourth straight day of losses on Wednesday, erasing all the gains of this year, before bouncing overnight as China edges toward reopening. While demand concerns are rising with the aggressive global tightening seen this year, the supply side has remained equally volatile. US crude inventories fell by a less-than-expected last week as exports slowed and production reached 12.2m b/d. In addition, distillate stocks rose by more than 6 million barrels as demand on a four-week rolling basis slumped to the lowest level since 2015. Short-term technical traders are in control as the overall level of participation continues to fall ahead of yearend. US 10-year treasury benchmark plunges through 3.50% (TLT:xnas, IEF:xnas, SHY:xnas) US treasury yields dropped at the long end of the yield curve, with the 10-year benchmark dipping well below 3.50%, a key chart- and psychological point. The yield curve inverted to a new extreme for the cycle as the market is pricing that inflationary risks are easing and for the Fed to begin cutting interest rates by late next year. What is going on? New deep coal mine in UK the first to be approved in 30-years The new coking coal mine in Cumbria was approved by levelling-up secretary Michael Gove and will employ approximately 500 people and will cost £165 million to develop. Coking coal is used in steel-making, unlike thermal coal used for power stations. Musk may pledge more Tesla shares to avoid debt spiral Elon Musk and his advisors are considering another margin loan with Tesla shares as collateral to swap with more expensive debt carrying high interest rates ($3bn at 11.75% interest rate) issued during the Twitter takeover. These considerations underscore the increased risk in Elon Musk’s investments, including Tesla. EZ Q3 GDP grew more than initially forecasted The final estimate of the EZ Q3 GDP shows an increase to 0.3 % versus prior 0.2 %. Growth fixed capital formation was the biggest contributor to growth (0.8 percentage point) behind household spending (0.4 percentage point). The contribution from government expenditure was negligible during the period. This shows that households and companies are rather resilient despite the negative economic environment and inflation across the board. Based on the latest PMI for November (the last estimate was published on Monday), we expect a small GDP contraction in the eurozone in Q4. This would be marginal (probably minus 0.1 %). Putin’s nuclear threat sours risk sentiment Following drone attacks on three Russian air bases that Moscow blamed on Kyiv, Putin has now warned that the Ukraine conflict could go on for a long time and nuclear tensions have also risen because of it. He also did not clearly stay away from pledging that Russia will not be the first to use nuclear weapons, and rather said that Russia will defend itself and its allies “with all the means we have if necessary. The irresponsible talk on nuclear weapons is a sign that Putin is getting desperate with Ukraine gaining military grounds, and his actions will be key to watch. Risk sentiment likely to be on the back foot today, and food prices as well Uranium will be in focus. MondoDB shares rally 23% on earnings The database provider delivered Q3 earnings that surprised the market with revenue at $334mn vs est. $303mn and adjusted EPS of $0.23 vs est. $0.17, but more importantly MongoDB raised its fiscal guidance on revenue to $1.26bn vs est. $1.20bn. Japan Q3 GDP continues to show contraction The final print of Japan’s Q3 GDP was released this morning and it was slightly better than the flash estimate of -1.2%, but still showed a contraction of -0.8% annualized seasonally adjusted q/q. Stronger than expected growth in exports and a build of inventories led to the upward revision, private consumption was slower than previously expected at just 0.1% q/q. Lower oil prices and the return of inbound tourists may further aid the Japanese economy, but slowdown in global demand will continue to underpin a weakness in exports. Bank of Canada hiked 50bps and signaled the next move will be data dependent Bank of Canada hiked policy rate by 50bps to 4.25%, in line with market expectations but higher than the market pricing of 25bps. The central bank signaled the next move will be data dependent by saying that the “Governing Council will be considering whether the policy needs to rise further to bring supply and demand back into balance and return inflation to target.” Still, there was some “hawkish optionality” as the Bank said that the BoC will consider if future rate hikes are necessary to bring supply and demand back into balance and return inflation to target, which means there is potential for more rate hikes after a temporary pause. Canadian two-year rates were a basis point or two lower after considerable intraday volatility and near the lows for the cycle. US consumer food giants’ Campbell Soup and General Mills shares surge Campbell Soup shares popped 6% higher on Wednesday, gapping up to $56.18 after the company reported stronger quarterly earnings than expected. Its shares are now 15% off their record high that it hit in 2016. Campbell Soup shares are up 45% from last November. Another stock that did well overnight was General Mills, rising 2% to an all-time high of 87.50 after the wheat price jumped 3% on supply concerns returning. Despite the wheat price falling 19% from September, General Mills has been able to grow its quarterly profit and free cash flows. What are we watching next? What is the playbook for the pricing of the coming “landing”? There are several different paths from here, the one the market is least prepared for is one that shows resilient US economic growth and higher than expected inflation in coming months. But even if data does continue to prove the market’s strong conviction that inflation is headed lower and that growth will soften, will markets price some version of a soft landing or will fears of a “standard” recession cycle begin to weigh on risk sentiment as credit spreads widen and asset prices drop on fears of rising unemployment and falling profits? Until this week, financial conditions have been easing sharply and credit markets look complacent, so there is little fear priced in. After a wild year of volatility, large macro players may be unwilling to place large bets on the direction for markets until we have rolled into the New Year. Earnings to watch Today’s US earnings focus is Broadcom, Costco, and Lululemon. With a market value of $200bn, Broadcom is the most important earnings release for market sentiment and analysts remain bullish with a revenue growth expected at 20% y/y for the quarter that ended in October. Today:  Broadcom, Costco, Lululemon, Chewy Friday: Oracle Corp, Li Auto Economic calendar highlights for today (times GMT) 0800 – Hungary Nov. CPI 1200 – ECB President Lagarde to speak 1200 – Mexico Nov. CPI 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1430 – EIA's Weekly Natural Gas Storage Change Report 0130 – China Nov. PPI/CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 8, 2022 | Saxo Group (home.saxo)

Stocks fell for a fifth day, but the sovereign bonds gained, a hint that the market catalyzer shifted from the hawkish Federal Reserve (Fed) pricing – where stocks and bonds fall at the same time, to recession fears, where stocks remain under pressure, while investors seek refuge in safer sovereign assets. Yields and USD The falling yields kept the US dollar under pressure below the critical 200-DMA, which stands at 105.75. American crude oil One big move of the day was oil. The barrel of American crude slipped below the $73 floor and fell to $71.70 on the back of rising recession fears. Oil And note that we have started seeing a structural change in the oil markets. Crude price curve was in backwardation up until a month ago. But over the past weeks we started seeing the front-end of the price curve falling and even going back to contango. I discuss in this episode what that means for oil prices. Gold Elsewhere, news that China increased its bullion reserves for the first time in three years have a boost to gold and silver. The mint ratio fell below 80, but gold could still be a better choice for those preparing their portfolios for recession. Watch the full episode to find out more! 0:00 Intro 0:31 Markets price in recession 2:36 Oil slips below $72pb 3:57 Is contango coming & what does it mean? 6:25 Loonie to remain under the pressure of weaker oil 8:00 Gold or silver?! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Crude #oil #contango #backwardation #energy #crisis #recession #fear #market #selloff #USD #EUR #Gold #silver #mint #ratio #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  Today, we look at the overall sense that market players don't want to take any strong new bets until we get to the other side of Dec 31. We also look US treasury yields dropping through pivotal levels at the longer end of the curve and the remarkable fact that the curve remains near its most inverted even as the 2-year yield is at local range lows. The market is increasingly convinced that Fed easing is set to start within 12 months after a bit more hiking next week and early next year. We also look at crude oil dynamics, natural gas in Europe, Swedish housing prices, weak outlook from US banks, the latest woes for Tesla, the Bank of Canada keeping CAD the weakest of G10 currencies, and more. Today's pod features Peter Garnry on equities, Ole S Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Will market be allowed to go into hibernation until 2023? | Saxo Group (home.saxo)

Bank of Canada surprises with 50 bp hike The Bank of Canada delivered a second straight 50-bp hike on Wednesday, which brought the cash rate to 4.25%. The markets had been split on whether the BoC would raise by 50 bp or 25 bp, pricing in 33 bp ahead of the decision. The move didn’t have an effect on the Canadian dollar, which closed the day unchanged. The BoC decided on the larger rate move due to strong growth, a tight labour market and high inflation. The rate statement noted that inflation is “still too high” but added that core inflation has been falling, which may indicate that inflationary pressures are “losing momentum.” What’s next for the BoC? The rate statement contained a significant hint that the Bank may be close to winding up the current tightening cycle, stating that the BoC was “considering whether the policy rate needs to rise further”. This was in contrast to the October meeting when the BoC stated it “expects that the policy interest rate will need to rise further.” This appears to be a dovish shift, in that additional rate hikes are longer a given. The BoC meets next in late January, and the Bank’s rate decision could again go down to the wire, only this time it will be a choice between a 25 bp increase and a pause. Policy makers have some time to gauge the effect of high rates on the domestic economy and they will also be keeping a close eye on developments in Europe, China and the US. Ahead of next week’s CPI report, the US releases PPI and UoM Inflation Expectations on Friday. There are signs that inflation is weakening, and if this is reflected in Friday’s data, the financial markets could get a boost and the US dollar could lose ground, a scenario we’ve become accustomed to seeing whenever inflation underperforms.   USD/CAD Technical There is weak resistance at 1.3681. The next resistance line is 1.3766 USD/CAD has support at 1.3596 and 1.3484 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

USD/CAD has managed to pick bids above the crucial support of 1.3600. A decline in United States inflation will set the stage for a slowdown in the interest rate hike by the Federal Reserve. The Bank of Canada is ready to hike interest rates further if it fails to see signs of a slowdown in inflation. USD/CAD is expected to display a sheer move as the RSI (14) is hinting at a volatility contraction. USD/CAD has attempted a recovery after dropping marginally below the crucial support of 1.3620 in the early European session. The Lonnie asset is aiming to conquer the immediate resistance of 1.3640 as the US Dollar Index (DXY) has recovered sharply as the market mood has turned cautious again ahead of the United States inflation and the outcome of the Federal Reserve (Fed) policy. The US Dollar Index (DXY) has recovered sharply after a corrective move below the round-level support of 105.00. The USD Index has accelerated its recovery to near 105.06 and is expected to remain volatile ahead. Investors are confused about whether to underpin the risk-aversion theme as the Federal Reserve is set to hike its interest rate peak guidance in its monetary policy meeting on Wednesday or to support the risk appetite theme due to lower consensus for the United States Consumer Price Index (CPI) data. Meanwhile, S&P500 futures are displaying a marginal fall in early London after posting solid gains on Monday. The 10-year US Treasury yields are hovering around the critical resistance of 3.60%, displaying obscurity in the market mood. Upbeat US PPI and lower annual inflation expectations trim inflation consensus Market participants have got anxious ahead of the release of the US inflation. Price pressures have remained the talk of the town this year as the sentiment of the households remained dented and the Federal Reserve policymakers remained worried thinking about the consequences of a higher price rise index. A surprise drop in November’s Producer Price Index (PPI) report and one-year consumer inflation expectations is hinting at a slowdown in the current inflation rate. The headline PPI dropped to 7.4% as producers are worried about a decline in consumer spending. While one-year consumer inflation expectations have declined to 5.2% in November from 5.9% in October, marking the biggest one-month decline on record. This has led to a decline in the consensus for headline inflation to 7.4% vs. the former release of 7.7%. While the core CPI is expected to trim to 6.1% against 6.4% reported earlier. Analysts at JP Morgan Chase & Co. have cited that a soft reading in US CPI data could spark a powerful rally in US equities. The 500-stock basket of the United States could rally up to 10% if headline inflation drops to 6.9% or lower, as reported by Bloomberg. Lower inflation to cement a slowdown in Federal Reserve’s interest rate hike pace Mounting inflation pressures have been forcing the Federal Reserve to tighten the interest rate policy despite the accelerating risks of a recession. The agenda of the Federal Reserve chair Jerome Powell has been the achievement of price stability. Signs of deceleration in the inflationary pressures will set the stage for a slowdown in the policy tightening pace by the Federal Reserve. The risk of higher interest rate peak guidance for CY2023 as the inflation rate will remain beyond the targeted rate of 2% for a while. Rabobank analysts said they expect the US central bank to hike the policy rate by 50 basis points (bps) and see policymakers revising the terminal rate projection to the neighborhood of 5%. BOC Governor seems on foot to hike rates further if fails to dwindle inflation The speech from Bank of Canada (BOC) Governor Tiff Macklem on Monday cleared that the Canadian central bank won’t think twice about hiking interest rates further if inflation remains stubborn ahead. While speaking to business leaders in Vancouver, the Bank of Canada Governor said that policy tightening has begun to work but would take time to feed the economy. The present challenge in front of the Bank of Canada is that higher interest rates could push the economy into an unnecessarily painful recession, as reported by Reuters. USD/CAD technical outlook USD/CAD has dropped after facing barricades around the supply zone placed in a narrow range of 1.3690-1.3700 on an hourly scale. On a broader note, the 20-period Exponential Moving Average (EMA) at 1.3640 is overlapping with the Loonie asset price, which indicates a sideways auction profile. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates a consolidation ahead till the release of a potential trigger

USD/CAD picks up bids to print the first daily gains in four, bounces off weekly low. Sluggish markets, rebound in US Treasury yields allow US Dollar to pare recent losses. WTI crude oil eases from one-week high as downbeat China data, higher interest rates probe oil bulls. USD/CAD extends recovery from weekly low to refresh intraday high near 1.3570 during the first positive day in four amid early Thursday. In doing so, the Loonie pair takes clues from the latest rebound in the US Dollar, as well as a pullback in Canada’s main export item, WTI crude oil. US Dollar Index (DXY) consolidates recent losses around 103.80 while bouncing off one-month-old support, as well as the six-month low, as traders turn cautious ahead of multiple central bank announcements. Read next: Given the peculiarities of the US labor market and the high labor mobility, the acceptable unemployment rate is considered to be 5.0%| FXMAG.COM On the other hand, WTI crude oil snaps a four-day uptrend as it retreats from the weekly top to $76.70 amid fears of lesser demand due to downbeat China data and higher interest rates at the major central banks. Recently, China’s Retail Sales slumped to -5.9% in November versus -3.6% expected and -0.5% prior while Industrial Production came in at 2.2% compared to 3.3% market forecasts and 5.0% previous readings. Previously, OPEC and the International Energy Agency (IEA) forecasted a rebound in oil demand and joined the softer US Dollar to favor the energy bulls. The market’s reassessment of the Fed verdict, suggesting a 50 bps rate hike and readiness to hold the rate higher for a longer period, could be cited as a reason for the US Dollar’s latest recovery, as well as the USD/CAD pair’s upside. Against this backdrop, S&P 500 Futures remain mildly offered but the US 10-year Treasury bond yields probe a two-day downtrend near 3.50%. Further, the US two-year bond yields also extend recovery from the monthly low while printing the first daily positive in three near 4.25%. Read next: From the fundamental point of view, these facts may become a game changer, sending the EUR/USD pair to the parity level | FXMAG.COM Moving on, the second-tier data from Canada, mainly relating to housing and employment insurance, may entertain USD/CAD pair traders. However, major attention will be given to the monetary policy announcements from the Swiss National Bank (SNB), European Central Bank (ECB) and the Bank of England (BOE). Technical analysis Wednesday’s Doji candlestick above the 21-day Exponential Moving Average (EMA), at 1.3535 by the press time, keeps USD/CAD buyers hopeful of reaching the monthly high near 1.3700.

Economies today face a litany of challenges they have not faced in the last decade: Putin's war in Ukraine, record-breaking inflationary pressures, looming global recession and the struggle to stay ahead of the ongoing climate crisis. The banks are doing what they can to slow down inflation, but not the Bank of Japan. His decision may remain unchanged. Meanwhile, geopolitical uncertainty, the threat of further disruption to the global supply chain and higher interest rates remain key risks to Canada's economic growth. Bank of Japan Japan's benchmark interest rates have been among the lowest in the world for decades. Part of the yen's recent strength stems in part from talk that the BoJ may change its yield-curve control policy now that consumer price inflation has surged to 3.7% - an eight-year high. However, such a move seems unlikely. Japan's central bank has pledged to pursue an "over-inflation" policy and appears to have no intention of curbing its extremely loose monetary policy. Inflation in Japan is low compared to rates in other developed economies, which allows the country's central bank to keep interest rates very low. Although the Bank of Japan has raised its inflation forecast for 2022 to 2.9%, down from its previous forecast of 2.3%, it is expected to keep its key short-term interest rate at -0.1% and maintain the 0% cap for its 10-year bond yield at this month's meeting. During his decade in office, Kuroda, seeking to push inflation to 2%, introduced massive asset purchase and YCC, an elaborate program that combined a negative short-term target rate and a 0% cap on 10-year bond yields. In addition to the global supply pressure caused by the war in Ukraine and the pandemic, the collapse of the yen triggered a sharp increase in the cost of imported raw materials and ultimately household goods, making Kuroda and its currency-deprecating low interest rates the target of public outcry As Japan's massive pile of debt makes an abrupt interest rate hike too costly, the BoJ will tread carefully and explain the shift as a gradual move towards normalizing emergency stimulus - rather than full monetary tightening, they said. But policymakers also know they are running out of time to deal with the huge costs of the Bank of Japan's relentless defense of its 0% yield cap, such as declining bond market liquidity, crushed bank margins and a devastating yen sell-off. BOJ officials are now preparing the theoretical basis for future policy change, releasing research into whether firms and households will finally shake off their deep-seated reluctance to raise prices. Any apparent shift in BoJ thinking, even if it does not lead to an immediate change in monetary policy, could trigger a massive sell-off in Japanese bonds, with significant implications for global markets. Canada GDP The Canadian economy is moving closer to a recession in 2023. Early signs of easing inflationary pressures raise the odds that the slowdown will be "mild" by historical standards. Unemployment fell to a record low in the summer (at least since 1976) and only slightly increased since then. The US economy is also expected to plunge into recession in 2023, which will take a toll on Canadian exports. Price growth is still well above the central bank's targets, but increases have been smaller and less widespread in recent months. The crisis in the global supply chain, which largely contributed to the initial rise in inflation, is weakening. Commodity prices remain high but have fallen after a sharp rise earlier this year when Russia invaded Ukraine. Withholding interest rate hikes will not prevent a recession in Canada in the coming year. A mild deterioration of the economic situation is probably already certain in the light of the current restrictive level of interest rates. GDP is expected to stay at 0.1%, but neither rising nor falling suggests stagnation, which could lead to a mild recession. Source: investing.com

USD/CAD holds lower grounds near intraday bottom, prints four-day downtrend. Cautious optimism, downbeat Treasury yields weigh on US Dollar. WTI seesaws near 13-day high amid hopes of more demand on winter, travel concerns. USD/CAD takes offers to refresh intraday low near 1.3580 during early Thursday morning in Europe. In doing so, the Loonie pair drops for the fourth consecutive day while extending the previous day’s downside break of a short-term key support trend line toward another support line. That said, the quote’s latest weakness could be linked to the broad US Dollar weakness, as well as firmer prices of WTI crude oil, Canada’s main export item. It should be noted that the mixed prints of Canada inflation data failed to recall USD/CAD buyers the previous day. US Dollar Index (DXY) drops half a percent to around 103.85 at the latest as the US 10-year Treasury yields remain depressed at around 3.65%, extending the previous day’s pullback from the monthly high. WTI crude oil prints mild losses as it pares the daily gains around $78.40. Even so, hopes of more energy demand due to fierce winter and more travel forecasts keep the black gold positive on a weekly basis. On Wednesday, Canada’s Consumer Price Index (CPI) declined to 6.8% YoY in November from 6.9% in October, versus market forecasts of 6.7%. Further, the more important reading of inflation, namely the Core Bank of Canada (BOC) CPI, which excludes volatile food and energy prices, remained unchanged at 5.8% YoY. It should be noted that the Bank of Japan’s (BOJ) second unscheduled bond-buying joins the cautious optimism in the market, as portrayed by mildly bid stock futures and Asia-Pacific equities, also exert downside pressure on the USD/CAD prices. Bloomberg cites China’s State Council and the People’s Bank of China (PBOC) to hint at more positives for the dragon nation and revives the market’s optimism of late. “China’s State Council, People’s Bank of China (PBoC) and the country’s top securities regulator jointly conducted a study during last week’s economic policy meeting, aiming to prioritize growth and boost the property market in 2023,” reported Bloomberg. Alternatively, news suggesting China’s biggest budget deficit on record, for the January-November period, joins the Russia-Ukraine woes to probe the USD/CAD bears. Looking forward, final prints of the US Gross Domestic Product (GDP) and Core Personal Consumption Expenditure (PCE) details for the third quarter (Q3) could entertain traders ahead of Friday’s US Core PCE Price Index for November, also known as the Fed’s preferred inflation gauge. That said, the US GDP is expected to confirm 2.9% Annualized growth in Q3 while the Core PCE is anticipated to also meet the initial forecasts of 4.6% QoQ during the stated period. Technical analysis A clear downside break of the two-week-old ascending trend line, around 1.3630 by the press time, directs USD/CAD bears towards an upward-sloping support line from November 15, close to 1.3540 at the latest.

Previewing the upcoming jobs report from Canada, analysts at TD Securities said that they expect employment to rise by 8,000 in December with the labour market starting to cool down. Wages to push higher to 5.5% y/y "This should push the unemployment rate back to 5.2%, although we expect full-time employment to drive the headline print amid scarce labour supply." "We also look for wages to push higher to 5.5% y/y with help from muted base effects, while hours worked should see a modest increase."   Read next: The First Trading Day Of 2023: GBP/USD Is Trading 1.2051, USD/JPY Pair Below 131, The Aussie Pair Is Around 0.68 And EUR/USD Above 1.0680| FXMAG.COM

USD/CAD attracts fresh buying on Thursday, though the upside potential seems limited. A modest downtick in oil prices undermines the Loonie and lends support to the major. Smaller Fed rate hike bets weigh on the USD and could cap gains ahead of the US CPI. The USD/CAD pair regains positive traction on Thursday and steadily climbs to the top end of its weekly range, closer to mid-1.3400s during the early European session. The intraday move up, however, lacks bullish conviction and is more likely to remain capped ahead of the release of the latest US consumer inflation figures. In the meantime, a modest pullback in crude oil prices from over a one-week high touched on Wednesday undermines the commodity-linked Loonie and lends some support to the USD/CAD pair. Despite the recent optimism led by China's pivot away from its zero-COVID policy, worries that a deeper global economic downturn will hurt demand act as a headwind for the black liquid. That said, subdued US Dollar price action might hold back traders from placing aggressive bullish bets around the major and keep a lid on any further gains. In fact, the USD Index, which measures the greenback's performance against a basket of currencies, languishes near a seven-month low amid the prospects for smaller rate hikes by the Fed. Investors now seem convinced that the US central bank will soften its hawkish stance amid signs of easing inflation. This is evident from a further decline in the US Treasury bond yields and continues to weigh on the greenback. Traders, however, might prefer to wait for the crucial US CPI report before determining the near-term trajectory. Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM The Fed policymakers have indicated that they remain committed to combat high inflation and that rates could remain elevated for longer, or until there is clear evidence that consumer prices are falling. Hence, a stronger US CPI print will lift bets for a more hawkish Fed and push the USD higher, allowing the USD/CAD pair to build on this week's recovery from its lowest level since November 25. Conversely, a softer reading will set the stage for an extension of the recent rejection slide from the 1.3700 round-figure mark.

USD/CAD has picked strength amid caution in the market mood, however the overall sentiment is still positive. Federal Reserve is likely to trim the pace of policy tightening due to a downward trend in US inflation. A sheer recovery in oil prices led by expectations of economic recovery in China may strengthen the Canadian Dollar. USD/CAD is likely to continue its downside journey toward the horizontal support plotted at 1.3226. USD/CAD has picked strength and has extended its recovery to near the round-level resistance of 1.3400 in the early European session. Earlier, the Loonie asset picked up demand after dropping to near 1.3345 as the risk appetite of the market participants dropped. Investors trimmed their longs in risk-sensitive assets after a stretched rally. The S&P500 futures have sensed selling pressure after remaining extremely bullish consecutively in the past three trading sessions, portraying caution in the overall positive market mood. A decline in the risk appetite has also impacted the demand for US government bonds, which has increased the 10-year US Treasury yields to 3.47%. The US Dollar Index (DXY) has turned sideways below 102.00 after registering a fresh seven-month low at 101.65. Soften US Inflation supports lower interest rate hike by the Fed Thursday’s release of the United States Consumer Price Index (CPI) has provided confidence that the price pressures are softening and the Federal Reserve (Fed)’s blueprint of achieving price stability is operating effectively. From a peak of 9.1%, the annual headline price index has dropped to 6.5% in a few months. Thanks to the declining gasoline and used car prices have decelerated the pace of inflation in the United States economy. A meaningful decline in the US price index has triggered odds of further deceleration in the pace of the interest rate hike already after slowing in December’s monetary policy meeting as Federal Reserve chair Jerome Powell and his teammates are working in the right direction. Philadelphia Fed Bank President Patrick Harker said on Thursday that it was time for future Fed rate hikes to shift to 25 basis points (bps) increments, as reported by Reuters. S&P500 to achieve recovery if Fed trims policy tightening pace The equity domain in the United States economy witnessed an intense sell-off in CY2022 as the Federal Reserve was on a trip of hiking interest rates to achieve the 2% inflation target. The US central bank hiked the borrowing rates with four 75 basis points (bps), two 50 bps, and one 25 bps rate hike announcements to 4.25-4.50%. As inflation is getting under control gradually and the Federal Reserve won’t be so hard on interest rates, it looks like the S&P500 will get back into the picture. The slowdown in the pace of the interest rate hike will allow firms to achieve a sense of optimism, which will support them in executing expansion plans and boosting operations. No doubt, the pace of policy tightening will be trimmed but short-term pain will stay. Philadelphia Fed Bank President Patrick Harker cited that recession in the United States economy is not into the picture but the Gross Domestic Product (GDP) could slow to 1% this year. Oil faces barricades for around $79.00 After a perpendicular rally led by support from recovery in the Chinese economy led by sheer reopening measures and expectations of further sanctioning on Russia, oil prices are facing a halt around $79.00. Moscow is expected to face further sanctions from Western countries for oil supply as nations want to restrict it from getting liquidity to fund arms and ammunition in its fight against Ukraine. Further upside in the oil price looks likely amid a decline in US inflation, which will trim the policy tightening pace of the Fed. Meanwhile, the United States administration has denied oil supply to China from its Strategic Petroleum Reserve (SPR). This will force the Chinese economy to look for alternative suppliers, which could accelerate oil prices in a short span of time. It is worth noting that Canada is a leading exporter of oil to the United States and higher oil prices will strengthen the Canadian Dollar. Read next: The USD/JPY Pair Drop To 130, The Aussie Pair Keeps Trading Above 0.69$| FXMAG.COM USD/CAD technical outlook USD/CAD has delivered a breakdown of inventory distribution placed in a range of 1.3500-1.3700 on a four-hour scale. A breakdown of the inventory distribution phase results in extreme volatility expansion which triggers wider ticks to the downside. The Lonnie asset is likely to find a cushion around the horizontal support plotted from November 15 low at 1.3226. Meanwhile, downward-sloping 20-and 50-period Exponential Moving Averages (EMAs) at 1.3414 and 1.3460 respectively, add to the downside filters. A bearish momentum will be triggered if the Relative Strength Index (RSI) (14) will slip into the bearish range of 20.00-40.00.

The Franklin Templeton Fixed Income (FTFI) Central Bank Watch is a qualitative assessment of the central banks for the Group of Ten (G10) nations plus two additional countries (China and South Korea). See full methodology on page 6. Key highlights Stepping down pace of hiking ≠ outright dovish pivot. A majority of developed market (DM) central banks should gradually reach their respective peak policy rates through the first half (H1) of 2023. The US Federal Reserve (Fed) and the European Central Bank (ECB) remain on the most hawkish end of the spectrum. The Bank of Korea (BoK) may well be the closest to a dovish pivot. Tight labor markets and sticky inflation are still the primary concerns. Although headline inflation may be receding, central banks remain concerned about tight labor markets keeping wages elevated, which in turn can spill over into the stickier components of inflation. Bank of Japan (BoJ) surprises with a policy tweak. A wider trading band for 10-year Japanese government bonds (JGBs) has already had implications for global bond markets and US dollar dominance. Although the BoJ insists its latest move isn’t a step toward broader tightening, a policy move in 2023 is very much on the table. Latest thoughts on global central bank policy Far from done on tightening policy; markets think otherwise As expected, the Fed downshifted to a 50-basis point (bp) hike at the December Federal Open Market Committee (FOMC) meeting. “Ongoing increases” in the policy rate were deemed to be appropriate— giving the Fed optionality in February. Despite recent downside surprises in inflation, the Fed raised its median inflation projections, prompting a higher median peak policy rate in 2023. Fed Chair Jerome Powell welcomed the deceleration in monthly core inflation but noted that services inflation excluding housing remains uncomfortably high. Meanwhile, in our view, the ongoing strength of the labor market and a still-elevated level of demand-supply imbalance will keep wage and services inflation well supported. Despite Powell’s hawkish rhetoric, markets continue to price in a peak rate of just 4.9, with rate cuts beginning in September 2023 and 50 bps of cumulative cuts by the end of the year. We, on the  other hand, expect a total of 75 to 100 bps of increases, given the still-negative real policy rate and the likely persistence of services inflation. However, smaller (25 bp) hikes wouldn’t come as a surprise  since the FOMC intends to “feel their way” to an appropriate policy stance. Once at the peak rate, the Fed will signal a pause through 2023 as it gauges the full economic impact from all the tightening. Closing in on a pause? After raising rates at a record pace of 400 bps over the past nine months to 4.25%, the BoC signaled  a willingness to pause at its next policy meeting on January 25. The December statement was in sharp contrast to the one from October, when the bank was expecting rates to go even higher. However,  the Bank did not firmly close the door on future rate hikes, placing the onus on the evolution of economic data to determine future action. The BoC noted that the economy continues to operate in excess demand, and that while sequential measures of core inflation may be losing momentum, they remain uncomfortably high. We believe the BoC’s adoption of a more neutral tone is meant to gauge how tighter monetary policy is working its way through the economy; it is not indicative of an outright dovish pivot.  If inflation data were to surprise to the upside, we would not rule out a final 25-bp hike in January. While we expect the BoC to remain on pause throughout 2023, it faces a challenge in convincing markets not to expect a shift to cutting rates—especially as bond yields fall. Smaller hikes = more tightening The ECB raised its policy rates by 50 bps in December, slowing the pace from two consecutive 75-bp jumbo hikes. However, the message coming from the statement and press conference was extremely hawkish. ECB President Christine Lagarde affirmed that rates need to go significantly higher, at a steady pace (of 50 bps) and over a period of time. This effectively erases any dovish pivot expectations of a  more careful calibration going forward, reinforced by explicitly pushing back against market pricing of a sub-3% terminal rate, and indicating that rates will remain in restrictive territory to dampen demand  and inflation expectations. The balance sheet shrinkage will accelerate in 2023 with the beginning of passive quantitative tightening (QT) on its asset purchase program (APP), starting in March at a pace of EUR 15 billion per month (approximately half of expected redemptions) to be reviewed in June. Inflation is forecasted to remain above target until mid-2025, supported by higher wages, while a soft-landing scenario for growth looks increasingly optimistic over the medium-term. We now see the terminal rate at a minimum of 3.25% with upside risks linked to the inflation dynamics of the next two quarters. Source: cbw-0123-u.pdf (widen.net)

USD/CAD comes under renewed selling pressure on Monday amid sustained USD weakness. Rising bets for smaller Fed rate hikes and a positive risk tone continue to weigh on the buck. A modest pullback in oil prices could undermine the Loonie and help limit any further losses. The USD/CAD pair struggles to capitalize on Friday's bounce from the 1.3320 area, or its lowest level since November 25 and meets with a fresh supply on the first day of a new week. The pair remains on the defensive through the Asian session and is currently placed near the daily low, around mid-1.3300s. The US Dollar extends its recent sell-off and drops to a fresh seven-month low amid speculations that the Fed may be nearing the end of its rate-hike cycle. This, in turn, is seen as a key factor exerting downward pressure on the USD/CAD pair. Investors now seem convinced that the US central bank will soften its hawkish stance and have started pricing in a smaller rate hike going forward. The bets were lifted by last week's US consumer inflation figures, which showed that the headline CPI fell for the first time in more than 2-1/2 years in December. Read next: The UK Economy Expects A Slightly Fall In Inflation, Expected To Fall By 0.1%| FXMAG.COM Adding to this, several Fed officials backed the case for a 25 bps lift-off in February. This, along with a generally positive tone around the equity markets, continues to weigh on the safe-haven buck. That said, growing worries about a deeper global economic downturn should keep a lid on the optimism and lend some support to the greenback. Apart from this, a modest pullback in crude oil prices could undermine the commodity-linked Loonie and further contribute to limiting the downside for the USD/CAD pair, at least for the time being. The mixed fundamental backdrop warrants caution for aggressive bearish traders and positioning for any further losses. The US markets will remain closed on Monday in observance of Martin Luther King Jr. Day. Moreover, there isn't any major market-moving economic data due for release from Canada. Hence, traders will look to the Bank of Canada's Business Outlook Survey report for some impetus around the USD/CAD pair. Apart from this, oil price dynamics should influence the Canadian Dollar and allow traders to grab short-term opportunities around the major.

Chinese activity data for 4Q22 released overnight was much better than expected and supports the proposition that the 2023 Chinese growth story will support pro-cyclical currencies, including the euro. Ongoing declines in natural gas prices are also helping. Today's focus will be on digesting UK labour market data, the German ZEW, and Canadian CPI Activity data released overnight supports the view that China's zero-Covid reversal will spark resurgent Chinese demand USD: Quiet start to the week still favours pro-cyclical currencies FX markets have had a quiet start to the week – perhaps awaiting edicts from Mount Davos? However, Chinese data released overnight was material and very much supports this year's hottest trend that China's zero-Covid reversal will spark resurgent Chinese demand. My colleague Iris Pang was very impressed by the December retail sales and fourth-quarter GDP data, so much so that she has revised up the 2023 China GDP forecast to 5%. The December data, in particular, supports the proposition that despite the pick-up in case numbers, the freedom of movement story is positively dominating the Chinese demand story. The Chinese data did not, however, trigger any follow-through buying of the renminbi or Asian currencies in general. Rather than concluding that this story has already run its course in FX markets, we would prefer to see price action as merely quiet before the Chinese New Year starting next week, and the big event risk in early Asia tomorrow, which is the Bank of Japan (BoJ) meeting. The dollar itself is steady. The US data calendar only really kicks off with what may be a soft December US retail sales release tomorrow. And there are no Fed speakers during European hours today. Some further DXY consolidation looks likely in a 102.00-102.50 range today. A downside break could emerge in Asia tomorrow, were the BoJ to again tweak its 10-year JGB yield target. Chris Turner  EUR: Revising the EUR/USD forecast higher Yesterday we published some substantial upside revisions to our EUR/USD forecast profile. Broadening signs of slowing US price pressures, stronger signs of US recession, a better Chinese demand outlook and a better energy situation all made our sub-consensus EUR/USD forecasts untenable. We now favour EUR/USD moving higher through 2Q23 towards the 1.15 area – but the gains may stall there in 2H23 given what could be trouble with the US debt ceiling in late summer and higher energy prices next winter. Back to the shorter term, the EUR/USD backdrop remains supportive. As discussed above, China's demand trends are supportive of pro-cyclical currencies like the euro. That better outlook for the eurozone could appear in today's German January ZEW investor survey, where the expectations component is expected to have improved from -23 to -15.  Also positive is the continuing fall in European gas prices. Two stories caught our eye today. The first is that European natural gas inventories are now 82% full versus the average levels of 63% normally seen at this stage of the heating cycle. The second is that Chinese importers are redirecting LNG shipments to Europe, given local inventories seem sufficient. That is a surprise. The continuing fall in European natural gas remains a positive development for the eurozone trade balance and is euro supportive. EUR/USD may consolidate in a 1.0780-1.0870 range today – but the near-term macro trends remain supportive. Chris Turner GBP: 50bp hike still in play for February Our UK economist, James Smith, describes today's release of November jobs figures as "another month of relative resilience in the UK jobs market". Wage growth was a little higher than expected and supports the latest findings from the Bank Of England's Decision Maker Panel survey. Depending on the resilience of tomorrow's release of December UK CPI data it seems too early to dismiss the risk of another 50bp rate hike from the Bank of England on 2 February. Currently the market prices in around 42bp of tightening at that meeting. Today's data saw EUR/GBP drop 15 pips – a move that makes sense. EUR/GBP is trading close to 0.89 because of December's hawkish ECB shift. The longer the BoE stays in hawkish mode, the more support sterling can get. Expect EUR/GBP to trade on the soft side of an 0.8850-0.8900 range today, with tomorrow's UK CPI release proving the next major input. Chris Turner CAD: Inflation key for BoC January move The Bank of Canada (BoC) looks set to face a hike/no-hike dilemma at next week’s (25 January) policy meeting. Signs of slowing economic activity were taken on board in the latest BoC statement and clearly emerged in yesterday’s BoC Business Outlook survey, where the future sales index dropped to the lowest since the pandemic and most interviewed firms said they expect a recession in Canada. However, the jobs figures came in very strong in the December read, with robust full-time hiring keeping the unemployment rate around cyclical lows. The slowdown in wage growth from 5.4% to 5.2% did not seem enough of a silver lining, and markets have been reluctant to price out the 19bp currently embedded in the OIS curve. Today’s CPI read will be key. Consensus expectations are centred around a deceleration in headline inflation from 6.8% to 6.4%, and from 5.0% to 4.9% in the core (median) rate. Any signs of resilience in inflation would likely see markets fully price in a 25bp hike in January. Below-consensus reads should support CAD short-dated bonds, but it seems hard that investors will completely rule out a hike next week. The impact on CAD should be quite visible in both directions, although external forces should remain the key drivers on the loonie. Building USD weakness may favour a USD/CAD contraction to 1.31-1.33 in the coming weeks, although a surprise hold by the BoC is a clear upside risk for the pair.  Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The Canadian dollar is unchanged on Friday, trading at 1.3466 in the European session. We could see some volatility in the North American session, as Canada releases retail sales. Retail sales expected to decline The markets are bracing for a downturn in retail sales for November, with a forecast of -0.5% m/m for the headline figure and -0.4% for the core rate. This follows a strong report in October, as the headline reading was 1.4% and core retail sales at 1.7%. If the releases are as expected or lower, it could be a rough day for the Canadian dollar. Today’s retail sales release is the final major event prior to the Bank of Canada’s meeting on January 25th. The markets have priced in a 25-bp increase, but a hold is also a possibility, especially with December inflation falling to 6.3%, down from 6.8%. The BoC has raised rates by some 400 basis points in the current rate-tightening cycle, which began in March 2022. Similar to the market outlook on the Fed’s rate policy, there is significant speculation that the BoC could wind up its tightening at the first meeting of 2023 and then keep rates on hold. The BoC has said that future hikes will be determined by economic data, and there are signs of strength in the economy despite the Bank’s aggressive rate policy. GDP expanded by 2.9% in Q3 which was stronger than expected and job growth sparkled in December, with over 100,000 new jobs. The markets will be looking for clues about future rate policy from the rate statement and BoC Governor Macklem post-meeting comments. Read next: $1 Million In Sanctions Against Former President Donald Trump, Netflix Co-Founder Reed Hastings Has Stepped Down As CEO| FXMAG.COM USD/CAD Technical 1.3455 is a weak support line, followed by 1.3328 1.3582 and 1.3707 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Wednesday's data is expected to reveal another CPI rise, but both the Treasury and the Reserve Bank of Australia (RBA) predicted a peak in the December quarter. In the coming week, the Bank of Kandy will make decisions regarding its monetary policy. CPI in Australia The Australian Bureau of Statistics will release its Consumer Price Index (CPI) data for the December quarter on Wednesday as the cost of many household items rises. Commonwealth Bank analysts forecast inflation to rise by 1.7 per cent over the quarter, compared with an increase of 1.3 per cent in the same period a year earlier. In the minutes of its November meeting, the Reserve Bank of Australia said it expected headline inflation to peak around 8% and core inflation to peak at 6.5%. at the end of 2022, before both start declining earlier this year. None of the forecasts have been updated after the meeting in December. A print above 7.6% would flag a problem for the central and could alter expectations for their February monetary policy meeting. The futures market is currently pricing around a 15 bp increase in the cash rate target, reflecting uncertainty between a 25 bp lift or no change. Source: investing.com Interest rates in Canada Canada's central bank is expected to announce its eighth consecutive rate hike on Wednesday, with most commercial banks anticipating a quarter-percentage-point increase. That would raise the central bank's key interest rate to 4.5 percent, the highest level since 2007. But also in line with this view, some gleeful experts predict that the Bank of Canada will hold back and not raise its key interest rate above the current level of 4.25%. However, the bank does not seem determined to end the tightening cycle. After peaking at 8.1 percent in June, year-on-year inflation slowly declined and reached 6.3 percent in December. For some economists, this drop in inflation is proof that the Bank of Canada's restrictive monetary policy is working. In any case, headline inflation at 6.3 percent is still three times above target - so the inflation hawks will conclude that the bank must keep raising the interest rate. And similarly when we take into account core inflation - which excludes food and energy, two volatile components of the CPI basket. The Canadian economy added 104,000 jobs in December — far exceeding forecasts of an increase of 8,000 jobs — and the unemployment rate fell to 5 per cent from 5.1 per cent in November. The labour market, therefore, continues to be very tight. And this is what really worries the Bank of Canada If the decision to raise interest rates depended solely on the latest available data, then the answer would be simple: the main interest rate will not be raised above the current 4.25 percent. But if the decision depended on the bank's inflation outlook, the rate would definitely be raised on January 25 and later. Source: investing.com, rba.com,

USD/CAD fades bounce off intraday low during four-day downtrend. Oil price struggles to defend gains amid mixed concerns. Hawkish hopes of Bank of Canada, talks surrounding Fed policy pivot keep sellers hopeful. Preliminary readings of US S&P Global PMIs for January will be crucial ahead of BoC interest rate decision. USD/CAD slides to 1.3350 as bears keep the reins for the fourth consecutive day heading into Tuesday’s European session. In doing so, the Loonie pair cheers the broad US Dollar weakness, as well as a slow grind to the north in prices of Canada’s key export item, namely WTI crude oil, ahead of monthly activity data from the US. It’s worth noting that Wednesday’s Bank of Canada (BoC) monetary policy decision will be eyed closely by the pair traders amid talks surrounding a policy pivot. That said, WTI crude oil pares intraday gains near $81.70 after a softer start to the week. Even so, black gold remains around the seven-week high amid hopes of China-linked demand. It should be observed that the latest talks surrounding the US readiness to use Special Petroleum Reserves (SPR) in the need weigh on the quote. Elsewhere, the struggles between the US and China surrounding the Beijing-based companies’ ties to the Russian war effort join the fears of economic recession to weigh on the market sentiment and probe USD/CAD bears. Though, mixed figures of the Canadian housing data published the previous day joined the downbeat US Conference Board’s Leading Index and put a floor under the prices. On a broader front, the absence of Fed policymakers’ talks ahead of the February meeting and the Lunar New Year holidays in China restricts the market moves, as well as limit USD/CAD pair’s momentum. Amid these plays, the S&P 500 Futures resist following Wall Street’s gains while retreating from the six-week high marked the previous day, making rounds to 4,030-35 at the latest. On the same line, the US 10-year and two-year Treasury bond yields snap three-day recovery moves by struggling around 3.51% and 4.21% by the press time. To break the monotony, USD/CAD traders may take clues from the first readings of January’s S&P Global PMIs and the fourth-quarter (Q4) Gross Domestic Product (GDP). However, major attention will be given to Wednesday’s BoC where the Canadian central bank is up for 0.25% rate hike. More importantly, hints for further rate hikes will be closely observed to determine further downside bias for the Loonie pair. Technical analysis Having failed to cross the 100-DMA, around 1.3515 by the press time, the USD/CAD bears poke a 10-week-old support line, near 1.3340 at the latest, to confirm further downside of the Loonie pair.

Summary:  US equities sprinted to new local highs yesterday, with the S&P 500 crossing back above the 200-day moving average ahead of the heart of earnings season set to swing in motion today on Microsoft and other large companies reporting, with the earnings calendar heavy through next week. The US dollar trades weaker across the board as the Fed enters its quiet period ahead of next week’s FOMC meeting.   What is our trading focus? Equities: Momentum is building with breakout in technology stocks US equities rose yesterday with S&P 500 futures reaching their highest close since mid-December and Nasdaq 100 futures rallied all the way to 12,000 before closing a bit lower. Sentiment is improving on technology stocks due to the significant layoff announcements improving the outlook for profitability. The US leading indicators were weaker than estimated and the level observed fits with a high degree of certainty of a recession, so it feels like the equity market is balancing on a knife-edge. Today is an important earnings session with the key focus being Microsoft after the market close, but ahead of the market open earnings from industrials such as GE and 3M will set the tone on the opening. FX: USD falters again as risk sentiment bulls higher The greenback has traded weaker since yesterday, although yesterday’s high water mark in EURUSD above 1.0900 yesterday has not yet been surpassed as the USD weakness was more pronounced against more pro-cyclical currencies like AUD and SEK within the G10 on the strong surge in risk sentiment, even as the anticipation of Fed rate cuts for late this year and through next year has eased significantly (about 30 basis points for the policy rate priced by end of 2024 from the trough of late last week). The Fed has entered a quiet period ahead of next Wednesday’s FOMC meeting, with little data in the interim save for the December PCE inflation data this Friday. Elsewhere, New Zealand and Australia report Q4 CPI tonight in the Asian session and a Bank of Canada decision is up tomorrow (see preview below). Crude oil (CLH3 & LCOH3) supported by firm diesel prices ahead of sanctions Europe’s diesel market reached a two-month high on Monday with the ICE gasoil (FPc1) contract trading above $1000 per ton. A development being driven by EU’s ban on seaborne imports of Russian fuel products from February 5, and increased demand for jet fuel as travel continues to recover. Overall, the focus stays with China amid hopes of a recovery in fuel demand more than offsetting potential weakness in the US as economic data points to slowdown. National holidays across Asia, especially in China and Singapore kept trading to a minimum. In Brent, traders will now be looking for $90 next while support is in the $84 area. Gold trades higher on US recession concerns Gold reached a fresh nine-month high overnight after US leading indicators saw another sharp fall in December, and together with weak company earnings and layoffs and last week's weak retails sales it raises the risk of a US recession in the near term. A senior director at The Conference Board said: “Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023”. Developments that raises the potential for just one more US rate hike before the FOMC decides to pause. ETF holdings, which has been drifting lower this month finally saw a small pickup in demand while silver’s plunge remains a concern. At one point on Monday, it dropped 5% on technical selling and long liquidation below $23.20 before recovering to trade $23.60 this am. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields continue to edge higher US treasuries continue to soften, taking yields modestly higher after the 10-year benchmark’s move below the prior significant 3.40% low was rejected. This morning sees the 10-year benchmark trading back above 3.50% with company earnings and guidance in focus as the heart of earnings season swings into motion today. Yields at the front of the US yield curve have also rebounded from new lows posted last week in the wake of weak US Retail Sales and a dovish BoJ meeting, with the 2-year rising from a low of 4.03% last Thursday to 4.23% currently. The US treasury will hold a 2-year auction today. What is going on? Biden administration confronts China, accusing Chinese companies of supporting Russia’s war effort Citing “people familiar with the matter”, a Bloomberg article claims that the Biden administration has confronted China with evidence that state-owned Chinese companies are supplying “non-lethal” military and other assistance that amounts to a support of Russia’s war effort in Ukraine, while stopping short of “wholesale evasion” of US sanctions. More positive signs the travel sector is roaring back in Asia; on land and in the air Chinese road traffic congestion increased 22% from a year ago, as measured across 15 key cities. This is a positive sign that Chinese residents are striving to return to normalcy. Moving to air traffic, we believe the broader Asian-Pacific regional will likely report stronger numbers for Q4 of 2022 and Q1 of 2023, supporting higher revenue in the travel and tourism sector. Despite airlines travel returning, airlines costs are also rising with fuel costs higher after the oil price has bounced up 17% off its December low. Growth has a high ceiling for domestic Chinese air travel, with passenger traffic in November (the most recent available data point) at some 75% below late 2019 levels. The Aussie dollar above 0.7000. Australia CPI next test AUDUSD has traded back above 0.7000, nearly matching the highest levels since last August. The Aussie initially jumped to 0.7045 today in Asia after Australia’s service sector data improved, even though the Services PMI print remained in contractionary phase. The Q4 Australian CPI report is out tomorrow and is expected to rise to 5.8% YoY from 5.6% (for the important trimmed mean CPI), amid tighter energy markets, and higher metal prices. Spotify to cut 6% of workforce Like the rest of the technology sector Spotify announced yesterday that it is cutting 6% of its workforce to offset the top line weakness and improve profitability. The initial reaction in Spotify shares was strong but was faded during the session. The US Leading Indicator (LEI) fell sharply again in December It continues to signal recession for the US economy in the near term said Ataman Ozyildirim, Senior Director, Economics, at The Conference Board. “There was widespread weakness among leading indicators in December, indicating deteriorating conditions for labor markets, manufacturing, housing construction, and financial markets in the months ahead. Meanwhile, the coincident economic index (CEI) has not weakened in the same fashion as the LEI because labor market related indicators (employment and personal income) remain robust. Nonetheless, industrial production— also a component of the CEI—fell for the third straight month. Overall economic activity is likely to turn negative in the coming quarters before picking up again in the final quarter of 2023.” What are we watching next? Bank of Canada meets tomorrow – most see a 25-basis point hike tomorrow followed by a pause Most observers are looking for the Bank of Canada to hike one last time for this cycle tomorrow to take the policy rate to 4.50% and to indicate a pause to assess inflationary and labor market conditions before deciding on next steps. The Bank of Canada hiked rapidly in 2022 in an attempt to catch up with galloping inflation but has contrasted with the Fed in signalling a pause in the hike cycle before the Fed, which has been slow to signal that peak rates may be nearing. USDCAD trades near the lows since last November at 1.3350 this morning, with the 200-day moving average creeping higher and near 1.3200. Earnings to watch The Q4 earnings season accelerates this week with key earnings from Microsoft, ASML, Tesla, Visa, and Chevron. The aggregate earnings surprise for the S&P 500 companies that have reported earnings is currently 4.1% and the market has responded positively to the Q4 earnings reported so far with Netflix’s 8.5% jump on its strong outlook for its advertising business being the clearest evidence. Today’s key earnings focus is Microsoft (read our earnings preview here) with expectations of lower revenue growth and lower operating margin. Other important earnings today are from J&J, Texas Instruments, GE, and 3M. Today: Nidec, Microsoft, J&J, Danaher, Verizon, Texas Instruments, Raytheon Technologies, Union Pacific, Lockheed Martin, Intuitive Surgical, GE, 3M, Halliburton, DR Horton Wednesday: ASML, Lonza Group, Tesla, Abbott Laboratories, NextEra Energy, IBM, Boeing, ServiceNow, CSX, Freeport-McMoRan, Lam Research, Norfolk Southern Thursday: Tryg, Novozymes, Kone, Nokia, LVMH, Christian Dior, STMicroelectronics, SAP, Diageo, Atlas Copco, Volvo, SEB, Visa, Mastercard, Comcast, Intel, Blackstone, Valero Energy, Archer-Daniels-Midland, Dow, Nucor, L3Harris Technologies, Southwest Airlines, American Airlines Friday: Fanuc, Chevron, American Express, Colgate-Palmolive Economic calendar highlights for today (times GMT) 0810 – ECB’s Klaas Knot to speak 0815-0900 – Eurozone Jan. Flash Manufacturing and Services PMI 0930 – UK Jan. Flash Manufacturing and Services PMI 0945 – ECB President Lagarde to speak 1100 – UK Jan. CBI Business Optimism and Trends in Total Orders/Selling Prices 1300 – Hungary Central Bank Rate Decision 1330 – Philadelphia Fed Non-manufacturing Survey 1445 – US Jan. Flash Manufacturing and Services PMI 1500 – US Jan. Richmond Fed Business Conditions 1800 – US Treasury auctions 2-year notes 2130 – API's weekly report on US oil inventories 2145 – New Zealand Q4 CPI 0030 – Australia Q4 CPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 24, 2023 | Saxo Group (home.saxo)

European markets were somewhat of a mixed bag yesterday after the lates flash PMI numbers painted a patchy outlook for certain parts of the economy in the UK and Europe.   US markets also underwent a mixed finish with the Dow finishing higher and the Nasdaq 100 lower,  due to caution ahead of the release of key earnings announcements after the close last night, with the main focus on Microsoft's Q2 numbers being of particular interest. These saw the software giant record revenues of $52.7bn, which was slightly below expectations, with profits of $2.32c a share.   As expected, personal computing and gaming revenue was disappointing, falling short of forecasts at $14.24bn, however this was offset by strong cloud revenue of $27.1bn. Windows OEM revenue fell 39%, while Xbox content and services saw a decline of 12%. On guidance Microsoft was rather pessimistic suggesting that Azure growth would slow, and that new business was already becoming more difficult. Microsoft also said subscriptions were also likely to slow, and that revenues would remain flat in Q3.   Looking ahead to today's European session the pessimistic outlook to last night's earnings numbers looks set to see a slightly lower open.   With UK inflation seeing a step-down last week to 10.5%, it remains painfully high for a lot of people, and on the RPI measure is even higher. In December, the ONS took the decision to pull the release for PPI inflation due to problems with some of the calculations, with respect to diesel prices as well as the food prices calculation.  This is significant as PPI can act as a leading indicator as to what is coming down the line when it comes to inflationary, as well as disinflationary forces. Prior to the ONS pulling the numbers in December there had been evidence that factory gate prices had been falling sharply with the last recorded October numbers seeing a slowing in inflationary pressure from the peaks in the summer.   If we get a further sharp slowdown in the annual numbers, this ought to give confidence that the headline numbers will also see similar falls in the coming months. Annualised input numbers in October came in at 19.5%, down from 20.8%, while output prices for October came in at 17.2%. Monthly input price estimates for today's December numbers are for a decline of -0.8%.   With energy prices continuing to fall over the winter, we've started to see gradual improvements in economic activity across the euro area. This improvement has been reflected in the better-than-expected German manufacturing numbers yesterday and was also responsible for a better than forecast improvement in German IFO business sentiment in December to 88.3.   This trend is expected to continue in today's January numbers with another improvement to 90.3, with the current assessment also set to improve to 94.9, and expectations set to rise to 85.3, from 83.2.   It was back in October that the Bank of Canada set the cat amongst the pigeons when it raised rates by a less than expected 50bps to 3.75%, in a move that suggests that central banks were starting to wake up to the possibility that too aggressive rate rises could do more harm than good.   They then followed that with another 50bps rate rise in December, to 4.25%, as concern grew that raising rates too high could create problems in the housing market.   With today's decision coming a week before next week's Federal Reserve decision, a lot of people are looking at the Bank of Canada for a steer in terms of whether we could see a step down from the Fed. It is widely anticipated that the BoC will announce another step down to 25bps, after headline inflation fell back to 6.4% from 6.8% in December. Median core prices however have remained sticky, remaining at 5% in November and up at the highs of the year, which in turn may mean the Bank of Canada could decide to err towards 50bps.     EUR/USD – currently range trading between the highs this week at 1.0927, and wider resistance at the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. A move through 1.0950 opens up a move towards 1.1110. Support remains back at the 1.0780 area.   GBP/USD – continues to struggle below the 1.2450 area and slipped back to towards the 1.2250/60 area. Above 1.2450 could see a move towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – having found support above the 50- and 100-day SMA last week the bias remains for a return to the recent highs at 0.8900. The next support below 0.8720 targets 0.8680.   USD/JPY – found resistance just above 131.00 yesterday, before slipping back. A move through 131.60 and last week's high potentially targets a return to the 132.50 area in the short to medium term. Support currently at the 128.20 area as well as the lows last week at 127.20.    FTSE100 is expected to open 5 points higher at 7,762   DAX is expected to open 25 points lower at 15,067   CAC40 is expected to open 10 points lower at 7,040   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

Trading in the US was eventless, except for the wild moves that marked the opening bell at the NYSE.  The S&P500 swung around the 4000, without any major moves up or down, as investors remained undecided faced with mixed company earnings, and mixed economic data.  Both US services and manufacturing PMI came in better than expected in January, but both remain in the contraction zone. While the Richmond Manufacturing index fell to -11, significantly lower than -5 expected by analysts.   In summary, the data confirmed a certain slowdown in US economic activity, but it didn't point to a free fall.   The US 2-year yield fell for the second straight session, as the soft data kept the Federal Reserve (Fed) doves at a soft and warm spot.   But at the current levels, the swap market suggests around 48 bp rate increase over the next two FOMC meetings. This means that the present activity in the swap market gives around 8% probability for no rate hike at all after the Fed's February meeting.   And if that's what keeps the S&P500 bid around the 4000 mark, it's worrying.  Earnings, earnings  The S&P500 could or could not get a boost from Microsoft at today's session, as Microsoft announced better-than-expected results yesterday after the market close, but the results were not all rosy. The revenue – which grew at its slowest pace since 2016 - slightly missed expectations, but the earnings beat estimates. The Intelligent Cloud segment grew 18%, as the Azure services grew 31% - slower than the past quarter but better than expected with the prospects of being further boosted by the ChatGPT deal. The shares rallied 5% in the afterhours, but gains were mostly given back.   S&P500 futures are down -0.40% at the time of writing.  Today, it's Tesla's turn to go to the earnings confessional after the bell, and nobody can tell you with confidence what will happen to the share price once the results are freshly out of the oven.   Tesla is doing very well, the company announced record car deliveries quarter after quarter, but the record deliveries weren't enough to meet the market expectations over the past three quarters. And unfortunately, the expectations make the market price, and missing them is no good thing for the share price.  In the FX  The US dollar remains under the pressure of soft data, and worryingly softening Fed expectations, while the euro got the boost that we were hoping for at yesterday's PMI release.   The EURUSD is again testing the 1.09 level to the upside this morning. And the gently widening divergence between the hawkish European Central Bank (ECB) expectations and the dovish Fed expectations remains supportive of a further advance. But be careful, the pair is about to step into the overbought market, which could slow the rally into the 1.10 target.  Across the Channel, the numbers were not as enchanting as on the main continent, and no one is surprised I guess to see the services PMI plunge to 48 in January with all the strikes going on. The manufacturing PMI on the other hand contracted less than expected but a new report suggested that the number of UK firms facing collapse jumped by more than a third at the end of last year.   Cable plunged below its year-to-date ascending channel, and the euro-pound is bought without much hesitation at the 50, 100-DMA levels, and should continue pressuring higher on a broadly stronger euro.   In Canada, the Bank of Canada (BoC) is preparing to announce its final 25bp hike. The dollar-CAD puts more weight into clearing the 1.3350 support, but crude oil is not helping, as the price of a barrel of American crude continues bumping its head against the solid $82pb wall, the 100-DMA, without being able to break it to the upside.   The API data showed almost 3.4-million-barrel build in the US inventories last week, hinting that the more official EIA data could also disappoint the bulls at today's read.   But the medium term outlook for crude oil remains positive, therefore, price pullbacks remain interesting dip buying opportunities as long as the 50-DMA support, which stands a touch below the $78pb mark, holds. 

The Bank of Canada is facing a hike/no-hike dilemma today. Our view is that it will deliver the last 25bp hike of the cycle now, but retain some flexibility to avoid sounding too dovish. The CAD impact may be slightly positive. Elsewhere, there are no key data releases in the US, while the German Ifo index will be watched closely after yesterday's strong PMIs USD: No key US data today Yesterday’s PMIs painted a less dramatic picture of the US service sector compared to the latest ISM survey and triggered a positive reaction in the dollar. However, markets quickly sold the USD rally, confirming a rather pronounced bearish bias despite encouraging data. It does appear investors are happily buying the dip in EUR/USD around the 1.0850 handle at the moment, and that could prove to be a short-term floor for the pair. There are no data releases to highlight today and no Fed speakers due to the pre-FOMC blackout period. Markets have cemented their view that next week’s move will be a 25bp hike, but are still reluctant to fully price in another 25bp of tightening: the futures and swap market are embedding a 4.90% peak rate. This signals the perceived balance of risks is tilted to the dovish side ahead of next week’s FOMC. Should this narrative gain more traction this week, the dollar may remain gently offered. However, a sharper decline in the dollar may not be on the cards until other large event risks (European Central Bank, Bank of England meetings) are past us. Francesco Pesole EUR: 1.0850 emerging as a short-term floor A below-consensus reading in German manufacturing was the only flaw in an otherwise convincing set of PMIs in the eurozone yesterday. The eurozone composite PMI index moved back into expansionary territory (i.e. above 50.00) for the first time since June 2022, endorsing the ongoing re-rating of the growth outlook in the region. As mentioned in the USD section, 1.0850 has emerged as a buy-the-dip area in EUR/USD over the past two sessions. Good data out of the eurozone is likely keeping most investors on the bullish side of the euro for now, and downside risks for EUR/USD appear contained. A test of 1.1000 by the end of the week is looking more likely, although a decisive break higher is not our base case before the ECB. Today, the focus will be on the Ifo indices out of Germany. All three gauges (business climate, current assessment, and expectations) are expected to improve. Looking at the ECB pricing ahead of next week's meeting, it now seems very plausible that markets will not question a 50bp hike, although another half-point move in March is not fully priced in (around 80% implied probability). The degree of ECB President Christine Lagarde’s commitment to another 50bp move will be the key driver of the market reaction next week. Francesco Pesole CAD: BoC to hike one last time Once a hawkish stand-out, the Bank of Canada is facing a hike/no-hike dilemma today. This is, at least, what market pricing seems to suggest, with 17bp of tightening priced in for today’s announcement. Economists’ consensus is leaning more in favour of a 25bp move, which is also ING’s view. As discussed in our BoC preview, a still-tight jobs market is partly offsetting the decline in headline inflation and signs of economic slowdown, and probably suggests this is the right time to deliver the last 25bp hike of the cycle. Should the BoC surprise with a hold, there’s a good chance the bank will keep the door open for a move in March, which would match the market’s current pricing, and ultimately fail to hit the Canadian dollar. A 25bp hike but a strong signal that rates have peaked and growing concerns on the economic outlook (new economic projections are released today) could prove to be a more dovish outcome than a “hawkish hold”, as markets price in more rate cuts in the second half of the year. This is, however, hardly a desirable outcome for a central bank that is still fighting inflation, and our impression is that the BoC will want to retain some ambiguity around future moves for now. The impact on CAD may be positive but rather limited in the end. USD/CAD remains on track for a move to 1.30 in the coming months, in our view, but USD weakness should be the primary driver of such a move. Francesco Pesole HUF: Forint strongest since the middle of last year The Hungarian central bank yesterday confirmed its commitment to keeping conditions tight for a longer period and that it has taken a patient approach to monetary policy. Moreover, the NBH reiterated its intention to continue withdrawing liquidity from the market via the one-week discount bill and the long-term deposit tender. More interestingly, the NBH raised the reserve requirement ratio for banks to 10% effective from April. Overall, it has sent a very clear signal that the hawkish mode will last for an extended period of time and the central bank is not going to allow any hasty moves. The result is a forint slightly below 390 EUR/HUF at the end of yesterday's trading, higher rates at the short end of the IRS curve and FX implied yields climbing higher. The forint is thus the strongest since the middle of last year and we believe it could still benefit from yesterday's decision. Added to this is the higher EUR/USD level compared to last week and yesterday's renewed drop in gas prices back below €60/MWh. On the other hand, we may see some profit-taking today after the forint's multi-day rally and ahead of Friday's risky sovereign rating review from S&P. Overall, we expect the forint to stabilise around 390 EUR/HUF for now. Frantisek Taborsky Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  US equities struggled to find a direction on Tuesday following a technical glitch on the NYSE at the open. US and EU PMIs were better than expected although the UK print was weaker than expected. Earnings results continued to disappoint especially with gloomy guidance from Verizon, 3M and Lockheed Martin, while Microsoft posted solid cloud sales. Tesla is up next on the investors’ radar, leading into the full set of tech earnings next week. Australia CPI came in stronger than expected, boosting AUD. Bank of Canada decision due today and the last rate hike of the cycle appears to be on the cards.   What’s happening in markets? Equity markets lose steam and trade cautiously ahead of the Fed’s preferred inflation gauge US equity markets were a bit dull on Tuesday investors weighing up mostly stronger than expected Microsoft earnings results, vs a weaker than expected earnings from chipmaker giant, Texas Instruments. The S&P500 (US500.I) fell 0.1% but closed above it 200-day average for the second day (a sign there are more bulls in the market than bear), while the Nasdaq 100 (NAS100.I) lost 0.2%. Still markets are waiting for the next major catalysts; Tesla’s results on Wednesday, then later in the week, the Fed’s preferred inflation gauge, the Core Personal Consumption Expenditures (PCE) price index for December; to also gauge if the Nasdaq’s rally of 11% from its low can be sustained, especially as the PE for the Nasdaq is about 54.6 times earnings; meaning tech stocks are still quite expensive compared to their averages. The risk is if Core PCE doesn’t fall as expected from 4.7% QoQ to 3.9%, then we could see a selloff in equity markets, while the US dollar would be bought. However, the S&P500 is seemingly bullish for now, until the next tests (some of which we mentioned), click for an in depth Technical Analysis on what the next levels could be for the S&P500. Mixed Microsoft (MSFT) result has shareholders a relieved as cloud sales rise more than forecast; a sign the business could stand tall amid the murky year ahead After hours Microsoft (MSFT) shares gained 4.3% with investors relieved its revenue in constant currency rose 7% in the quarter, versus the 6.59% estimate. Microsoft’s closely watched Azure cloud-computing business, sales gained 38%, compared with predictions for a 37% increase, excluding the impact of currency fluctuations. This underscores Azure’s ability to help drive the company, even as sales of Windows software to PC makers plummeted amid a slumping market. Adjusted earnings per share came in at $2.32, slightly better than the $2.30  estimate, thanks to the cost cutting. Capital expenditure was $6.27 billion, less than Bloomberg estimated ($6.63 billion), while revenue slightly missed expectations hitting $52.75 billion vs the $52.93 billion estimate. FX: AUDUSD boosted by hotter-than-expected CPI A mixed day for the US dollar on Tuesday as it broadly ended the day unchanged after the tech issues with the US equity open and broadly firmer US PMIs. The move lower in yields however dragged on the USD, and Japanese yen was the biggest gainer on the G10 board. USDJPY reversed from 131 back to 130 levels at US close but seeing upward pressure again this morning in Asia. NZDUSD hovers around key resistance level of 0.65 as NZ 4Q CPI came in stronger than expected at 7.2% vs estimate of 7.1%, while Chris Hipkins was sworn in as the 41st prime minister. AUDUSD hit fresh highs of 0.7080 after the Australia CPI release came in above expectations at 7.8% YoY and 1.9% QoQ (exp 7.6% YoY and 1.6% QoQ). Meanwhile, EURUSD stays close to 1.0900 with stronger than expected Eurozone PMIs and mixed ECB speakers underpinning. Villeroy suggested the ECB will reach peak rates by the summer, although Simkus said this may be unlikely but the ECB should continue with 50bp hikes. Nagel said the ECB is not done on inflation that remains far too high, and Panetta said the ECB should not commit to any specific policy move beyond February. Crude oil (CLG3 & LCOH3) prices drop Oil prices dropped on Tuesday amid risk off tone broadly across markets amid a mixed set of earnings results. WTI prices fell 1.8% below $81/barrel while Brent was down 2.3% to sub-$86.50. OPEC+ are expected to keep oil production unchanged when they meet next week as they await clarity on Chinese demand and the impact of EU’s ban on Russian supply (from Feb 5). Meanwhile, API inventories suggested a still-tight oil market with US crude inventories rising 3.38mm barrels last week and focus will be on the official data due today. Gasoline inventories rose by 620,000 barrels after last week’s API data showed the fuel inventories rising by 2.8 million barrels last week. Distillates fell 1.929 million barrels after falling by 1.8 million bpd in the week prior. Metals see red on profit taking, while gold nudges up on the cusp of a bull market Copper declined 0.2% with investors booking profits after the copper prices have gained 32% from its low. Traders bought into Wheat, lifting Wheat up 2% as its trades at year-lows. While Gold nudged up 0.3% taking its rally off its low to 19.5%, meaning that gold is on the cusp of a bull market.  Read next: The Aussie Pair Is Above 0.70$, GBP/USD Pair Lost Its Level Of 1.24$| FXMAG.COM What to consider? US PMIs held up stronger than expected US flash PMIs for January surpassed expectations, as services rose to 46.6, above the expected 45.0 and the prior 44.7, while manufacturing lifted to 46.8 from 46.2 (exp. 46.0), which comes ahead of ISM on February 1st. The composite rose to 46.6 from 45.0, and this will probably further boost the calls in favor of a soft landing rather than a deep recession as has been the case since the start of the year due to faster-than-expected China reopening and stronger Eurozone outlook. Still, activity is in contraction and job growth is cooling, but the January print also pointed to a re-acceleration in the input cost inflation. Eurozone composite PMI returns to expansion Eurozone PMI rose to 50.2 in January from 49.3 in December and 49.8 expected, suggesting that the region may be able to skirt a recession due to a less harsh winter this season which has given room to the ECB to continue to focus on fighting underlying inflationary pressures. Manufacturing PMI was just below the key 50-mark at 48.8 but better than last month’s 47.8, while the rise of services PMI to 50.7 drove most of the gains. UK services PMI, on the other hand, fell to 48 from 49.9 in December, while manufacturing gained slightly to 46.7 in January from 45.3 previously but still remained in contraction. This suggests further signs of UK being in a recession in early 2023 and possibly a sooner pause for the BOE than the ECB. Bank of Canada decision due today, most see a 25-basis point hike tomorrow followed by a pause Most observers are looking for the Bank of Canada to hike one last time for this cycle today to take the policy rate to 4.50% and to indicate a pause to assess inflationary and labor market conditions before deciding on next steps. The Bank of Canada hiked rapidly in 2022 in an attempt to catch up with galloping inflation but has contrasted with the Fed in signalling a pause in the hike cycle before the Fed, which has been slow to signal that peak rates may be nearing. Tesla earnings on watch for margin pressure from price cuts Analysts expect revenue growth of 36% y/y and EPS of $1.12 up 64% y/y. Analysts are still very bullish on revenue growth for 2023 with expectations at 30% growth despite the recent slip in deliveries and three quarters of growing difference between production and deliveries. This is also reflected in the consensus price target at $190 vs the current price of $144. Traders and investors are also expressing a bullish take on Tesla with the put-call ratio on volume being 0.79 and the put-call open interest ratio at 0.65. The key thing to watch will be the comments on recent price cuts for several models, and how that impacts the bottom line, and whether the demand response is big enough to offset the price reduction to see the bottom line grow this year.   For a look ahead at markets this week – Read/listen to our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Market Insights Today: Positive surprise from US and EU PMIs; Tesla earnings ahead – 25 January 2023 | Saxo Group (home.saxo)

Summary:  US equities posted an uninspiring session yesterday and the mood soured slightly after the close on Microsoft reporting earnings and issuing weak guidance for its cloud business. Today, the hotly anticipated Tesla earnings report is up after hours. Elsewhere, US Treasury yields dipped and the Australian dollar jumped to new cycle highs in many AUD pairs, including versus the US dollar, on hotter than expected Australian Q4 CPI data.   What is our trading focus? Equities: Momentum faded in US equities mixed earnings The Q4 earnings releases yesterday weighed on sentiment yesterday with the biggest negative surprise coming from 3M expecting -3% to 0% organic revenue growth in 2023 which indicates a sharp decline in volume which 3M confirmed is taking place in consumer electronics and retail related businesses. After the cash close Microsoft reported a worse than expected outlook sending S&P 500 futures lower trading around the 4,020 level early European trading hours. We expect sentiment to remain in a negative mood as the market awaits Tesla’s Q4 result after the market close. FX: USD generally weaker together with sterling, AUD surges The USD was sold again yesterday after a minor rebound, with EURUSD trading back above 1.0900 by this morning and near the cycle highs, while the weaker USD signal was not particularly pure or broad. USDJPY remains above 130.00 as the price action there has lost energy, for example. Some of the euro strength may be on EURJPY flows as the ECB jawboning remains on the hawkish side of late, and on EURGBP flows as sterling stumbled badly yesterday on a very weak preliminary January UK Services PMI yesterday, with EURGBP well back up into the range above 0.8800. The recent cycle top there was just south of 0.8900. Overnight, AUD jumped broadly to the strong side overnight on hot CPI data (more below). Crude oil (CLH3 & LCOH3) sits between two chairs Following Tuesday’s sharp fall, as investors turned more risk adverse following disappointing earnings, crude oil prices are slightly higher into today’s session with recession fears continuing to be offset by an expected increase in Chinese demand and supply concerns related to next month's EU embargo on Russian seaborne sales of fuel products. In Brent the approach to $90 and the December high at $89.40 is likely to prove a tough nut to crack until more supporting news reaches the market. API data showed another build in US crude stocks, but at 3.4mn barrels if was less than the huge builds seen recently. The EIA data is out later today. Gold at new cycle high Gold reached a new cycle high on Tuesday of $1942.5 before profit taking emerged following the better-than-expected PMIs before bouncing back after the weak Richmond Fed index. Bullion trades up close to 6% this month and more than 300 dollars above the early November low on growing recession fears and expected slowing of Fed tightening. The remainder of the week is littered with US economic data, including US Q4 GDP and PCE, the Fed’s favoured inflation metric. Gold remains in a steep uptrend with support at $1900 followed by $1880 where the 21-day moving average and trendline from the November low meet. Silver has stabilised following Monday’s short-lived sell off below $23.15 but a couple of closes above the 21-day moving average, last at $23.76 will be needed to turn the sentiment more supportive. Chicago wheat futures advance Chicago wheat, one of the three most shorted commodities by the hedge fund industry trades near a one-week high after crop conditions worsened in Texas, the second biggest US producing state of winter wheat, a reminder that dry soil conditions remain following last year's massive drought. In the week to January 17, data from the CFTC showed hedge funds held the biggest short position in Chicago wheat since May 2019. Together with Arabica coffee, another heavily shorted contract, these contracts remain exposed to short covering should the technical and/or fundamental outlook turn more favourably. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fall. Very strong 2-year Treasury auction US treasuries found support and rallied yesterday, taking the 10-year treasury yield benchmark back below 3.50% and the 2-year was back below 4.20% this morning, in part after a very strong 2-year auction that saw the strongest bidding metrics since the early 2020 pandemic outbreak timeframe. The US treasury will auction 5-year T-notes today. Grumbles around a protracted US debt ceiling showdown in Congress and the risk of default by the US government not wearing on trust in US sovereign paper yet, with “crunch time” for the issue seen as early as early summer if the situation not resolved before then. What is going on? Microsoft’s outlook sent shares lower The world’s largest software company missed revenue estimates in Q2 (ending 31 December) by a small margin but hit the EPS consensus estimate with EPS at $2.32 for the quarter. The initial reaction was positive in the extended trading session but as the outlook became clearer to investors shares sold off. Microsoft forecasts a continuous slowdown in the commercial business in the next two quarters leaving room for a growth acceleration later in 2023. ASML confirms strong demand for chips Europe’s largest technology company reports Q4 sales of €6.4bn in line with estimates and a gross margin of 51.5% vs est. 49.3%. Investors will be pleased to see the confidence in the outlook with Q1 sales guidance at €6.1-6.5bn vs est. €6.1bn and FY23 revenue growth of 25% compared to consensus at 20% y/y. The company also sees a slight improvement in the gross margin. The Aussie dollar rallied up to 0.8% to 0.7100+, a new 5-month high on hot Q4 CPI print The Australian dollar popped to 0.7108 US, its highest level since early August after another Australian inflation print came out hotter than expected after electricity prices surged, rents also remained stubbornly high, along with furnishings, and household equipment price. Core Trimmed Mean CPI rose 6.9% YoY, above the 6.5% consensus expected. Headline inflation came in at 7.8%, slightly below consensus expectations. Recall the RBA expects inflation to remain high in early in 2023, particularly amid higher energy costs. This is also in line with several other government bodies’ thinking. The stronger inflation data saw odds of an RBA hiking pause for February falling, with a majority now looking for a hike at the Feb. 8 RBA meeting, with about 65 basis points of total additional tightening priced for the RBA, with a peak policy rate priced near 3.75%. Eurozone Flash Jan. Composite PMI edges into expansion Eurozone PMI rose to 50.2 in January from 49.3 in December and 49.8 expected, suggesting that the region may be able to skirt a recession due to a less harsh winter this season which has given room to the ECB to continue to focus on fighting underlying inflationary pressures. Manufacturing PMI was just below the key 50-mark at 48.8 but better than last month’s 47.8, while the rise of services PMI to 50.7 drove most of the gains. UK services PMI, on the other hand, fell to 48 from 49.9 in December, while manufacturing gained slightly to 46.7 in January from 45.3 previously but still remained in contraction. This suggests further signs of UK being in a recession in early 2023 and possibly a sooner pause for the BOE than the ECB. US Flash Jan. PMIs hold up better than expected US flash PMIs for January surpassed expectations, as services rose to 46.6, above the expected 45.0 and the prior 44.7, while manufacturing lifted to 46.8 from 46.2 (exp. 46.0), which comes ahead of ISM on February 1st. The composite rose to 46.6 from 45.0, and this will probably further boost the calls in favour of a soft landing rather than a deep recession as has been the case since the start of the year due to faster-than-expected China reopening and stronger Eurozone outlook. Still, activity is in contraction and job growth is cooling, but the January print also pointed to a re-acceleration in the input cost inflation. US and Germany to send tanks to Ukraine The Biden administration is reportedly expected to announce the intent to send 30 M1 Abrams tanks to Ukraine, with Germany’s Chancellor Scholz also reportedly deciding to send at least 14 of its Leopard 2 tanks to Ukraine after a long hesitation. Reports suggest Germany would only agree to send its best tanks if the US did likewise. It is unknown how rapidly the tanks could be deployed at the front. The US Justice Department and eight US states sue Alphabet Inc.’s Google (GOOGL:xnas) ... charging the company with a monopoly in its digital advertising market place and calling for a break-up of the company’s business in this area. Google retorted that the case “largely duplicates an unfounded lawsuit by the Texas Attorney General, much of which was recently dismissed by a federal court. DoJ is doubling down on a flawed argument....” Alphabet, Inc.’s share price fell 2% yesterday. Codelco produced 10% less copper than planned last year Production at Codelco, the Chilean state-owned miner said on Tuesday it produced 10% less copper than planned last year. Driven by mishaps at existing operations, such as rockfall, equipment malfunctions and dam freeze. In addition, some projects were delayed as the industry is seeing cost blowouts. Chile, the world's biggest supplier has increasingly been challenged by steadily falling ore quality, water shortages and projects becoming pricier. Developments that together with social unrest in Peru and the expected pickup in demand from China and the green transformation point to underlying support for copper. Freeport-McMoRan (FCX) report production and earnings later today and it may overtake Codelco as the world’s top producer. What are we watching next?  Bank of Canada meets today – most see a 25-basis point hike tomorrow followed by a pause Most observers are looking for the Bank of Canada to hike one last time for this cycle today to take the policy rate to 4.50% and to indicate a pause to assess inflation- and labour market conditions before deciding on next steps. The Bank of Canada hiked rapidly in 2022 in an attempt to catch up with galloping inflation but has contrasted with the Fed in signalling a pause in the hike cycle well before the Fed, which has been slower to signal that peak rates may be nearing. USDCAD trades near the lows since last November at 1.3350 this morning (2023 low is 1.3322), with the 200-day moving average creeping higher and near 1.3200. Tesla earnings on watch for margin pressure from price cuts Analysts expect revenue growth of 36% y/y and EPS of $1.12 up 64% y/y. Analysts are still very bullish on revenue growth for 2023 with expectations at 30% growth despite the recent slip in deliveries and three quarters of growing difference between production and deliveries. This is also reflected in the consensus price target at $190 vs the current price of $144. Traders and investors are also expressing a bullish take on Tesla with the put-call ratio on volume being 0.79 and the put-call open interest ratio at 0.65. The key thing to watch will be the comments on recent price cuts for several models, and how that impacts the bottom line, and whether the demand response is big enough to offset the price reduction to see the bottom line grow this year. Earnings to watch Today’s key earnings focus is ASML and Tesla as both earnings will set the direction for sentiment in the market. Read our earnings preview from yesterday here.  Today: ASML, Lonza Group, Tesla, Abbott Laboratories, NextEra Energy, IBM, Boeing, ServiceNow, CSX, Freeport-McMoRan, Lam Research, Norfolk Southern  Thursday: Tryg, Novozymes, Kone, Nokia, LVMH, Christian Dior, STMicroelectronics, SAP, Diageo, Atlas Copco, Volvo, SEB, Visa, Mastercard, Comcast, Intel, Blackstone, Valero Energy, Archer-Daniels-Midland, Dow, Nucor, L3Harris Technologies, Southwest Airlines, American Airlines  Friday: Fanuc, Chevron, American Express, Colgate-Palmolive  Economic calendar highlights for today (times GMT) 0900 – Germany Jan. IFO Business Climate survey  1500 – Canada Bank of Canada Rate Decision  1530 – US Weekly DoE Oil and Product Inventories  1600 – Canada Bank of Canada Statement and Press Conference  1800 – US 5-year Treasury Auction  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 25, 2023 | Saxo Group (home.saxo)

USD/CAD is set to extend the downside to near the weekly low around 1.3320. Bank of Canada is expected to hike the interest rate further by 25 bps to 4.5%. The expectation of a smaller interest rate hike by the Federal Reserve is backed by escalating recession fears. USD/CAD is expected to deliver a breakdown of the Inverted Flag chart pattern that might expand volatility ahead. USD/CAD is hovering near the critical support above 1.3340 in the early European session. The Loonie asset has dropped after failing to sustain above 1.3400 and is expected to decline further to near the weekly lows around 1.3320. The major is following the footprints of the US Dollar Index (DXY), which is displaying a subdued performance. Weakness in the S&P500 futures led by a dip in Microsoft earnings due to missed estimates in the cloud business and technical glitches in the NYSE has turned investors’ risk-averse. Also, investors are restricting themselves from building full-capacity positions ahead of the United States Gross Domestic Product (GDP) data. The US Dollar Index (DXY) is struggling to sustain above the 101.50 resistance. The alpha created by the US government bonds has rebounded firmly. The 10-year US Treasury yields have scaled to near 3.47%. Bank of Canada to tighten policy further To tame stubborn inflation, the Bank of Canada (BoC) might continue to tighten its monetary policy further. Canada’s inflation has been recorded at 6.3% from its December Consumer Price Index (CPI) report, which is three times more than the 2% inflation target. According to a poll from Reuters, Bank of Canada Governor Tiff Macklem’s aggressive policy tightening campaign is expected to calm down as the street sees a further interest rate hike by 25 basis points (bps) to 4.50%. Also, it conveys that the Bank of Canada will keep interest rates at 4.5% for the rest of the year, which indicates that this might be the end of further policy tightening. Canada’s headline inflation stood at 6.3% for December and is expected to remain above 2% inflation target till Q3CY2024. Factors that have kept Canada’s inflation at the rooftop are the tight labor market and supply chain bottlenecks. Upbeat employment opportunities have not provided a significant reason to producers to trim the prices of goods and services at factory gates. A higher-than-projected hawkish interest rate decision by the Bank of Canada might strengthen the Canadian Dollar. Oil price attempts a recovery from $80.00 Sheer weakness in the oil prices witnessed on Tuesday has met with demand in Wednesday morning around the critical support of $80.00. The black gold witnessed immense pressure as oil demand is expected to witness short-term pain due to extended holidays in Chinese markets for Lunar New Year celebrations. Also, the absence of chatters about supply cuts in the report from OPEC impacted the oil price. Meanwhile, the oil price has attempted a recovery amid headlines that the United States is considering refilling the Strategic Petroleum Reserve (SPR). US President Joe Biden exploited the oil reserves to fight rising oil prices in CY2022. It is worth noting that Canada is a leading exporter of oil to the United States and a recovery in the oil price might support the Canadian Dollar. Read next: The Aussie Pair Is Above 0.70$, GBP/USD Pair Lost Its Level Of 1.24$| FXMAG.COM Contraction in US GDP might accelerate recession fears After a better-than-projected preliminary United States S&P PMI data, investors are shifting their focus toward the release of Thursday’s Gross Domestic Product (GDP). The street is expecting the fourth quarter GDP at 2.8% vs. the prior release of 3.2%. Investors should be aware of the fact that the US Bureau of Economic Analysis reported negative growth in the first two quarters of CY2022. And further contraction in the fourth quarter might accelerate recession fears. The rationale behind softening of economic activities is the higher interest rates by the Federal Reserve (Fed), which has trimmed the leakage of borrowings due to higher interest obligations. Apart from that, chatters about interest rate policy by the Federal Reserve are impacting the US Dollar. The street is expecting a further deceleration in the pace of policy tightening by the Federal Reserve as inflation has been softened significantly. USD/CAD technical outlook USD/CAD is forming an Inverted Flag chart pattern on an hourly scale that indicates a sheer consolidation, which is followed by a breakdown in the same. Usually, the consolidation phase of the chart pattern serves as an inventory adjustment in which those participants initiate shorts, which prefer to enter an auction after the establishment of a bearish bias. Downward-sloping 20-and 50-period Exponential Moving Average (EMA) at 1.3365 and 1.3375 respectively are acting as a major barricade for the US Dollar. Meanwhile, the Relative Strength Index (RSI) (14) is oscillating in a 40.00-60.00 range, which indicates volatility contraction

Trading in the US was eventless, except for the wild moves that marked the opening bell at the NYSE. S&P500 The S&P500 swung around the 4000, without any major moves up or down, as investors remained undecided faced with mixed company earnings, and mixed economic data. Microsoft  Microsoft announced better-than-expected results yesterday, but the 5% rally in the afterhours trading rapidly faded. Tesla is due to announce its earnings today. Forex In the FX, the US dollar remains under the pressure of soft data, and worryingly softening Fed expectations. The EURUSD is testing the 1.09 resistance on encouraging PMI data, while sterling is softer on growing slowdown worries. Bank of Canada In Canada, the Bank of Canada (BoC) is preparing to announce its final 25bp hike. The dollar-CAD puts increasing weight into clearing the 1.3350 support, but crude oil is not helping, as the price of a barrel of American crude continues bumping its head against the solid $82pb wall, the 100-DMA, without being able to break it to the upside. Read next: The Department Of Justice's Lawsuit Against Google | FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:38 S&P500 flat around 4000 1:55 Fed expectations become alarmingly soft 2:55 Microsoft earnings may not boost sentiment in S&P500 4:43 Tesla earnings due after the bell 6:26 US softer, euro stronger 7:29 Deteriorating UK outlook is not a concern for FTSE 100 8:48 BoC to announce a final 25bp hike 9:00 Crude oil: $82pb resistance too strong to clear… Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Tesla #Microsoft #earnings #ChatGPT #Nvidia #PMI #data #Fed #ECB #expectations #USD #EUR #GBP #BoC #rate #decision #CAD #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

USD/CAD is aiming to shift its auction above 1.3400 as the BoC has reached the terminal rate for now. The rising probability of a smaller interest rate hike by the Fed is weighing on US yields. Oil price is losing foot above $80.50 as oil demand sees short-term pain due to China’s Lunar New Year holidays. The USD/CAD pair has corrected marginally after a recovery move from 1.3380 in the Asian session. The Loonie asset is looking to shift its business above 1.3400 despite a recovery attempt from the US Dollar Index (DXY). The recovery attempt in the USD Index seems less confident amid the risk-on market mood. S&P500 futures are showing marginal gains in early Asia after settling almost flat on Wednesday. The 500-stock basket has turned volatile as corporate are demonstrating their quarterly performance through earnings displays. The USD Index is putting efforts in building a cushion around a seven-month low at 101.10 ahead of the United States Gross Domestic Product (GDP) (Q4) and other economic data, which will release on Thursday. The rising probability of a smaller interest rate hike by the Federal Reserve (Fed) for its February meeting is weighing on the US Treasury yields. The alpha generated by the 10-year US Treasury bonds has dropped to 3.44%. The street is expecting a contraction in the scale of economic activities in the fourth quarter to 2.6% from the former release of 3.2% as Fed chair Jerome Powell has burnt their hands by triggering recession fears in his fight against stubborn inflation. The release of the Durable Goods Orders (Dec) will provide cues about the forward demand, which is expected to jump to 2.5% vs. the prior release of -2.1%. Meanwhile, the Canadian Dollar is expected to face the heat as Bank of Canada (BoC) Governor Tiff Macklem has paused further policy tightening after pushing the interest rates by 25 basis points (bps) to 4.5%. The BoC will keep interest rates steady at 4.5% for the rest of the year and will assess the impact of yet terminal rate ahead. On the oil front, oil price is struggling to sustain above 80.50 as celebrations in China due to the Lunar New Year festival has resulted in a pause in economic activities and henceforth a short-term pain in the oil demand. It is worth noting that Canada is a leading exporter of oil to the United States and lower oil prices might impact the Canadian Dollar.  

Summary:  Risk sentiment was boosted in the US afternoon session after Bank of Canada’s pause signal sparked hopes of the Fed taking a similar turn next week. This saw dollar dipping and Gold surging to fresh cycle highs. Earnings results continue to be mixed with cost cutting efforts in the limelight, but some optimism came from buyback announcements from companies like Chevron and Blackrock. Meanwhile, Tesla beat on the EPS but missed on margin and free cash flow. HK stocks return today after Lunar New Year holiday while China markets are still closed.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) pared early losses to finish little changed On the back of the weakness in the outlook, especially a 7%-8% sequential decline in its Azure cloud computing in the current quarter, from Microsoft (MSFT:xnas), at one point in the New York morning Nasdaq 100 fell as much as 2.5% and S&P 500 slide nearly 1.7%. Stocks then spent the rest of the day climbing to recover from the morning losses. Nasdaq 100 finished the Wednesday session down only 0.3% and S&P 500 nearly unchanged. Microsoft pared early loss to close 0.6% lower. AT&T (T:xnys) jumped 6.6% on solid wireless subscription growth. Boeing (BA:xnys) plunged as much as 4.2%, following reporting a Q4 loss due to margin weakness, but pared all the loss and more, closing 0.3% higher. After the close, Tesla (TSLA:xnas) reported EPS of USD1.19, beating expectations slightly but EBITDA margin of 22.2% missing expectations. The EV giant expects to deliver about 1.8 million vehicles in 2023, in line with expectations. Tesla shares surged over 5% in extended hour trading. US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) richer by 1-3bps on lower UK & European yields Treasuries got a bid across the pond from stronger U.K. gilts and European government bonds which were helped by safe-haven buying on concerns of a potential escalation of the war in Ukraine as Germany and the U.S. are supplying tanks to Ukraine. Traders also took note of the Bank of Canada’s indication of a plan to pause rate hikes to assess the impact on the economy after raising its policy rate by 25bps to 4.5% on Wednesday. The 5-year auction went well with strong demand. Treasury yields fell 1 to 3 bps across the curve, with the 2-year finishing the session at 4.13% and the 10-year at 3.44% Hong Kong’s stock market back from the Lunar New Year holiday; Shanghai and Shenzhen closed Hong Kong’s stock market is resuming trading today after a 3-day long Lunar New Year Holiday while the mainland bourses remain closed for the holiday. During the first four days of the Lunar New Year holiday from Saturday to Tuesday, China’s passenger trips by road, rail, air, and water waterways reached nearly 96 million in China, about 29% higher from the same period last year. Chinese ADRs were in general firmer from their pre-holdiday closes in Hong Kong, with Alibaba (BABA:xnys; 09988:xhkg) up 1.2%, Tencent (TCEHY:xnas; 00700:xhkg) up 2.1%). JD.COM (JD:xnas; 09618:xhkg) up 0.6%, Li Auto (LI:xnas; 02015:xhkg) +6.5%, and NIO (NIO:xnys; 09866:xhkg) +7.1%. FX: Dollar downturn resumes amid expectations of a dovish Fed While a downshift in the Fed rate hike trajectory has been broadly signalled by the members of the board before the quiet period kicked off, the Bank of Canada’s pause signal has left the markets hoping for a similar turn from the Fed next week. This brought a fresh weakness in the US dollar overnight, with G10 gains led by AUD after a firmer-than-expected Q4 CPI print yesterday which would likely drive the RBA to continue to hike for now. AUDUSD hold above 0.71 with AUDNZD marching above 1.0950. GBPUSD returned back above 1.2400 as well while EURUSD is hovering near the YTD high of 1.0927 with a strong German Ifo report (read below) and hawkish rhetoric from the ECB continuing. USDJPY also back below 129.50 in the Asian morning. Crude oil (CLG3 & LCOH3) prices range-bound Crude oil prices remained firm on Wednesday after the EIA data showed an unexpected rise in US crude inventories. EIA reported a 0.5mln bbl build for US crude stocks in the latest week, marking the fifth straight build, albeit considerably less after the 8.4mln bbl build for the prior week, and on the lighter side of analyst expectations for a 1mln bbl build. Meanwhile, a weaker dollar and sustained positive signals from China reopening underpinned as well. WTI continued to find bids at $79.50 while Brent was supported around $85.50 with eyes on the December high of $89.40. Gold (XAUUSD) pushes to fresh 9-month highs; eyes on 1950 The weakness in the dollar amid expectations of a Fed downshift to a smaller rate hike next week continues to push Gold prices higher. The yellow metal surged to 1949.20 overnight, the highest levels since April 2022. A dovish hike by the Bank of Canada last night has set up the markets for a similar shift from the Fed next week. The US GDP release today will be of key interest to gauge whether the market expectations shifting in favor of a soft landing rather than a recession can continue to hold. The focus will then turn to the PCE data on Friday before we head into the Fed meeting week. Support at $1900.  Read next:Despite The Challenges Starbucks Is Developing In Italy, Bank BNP Paribas In Frankfurt Have Been Raided| FXMAG.COM What to consider? Bank of Canada’s dovish hike The Bank of Canada raised interest rates by 25bps to 4.50%, the highest level in 15 years. It plans to hold going forward, but Governor Tiff Macklem said he's "prepared" to hike again if needed. The decision was slightly dovish with a clear pause being signalled, despite the caveat to hike again. The MPR saw the bank lower its 2022 and 2023 inflation forecast but sees 2024 inflation at 2.3% (prev. 2.2%), the same year it expects it to reach its target. Growth forecasts were raised in 2022 and 2023, but lowered in 2024. Markets are taking this as a positive signal in the hope that the Fed could take a similar turn next week. Improving German business outlook further lowers recession risk Germany business confidence survey signalled that the worst may be over for the economy and a slowdown may be ahead, but a deep recession appears to be unlikely at this point. The threat of an immediate energy crunch has receded due to the less harsh winter, and supply-chain constraints are also easing with China’s reopening. The expectation index of the Ifo survey rose for the fourth successive month to 86.4 in January from 83.2 previously, but remained historically subdued amid elevated inflation curbing purchasing power. The current assessment slightly deteriorated. US GDP on the radar today, along with jobless claims An advance print of the Q4 GDP will be released in the US today, and some deceleration is expected from last quarter’s 3.2% YoY. But consensus still expects a strong growth of 2.7% YoY as spending on services sustained. The big concern will be if we see consumers pulling back, as was signalled by a slump in retail sales this month. That could raise concerns on whether a soft landing is really possible. However, judging from the recent labor market strength, it may be too soon to count the consumer out. Initial jobless claims for last week will also be on watch after the previous figure dipped to sub-200k levels signalling a still-tight labor market. Tesla earnings beat Tesla reported Q4 revenue of USD24.32 billion, 1% above the consensus estimate of USD24.07 billion as per Bloomberg’s survey, and a growth of 13% Q/Q and 37% Y/Y. Adjusted net income grew nearly 60% to USD 3.69 billion from a year ago. Adjusted earnings per share came in at USD1.19, beating the consensus estimate of USD1.12 by 6%. The gross margin of 25.1% was below the 26.6% expected by the street and the EBITDA margin of 22.2% was lower than the 22.6% forecasted by analysts. The EV giant said it is accelerating cost-cutting actions. Tesla commented that its factory in China has been running near full capacity and it is not expecting meaningful volume increases in the near term. Chevron boosts buyback on record profits Chevron (CVX) announced $75 billion buyback (22% of marketcap and tripling the current program) that will start in Apr 1 and raised dividend by 6.3% to $1.51/share a quarter implying yield of 3.4%. 4Q earnings are due tomorrow. Other companies like Blackrock and Netflix have also announced buybacks for 2023, sending some optimism on a soft landing scenario as companies are not hoarding cash with fears of an incoming recession.   Source: Market Insights Today: Bank of Canada’s dovish hike; Step up in share buybacks – 26 January 2023 | Saxo Group (home.saxo)

Summary:  A whipsaw session in the US for equity traders, as a steep sell-off intraday, in part on Microsoft shares gapping lower at the open on its after-hours earnings report of the prior day was fully reversed by the close. Tesla’s strong guidance after hours kept the mood elevated, as did sideways to lower US treasury yields and a weak US dollar. Another long list of US and European companies are set to report earnings today, including Europe’s largest company by market cap, luxury goods maker LVMH.   What is our trading focus? Equities: US equity market holds up after a stumble The market suffered a significant intraday drawdown yesterday, in part on mega-cap Microsoft gapping lower on the open after its earnings report after the close on Tuesday. But that stock and the broader market recovered to approximately unchanged by the close of the session, keeping the sense of suspense alive around the direction of this market, with a long-standing descending trend-line from the all-time top in play for the S&P 500 near recent highs above 4,000 and the price action criss-crossing the 200-day moving average. Today sees a further flurry of earnings reports, including from the two credit card giants Mastercard (to report before market open) and Visa (after market close). Hong Kong’s Hang Seng (HIF3) surged on return from the Lunar New Year holiday On the first trading day of returning from the Lunar New Year holiday while the mainland bourses remain closed, Hang Seng Index surged 2% and Hang Seng TECH Index jumped 3.6%. During the first four days of the Lunar New Year holiday from Saturday to Tuesday, China’s passenger trips by road, rail, air, and water waterways reached nearly 96 million in China, about 29% higher than in the same 4-day period in the Lunar New Year holiday last year. It added to the optimism that the initial Covid outbreak when pandemic containment measures were lifted has not stalled the rebound in mobility and economic activities. Xiaomi (01810:xhkg), surging 12%, was the best performer within the benchmark Hang Seng Index, following the leak of an EV blueprint design being considered as an indication of the mobile phone and electronic device maker is on track to launch its first EV in 2024. FX: USD drops with resilient risk sentiment and as yields ease lower, perhaps in part on dovish Bank of Canada The USD remains on the weak side, falling again after a brief rally yesterday as sentiment rebounded in equity markets. Another strong treasury auction (see more below) kept US yields under pressure, with the Bank of Canada’s signalling of a pause after yesterday’s hike reminding the market of the US Fed’s trajectory as it is seen pausing rate hikes soon. AUD was especially firm, rallying hard yesterday after a firmer-than-expected Q4 CPI print which is seen likely to drive the RBA to continue to hike for now. AUDUSD has held above 0.71, while AUDNZD rallied hard to 1.0950+, closing in on its 200-day moving average just above 1.1000. GBPUSD recoverd back toward 1.2400 as well while EURUSD is hovering near the YTD high of 1.0927 after a strong German Ifo report yesterday (read below) and hawkish rhetoric from the ECB continuing. USDJPY also back below 129.50 overnight in Asia. Crude oil (CLG3 & LCOH3) prices range-bound Crude oil trades near unchanged after holding tight ranges overnight the Asia session amid low liquidity as the Lunar New Year holiday continues.  EIA reported a 0.5mn barrel build in US crude stocks in the latest week, while Cushing inventories jumped by more than 4 mn barrels, the biggest since April 2020, to 35.6mn barrels, thereby supporting the current spread widening between WTI and Brent to near $6/bbl. Export was firm while total products demand to its lowest for this time of year since 2014. Meanwhile, a weaker dollar and sustained positive signals from China reopening underpinned prices. WTI continued to find bids at $79.50 while Brent was supported around $85.50 with eyes on the December high of $89.40. Gold (XAUUSD) pushes to fresh cycle high near $1950 The weakness in the dollar amid expectations of a Fed downshift to a smaller rate hike next week continues to push gold prices higher. The yellow metal reached 1949.20 overnight, the highest levels since April 2022. A dovish hike by the Bank of Canada last night has set up the markets for a similar shift from the Fed next week. The US GDP release today will be of key interest to gauge whether the market expectations shifting in favor of a soft landing rather than a recession can continue to hold. The focus will then turn to the PCE data on Friday before we head into the Fed meeting week. Additional price momentum being provided by ETF’s where total holdings this week has jumped by 13 tons. Support at $1900 with resistance at 1963$, a Fibonacci level. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fall, 5-year auction another strong one US treasuries continued to rally and yields edged lower, keeping the 10-year US treasury benchmark yield below 3.50%. A 5-year auction saw very strong bidding metrics, if not quite as dramatic as those of the 2-year auction of the prior day. More impactful US macro data is up today, including the first Q4 GDP estimate and weekly jobless claims number, with December PCE inflation data up tomorrow. What is going on? Tesla reports strong profits, forecasts 37% jump in sales this year The company beat consensus estimates in reporting $1.19 of earnings per share and said that it would increase its output “as quickly as possible” after having previously forecasted that it would average 50% annual growth in coming years. The coming year’s forecast production increase was for a rise of about 37%, and questions loom about the company’s margins after it cut prices sharply earlier this month. The company warned on economic uncertainty and claimed to be accelerating its “cost reduction roadmap.” Tesla stock has rallied over 40% from the cycle lows of a few weeks ago and was up marginally in late trading yesterday after the earnings release. Bank of Canada’s dovish hike The Bank of Canada raised interest rates by 25bps to 4.50%, the highest level in 15 years. It plans to hold going forward, but Governor Tiff Macklem said he's "prepared" to hike again if needed. The decision was slightly dovish with a clear pause being signalled, despite the caveat to hike again. The MPR saw the bank lower its 2022 and 2023 inflation forecast but sees 2024 inflation at 2.3% (prev. 2.2%), the same year it expects it to reach its target. Growth forecasts were raised in 2022 and 2023, but lowered in 2024. Markets are taking this as a positive signal in the hope that the Fed could take a similar turn next week. Improving German business outlook further lowers recession risk Germany business confidence survey signalled that the worst may be over for the economy and a slowdown may be ahead, but a deep recession appears to be unlikely at this point. The threat of an immediate energy crunch has receded due to the less harsh winter, and supply-chain constraints are also easing with China’s reopening. The expectation index of the Ifo survey rose for the fourth successive month to 86.4 in January from 83.2 previously but remained historically subdued amid elevated inflation curbing purchasing power. The current assessment slightly deteriorated. Bad time for small caps on Euronext Paris With tightened financial conditions, it is getting increasingly complicated for several small companies to get access to affordable financing. In less than two days, two small caps listed on Euronext Paris have faced severe financial difficulties. A court ordered the liquidation of Deinove – a French biotechnology company pioneering the exploration of a new domain of life, unexplored at 99.9 %: the microbial dark matter. The company, based in the South of France, failed to secure a new round of financing. Yesterday, Lysogène went into receivership. This is another French biotechnology company focusing on lead programs in neurodegenerative lysosomal. The stock is down 85 % on a yearly basis. Expect other small listed companies to experience the same fate as access to financing is getting much more complicated in a high-interest environment. The biotechnological sector is certainly one of the most vulnerable, along with other high-tech segments (such as artificial intelligence). What are we watching next? US GDP on the radar today, along with jobless claims An advance print of the Q4 GDP will be released in the US today, and some deceleration is expected from last quarter’s 3.2% YoY. But consensus still expects a strong growth of 2.7% YoY as spending on services was sustained. The big concern will be if we see consumers pulling back, as was signalled by a slump in retail sales this month. That could raise concerns on whether a soft landing is possible. However, judging from the recent labour market strength, it may be too soon to count the consumer out. Initial jobless claims for last week will also be on watch after the previous figure dipped to sub-200k levels signalling a still-tight labour market. Earnings to watch Today’s key earnings focus in Europe is on the largest company on the continent by market value, LVMH, which continues to ride high on strong sales, and with special focus on how the company guides on the anticipation of a reopening China. It reports after the European market close today. A number of other prominent European names are reporting, including SAP (results already out this morning, with upbeat revenue guidance relative to forecast). In the US, the focus is on the two credit card giants Mastercard, which will report before the open and Visa, which reports after the market close. US chip giant Intel will also report after the market close, as that beleaguered company continues to try righting the ship after touching eight-year lows last year, and with slumping PC demand a prominent concern. Today: Tryg, Novozymes, Kone, Nokia, LVMH, Christian Dior, STMicroelectronics, SAP, Diageo, Atlas Copco, Volvo, SEB, Visa, Mastercard, Comcast, Intel, Blackstone, Valero Energy, Archer-Daniels-Midland, Dow, Nucor, L3Harris Technologies, Southwest Airlines, American Airlines Friday: Fanuc, Chevron, American Express, Colgate-Palmolive Economic calendar highlights for today (times GMT) 1330 – US Dec. Chicago Fed National Activity Index 1330 – US Q4 GDP Estimate 1330 – US Weekly Initial Jobless Claims 1500 – US Dec. New Home Sales 1530 – US Weekly Natural Gas Inventory report 1600 – US Jan. Kansas City Fed Manufacturing Activity 2330 – Japan Jan. Tokyo CPI 0000 – New Zealand ANZ Business Confidence/Activity Outlook 0030 – Australia Q4 PPI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 26, 2023 | Saxo Group (home.saxo)

The S&P500 was flat yesterday, as investors tried to make sense of the deluge of company earnings that hit the fan before, during and after the session. Microsoft didn’t gain on better-than-expected earnings, and Tesla announced record profits, but the share price jumped only 5% in the afterhours. Stocks Latest positive price action in stocks – which is now fading, and the positive price action in bonds suggest that the recession odds became less for stock traders, and more for bond traders since the start of this year. And that’s a risk for stock gains, besides earnings. Bank of Canada In central banks, Bank of Canada (BoC) hiked its bank rate by 25bp yesterday and announced to pause. The BoC decision spurred the expectation that the Federal Reserve (Fed) could do the same: hike by 25bp next week then pause. Bank of England For the Bank of England (BoE), investors are almost sure that the year will end with a 25bp hike due to the slowing economy. Australia But in Australia, the surprise rebound in Australian inflation, spurred the Reserve Bank of Australia (RBA) hawks yesterday. Summary In summary, investors’ hearts will continue to swing between slowing economy and easing inflation, and the bumps in inflation along the way.But the data will tell who is right and who is wrong. All eyes are on US GDP today! Watch the full episode to find out more! 0:00 Intro 0:47 Microsoft sold on slowing revenue warning 1:51 Tesla’s record profit sees limited reaction 3:34 Stock and bonds don’t price the same recession odds 5:11 FX update: USD down, euro, sterling, Aussie up 7:51 Chevron to buy back $75bn stocks! 9:01 Chinese have enough money to temper recession. They just need to spend it! Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Tesla #Microsoft #earnings #Chevron #stock #buyback #US #GDP #data #Fed #ECB #BoE #RBA #BoC #expectations #recession #odds #USD #EUR #GBP #AUD #crude #oil #China #New #Year #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH      

Last year saw the most aggressive policy tightening path in four decades, but Fed officials have laid the groundwork for more modest 25bp hikes in February and March. Recessionary forces are building though and inflation looks set to slow sharply from here, implying rates cuts will be on the agenda later in the year US Federal Reserve Chair Jerome Powell 25bp with more still to come Having raised the Fed funds target range by 425bp in 2022, including 75bp and 50bp moves, expectations are firmly centred on the Federal Reserve opting for a more modest 25bp interest rate increase on Wednesday – taking the target range to 4.5-4.75%. While inflation is still well above target and unemployment is at a cycle low, there are signs that the economy is responding to tighter monetary policy and the Fed will be cognisant of fears that hiking rates too hard and fast risks toppling the economy into recession. Officials certainly appear to be backing "standard" 25bp increases from now on after enacting their most aggressive hiking cycle for 40 years, but most are warning that there is still more work to be done. Consequently, we expect to hear that ongoing interest rate hikes are "appropriate" with the balance sheet shrinking strategy remaining in place. Scenarios for the Federal Reserve meeting Source: ING   Officials are unlikely to switch to a “data dependency” narrative just yet, fearing that adopting too dovish a line could fuel market expectations for eventual rate cuts. In turn, this could lead to an unwanted loosening of financial conditions that contribute to inflation staying higher for longer. Conversely, signalling 25bp but then hiking by a more aggressive 50bp would generate a large risk-off reaction with sharply higher borrowing costs. The majority of the committee would likely consider this too risky an option given the potential to intensify recessionary forces that could end up excessively dampening inflation. With no new Federal Reserve forecasts at this meeting, the accompanying press conference is likely to re-affirm that it is appropriate to move in smaller 25bp steps from now on and we are not at the endpoint yet. The Fed could over and/or under-hike other rates for technical reasons, but likely won't Apart from the headline funds rate range of 4.25% to 4.50%, the Fed will also adjust higher the rate on the reverse repo facility and on excess reserves. These are currently at 4.3% and 4.4% respectively, and are often seen as the tighter corridor within which the effective fed funds rate sits (currently 4.33%). There is constant speculation on the likelihood of the Fed deciding to under-hike the rate on the reverse repo facility, to bring it to flat to the fed funds floor (it’s currently 5bp over). The logic would be to encourage less use of this facility, which routinely takes in US$2tr in excess liquidity on a rolling daily basis. However, in all probability, repo would simply trade down to the same area, without a material effect on volumes. There is a similar argument to instead over-hike the rate on excess reserves, say by 30bp (instead of 25bp). The idea here would be to encourage a downsize in the use of the reverse repo facility in place of an upside in bank reserves (higher relative remuneration). This would allow the Fed to better manage bank reserves, ensuring that it doesn't fall too fast, as it gradually ratchets its balance sheet lower through the ongoing soft quantitative tightening programme (as it allows $95bn of bonds per month to roll off the front end). In all probability, it won’t do this either. It is already a 10bp spread between the reverse repo window and the excess reserves one, and widening that to 15bp might not make a material difference. That said, a spread of 20bp just might, and is something the Fed could consider down the line i.e. under-hiking the reverse repo rate and over-hiking the rate on excess reserves. On this occasion, there would be quite a surprise if it did anything along these lines, at least not at this juncture. The Fed could also upsize the quantitative tightening agenda, but likely won't either The Fed has also been quite quiet on the balance sheet roll-off programme. It seems that’s the way it likes it – churning away quietly in the background, and not causing too many market ripples. The big question in this space is whether the Fed could consider outright selling some bonds off its books, and thereby engage in a harder version of quantitative tightening. It would be huge if it did. There is certainly an appetite for bonds in the market if the recent Treasury auctions are anything to go by. However, such selling of bonds outright would likely be a step too far at this juncture, as it would likely generate a tantrum. But it's always there should the Fed start to feel that the fall in longer-dated market rates is acting contrary to its hiking efforts on the front end. Even a mention that it is looking at this down the line would have a material effect. Not expected, but these are potential market movers that we need to cross off as the meeting outcome unfolds. Importantly, any mention of potentially upsizing the bond roll-off in the future or considering any bond selling (e.g. of the longer-dated mortgage portfolio) would signal it was uncomfortable with where longer-dated market rates are at. But the outlook is darkening and the peak is close We think that the Fed will probably hike once more on 22 March, but that will mark the top for the policy rate. We are concerned that signs of a slowdown will spread and intensify with a recession our baseline forecasts. Residential construction has fallen in each of the past six months, industrial production has been down for the past three months and retail sales have dropped by 1% or more in both November and December. Unfortunately, business surveys offer no hint of a turn with both the manufacturing and service sector ISM indices in contraction territory and the Conference Board’s measure of CEO confidence at the most depressed level since the Global Financial Crisis – a clear signal that businesses will be focusing more on cost-cutting rather than revenue expansion this year. At the same time, the heavy weighting of shelter and vehicles within CPI and clear signs of softening corporate pricing power mean that inflation will be close to 2% by the end of this year. Rents have topped out in most major cities while vehicle prices are now falling, with the National Federation of Independent Businesses survey on price intentions pointing to a sharp slowdown in core inflation through the second quarter into the third quarter of this year. As for the jobs market, while headline payrolls growth remains impressive there are flashing warning lights with the temporary help component reporting falling employment numbers in each of the past five months. This is concerning because this grouping of workers is typically easier to hire and fire by the nature of the position so they tend to lead broader shifts in payrolls. Worryingly, the declines are getting bigger each month, suggesting the momentum in the jobs market is souring. In an environment of weak activity, falling inflation, and mounting job losses, we doubt the Fed will raise rates beyond March with rate cuts the order of the day from the third onwards. FX: Things are getting interesting It has been pretty much one-way traffic for the dollar bear trend since early November. Clear signs of easing US price pressures and a slowing economy have upended the prior narrative of a Fed forced to tighten into a recession. Risk assets have rallied strongly. Data shows that the EUR/USD six-hour reaction to last year’s Federal Open Market Committee (FOMC) decisions triggered moves of anywhere between +/- 0.7%. And the FX options market has a 90 pip range priced for EUR/USD over the period which covers both the Fed and the ECB meetings next Wednesday/Thursday.  We were about to say that an expected 25bp rate hike from the Fed and a relatively unchanged statement would have little impact on FX markets. Yet we have just seen FX markets move on the Bank of Canada’s decision to halt its tightening cycle at 4.50%. The dollar was marked lower on this decision, presumably on the minority view that the Fed could also be ready to call time on its tightening cycle. This suggests that the FOMC meeting could prove more interesting than the market has priced. Our base case would assume that EUR/USD continues to trade near 1.08/1.09 after the FOMC meeting. Any suggestion that the Fed was virtually done tightening could send EUR/USD through 1.10. While aggressive Fed push-back against the 50bp of 2023 easing already priced by the market could briefly send EUR/USD to 1.07. In the bigger picture, we expect EUR/USD to head higher this year – perhaps to the 1.15 area in the second quarter – this will be the time when US inflation is falling more sharply and China re-opening is providing a tailwind to the pro-cyclical currencies, including the euro. Read this article on THINK TagsUS Recession Interest rates Federal Reserve Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Major central banks to bring hike cycles to a close We think that the aforementioned easing in inflation rates should herald an end to interest rate hikes for most of the major central banks in the first half of 2023. We think that the Federal Reserve will be done raising rates after its March meeting. At its final meeting of the year in December, the Federal Open Market Committee (FOMC) took its first baby steps towards ending its aggressive interest rate hike cycle, delivering a 50bp rate hike following four consecutive 75bp moves. In its ‘dot plot’, committee members indicated that an additional 75 basis points of hikes may be on the way this year, though futures are only pricing in 50. The key message was that rate cuts are not on the horizon any time soon, and are not expected until 2024. In our view, both the European Central Bank and Bank of England will follow suit in ending their respective hiking cycles in mid-2023. The ECB was the most hawkish of the three major central banks in December, as it announced a start date for quantitative tightening, while President Lagarde warned that multiple additional 50bp rate increases may be on the horizon. Meanwhile, we have little doubt that the Bank of England will continue to confuse markets this year, a hallmark of its communications in 2022. The BoE also raised rates by 50bps during its final meeting of the year, although the three-way voting split among MPC members provided little clarity to investors. We believe that the Reserve Bank of Australia, Swiss National Bank, Riksbank and Norges Bank may only have one or two more hikes left in them, while the Bank of Canada appears to have already ended its tightening cycle. The Reserve Bank of New Zealand is expected to be the most active central bank in the G10 in 2023, with markets finally beginning to price in a long-awaited rate hike from the Bank of Japan in the second half of the year. On the whole, most emerging market central banks are slightly ahead of their major counterparts and, for some, attention may soon turn to the timing of interest rate cuts. For many developing economies, inflation has, however, become deeply entrenched, and that may ensure higher rates for longer, a delayed pick-up in economic activity and a higher risk of default. Read next: Intentional Depreciation Of The Currency - Devaluation| FXMAG.COM Global downturns on the way? As inflation rates begin to trend lower, and central banks globally press pause on their hiking cycles, attention among market participants will increasingly turn towards the possibility of recessions. We have already seen signs of a deterioration in most indicators of economic activity. The G3 business activity PMIs, which provide the most timely gauge of growth in the services and manufacturing sectors, have printed below the level of 50 representing contraction. Indicators of consumer, business and investor sentiment have declined, as have a number of barometers of consumer spending activity. Generally speaking, we think that downturns in 2023 will be rather mild, and we’ve not seen any evidence in the data just yet that would indicate sharp recessions are on the way. We see a number of reasons to be optimistic about the global economic outlook, and believe that the pending downturns in activity won’t be as bad as currently expected by markets: Energy crisis fallout set to be limited. Natural gas prices have eased sharply, as shortages of natural gas appear unlikely this winter. Supply chains are normalising. Freight rates have declined almost back to pre-covid levels, with the impact of the war in Ukraine set to be less onerous in 2023. Inflation appears to be peaking in a handful of economic areas, as are interest rates. Labour markets are strong, characterised by very low unemployment rates, high job vacancies and solid nominal earnings growth. As of yet, we have seen little signs of a deterioration in labour market conditions. Households are well placed to withstand high prices, particularly given the extent of government support (fiscal policy remains supportive with no tightening in sight) and high savings accumulated during lockdowns. China is moving away from its zero-COVID policy. The country continues to lift its draconian restrictions as it prepares its society for living with the virus. In our view, the end to central bank interest rates hikes, and the possibility that downturns in global activity won’t be as bad as currently anticipated, provide a conducive environment for an appreciation in high-risk currencies. In anticipation of a dovish pivot from the Federal Reserve, the US dollar has shed around 8.5% of its value since its September peak. We think that this move has more room to run, and we are pencilling in advances in most currencies against the dollar, notably emerging markets, which we think remain broadly undervalued. The extent of these moves will likely depend on the resilience of economies to the pending downturn, and the timing of when central banks globally will both end their tightening cycles and begin cutting interest rates. 2022 was a highly volatile year in the foreign exchange market, and we suspect that 2023 will prove much the same. Written by: Enrique Diaz-Alvarez, Matthew Ryan (CFA), Roman Ziruk, Itsaso Apezteguia, Eduardo Moutinho, Michal Jozwiak – Ebury’s Market Analysts Source: 2023 FX Market Preview: Is a global recession on the way? (ebury.com)

The Canadian dollar trades in a wide price range, which limits are marked with the levels of 1.3360-1.3460 (marks correspond to the lines Tenkan-sen and Kijun-sen on the D1 chart). During the entire week ,the pair alternately pushes back against the limits of this 100-point price range, and by and large, it makes no headway. If we look at the pair's weekly chart, we will see that the pair is within the framework of the upward pullback. Last week, the bears made a new near 3-months low (1.3261), but failed to consolidate within the range of the 32nd figure, amid strong US Nonfarm and increasing hawkish expectations of the Federal Reserve's next actions. However, the price growth stalled: traders are waiting for the "Canadian Nonfarm" to be released at the start of the U.S. trading session on Friday. An important report for the Canadian currency Typically, key U.S. and Canadian labor market data is released on the same day and even at the same time. The U.S. Nonfarm set the tone for all of the U.S. dollar pairs, while the Canadian figures are in the shadow: for obvious reasons, few traders are interested in them. In the context of the pair, the loonie follows the greenback, so the Canadian Nonfarm remains in the background compared to the more weighty U.S. report. But this month there was, so to speak, a "de-synchronization" with an interval of a week: the main labor market report in the US was released last Friday, while in Canada it will be released today, February 10. The U.S. report provided support for the bulls, while the Canadian figures could either strengthen the bullish sentiment or trigger a downward momentum. Either way, the loonie will only react to "its" numbers today, as the market has already effectively played back the US report. Take note that preliminary forecasts do not promise a "bright future" for the Canadian dollar. Most likely, the report will be quite weak and that will put more pressure on the loonie, allowing the bulls to overcome the resistance level of 1.3520 (the middle line of the Bollinger Bands indicator on the weekly chart) and stay within the 35th figure. Thus, the Canadian employment report is expected to rise by only 15,000 in January after a strong jump of 104,000 in December. That said, January's 15,000 gain will come mostly from an increase in part-time employment (+10,000), while the full-time component will show a more modest result (+5,000). The "headline" indicator of the report is also unlikely to impress traders: the unemployment rate should rise to 5.1%. In this case the growth is minimal, but a consistent downtrend was recorded during the last two months. The labor force participation rate is likely to fall in January, from 65.0% in December to 64.7%. Possible effects of a weak report At the end of the Bank of Canada's January meeting, the central bank increased the rate by 25 basis points, but actually announced a pause. Bank of Canada Governor Tiff Macklem said that further interest rate increase may not be necessary, because, according to the central bank's forecasts, "economic growth will slow down with a simultaneous decline in inflation". A little later, the governor outlined the central bank's decision in more straightforward terms, saying it was now time to pause to assess whether monetary policy was sufficiently restrictive. In other words, Macklem confirmed rumors following its January meeting that the central bank intends to maintain a wait-and-see approach. Therefore, a weak labor market report will not play a decisive role in this matter (this issue has already been resolved). Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM   However, now there are talks on a different plan - that the Bank of Canada may cut the rate in the second half of this year. The poll of market participants for 4 quarter published by the Canadian central bank on Monday showed that the median forecasts for the rate by the end of 2023 was 4%, i.e. rate reduction by 50 basis points is supposed. And while at the final press conference in January, Macklem said that "it is too early to talk about interest rate cuts," he did not actually rule out such a scenario (as, for example, the U.S. Federal Reserve did, de facto ruling out a rate cut in 2023). Therefore, weak Canadian labor market data may reinforce the market's dovish expectations regarding the Bank of Canada's future actions. Conclusions If the Canadian Nonfarm is in the red zone, bulls may attempt an upward breakout, overcoming the upper limit of the 1.3360-1.3460 range. The closest target will be 1.3520, which is the middle line of the Bollinger Bands on the weekly chart. In case Friday's report turns out to be in the green zone, then most likely, the pair will continue to trade within the aforementioned price range.   Relevance up to 18:00 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334712

Bank of Korea (BOK) Governor Rhee Chang-yong said in a statement on Tuesday, “more delicate policy response is necessary as uncertainty is high both externally and internally.” Additional quotes “Difficult to predict future inflation path due to uncertainty over China's reopening, Ukraine war.” “Will respond in a timely manner in case of uneasiness in financial, forex markets.” Market reaction USD/KRW remains on the offers below the $1,300 mark following the above comments, keeping its range trade intact so far this Tuesday.

The coming week will be full of important data. Australia and Canada will share their economic growth (GDP) reports. Australia GDP Australia's Q4 GDP is scheduled for next week and will provide the latest information on the health of the economy and whether the central bank's tightening cycle will have a further impact on growth. As a reminder, earlier GDP figures were weaker than expected in Q3 as Q/Q growth slowed to 0.6% vs. 0.7% (previously 0.9%), and the y/y ratio also failed to meet expectations, but accelerated compared to Q2, increasing by 5.9% vs. 6.2% (previously 3.6%). Growth remained driven by household spending, with the Australian Bureau of Statistics also seeing strong wage growth and a rebound in housing construction, while the annual growth rate was supported by a lower base given that the economy contracted a year earlier due to the COVID-19. These base effects are also likely to be a factor in the upcoming GDP data. NAB expects a GDP print of 0.9% q/q (2.8% y/y) in Q4 2022. This partly reflects the ongoing recovery in services spending. Source: investing.com Partial data on housing investment shows a slight increase in new buildings, but a large decrease in renovations. The nominal value of business investment appears to have declined, with a weak performance in non-renewable and engineering construction. However, data on capital expenditures on buildings and structures suggest a better result. Growth is expected to slow sharply from then on, driven by flat or negative consumption figures in the second half of 2023 as the full impact of higher interest rates and inflation wears off. Impact on RBA This publication is unlikely to affect the path of monetary policy in the near term, with the RBA already signaling further gains in the coming months. Indeed, the national accounts price and wage measures are likely to confirm widespread inflationary pressures in the economy. Ultimately, the RBA signaled that there would be further gains in the coming months based on the forward-looking reaction function and their latest set of forecasts. That said, a slowdown in growth is likely to be the first sign that the economy is cooling in response to interest rate hikes as global inflation slows down. Canada's GDP The Canadian economy is already performing better than expected despite high interest rates, ongoing supply chain disruptions and long-standing fears of a recession. Inflation is weakening. Job creation is at near record levels. The unemployment rate remains at its lowest level in four decades. Consumer spending is solid. And we may have seen an interest rate peak, thanks to the continuing fall in inflation that higher rates are supposed to curb. Canada's monthly GDP change is expected to hold at 0.1%. The quarterly GDP reading is forecast to drop significantly from 2.9% to 1.5%. Source: investing.com The BoC still predicts a mild recession this year and warned last week that the first three quarters of 2023 will see near-zero economic growth. Unemployment is expected to rise from the current 5 percent to around 6.7 percent this year, easing inflationary wage pressures. The BoC hopes that a tight labor market will enable employers to control wage costs with redundancies instead of redundancies. Source: investing.com

USD/CAD attracts some dip-buying on Monday and draws support from a combination of factors. Sliding Oil prices undermines the Loonie and acts as a tailwind for the pair amid a stronger USD. The fundamental backdrop favours bullish traders and supports prospects for a further move up.  The USD/CAD pair attracts some buying following an intraday dip to sub-1.3600 levels on Monday and hits a fresh daily high during the early European session. The pair is currently placed around the 1.3625 region, though remains below its highest level since January 6 touched on Friday. Crude Oil prices meet with a fresh supply on the first day of a new week, which is seen undermining the commodity-linked Loonie and lending support to the USD/CAD pair. Worries that rapidly rising borrowing costs will dampen economic growth and dent fuel demand overshadow the prospect of lower exports from Russia. This, in turn, fails to assist Oil prices to build on a two-day-old recovery move from a nearly three-week low touched last Thursday. Apart from this, bets that the Bank of Canada (BoC) will pause the policy-tightening cycle, bolstered by softer Canadian consumer inflation figures released last week, weighs on the domestic currency. In contrast, the Federal Reserve is expected to stick to its hawkish stance in the wake of stubbornly high inflation. This, along with a softer risk tone, keeps the safe-haven US Dollar pinned near a multi-week high and acts as a tailwind for the USD/CAD pair. The prospects for further policy tightening by the Fed were reaffirmed by the stronger US PCE data on Friday, which indicated that inflation isn't coming down quite as fast as hoped. Adding to this, the incoming positive US macro data points to an economy that remains resilient despite rising borrowing costs and fueled hawkish Fed expectations. This remains supportive of elevated US Treasury bond yields and continues to boost the Greenback. Read next: Pfizer Is In The Early Stages Of An Acquisition Of Biotech Company Seagen, Twitter's Staff Has Shrunk Since Elon Musk Took Over| FXMAG.COM The aforementioned fundamental backdrop seems tilted firmly in favour of bulls and suggests that the path of least resistance for the USD/CAD pair is to the upside. Further, the technical picture also indicates a bullish continuation pattern may has formed after Friday's strong up day, which also helped to confirm the major trendline break of the previous two sessions. This continuation pattern could see prices rise up to the 1.3800 level conditional on confirmation from a break above Friday's high at 1.3665.  Market participants now look to the US economic docket, featuring the release of Durable Goods Orders and Pending Home Sales data. This, along with Oil price dynamics, should provide a fresh impetus to the USD/CAD pair and allow traders to grab short-term opportunities.

Canadian GDP expected to slow in Q4 It’s a very light data calendar for Canadian releases this week, with today’s GDP report the sole tier-1 event. Canada’s economy is expected to slow to 1.5% y/y in the fourth quarter, following a solid 2.9% gain in Q3. A slowdown in economic activity is what the Bank of Canada is looking for, as inflation remains public enemy number one.  CPI is moving in the right direction as it fell to 5.9% in January, down from 6.3% in December. The BoC is optimistic that the downturn will continue, with a forecast that inflation will fall to 3% by mid-2023 and hit the 2% target by the end of the year. The BoC will have to tread carefully in this tricky economic landscape. The economy is cooling and while inflation is easing, it remains much higher than the 2% target and will require additional rate hikes which will make a soft landing a difficult endeavour. If growth continues to weaken in 2023, there is a strong chance of the economy tipping into a recession by mid-2023. The Bank meets next on March 8 and the markets are expecting a 0.25% hike for the second straight time. The Bank would like to take a pause in its tightening cycle but this will require a substantial drop in inflation. In the US, strong employment and consumer data and stubborn inflation have supported the Fed’s hawkish stance and there is talk of the Fed raising rates as high as 6%. It was only a few weeks ago that the markets were talking about a ‘one and done’ rate hike in March, followed by a long pause and perhaps some cuts by year’s end. This has all changed as the US economy has proven to be surprisingly resilient, despite rising rates and high inflation. The markets are currently pricing in three more rate hikes this year, but that could change in a hurry if key releases in February show that the economy is slowing down.   USD/CAD Technical There is resistance at 1.3701 and 1.3794 1.3570 is under strong pressure in support. 1.3478 is the next support line This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

After 425bp of interest rate hikes, the Bank of Canada signalled it would pause to digest the impact. Since its January meeting, growth has disappointed and inflation has slowed more than expected, though job creation continues at pace. Canada is heavily exposed to higher rates and we see downside risks to growth, with rate cuts on the cards for 4Q Tiff Macklem, governor of the Bank of Canada No change as Bank of Canada confirms we are at the peak All 22 banks surveyed by Bloomberg expect the Bank of Canada (BoC) to leave policy interest rates unchanged next week. This shouldn’t come as a surprise given that at the 25 January BoC policy meeting, the governing council stated that it expects to “hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases” at upcoming meetings. The data since then has shown inflation undershooting expectations despite remaining well above the 2% target and GDP growth stalling at 0%, significantly below the 1.6% annualised rate expected. However, the economy continues to create jobs in significant numbers with January’s 150,000 increase in employment meaning that there are now 806,000 more Canadians in work than before the pandemic struck in 2020. Inflation rates (YoY%) Source: Macrobond, ING Canada much more exposed to higher interest rates than the US The weak growth and disinflation story should trump the jobs data especially given that monetary policy operates with long and varied lags and labour market data tends to be the most lagging of all the lagging indicators. The Bank of Canada has implemented 425bp of hikes over the course of just eight meetings, including a 100bp move in July, while Canada is much more exposed to interest rates rate hikes via a higher prevalence of variable rate borrowing and high debt levels versus the US. For example, in the US the 30Y fixed rate mortgage is the most common borrowing method while in Canada it is five years or less before they face a change in interest rate. In fact, Canadian household liabilities are equivalent to more than 180% of disposable income versus 103% in the US. Canada is therefore more exposed to the risk of a housing market correction, especially when we consider that house prices in several cities are ten times greater than average household incomes, whereas in the US it is typically five to six times income. Central Bank policy rates (%) Source: Macrobond, ING Cuts could be on the agenda before year-end Consequently, we are concerned that the Canadian economy is likely to be more impacted by the interest rate hikes already enacted than most other major economies. We look for the economy to continue to slow and in fact contract later this year, which will help to dampen price pressures. As a result, we see a strong chance that the BoC will end up reversing course and cutting interest rates later in the year. FX: BoC pause means less upside and downside risks for CAD From a market perspective, the fact that the BoC has paused (and mostly likely peaked) naturally has negative implications for the Canadian dollar: a wider USD-CAD rate differential reduces USD/CAD downside potential. However, there are some silver linings. Remember that Canada has a rather vulnerable property market, which is experiencing a deep correction as mortgage rates spiked. This is also the case in another country, Sweden, where the central bank is still hiking rates quite aggressively. The difference is that the BoC dovish pivot should now prevent the build-up of that housing-related risk premium in the currency market that the Riksbank tightening is instead risking to cause. In other words, the BoC pause means both fewer upside and downside risks for the loonie. At the March meeting, markets will monitor whether the BoC will continue to leave the door open for more tightening if necessary. There are very few reasons for Governor Tiff Macklem to close that door at this stage, and the 25bp of additional tightening (a spill-over from the Fed's pricing) currently embedded in the CAD OIS curve are not something the BoC should be uncomfortable with. A largely unchanged message by the BoC in March may ultimately have limited implications for CAD.  We continue to expect a move below 1.3000 in USD/CAD by year-end, but that should mostly be the result of US dollar weakness and a generalised improvement in risk sentiment. CAD remains less attractive than the other dollar bloc currencies (AUD, NZD), which can benefit from more domestic tightening and exposure to the benign Chinese growth story.  Read this article on THINK TagsCanada CAD BoC Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

On Wednesday, the Bank of Canada unveils its latest interest rate policy. Many expect the Governor of the Bank of Canada, Tiff Macklem, to deliver on his promise to hold off on interest rate hikes. Interest rates It's been almost exactly a year since the Bank of Canada began aggressively raising its key overnight lending rate. Since then, Canadian households have struggled with ever-increasing debt payments. Borrowing costs have increased by a staggering 425 basis points in the last 12 months. GDP is slowing, inflation is slowing, and wage growth is moderate. However, economists agree that it is enough to convince the Bank of Canada to catch up and finally give some respite to households struggling with rising debt payments and looming mortgage renewals. The Bank of Canada will keep its key interest rate unchanged at 4.50% until the end of the year Taking a decision on interest rates next week, both Charbonneau and Janzen believe the Bank of Canada has done enough to warrant a pause in interest rate hikes. However, the central bank was in a very different place last March, facing heavy criticism for taking too long to contain rising inflation. Inflation The consumer price index has fluctuated between one and two percent for most of the last few decades. As the effects of the COVID-19 pandemic began to perpetuate, inflation began to pick up. The most recent inflation data suggests the country is inching closer to normal price growth. Canada’s annual inflation rate slowed to 5.9 per cent in January, down from the peak of 8.1 per cent reached in the summer. GDP Statistics Canada's latest GDP report shows that the Canadian economy tumbled into the fourth quarter with zero growth, but under the disappointing figures was resilient consumer spending keeping the economy afloat. While that report showed a much bleaker economy than forecasters had expected, the federal agency's preliminary estimates showed the economy rebounded in January with a 0.3 percent increase. The GDP figures simply "confirm" that the Bank of Canada will not raise interest rates when it announces its decision on Wednesday. Labour Market Canadian employers added 150,000 jobs in January. This is about 10 times more than economists expected. Economists agree that another 5,000 jobs will be added on Friday after the February data is released. Wages have never increased as much as prices. So workers have actually lost purchasing power over the past two years. Statistics Canada said wage growth peaked last November at 5.6 percent. And while a strong labor market is good news for workers, Bank of Canada Governor Tiff Macklem has repeatedly said that a tight labor market is a symptom of an overheating economy that fuels inflation. If demand weakens, companies struggling with lower sales are likely to change their hiring plans, causing unemployment to rise. Source: ivnesting.com

Despite another week of rising yields, European markets still managed to finish last week higher over concern that various inflation measures are starting to tick back higher again, having been in decline over the last few months.   The German DAX had a particularly good week posting its highest daily and weekly close in over a year, as confidence over falling energy prices and a more resilient global economy as China's economy reopens helps to foster a slightly less negative outlook about growth prospects.     The FTSE100 found itself lagging weighed down by underperformance in some of its more defensive names.      US markets also managed to finish the week higher, breaking a losing streak that had lasted three weeks in a row. Both the S&P500 and Nasdaq 100 managed to rebound after finding support at their respective 200-day SMA's.   Friday's rebound came against a backdrop of a sharp decline in US 10-year yields which fell back from their highest level since November, above 4%. Friday's ISM services report showed little sign that the big rebound in the US economy in January was a one-off, with the headline number falling slightly to 55.1, from 55.2, with further gains in employment to 54, and new orders rising to 62.4.   Prices paid did slow, but still remained high at 65.4.   As a leading indicator for this week's delayed non-farm payrolls number for February, it's a further indication that the US labour market continues to remain very resilient, with ADP and job openings (JOLTS) data also likely to add insight.     As we look ahead to this week the main focus, apart from Wednesday's ADP, and Friday's payrolls report, will be on Fed chair Jay Powell's testimony to US lawmakers tomorrow and Wednesday where he is likely to be quizzed on how he sees the US economy in light of recent strong data, and what measures the Fed might feel inclined to take if the data continues to come in strong.   It's unlikely that he will give too many clues given how close to the next meeting we are, and the main takeaway is likely to be data dependence, however, don't be surprised if markets pore over every single nuance just so that they can reinforce their own particular mindset.   We do have two other important rate decisions this week, namely from the RBA tomorrow, and the Bank of Canada on Wednesday, where the central bank may have cause to rue their decision to signal a pause at their last meeting given the strength of recent economic data.   Over the weekend the Chinese government signalled that this year's GDP target would be 5%, which comes across as a little on the low side given that last year saw a 5.5% target under more difficult circumstances. It's also potentially disappointing when it comes to the prospects for global GDP as a more restrained China means less potential for demand.   The lower-than-expected target might also suggest that Chinese officials are less likely to push stimulus into the economy as it strives for stability over anything else.   It could also be an acknowledgment that recent protectionist measures have damaged confidence in China as an investment opportunity, and consequently, investors could well be more cautious over the next 12 months.   This less-than-ambitious target appears to be weighing on commodity prices with Asia markets broadly positive as we look ahead to the start of today's European session, and a positive start to the week.   EUR/USD – struggled to get above the 1.0700 area last week but has remained above the bullish reversal of last Monday at the 1.0530 area. We need to push through the 50-day SMA at 1.0730 to open up 1.0820. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85. GBP/USD – last week saw us ping between the 1.1920 area and the 200-day SMA, and the 50-day SMA at 1.2150 which remains a key resistance area. A break of 1.1900 retargets the 1.1830 area, while a break of the 1.2150 area is needed to retarget the 1.2300 area. EUR/GBP – failed to push above trend line resistance at 0.8900 from the January peaks last week. Above 0.8900 targets the 0.8980 area. We need to push below support at the 0.8820/30 area to retarget the 0.8780 area. USD/JPY – the failure to push through the 200-day SMA at 136.90/00 last week has seen the US dollar slide back. Support comes in at the 135.20 area. We also have interim support at 133.60. A break above 137.00 could see a move to 138.20.   FTSE100 is expected to open 5 points higher at 7,952 DAX is expected to open 47 points higher at 15,625 CAC40 is expected to open 37 points higher at 7,385 Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

There are plenty of reasons that should push equities lower, but equities continue trending higher. Both European and American stocks closed last week with gains, and futures hint at a positive start to the week despite China's announcement of a modest 5% growth target. But the 5% growth target raises concerns about the amount of stimulus that the Chinese will put on the table, and the possible continuation of the government crackdown. The Chinese officials said that they don't want a disorderly growth in real estate – which is a major ingredient for the Chinese growth. Plus, the local governments could borrow and spend less, even though the Chinese as a whole increased their fiscal deficit projection. This means that China is on its way for more centralization of the power around Xi Jinping and less freedom for local entities. Combined with Xi's fight against euphoric growth and the West's limitation on investment and technology exports to China, we shall see investors reluctant to return to Chinese equities. China's modest 5% growth target weigh on energy and commodity prices. Iron ore and copper futures are down, and US crude's 100-DMA resistance, around the $80pb level, will likely remain strong. On this week's agenda FED talk Federal Reserve (Fed) Chair Jerome Powell will deliver his semi-annual testimony before the Senate this week, and he will certainly reiterate that the Fed is not yet done with its fight against inflation, that the labour market remains particularly strong, that a soft landing is possible, yet the Fed won't hesitate to sacrifice growth to abate inflation as soon as possible. Looking at the latest set of data, the U-turn of easing inflation and last month's blowout jobs figures, we don't expect to hear anything less than hawkish from Mr. Powell. But it's always possible that a word like 'disinflation' slips out of his mouth, and that we get a boost on risk. US jobs The US economy is expected to have added around 200'000 jobs, with the possibility of a negative surprise after last month's above half a million read. Unemployment is seen steady around 3.4% - a more than 50-year low, while average earnings are seen going up from 3.4% to 3.7% over the year. Nothing encouraging for the Fed doves. But who cares? RBA, BoC, BoJ The Reserve Bank of Australia (RBA), the Bank of Canada (BoC) and the Bank of Japan (BoJ) will be announcing their latest policy verdicts this week and among them, only the RBA is expected to hike the rates by another 25bp despite last week's surprise softening in latest inflation and growth numbers. More than 40% of the companies in the ASX 200 posted negative earnings surprise last quarter, up from 28% a year ago. The latest figures from macro and micro fronts raise questions about how far the RBA could go in terms of rate hikes. On the currency front, since the end of February, the AUDUSD slipped into the bearish consolidation zone, but the pair has been following the 100-DMA slightly to the upside, as the Chinese reopening sustains iron ore prices – except for today, of course, as China's 5% growth target hasn't been a boon for energy and commodity stocks. China could still rescue the Aussie from falling further, but the Chinese winds could hardly reverse the negative trend in AUDUSD as the Fed-supported US dollar is certainly not done its positive push yet.

USD/CAD struggles to gain any meaningful traction and oscillates in a range on Monday. Retreating US bond yields keeps the USD bulls on the defensive and acts as a headwind. A modest downtick in Oil prices undermines the Loonie and lends support to the major. The USD/CAD pair kicks off the new week on a subdued note and seesaws between tepid gains/minor losses, around the 1.3600 mark heading into the European session. The pair, meanwhile, remains within Friday's broader trading range and is influenced by a combination of diverging forces. A softer tone surrounding the US Treasury bond yields keeps the US Dollar bulls on the defensive, which, in turn, acts as a headwind for the USD/CAD pair. That said, a modest pullback in Crude Oil prices - amid worries that a deeper global economic downturn will dent fuel demand - undermines the commodity-linked Loonie and lends some support to the major. The fears resurfaced after China set a lower-than-expected target for economic growth and forecast that the economy would expand by 5% in 2023. Apart from this, growing acceptance that the Federal Reserve will stick to its hawkish stance favour the USD bulls and support prospects for the emergence of some dip-buying around the USD/CAD pair. The incoming US macro data indicated that inflation isn't coming down quite as fast as hoped and pointed to an economy that remains resilient despite rising borrowing costs. Adding to this, a slew of FOMC members backed the case for higher rate hikes and opened the door for a 50 bps lift-off at the March policy meeting. Hence, the market focus will remain glued to Fed Chair Jerome Powell's semi-annual congressional testimony on Tuesday and Wednesday. Powell's comments will be closely scrutinized for clues about the Fed's future rate-hike path, which will play a key role in influencing the near-term trajectory of the USD. Investors this week will also confront the release of the closely-watched US monthly jobs report, popularly known as NFP on Friday, to determine the next leg of a directional move for the USD/CAD pair and before placing aggressive bets. Heading into the key event/data risks, the US bond yields and the broader market risk sentiment will continue to drive the USD demand and provide some impetus to the USD/CAD pair. Apart from this, Oil price dynamics should allow traders to grab short-term opportunities in the absence of any relevant market-moving economic releases on Monday, either from the US or Canada. Nevertheless, the aforementioned fundamental backdrop favours bullish traders and suggests that the path of least resistance for the major is to the upside.

There are plenty of reasons that should push equities lower, but equities continue trending higher. European and American stocks Both European and American stocks closed last week with gains, and futures hint at a positive start to the week despite China’s announcement of a modest 5% growth target. China But the 5% growth target raises concerns about the amount of stimulus that the Chinese will put on the table, and the possible continuation of the government crackdown. China’s modest 5% growth target weigh on energy and commodity prices. Iron ore and copper futures are down, and US crude’s 100-DMA resistance, around the $80pb level, will likely remain strong. On this week’s agenda: FED talk: Federal Reserve (Fed) Chair Jerome Powell will deliver his semi-annual testimony before the Senate this week. US Jobs: the US economy is expected to have added around 200’000 jobs, with the possibility of a negative surprise after last month’s above half a million read. The other central banks: the Reserve Bank of Australia (RBA), the Bank of Canada (BoC) and the Bank of Japan (BoJ) will be announcing their latest policy verdicts this week and among them, only the RBA is expected to hike the rates by another 25bp despite last week’s surprise softening in latest inflation and growth numbers. Watch the full episode to find out more! 0:00 Intro 0:31 Equity bulls remain in charge despite many reasons to sell! 3:15 China’s 5% growth target… 5:05 … weigh on crude oil 6:13 Powell testimony, US jobs & budget proposal 8:46 RBA, BoC & BoJ policy decisions Ipek Ozkardeskaya Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #China #growth #target #energy #crude #oil #commodity #prices #US #jobs #data #Fed #Powell #restimony #RBA #BOC #BOJ #rate #decision #USD #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

USD/CAD extends its sideways consolidative price moves through the early European session. Bullish Oil prices underpin the Loonie and act as a headwind amid a modest USD weakness. The downside remains cushioned ahead of Fed Chair Jerome Powell’s semi-annual testimony. The USD/CAD pair continues with its struggle to gain any meaningful traction on Tuesday and remains confined in a familiar trading range around the 1.3600 mark through the early European session. The latest optimism over a fuel demand recovery in China pushes Crude Oil prices to the highest level since last January, which, in turn, underpins the commodity-linked Loonie. Apart from this, a generally positive risk tone is seen weighing on the safe-haven US Dollar and acting as a headwind for the USD/CAD pair. The downside, however, remains cushioned as traders seem reluctant to place aggressive bets ahead of this week's key event/data risks and await a fresh catalyst before positioning for the next leg of a directional move. Tuesday's key focus will be on Fed Chair Jerome Powell's semi-annual congressional testimony, which will be looked upon for clues about the future rate-hike path amid bets for a 50 bps lift-off at the March FOMC meeting. The expectations were lifted by the incoming US macro data, which indicated that inflation isn't coming down quite as fast as hoped and pointed to an economy that remains resilient despite rapidly rising borrowing costs. Adding to this, a slew of FOMC policymakers recently backed the case for higher rate hikes. In contrast, the Bank of Canada (BoC) had signalled in January a likely pause in its tightening cycle and is now expected to leave rates unchanged at the upcoming policy meeting on Wednesday. This will be followed by the monthly employment details from Canada and the US (NFP), which should help determine the near-term trajectory for the USD/CAD pair. Nevertheless, the divergent Fed-BoC policy outlook suggests that the path of least resistance for spot prices is to the upside and any meaningful dip is likely to get bought into.

Summary:  While the focus stays on Fed, Powell and treasury yields, we get the first few central banks this week taking a less hawkish turn. Reserve Bank of Australia’s dovish hike may be followed by Bank of Canada’s pause, but the key message has remained around policy flexibility rather than claiming a victory on inflation. Comments suggest that central banks are not convinced about disinflation and continue to keep the door open for more rates hikes in Q2/H2. The fist two months of the year have been a roller-coaster, but markets have recently become more certain of stickier inflation and resilient economy going into the month of March. Global money market curves have re-priced higher to reflect the tighter monetary policies as a result. For the Fed, markets have now fully priced in a 5.5% terminal rate, somewhat higher than what was suggested by the median dot plot in December. Meanwhile, 160bps of additional rate hikes are priced in for the ECB with terminal rate forecast approaching 4%. While Powell’s testimony and the US jobs data remain key to watch this week to get a confirmation on the current market expectations for the Fed, some of the other G10 central banks have started to be more flexible in their tightening cycles despite the risks of inflation remaining elevated. This mostly includes the Reserve Bank of Australia and Back of Canada, both of which have pronounced property market risks compared to the other G10 economies. If inflation returns because of accelerating global growth or China reopening, both BOC and RBA may be forced to hike again. USD could remain firm in light of the relative hawkishness that can continue to be priced in from the Fed vs. ECB or BOE where a lot is priced in, as shown in the chart below. Reserve Bank of Australia opening the door to a pause The RBA raised rates for the 10th consecutive time, taking the cash rate target to an 11-year high of 3.6%. Despite one more rate hike being signalled for the April meeting, RBA Governor Lowe sounded less hawkish in the wake of the recent slew of weaker than expected data on GDP, employment, wages and inflation. Market pricing for terminal rate eased from 4.2% to 4.0%. AUDUSD has been hurt recently by the weaker global risk sentiment and the rise in geopolitical tensions, bringing the 0.67 level in focus for the first time since November. China’s growth targets have also been towards the lower end of the expected range, keeping the boost to AUD limited. Still, as better-than-expected Chinese headlines start to flow in from this month after the full reopening and the impact of Lunar New Year holiday, there are reasons to believe that AUD could continue to find support. The 61.8% retracement of the gains from the October low at 0.6547 will be the key support level to watch. Bank of Canada likely heading for a pause Market expects the BOC to pause its tightening cycle, keeping rates unchanged at 4.5%, after its message of “one and done” last month. Still, the message is likely to emphasise that the pause is conditional and the bank remains open to hiking rates again later in the year if inflationary pressures re-emerge. Employment and wage growth has softened, while the January CPI also eased from 6.3% YoY to 5.9% YoY. GDP growth for Q4 was also much weaker than expected as it came out flat vs. expectations of 1.6% annualized growth with Q3 being revised lower as well. CAD is down 1.7% against the USD since the January 25 meeting even as oil prices remained mostly range-bound. More so, CAD has been stronger on the crosses with AUDCAD down 3.7%. There could be potentially more tactical weakness to come for CAD as risks of a lag to the US policy rate broaden, and a recovery will have to wait until the USD story starts to weaken or oil prices pick up materially. Bank of Japan is the biggest event risk While data and commentary from officials has been less supportive of the case for further tweaks in Bank of Japan policy, outgoing governor Kuroda is known for his surprises. At his last meeting on Friday, he may want to part with some sparks resulting in a numb yen in the run upto the meeting. Japan’s labour unions have reportedly been asking for a record pay rise this year, which fueled some expectations that inflation may stay elevated. However January earnings data reported today showed real earnings down over 4%, the worst since 2014. Growth is nominal wages also slowed after a bonus-driven jump in December. Tokyo CPI for February was also softer than expected, and incoming Governor Ueda’s testimony remarks suggested he would be looking at policy continuity along with flexibility to respond to market pressures. The outcome of meeting on March 10 could range from anywhere between a further tweak to the yield curve control policy all the way to Kuroda claiming victory with his policy and giving pressing remarks to maintain yield control as inflation remains externally-driven. The base case is still a no change and JPY has its eyes more firmly set on Powell’s testimony and the path of US yields from here. Source: Macro Insights Central banks on the agenda RBA BOC and BOJ | Saxo Group (home.saxo)

Summary:  Equities tumbled as 2-year Treasury yields surged above 5% and dollar reached its YTD high on Powell opening the door for a bigger rate hike and a higher terminal rate. As risk sentiment deteriorated, AUD was a notable underperformer with RBA also going for a dovish hike. CAD in focus today with Bank of Canada expected to pause. China import data also remained mixed, and oil prices slumped by over 3% while Copper broke below the key $4 mark.   What’s happening in markets? S&P fell below 4000 after Powell’s testimony The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated following Jerome Powell’s testimony to the Senate. Powell warned that the FOMC would probably hike rates more and possibly faster than previously anticipated, given the latest data has come in stronger than expected. The S&P 500 fell 1.50% to 3986, below the 4000-handle and the benchmark’s 50-day moving average, while the Nasdaq 100 lost 1.2%. Rivian (RIVN:xnas) plunged 14.6% after the EV maker announced a private offering of USD1.3 billion convertible notes. Tesla (TSLA:xnas) shares fell over 3.2% and Apple (AAPL:xnas) lost 1.5%. Facebook’s parent Meta Platforms (META:xnas) closed almost steady after it was reported the social media giant plans another round of layoffs that could affect thousands of workers. Meanwhile, in Europe, stock markets also closed in the red - the benchmark Euro Stoxx 600 fell 0.8% with Santander being one of the worst performers, losing 2.4% most despite the business moving to target institutional clients. 2-year US Treasury yield jumped above 5%, for the first time since July 2007 Following Fed Chair Powell opening the door for a 50bp rate hike at the March FOMC meeting, investors sold the front-end of the Treasury curve and saw the 2-year finishing the session at 5.01%, the highest level since July 2007. The longer end of the curve, however, recovered from their intraday lows with the 10-year yield closing only 1bp cheaper at 3.96% and the 30-year yield 2bps richer at 3.87%. The 2-10-year yield curve flattened to -105bps, the deepest inversion since September 1981. The interest rate futures are pricing an over 60% chance for a 50bp rate hike at the next FOMC and a terminal rate at around 5.64% by September this year. The USD 40 billion 3-year auction went well with strong demand. Hang Seng Index and China’s CSI 300 dropped as SOE telcos rally faded to reverse lower After the follow-through rally, n central-government-owned enterprises in Hong Kong and mainland bourses in the telecommunication space lost steam, and the Hang Seng Index and CSI 300 dropped 0.3% and 1.5%. China Telecom (00728:xhkg) slid 4% and China Mobile (00941:xhkg) retreated 2.7%. China Tower came down 2.1%, paring some of the strong gains yesterday. On the other hand, SOE oil and gas giants managed to sustain gains and finish Tuesday higher with PetroChina (00857:xhkg) up 4.4%, Sinopec (00386:xhkg) up 4.2%, and CNOOC (00883:xhkg) up 3.3%, Chow Tai Fook (01929:xhkg) plunged 6% following the departure of the jeweller’s mainland operation chief. SJM (00880:xhkg) slid 4.1% after the loss widened to HKD7.8 billion in FY22. Australian equities slide after Powell’s comments Despite the RBA today suggesting it is at a closer point of pausing rate hikes, the Australian share market’s benchmark, the ASX200 has fallen 0.93% - taking it below its 50-day moving average. The pressure on Aussie market comes after Fed Chair Powell gave hawkish remarks to the US Senate – the FOMC would possibly hike rates faster than previously anticipated. Some of the day’s laggard on the ASX include Woodside (WDS) which has fallen 1.8% after going ex-dividend. BHP and Rio Tinto down by 0.5% ahead of going ex-dividend tomorrow. For what ex-dividend means for investors and traders, click here for possible implications. Despite the overall tone being negative today – as set by the Fed - the best performing companies are those that are benefiting and are likely to continue to benefit from China’s reopening  - with Qantas and Webjet trading over 1.4% higher, with Webjet hitting a 52-week high of $7.01. US dollar notches its biggest gain in a month. The Aussie dollar sinks over 2% After Powell said the US central bank is likely to raise rates higher than previously thought, the US dollar index surged to a fresh cycle high, moving back to levels not seen since December. That resulted in the Aussie dollar tumbling over 2%. Compounding on the AUD pressure, the RBA Governor said today, it is closer to where it's appropriate to pause rate rises. This comes just a day after Australia’s central Bank hiked interest rates for the 10th straight meeting, taking the cash rate to 3.6%. The RBA said monthly inflation had ‘peaked’, goods prices were expected to moderate in the months ahead, and the Bank alluded to services inflation being only temporary. Futures markets now suggest Australia’s cash rate could peak at 4% in September. The Aussie dollar against the US (AUDUSD) trades at 0.6585. Further declines could see the pair move to the next support level, at perhaps the 0.649 level. FX: JPY descent continues; CAD in focus With Powell’s hawkish remarks, 2-year Treasury yields jumped over 5% after a 12bps gain and the USD was pushed to fresh YTD highs. AUD and NZD were hurt by the deterioration in risk sentiment, with the former also pressured by a dovish turn from the RBA. Widening yield differential between US and Japan weighed on the yen, and USDJPY was seen testing 137.50 in the Asian morning session despite volatility risks from the Bank of Japan meeting scheduled on Friday. GBPUSD broke below the 200DMA to reach YTD lows, with BOE’s Mann commenting that sterling could weaken further. EURUSD dropped below 1.06 paring some of the hawkish ECB Holzmann reaction earlier in the week. CAD could be in focus today with a potential pause coming from BOC (read below), with USDCAD likely to take a look at 1.38+ levels. Crude oil drops over 3% on hawkish Powell After touching the top of the recent range, crude oil prices slid on Tuesday as Powell hinted at bigger and longer rate hikes, raising concerns of demand weakness. This comes along with a weaker-than-expected growth target from China for this year which continues to limit the optimism on Chinese demand recovery. Meanwhile, short-term supply concerns are subdued. OPEC Chief Haitham Al-Ghais also said that slowing oil consumption is US and Europe poses a concerns for the market, despite strong growth from Asia. EIA also released its short-term energy outlook and lowered its crude oil production forecasts for US supply for both this year and next amid signs of subdued growth and higher costs. WTI prices touched lows of $77 while Brent was back at $83 from $86+ earlier. Copper broke below $4 mark Base metals were broadly pushed lower on Tuesday as dollar surged to fresh YTD highs on remarks from Powell’s testimony opening the door for a bigger hike in March and a higher terminal Fed funds rate. China import data also gave mixed signals on the first two months of the year, with mined copper ore imports increasing but inflows of refined copper declining. Supply constraints from Peru also seemed to ease as the Peruvian government expects shipments of copper and zinc will normalise with days, following months of social unrest prompted by the impeachment of former President Pedro Castillo. Copper prices fell 2.8% to close below the $4 mark, bringing last week’s low of $3.93 and the 100DMA at $3.86 into focus. What to consider? Powell’s testimony opens the door to a 50bps rate hike in March Fed Chair Powell, in his prepared remarks to Congress, said if incoming data indicates faster tightening is required, the Fed is prepared to increase the pace of rate hikes, warning that the ultimate level of interest rates is likely to be higher than previously anticipated given the string of hot January data. This is another signal that March dot plot could see an upward shift. Not just that, but Powell has also opened the door to a 50bps rate hike in March and market pricing has shifted more in favor of a bigger hike on March 22. Terminal rate expectations have shifted higher to 5.63% from 5.48% previously. Remarks brought the 2-year yields above 5% and the deepest inversion in the 2-10 year yield curve. China’s exports and imports dropped further in February China’s exports fell 6.8% Y/Y and imports dropped 10.2% in February. The larger-than-expected decline in imports was partially due to the fall in commodity prices while commodity import volume grew. China to establish the Ministry of Science and Technology and the National Data Bureau At the National People’s Congress, China announced the establishment of the Ministry of Science and Technology to promote innovation in technology, the National Financial Regulation Bureau to replace the China Banking and Insurance Regulatory Commission (CBIRC) and take over from the People’s Bank of China the regulation of financial holding companies and from the China Securities Regulatory Commission investor protection, and the National Data Bureau to promote the development of the digital economy. The overhaul of the financial regulatory authorities, as we noted in our Two Sessions preview, is to strengthen the Chinese Communist Party’s leadership in the institutional setup, the division of functions, governance. China’s Foreign Minister reaffirmed the strategic partnership with Russia In a press conference on the side-line of the Two Sessions, China’s Foreign Minister Qin Gang reiterated the “China-Russia comprehensive strategic partnership of coordination for a new era” and downplayed Russia’s invasion into Ukraine to that the “Ukraine cries has complex historical fabrics and practical reasons with the underlying nature being the eruption of the conflicts in the security governance of Europe”. The pro-Russian stance, as opposed to the more conciliatory-leaning stance in recent months toward the West, added to investors’ concern over the Sino-American relationship. The Bank of England (BoE) worries about core inflation Yesterday, BoE’s Catherine Mann, former Global Chief Economist at Citibank, expressed concerns about the persistence of core inflation in the United Kingdom. It is currently running at 5.80% year-over-year versus a long-term average of 1.84%. Mann embraced a hawkish tone, highlighting the need for further interest rate hikes. She indicated that the terminal rate is beyond forecast horizon now. The monetary market forecasts it will be at 4.75 %. This implies three consecutive hikes of 25 bp in March, May and June. She also mentioned that the evolution of the sterling plays a very important role for monetary policy due to the high levels of imports. Despite worries about the state of the UK economy, the sterling has been rather resilient this year. It is down only 0.47% against the euro YTD. Most economists still expect the UK economy will go through a period of recession in 2023 (drop of GDP estimated at 0.6%). But a minority of them even expect the UK economy could avoid a recession if the decrease in energy prices continues. This is quite a change compared to forecasts initially released at the end of 2022. Iron ore price steady ahead of peak Chinese construction season Iron ore  - the steel-ingredient is trading slightly lower today, down 0.2% at $126.75, but holds around 2023 highs, after its price rose 2.1% yesterday. China is expected to increase demand - as it usually does ahead of China’s peak construction season. Around this time of year, steel mills typically start restocking iron ore, ahead of building work ramping up amid supportive weather. Adding to sentiment, yesterday Rio Tinto (RIO) said it’s seeing good demand from China - with the country shaking off pandemic restrictions. BHP and Rio go ex-dividend tomorrow, March 9. For implications of ex-dividends click here.   Bank of Canada meets next After RBA’s dovish hike, the stage is set for the Bank of Canada to pause on its tightening cycle at the meeting today. In light of the weaker-than-expected data and BOC’s signal from the January meeting, market is not expecting any rate hikes today although the message is likely to convey policy flexibility. Read our full preview here to know what it means for the CAD as the divergence of BOC to the Fed widens. Investing with a Gender Lens Gender Lens Investing is a strategy which puts weight on gender-based considerations in your investment decisions, so you can in some way contribute towards efforts to close the “gender gap”. As today is the International Women’s Day, we explore why and how we can invest with a gender lens in this video. We also look at some ETFs and Saxo's Women in Leadership equity theme basket which can help you get exposure to this theme. Here’s wishing everyone a very happy International Women’s Day from Saxo   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 8, 2023 | Saxo Group (home.saxo)

USD/CAD has printed a fresh four-month high at 1.3774 as the risk-aversion theme has strengthened further. Federal Reserve Powell has confirmed that the risk of persistent inflation is real and a higher terminal rate is expected than prior. Bank of Canada might keep interest rates steady as announced earlier. USD/CAD is running higher with sheer momentum considering the bullish message from indicators and oscillators. USD/CAD has printed a fresh four-month high at 1.3774 in the Asian session. The Loonie asset witnessed a stellar buying interest after extremely hawkish remarks by Federal Reserve (Fed) chair Jerome Powell on Tuesday. The major has continued its upside journey as the impact of Federal Reserve Powell’s hawkish remarks has not been fully discounted yet. S&P500 futures have retreated after an extremely weak recovery in the Asian session, portraying a healthy risk-off mood as the recovery movement has been capitalized by the market participants for making fresh shorts. The US Dollar Index (DXY) has refreshed its three-month high above 105.80 and is gathering strength for making more gains. A confirmation of bigger rates from Federal Reserve’s Powell has resulted in more fuel for US Treasury yields. The return on 10-year US Treasury bonds has recaptured the 4.0%. Rising US yields might result in a heavy sell-off in growth and tech stocks as their future cash flows will be discounted at a higher rate. Fed Powell endorses a higher terminal rate than previously anticipated The street is aware of the United States' persistent inflation and the need of bringing it down quickly to comfort households from rising payouts. The US inflation was declining at a higher rate than anticipation till December. However, January’s above-targeted inflation figures, resilience in consumer spending, and surprising heavy addition of payrolls in the labor market have renewed fears of stubborn inflation. This forced Fed’s Powell to sound extremely hawkish for interest rate guidance. Fed’s Powell in his testimony before Congress cited “ultimate level of interest rates is likely to be higher than previously anticipated,” after the “latest economic data have come in stronger than expected.” US Employment to provide more clarity on interest rate guidance This week, Federal Reserve (Fed) Governor Christopher Waller cited February’s strong economic indicators as a one-time blip and the price pressures will resume their downtrend from next month. Contrary to that, Federal Reserve’s Powell was extremely harsh on interest rate guidance. For clarity, investors are keenly awaiting the release of the United States Automatic Data Processing (ADP) Employment Change data, which is seen at 200K, higher than the former release of 106K. An upbeat US ADP Employment data will bolster the case of a bigger rate hike by the Fed in its March monetary policy meeting. As per the CME FedWatch tool, the chances of 50 basis points (bps) rate hike have reached 72%. Bank of Canada to keep monetary policy steady The Canadian Dollar is expected to deliver power-pack volatility as the Bank of Canada (BoC) will announce the interest rate decision ahead. Bank of Canada Governor Tiff Macklem has already announced a pause in the policy tightening spell as the central bank believes that the current monetary policy is restrictive enough to tame Canada’s sticky inflation. An unchanged monetary policy by the Bank of Canada and rising chances of bigger rates from the Federal Reserve will lead to a divergence in the Fed-BoC policy. USD/CAD technical outlook USD/CAD has come out of the previous seven-day consolidation and has also delivered a breakout of the Descending Triangle chart pattern on the daily scale. The downward-sloping trendline of the chart pattern is plotted from October 13 high at 1.3978 while the horizontal support is placed from November 15 low at 1.3226. Advancing 10-period Exponential Moving Average (EMA) at 1.3634 indicates that the upside momentum is extremely powerful. The Relative Strength Index (RSI) (14) is oscillating in the bullish range of 60.00-80.00, indicating that the bullish momentum is already active.

The Bank of Canada (BoC) is set to announce its interest rate decision on Wednesday, March 8 at 15:00 GMT and as we get closer to the release time, here are the expectations as forecast by the economists and researchers of seven major banks, regarding the upcoming announcement. BoC is expected to keep rates steady at 4.5% in March. There is no press conference this time. ING “We have much more confidence that the BoC will leave policy rates unchanged. At the 25 January BoC policy meeting, the governing council stated that it expects to ‘hold the policy rate at its current level while it assesses the impact of the cumulative interest rate increases’ at upcoming meetings. The data since then has shown inflation undershooting expectations and GDP growth stalling, yet the economy continues to create jobs. We will get an update on Canadian jobs at the end of the week and we wouldn’t be surprised to see a correction lower given the volatility in the series.” TDS “The downside surprise on Q4 GDP should allow the BoC to look past the blockbuster January jobs number and keep the overnight rate unchanged at 4.50%. The forward guidance is not expected to change too much from January, though the BoC might want to put more emphasis on the conditional nature of its pause. A low-energy BoC meeting would likely direct CAD's focus to the evolving global narratives. We see USD/CAD holding the 1.33/1.37 range unless US inflation goes awry this month.” NBF “We expect the BoC to keep its policy rate unchanged. The decision won’t come with updated projections, but the rate statement should nonetheless provide a high-level opinion on how Governing Council views recent economic developments. Our expectation is that it notes the economy is progressing ‘broadly as expected’, a characterization which should give investors more confidence that April will also result in no change to policy. A speech delivered by Senior Deputy Governor Carolyn Rogers on Thursday should reinforce this. After a year of frequent surprises on BoC announcement days, we’re relatively confident this will be a straightforward affair.”  CIBC “The BoC is a near lock to leave rates unchanged this month but will retain language indicating that the pause is conditional on seeing the economy track in line with the Bank’s expectations.” MUFG “We expect the BoC to remain in wait-and-see mode this week as they continue to assess the lagged impact of monetary tightening delivered to date.” Citibank “The BoC’s policy decision is very likely to see the cash target unchanged at 4.50% given that economic developments in Canada have evolved ‘broadly in line with the MPR outlook’. The most important adjustments in the policy statement will be to the guidance, where Citi analysts’ base case is for very little change.” Wells Fargo “For the first time since January last year, we expect the BoC to hold its policy rate steady at 4.50%. In January, the BoC raised rates 25 bps but also said if economic developments evolve broadly as expected, it would hold interest rates steady while it assessed the impact of its cumulative interest rate increases. That suggests a relatively high bar to resume rate hikes, and one we do not think has yet been met.”  

Summary:  Equity markets sold off steeply on a hawkish Fed Chair Powell, who testified before a Senate panel yesterday, and said that the Fed is willing to consider larger hikes again. Market pricing of peak Fed rates rose above 5.6% as the market now leans for a 50 basis point hike at the March 22 meeting. The US dollar was particularly reactive to Powell’s testimony, jumping to aggressive new highs for the cycle across the board. What is our trading focus? US equities (US500.I and USNAS100.I): fresh hawkish pivot from Powell reverses rally US equities turned sharply south yesterday on a hawkish pivot from Fed Chair Powell as he is clearly not comfortable with the most recent data. This took the 2-year rate above 5% for the first time in over 15 years and reversed the recent market rally, taking the S&P 500 back below the 4,000 level, though with some ways to go before the 200-day moving average comes into view just below 3,950. The Nasdaq 100 likewise reversed course, but is far more elevated relative to recent lows and the 200-day moving average – with the cash index trading 12,150, some 250 points above the moving average. Incoming US data and its impact on Fed expectations and especially longer yields will be key through next Tuesday’s US February CPI data. Hang Seng Index and CSI 300 declined on regulatory overhaul and US rates outlook Hang Seng Index dropped by 2.7% and the Hang Seng TECH Index plunged by nearly 4%. EV and China Internet stocks led the charge lower. In A-shares, CSI300 slid nearly 1%. On top of the tighter U.S. interest rate outlook stemming from Fed Chain’s Powell’s testimony, the establishment of the National Financial Regulation Bureau and the National Data Bureau and the consolidation of power around them may have stirred up concerns about uncertainty in the mind of investors about the regulatory trend on areas such as mobile payment and e-platform data.  FX: USD rips higher on hawkish Powell. CAD in focus on Bank of Canada meet today With Powell’s hawkish remarks, 2-year Treasury yields jumped some 13 basis points to close above 5% for the first time since 2007 and the USD rushed to fresh YTD highs. AUD and NZD were hurt by the deterioration in risk sentiment, with the former also pressured by a dovish turn from the RBA. Widening yield differential between US and Japan weighed on the yen, and USDJPY pierced above 137.50 in the Asian session despite volatility risks from the Bank of Japan meeting scheduled on Friday. GBPUSD broke below the 200DMA to reach YTD lows in the low 1.1800’s, with BOE’s Mann commenting that sterling could weaken further. EURUSD dropped below 1.0550, paring the hawkish ECB Holzmann reaction earlier in the week. CAD will be in focus today after the Bank of Canada trid to position for a tightening pause at its most recent meeting (read more below), with USDCAD likely to take a look at 1.38+ levels if the BoC doesn’t shift hawkish in line with the Fed. Gold and silver slump on Powell warning Gold and silver slumped after Fed Chair Powell, in his prepared remarks to Congress, said the Fed was prepared to increase the pace of rate hikes and to a higher-than-expected level should incoming data continued to show strength. Terminal Fed rate expectations shifted higher to 5.66% with the market pricing in a 60% risk of a 50 bp move at the March meeting. Across market risk appetite tumbled with the selloff in metals being led by silver’s 4.6% slump to a four-month low near $20.  Gold meanwhile has given back most of last week's bounce and following the failure to challenge resistance at $1864 and gain a foothold above the 21-DMA, the market is once again looking for support in the $1800 area ahead of $1775, the 200-DMA. With Powell signalling an incredible data dependency, the focus now turns to Friday’s job report. Crude oil drops over 3% on hawkish Powell Crude oil made an abrupt turnaround from a three-week high on Tuesday with growth and demand concerns taking center stage after Powell signaled his determination to fight inflation with more rate hikes. The most inverted US yield curve in decades now signals an even bigger risk of a recession and with that weakening demand for fuel. Together with China’s lower than expected growth target and OPEC Chief Haitham Al-Ghais seeing slowing oil consumption in US and Europe, both WTI and Brent dropped towards support at the lower end of their current ranges, in Brent at $81.30 and WTI at $73.50.  EIA also released its short-term energy outlook and lowered its crude oil production forecasts for US supply for both this year and next amid signs of subdued growth and higher costs. Copper trades back below the $4 mark Base metals were broadly pushed lower on Tuesday as the dollar surged to fresh YTD highs on remarks from Powell’s testimony opening the door for a bigger hike in March and a higher terminal Fed funds rate. China import data also gave mixed signals on the first two months of the year, with mined copper ore imports increasing but inflows of refined copper declining. Supply constraints from Peru also seemed to ease as the Peruvian government expects shipments of copper and zinc will normalise with days, following months of social unrest prompted by the impeachment of former President Pedro Castillo. Copper trades back below $4, bringing last week’s low of $3.93 and the 200DMA at $3.77 into focus. US Treasury yield curve sees next extreme in inversion. (TLT:Xmas, IEF:xnas, SHY:xnas) Fed Chair Powell’s surprisingly explicit rhetoric on the willingness to consider hiking by larger amounts again shocked the 2-year Treasury yield some 13 basis points higher with yields following through a few bps higher still in overnight trading. The 10-year yield only edged a few basis points higher and is still stuck near 4.00% this morning, which means the yield curve inversion has reached its deepest level yet for the cycle and sinc 1981 at below –105 basis points. The 3-year auction yesterday showed strong demand.  A 10-year auction is up today. What is going on? Powell’s testimony opens the door to a 50 bps rate hike in March Fed Chair Powell, in his prepared remarks to Congress, said that if “the totality” of incoming data indicates faster tightening is required, the Fed is prepared to increase the pace of rate hikes, warning that the ultimate level of interest rates is likely to be higher than previously anticipated given the string of hot January data. This is another signal that March “dot plot” of Fed rate forecasts could see an upward shift for this year and next. Powell even explicitly said that a 50-bp rate hike in March is possible and market pricing has shifted to favouring a bigger hike on March 22. Terminal rate expectations have shifted higher to 5.63% from 5.48% previously. Remarks brought the 2-year yields above 5% and the deepest inversion in the 2-10 year yield curve. Adidas cuts dividends and confirms uncertain outlook Adidas shares are down 3% in pre-market trading as the German sports retailer reports Q4 revenue of €5.2bn vs est. €5.3bn and operating loss of €724mn vs est. €717mn in addition to cutting 2022 dividend to €0.70 vs est. €1.64. The key questions remain for Adidas of whether China growth can come back, what to do with the Yeezy inventory of sneakers and clothes, and finally is the brand impacted so much that the turnaround case will take longer than estimated. Investing with a Gender Lens Gender Lens Investing is a strategy which puts weight on gender-based considerations in your investment decisions, so you can in some way contribute towards efforts to close the “gender gap”. As today is the International Women’s Day, we explore why and how we can invest with a gender lens in this video. We also look at some ETFs and Saxo's Women in Leadership equity theme basket which can help you get exposure to this theme. Here’s wishing everyone a very happy International Women’s Day from Saxo What are we watching next?  Bank of Canada meets next After RBA’s dovish hike, the stage is set for the Bank of Canada to pause on its tightening cycle at the meeting today. In light of the weaker-than-expected data and BOC’s signal from the January meeting, market is not expecting any rate hikes today although the message is likely to convey policy flexibility. Read our full preview here to know what it means for the CAD as the divergence of BOC to the Fed widens. More Powell today. Next US macro data and Bank of Japan loom After Powell surprised yesterday, the incoming data will need to support the market’s shift to a more hawkish stance, with potential for a further cementing of a 50 basis point move at the March 22 FOMC meeting possible on uniformly hot data (currently just above 40 basis points priced for March 22). Today we will get the February ADP payrolls change number and January JOLTS job openings data (together with some revisions of prior data), but these weigh less heavily than the official jobs report on Friday. Easily as important, the US February CPI data is up next Tuesday and will likely prove the arbiter of whether the Fed moves 50 basis points at the meeting. In the meantime, the global lift in yields is piling pressure on the yen this week, and on the Bank of Japan to shift away from its yield-curve-control policy ahead of its meeting this Friday, which will be the final meeting with Kuroda at the helm before he leaves early next month. Earnings to watch There are on US earnings releases today of importance. The market will focus on Adidas earnings (see review above) and then focus on earnings tomorrow from CATL and JD.com.  Wednesday: Ping An Bank, Thales, Adidas, Geberit  Thursday: CATL, Deutsche Post, JD.com  Friday: Daimer Truck, AIA Group, Oracle, DiDi Global  Economic calendar highlights for today (times GMT)  1000 – ECB President Lagarde to speak 1315 – US Feb. ADP Employment Change 1330 – US Jan. Trade Balance 1330 – Canada Jan. International Merchandise Trade 1500 – Canada Bank of Canada decision 1500 – US Fed Chair Powell to testify before House Panel 1500 – US Jan. JOLTS Job Openings 1530 – EIA's Weekly Crude and Fuel Stock Report 1700 – USDA's World Agriculture Supply and Demand Estimates (WASDE) 1800 – US 10-year Treasury Auction 1900 – US Fed Beige Book 0001 – UK Feb. RICS House Price Balance 0130 – China Feb. CPI/PPI Source: Global Market Quick Take: Europe – March 8, 2023 | Saxo Group (home.saxo)

Investors got a double shot of hawkishness from Federal Reserve (Fed) Chair Jerome Powell’s semi-annual testimony before the US Senate yesterday. Powell Powell’s comments sent the rate hike expectations significantly up and wreaked havoc across the US treasury and equity markets and the US dollar. Data Moving forward, the next few data points will be VERY important in cementing the expectation of a 50bp hike at the March 21-22 FOMC meeting. Today, the ADP report and job openings data. JOLTS data would better soften this month, after last month’s booming figure of 11 mio.On Friday, February jobs report will be released. We’d better see an easing here as well after last month’s blowout half-a-million NFP read. Finally, the latest CPI update is due next Tuesday. And again, it’d better head sufficiently lower after last month’s disinflation disillusion. Fed If the fresh data doesn’t go where the Fed wants to see them, bigger rate hikes will be on the menu, and hope of soft-landing and easy disinflation could fade away. USD And with all the hawks in the air, the US dollar went straight up yesterday and there is no reason to bet on a softer US dollar for the next couple of days. The dollar will likely consolidate and extend gains against most majors. Bank of Canada Bank of Canada (BoC) is expected to keep the rates unchanged at today’s monetary policy meeting. Watch the full episode to find out more! 0:00 Intro 0:35 Powell the Hawk 4:07 Data Watch 5:48 FX update: USD up, EUR, AUD down 8:31 BoC to do nothing Ipek Ozkardeskaya  Ipek Ozkardeskaya has begun her financial career in 2010 in the structured products desk of the Swiss Banque Cantonale Vaudoise. She worked at HSBC Private Bank in Geneva in relation to high and ultra-high net worth clients. In 2012, she started as FX Strategist at Swissquote Bank. She worked as a Senior Market Analyst in London Capital Group in London and in Shanghai. She returned to Swissquote Bank as Senior Analyst in 2020. #Fed #Powell #testimony #inflation #jobs #economic #data #BoC #RBA #rate #decision #USD #AUD #EUR #CAD #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

The Canadian dollar has steadied on Wednesday, after sliding 1% a day earlier. Later today, the Bank of Canada meets for its monthly meeting. BoC likely to pause The Bank of Canada is widely expected to take a pause at today’s meeting and maintain the cash rate at 4.50%. This would mark the first pause in rate hikes since the current tightening cycle began in January 2022. The BoC has raised rates by 425 basis points during this time and the tightening has had a dampening effect on the economy – GDP in Q4 flattened out and inflation has fallen under 6%. There is a possibility that the BoC will continue to hold rates, but that will depend on the data, particularly inflation and employment. The shift in policy is bearish for the Canadian dollar, especially with the Federal Reserve expected to continue raising rates. Currently, there is only a 25-bp differential in rates between the US and Canada, but if the Fed keeps raising and the BoC stays on the sidelines, the divergence in rates will weigh on the Canadian dollar, which has plunged some 3% since its February high. It’s a very different story south of the border, where the US economy is churning out strong numbers and the disinflation process appears to be on hold. In his testimony on Capitol Hill, Fed Chair Powell noted that the latest (January) data was stronger than expected and signalled that the Fed would respond with higher rates than it had previously anticipated. Although the January numbers may have been a blip, the markets are marching to the Fed’s tune and have now priced in a 50-bp hike at the March 22 meeting at 75%, up from 25% prior to Powell’s testimony, according to the CME Group.   USD/CAD Technical 1.3701 and 1.3784 are the next resistance lines 1.3571 is a weak support line, followed by 1.3478 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

Summary:  The ADP employment and JOLTS job opening numbers released on Wednesday leaned into the notion that the Fed can resume a faster pace. But it seems the market is coming to terms with the fact that interest rates will remain elevated as the VIX Index declined, and the US Dollar Index steadied manner. Ahead are CATL results, JD.com and DocuSign. The all-important jobs report on Friday and the U.S. CPI next week could bring about another round of market volatilities. Read on for more.   What’s happening in markets? US equities edged up modestly, digesting the message from Powell and job data The Nasdaq 100 (NAS100.I) gained 0.4% and S&P 500 (US500.I) inched up 0.1% on Wednesday, remaining calm to the hotter-than-expected ADP employment and JOLTS job openings data and Powell’s congressional testimony in his second day. The volume of 10.2 billion shares across U.S. exchanges was below average. As WTI crude fell by more than 1% to USD76.5, the energy sector was the biggest loser within the S&P500. Telsa (TSLA:xnas) slid 3%, following the National Highway Traffic Safety Administration highlighting potential issues in the EV maker’s Autopilot system and steering wheels that can detach on the Model Y SUVs. Campbell Soup (CPB:xnys) gained nearly 2% on earnings beat and sales increases. Crowdstrike (CRWD:xnas) rose 3.2%, paring some of the post-result after market gains the day before. In Europe, the STOXX Europe 600 finished the session flat. Yields on U.S. Treasuries moved higher on hot JOLTS job openings and a poor 10-year auction The Treasuries market did not act much to the hotter-than-expected ADP employment data and Powell’s second-day congressional testimony. Short-covering flows especially in the futures contracts drove the market higher and yields lower in the morning until selling emerged following the JOLTS job openings data which was stronger than estimates. Demand in the 10-year auction was weak as the auction stopped at nearly 3bps cheaper from the market level at the time of the auction and had a bid-to-cover ratio of 2.35, lower than 2.66 last time. The Treasury is auctioning USD18 billion of 30-year bonds today. The 2-year yield rose 6bps to 5.07% and the 10-year yield edged up 2bps to 3.99%, inverting the curve further to -109bps. Hang Seng Index and China’s CSI 300 decline on regulatory overhaul in China and U.S. interest rates Yesterday, the Hang Seng Index dropped by 2.4% and the Hang Seng TECH Index plunged by 3.2%.  EV and China Internet stocks led the charge lower. XPeng (09868:xhkg) plunged 7.1% and Li Auto (02015:xhkg) lost 6.3%. China internet names slid, with Alibaba (099088:xhkg), Meituan  (03690:xhkg) and JD.com (09618:xhkg) each down 3-4%. On top of the tighter U.S. interest rate outlook stemming from Fed Chain’s Powell’s testimony, the establishment of the National Financial Regulation Bureau and the National Data Bureau and the consolidation of power around them may have stirred up concerns about uncertainty in the mind of investors about the regulatory trend on areas such as mobile payment and e-platform data.  China telecommunication stocks were among the top gainers. China Unicom (00762:xhg) rose 3.5% after reporting Q4 earnings in line with estimates. TVB (00511) jumped 85% on Wednesday, following the Hong Kong TV broadcasting company holding its first live-streaming online shopping on the Taobao platform in mainland China. The 6-hour live-streaming session had around 4.85 million viewers. Over the past 4 sessions, the share price of TVB has gone up by 247%. In A-shares, the CSI300 finished 0.4% lower, clawing back most of the early losses, with telecommunication, defense, computing, media, and 6G concept names leading the rebound.  The US dollar consolidates, post-Powell gains The US dollar was little changed versus major currencies and was consolidating its strong gains after Powell’s first-day testimony the day before. USDJPY fell back below 107. Australia’s shares are under pressure as the heavy weights trade ex-dividend today BHP and Rio are trading ex-dividend, which is pressuring the equity market, while on the other side Myer shares jolted higher after the retailer declared a super-sized dividend. While accounting software company Xero also trades higher on announcing it will cut 800 jobs to improve its profitability. Meanwhile, in breaking news - part of the Aukus security partnership, Australia looks set to buy as many as five nuclear-powered Virginia class submarines from the US, with the submarine plan expected to be announced next week – when US President Joe Biden meets UK Prime Minister Rishi Sunak and Australian Prime Minister Anthony Albanese  - as part of the 18-month old Aukus partnership. Gold ticks higher as the market digests the latest hawkish Fed commentary that could lead the US into a recession Gold advanced on Wednesday after slipping about 2% in the prior session  - gaining strength as the US dollar's rally cooled. Despite the stronger dollar overall, gold has found support in the $1800 area – driven by economic uncertainty and the probability of a recession creeping higher. We await Friday’s jobs report – given rates are expected to remain higher – weakness in the data on Friday may be a catalyst for the US dollar to take a step back, which could theatrically trigger upside in the precious metal.   What to consider? Bank of Canada kept rates unchanged The Bank of Canada (BOC) was the first major central bank to pause from hiking rates. As widely expected, The BOC kept the policy rate unchanged at 4.50% but the door is open to come back on the hiking track to fight inflation as the central bank dropped the forward guidance that it expects to hold the policy rate unchanged if the economy evolves in line with its outlook. Powell largely repeated his message on the second day of his testimony On the second day of his congressional testimony, this time to the House Financial Services Committee, Powell told lawmakers that no decision had yet been made on the size of the rate hike at the March FOMC while he reiterated that the Fed was likely to bring the policy rate higher than previously anticipated and could move at a faster pace. More hot job data coming out of the U.S. The ADP Employment report had a 242K increase in jobs in February, rising from 119K (revised from 106K previously reported) in January and way above the 200K consensus estimate. JOLTS Job Opening also came in stronger than expected at 10,824K (consensus estimate: 10,546K; January 11,234K). Europe leads Australia, with more females in executive roles. The US lags  Various studies have shown that gender diverse executive teams can outperform the overall equity market. So, for International Women’s Day we dissected the makeup of listed companies' executive teams. We found that Europe has the most female representation followed by Australia - with the US lagging. An astounding 33 companies in the Stoxx600 have executive teams that are made up of over 50% women. Healthcare company Halma - also in the Stoxx600 - has a 60% female executive team. While media business- Future PLC, takes the cake - with a 100% female executive team. Australia follows Europe with a high portion of diversity.  14 of the ASX200 companies have executive teams that are over 50% female lead. Gold mining giant- Newcrest Mining- has an 86% women executive team. What’s also pleasing to see is that the world’s biggest mining company, BHP has over 50% female representation on its executive leadership team. And lastly- in the US- in the S&P500, just five companies have executive teams that are made up over 50% women. That includes Bed & Body Work with its 60% executive team - being female. To explore this thematic further, refer to Saxo’s Women in Leadership equity basket.   China’s inflation is expected to slow in February The growth in CPI is expected to slow to 1.9% Y/Y in February from 2.1% in January and PPI to contract further to -1.3% Y/Y. Eyes on CATL’s growth and outlook CATL, the world’s largest battery maker - and Tesla’s battery supplier - reports results on Thursday. It’s expected to report revenue growth of over 80%. However, there is room for a positive surprise - given strong battery and energy storage demand. CATL is also expanding overseas - teaming up with Ford to build a battery manufacturing plant in Michigan, which we will hopefully get detail on. As for its outlook - we expect it to be strong, as CATL’s increased its war chest, after selling its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. We also think guidance could be upgraded - given auto sales in China are expected to rise in 2023, following years of lockdowns. CATL outlook’s will be closely watched by not only EV makers - but also by EV investors – as they could give a gauge on how much car maker’s battery costs could rise.   Other company reports to watch ahead include JD.com - a Chinese consumer spending bellwether and DocuSign- a covid-19 stalwart All eyes will be on JD.com, the Amazon equivalent in China. It could give further insight into Chinese consumers’ appetite post lockdown. And what they’re seeing in consumer spending ahead. It's also worth watching Saxo’s China Consumer and Technology basket of stocks. And in the US - DocuSign reports after the market close on Thursday – this will be interesting to watch as over the last two years DOCU has beaten EPS and revenue estimates. The electronic signature company raised full its guidance when it reported third-quarter results that topped expectations. It’s also joined the spate of tech companies making mass-layoffs and cut 10% of its employees.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 9, 2023 | Saxo Group (home.saxo)

As widely expected, the Bank of Canada kept rates unchanged at 4.5% today. The Bank observed that restrictive monetary policy is already showing its effect on the Canadian economy, and sees a path for a return to 3% inflation by mid-2023. The option for a new hike is open, but we doubt that will be necessary, and the next move should be a cut Bank of Canada building in Ottawa A stark contrast to the Fed communication The contrast between the Bank of Canada (BoC) and the renewed hawkishness at the Federal Reserve is increasingly stark. Today, BoC confirmed that rates most likely peaked in January with “restrictive monetary policy” weighing on household spending and investment. While BoC acknowledges that the labour market “remains very tight”, it doesn't have the same fears as the Federal Reserve that this will keep inflation pressures elevated. Indeed, BoC argues that “weak economic growth for the next couple of quarters” and increasing “competitive pressures” will bear down on inflation and allow it to “come down to around 3% in the middle of this year”. Consequently, it repeated the line that should economic conditions evolve broadly in line with expectations, then it will continue to hold the policy rate “at its current level”, but reserved the right to “increase the policy rate further if needed to return inflation to the 2% target”. We don’t think the central bank will need to. Canada’s high household debt levels and greater exposure to interest rates rate hikes via a higher prevalence of variable rate borrowing make the economy more at risk of a deeper downturn than the US. For example, in the US the 30Y fixed rate mortgage is the most common borrowing method while in Canada it is five years or less before it faces a change in interest rate. As such, the next move is more likely to be an interest cut in our view Markets scale back tightening bets The Canadian dollar traded marginally on the soft side after the BoC announcement, probably as some investors were expecting some stronger concerns about potentially stickier inflation like in the US. The conviction call on the deflationary path (inflation at 3% by mid-2023) clearly suggests there is no real discussion about a resumption of monetary tightening at the moment. We are observing some unwinding of tightening bets at the time of writing. The CAD 2Y swap rate is trading around 10bp lower than pre-announcement, and the OIS curve is no longer pricing in a 25bp rate hike at the July meeting. This is no game changer for our medium-term (bearish) view on USD/CAD, which was not based on a hawkish surprise or additional tightening by BoC. However, it may trigger a bit more loonie underperformance in the near term. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  After Wednesday’s sentiment shock on hawkish Fed Chair Powell testimony, yesterday saw markets frozen in their tracks, awaiting key incoming data that will determine whether the Fed must continue turning the rate tightening screws, starting with the US February jobs data up tomorrow. In Asia’s Friday session tonight, we await the final Bank of Japan meeting with Kuroda at the helm before his exit next month. Will he surprise again as in December or leave the next steps in the direction of normalization for his successor? What is our trading focus? US equities (US500.I and USNAS100.I): more wait and see Following the big move in Tuesday’s session on Powell’s hawkish comments on policy rates and inflation yesterday’s session had much lower energy and ended with a small rebound in S&P 500 futures gaining 0.1%. Stronger than expected ADP job figures had a small initial negative impact as the jobs data continue to suggest a strong US labour market despite the higher interest rates underpinning the structurally higher inflation case. This morning the low energy in US equity futures continues and it feels like the equity market is back at the wait-and-see mode on inflation and the economy. As we have said before, it is the bond market that will dictate where equities go from here. If S&P 500 futures slips below Tuesday’s close, then the 3,950 level is the next level to watch and the approximate area for the 200-day moving average. Chinese equities (HK50.I and 02846:xhkg): oscillated in a lacklustre session Hang Seng Index and CSI 300 Index swung between small gains and losses. China’s CPI growth slowed to 1% Y/Y in February, much lower than the consensus estimate of 1.9%. Growth in food prices decelerated to 2.6% Y/Y from 6.2% Y/Y while growth in non-food prices halved to 0.6% Y/Y in February from 1.2% in January. PPI slide 1.4% Y/Y in February, bringing the producer prices deeper into deflation. Semiconductor Manufacturing (00981:xhkg) and Hua Hong Semiconductor (01347:xhkg) advanced, as investors expect the domestic chip making leaders to benefit from government policy initiatives and import substitution. COSCO China Shipping Energy Transportation (01138:xhkg) jumped 11.5% as investors anticipated the Chinese tanker and dry bulk shipping operator to benefit from recent rises in freight rates. FX: USD strength eases ahead of data. JPY firms. CAD weak on BoC The USD strength on the back of Fed Chair Powell testimony failed to find further momentum as the market awaits key incoming US data tomorrow (Feb. jobs report) and next Tuesday (Feb. CPI) for further conviction. With the rise in yields easing slightly, the JPY perked up after USDJPY failed to close above the 200-day moving average and as the market awaits a possible surprise from the outgoing Kuroda at tonight’s (Friday in Asia) Bank of Japan meeting (preview below). The Bank of Canada confirmed its prior guidance and did pause its rate tightening cycle at its meeting yesterday, continuing to signal a wait-and-see stance, which looks dovish in this environement. This saw CAD weak across the board yesterday, and USDCAD traded above 1.3800 at one point for the first time since November. Crude oil holds Powell-led losses, but support is not far away Crude oil futures remain stuck near a one-week low as the negative sentiment around further monetary tightening more than offset a surprise drop in US stocks, the first in ten weeks. Brent and WTI trade below their 21-day moving averages for a second day but the loss of momentum has yet to see either of them challenge trendline support, in Brent at $81.40 and WTI at $73.50. Rangebound for months and in no hurry to change that amid a balanced flow of supply and demand related news, the market is likely to pay close attention to the general level of risk appetite which is currently being dictated by the FOMC and its close attention to incoming data. With that in mind the next major market moving event is likely to be Friday’s US job report. Gold trades near key support on Powell’s higher, faster and longer threat Gold trades near support in the $1800 area as traders continue to digest Fed chair Powell’s comment on Capitol Hill that interest rates could go higher, faster and for longer. In the short-term with Powell signalling an incredible data dependency, the focus now turns to incoming US data, and ahead of Friday’s job report, another report showed US job openings drop to 10.8 million, still a number too high for the Fed. However, given the level of elevated rate hike expectation currently priced in, any weakness in incoming data may now trigger a stronger positive response than otherwise called for. Below the $1800 area the next level of interest is the 200-DMA at $1775. Yields on U.S. Treasuries moved higher on hot JOLTS job openings and a poor 10-year auction The Treasuries market did not react much to the hotter-than-expected ADP employment data and Powell’s second-day congressional testimony. Short-covering flows especially in the futures contracts drove the market higher and yields lower in the morning until selling emerged following the JOLTS job openings data which was stronger than estimates. Demand in the 10-year auction was weak as the auction stopped at nearly 3bps cheaper from the market level at the time of the auction and had a bid-to-cover ratio of 2.35, lower than 2.66 last time. The Treasury is auctioning USD 18 billions of 30-year bonds today. The 2-year yield rose 6bps to 5.07% and the 10-year yield edged up 2bps to 3.99%, inverting the curve further to -109bps. What is going on? The Netherlands proposing a chip gear export restriction to China As part of the US CHIPS Act the US pushing its trading partners to also restrict semiconductor technology to China which has hurt chipmakers including Nvidia. So far, the Dutch-based ASML, the world’s largest lithography machine makers for chip production, has said that those restrictions did not apply to them. However, non-compliance by ASML and other equipment makers would make it possible for China’s semiconductor industry to circumvent the intentions in the new US policy on semiconductors. Yesterday, the Dutch government announced that the Netherlands is proposing chip gear export restrictions to China and will include DUV (deep ultraviolet) lithography machines which are the most advanced machines for chip production. ASML says that the new export restrictions will not affect the 2023 outlook nor the long-term outlook, but the latter part might be a stretch and only time will tell. Apple to put more focus on India growth Apple is revamping its global sales unit shifting its focus to India from China with a new separate sales office and reporting line in India. This move follows the decision to increase production capacity of various Apple products to India from China underscoring the shifting geopolitical interest for the US and its corporate sector. With Apple being one of the most important companies in the US this is an important signal to other US companies about how to change global supply chains and where to get revenue exposure. WASDE adds further downside pressure on corn and wheat futures Chicago corn and not least wheat futures extended their slump on Wednesday after the USDA said domestic stockpiles rose by more than expected in response to lower exports. The agency also boosted the outlook for Ukraine corn exports while wheat, already under pressure from Russian sales and expectations the Ukraine grain corridor deal will be extended, dropped to an 18-month low after the agency raised production estimates for Kazakhstan, Australia and India. Soybeans meanwhile found support after the USDA slashed production from drought-stricken Argentina by more than expected. The world’s biggest exporter of soymeal and soyoil will harvest 33 million tons of beans this year, the smallest crop since 2011 and a 20% decline from its February estimate. More hot job data coming out of the US The ADP Employment report had a 242K increase in jobs in February, rising from 119K (revised from 106K previously reported) in January and way above the 200K consensus estimate. JOLTS Job Opening also came in stronger than expected at 10,824K (consensus estimate: 10,546K; January 11,234K). Bank of Canada confirms pause in rate tightening regime The Bank of Canada confirmed its guidance from the prior meeting and did not hike the policy rate yesterday, a particularly jarring divergence relative to the hawkishness we saw this week from Fed Chair Powell which has the market debating a re-acceleration in the pace of Fed hikes, and at a time when the ECB, for example, is priced to hike another 150 basis points or more this year. The Bank of Canada continues to expect that inflation in Canada will ease to “around 3%” by mid-year. The guidance on further in the policy statement remained unchanged: "Governing Council will continue to assess economic developments and the impact of past interest rate increases, and is prepared to increase the policy rate further if needed to return inflation to the 2% target.". One particularly complicating factor for the Canadian economy is the heavy load of private debt, much of it in mortgages, with a large minority of Canadians financing with adjustable rate mortgages and even fixed rate mortgages adjust their rate every five years, which will stress the budgets of a growing portion of Canadian households with every month that passes at the current yield levels – several multiples of where rates were for the 2020-2021 timeframe. Powell largely repeated his message on the second day of his testimony On the second day of his congressional testimony, this time to the House Financial Services Committee, Powell told lawmakers that no decision had yet been made on the size of the rate hike at the March FOMC while he reiterated that the Fed was likely to bring the policy rate higher than previously anticipated and could move at a faster pace. What are we watching next? Bank of Japan meeting tonight will be Kuroda’s last after 10 years as Governor Significant two-way volatility potential for the JPY tonight on the Bank of Japan meeting as the market well remembers the surprise decision from Governor Kuroda to expand the yield-curve-control “band” for 10-year Japanese Government bonds (really a cap in this era of higher interest rates) to +/- 0.50% from the prior 0.25%. One-week implied volatility in USDJPY options remains very elevated at almost 19% in anticipation of tonight’s decision and guidance, as the market is uncertain whether Kuroda might significantly tighten policy at his last meeting as a kind of declaration of victory on succeeding in bringing more sustained inflation to the Japanese economy, or whether he will leave the bulk of the tough process of policy normalization to his likely successor, Kazuo Ueda. USDJPY rose above its 200-day moving average this week at 137.20 and traded most of the way to 138, but has retreated this morning to well below 137.00. The market is only pricing a policy rate (the short rate) of positive 0.15% by the end of this year, versus –0.10% currently. More likely for the Bank of Japan to focus on loosening yield-curve-control for now rather than tinkering with the policy rate. Earnings to watch Today’s key earnings release to watch are CATL and JD.com which will provide fresh information from China’s corporate sector. JD.com is expected to report FY22 Q4 earnings before the US market open with analysts expecting revenue growth of 7% y/y down from 23% y/y a year ago, and EBITDA of CNY 8.06bn up from CNY 5.08bn a year ago. The outlook from JD.com matters a lot this time as it will reflect management’s confidence and expectations related to the Chinese reopening. CATL is expected to report sometime after the Chinese equity market close and is expected to report Q4 revenue growth of 87% y/y reflecting the strong demand for electric vehicles and batteries. Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 1200 – Mexico Feb. CPI 1230 – US Feb. Challenger Job Cuts 1330 – US Weekly Initial Jobless Claims 1400 – Poland National Bank Governor Glapinski press conference 1530 – EIA's Weekly Natural Gas Storage Change 1800 – US Treasury to auction 30-year T-bonds 1845 – Canada Bank of Canada Deputy Governor Rogers to speak Asian session: Bank of Japan meeting   Source: Global Market Quick Take: Europe – March 9, 2023 | Saxo Group (home.saxo)

Overview: Seeing the drama he inspired on Tuesday, the Fed chair tried soft-pedaling the idea that he was signaling a 50 bp hike in March. The market did not buy it. And the odds, discounted by the Fed funds futures rose a little above 70% from about 62% at Tuesday's close. The two-year note yield solidified its foothold above the 5% mark. With the Bank of Canada confirming its pause, the Reserve Bank of Australia does not seem that far behind, and even the Bank of England Governor Baily has recently pushed against the aggressive market pricing, saying that the central bank has moved away from the "presumption" that more rate hikes are needed. The dollar remains firm but mostly consolidating today, ahead of tomorrow's employment report. Some position adjusting ahead of the conclusion of the BOJ's meeting is lifting the yen today, which is the best performing G10 currency, gaining about 0.85%. The US 10-year yield is little changed, slightly below 4% today, while European benchmark yields are mostly 3-4 bp higher. Asia Pacific equity markets were mixed, with Japan and Australia rising and China, Hong Kong, South Korea, Taiwan, and India falling. Europe's Stoxx 600 is off 0.6% to nearly double this loss. US index futures are trading softer. With the greenback and US rates consolidating, gold is finding a reprieve after falling from around $1858 on Monday to a little below $1810 yesterday. April WTI is stuck in a tight range a little above yesterday's low (~$76.10). Lastly, we note that there is much talk about the tax hikes that will be in President Biden's budget proposals. We suggest, given the configuration of Congress that is more about political messaging, perhaps ahead of a formal declaration that he will seek re-election than the actual budget that will be eventually passed. Asia Pacific  China reported February consumer and producer prices, and both were weaker than expected. The end of the Lunar New Year holiday saw food, transportation, and recreation prices moderate, and the year-over-year rate of CPI slow to 1.0% from 2.1% in January. Food price inflation slowed to 2.6% year-over-year from 6.2% in January. Core inflation, excluding food and energy slowed to 0.6% from 1.0%. The new forecast/targets announced at the start of this week's National People's Congress has CPI rising to 3% this year. The market (median forecast in Bloomberg's survey) was at 2.4%. Producer prices fell 1.4% year-over-year, a larger decline than expected after a -0.8% pace in January. It was fifth consecutive monthly decline.  Even with fiscal and monetary stimulus, the Japanese economy continues to struggle and that constrains the policy options of the new leadership at the central bank. Growth in Q4 was revised from 0.2% quarter-over-quarter to flat. The revision is owed to weaker private consumption (0.3% rather than 0.5%). Net exports blunted some of the impact and was revised to 0.4% boost to GDP from 0.3%. Separately, the weekly Ministry of Finance report on portfolio flows shows that Japanese investors turned sellers of global bonds last week for the first time since the end of January. In the first nine weeks of the year, Japanese investors have bought JPY5.35 trillion or about $39.6 bln of foreign bonds. In the first nine weeks of 2022, Japanese investors sold around JPY1.66 trillion foreign bonds. Softer US rates and some anxiety over the conclusion of the Bank of Japan meeting tomorrow has seen the yen strengthen. The US dollar is pulling back from the three-month high set yesterday near JPY137.90 yesterday to almost JPY136.10 today. The week's low was set Monday slightly above JPY135.35. Large options set to expire today at JPY137 (~$1.4 bln) and JPY136.50 (~$1.05 bln) may have added fuel to the pullback. Options for $2.6 bln expire tomorrow at JPY136.00. Ahead of the BOJ meeting and the US employment data, a few hours later tomorrow, overnight yen volatility has spiked to over 41% from around 11.25% late yesterday. The Australian dollar is consolidating losses that took it to a new low since last November (~$0.6570) yesterday. It is inside yesterday's range and needs to rise above the high (~$0.6630) to lift the tone. It seems likely to spend the North American session consolidating. The dollar is also confined to a narrow range inside yesterday's price action against the Chinese yuan. The PBOC set the dollar's reference rate tightly against expectations, unlikely yesterday, when it was set notably weaker. The fix was at CNY6.9666, which is the strongest of the year, while the median in Bloomberg's survey was for CNY6.9667. Europe There is a light European economic calendar today. The next big event is the ECB meeting on March 16, where the staff will also update the economic forecasts. It we take a step back; we note that Germany's 10-year yield rose from around 2% in mid-January to 2.77% last week. The 10-year breakeven (the difference between the inflation-linked and conventional yields) also widened from about 2% to a little above 2.65% last week. However, it has collapsed to almost 2.40% and is near 2.44% now. That is to say that most of the rise in the nominal yield can be explained by an increase in the market-measure of inflation expectations. The higher-for-longer on rates, and the overnight index swaps show a 4.07% policy rate in October, a 70 bp increase since the end of January, seems to be souring the economic outlook. While the inversion of the US 2-10 curve draws much attention, the German curve is also inverted. At nearly 70 bp, the inversion is the most in more than 30 years and is nearly twice as inverted as it was at the end of January. Sweden's economy unexpected grew and grew strongly in January. The 2.0% monthly GDP gain contrasts with the median forecast in Bloomberg's survey for a 0.1% contraction. Household consumption rose by 0.5% (as much as it declined in December), and private sector production and services expanded strongly. The one source of weakness in today's reports was the 20.2% drop in industrial orders, which tends to be a volatile series. It had gains 23.3% in December. The euro is confined to a narrow range between about $1.0540 and $1.0570. There are options for almost 1.8 bln euros at $1.06 that expire today and 1.2 bln euros that expire there tomorrow. The near-term risk still seems to be on the downside and the 1.3 bln euros in options that expire tomorrow at $1.05 may still draw the price action. Yesterday's low was near $1.0525. The UK reports January GDP figures tomorrow and a small gain is expected after the 0.5% contraction in December. The British Chamber of Commerce became the latest to signal that the UK may avoid a recession. Sterling approached $1.18 yesterday and has recovered to almost $1.1890 today. The 200-day moving average is slightly above $1.19. There are options for almost GBP620 mln that expire there tomorrow. America Since Monday, the odds of a 50 bp hike by the Fed on March 22 has risen from about a 25% chance to around a 70% chance. This seems excessive, but arguably prudent ahead of tomorrow's jobs report. The terminal rate expectation has risen to 5.65%, up nearly 20 bp since Monday's settlement, and reflects a recognition of the increased risk of a 5.75% peak. The Beige Book, prepared for the upcoming FOMC meeting, was mixed. While it noted inflation pressures remained widespread, price increases moderated in many districts and prices are expected to continue to moderate. At the same time, growth was said to have accelerated slightly at the start of the year, but the pace in Q3 22 and Q4 22 were already above the Fed's long-term non-inflationary pace. Labor market conditions were "solid," though few districts reported businesses were becoming less flexible with some reduction of remote work options. That seems to be consistent with some easing of the tightness and several districts cited the lack of available childcare impeding work force participation. Some districts report easing of wage pressures, and this was seen as a trend in the coming months. As widely expected, the Bank of Canada stood pat, leaving the overnight target rate at 4.5%. Amid the more general theme of "higher for longer" the Canadian dollar was punished for the less aggressive posture and the Canadian dollar was the weakest of the G10 currencies, losing about 0.25% to fall to new four-month lows. The central bank's statement recognized the tightness of the labor market, and the need for inflation expectation to ease some more, but concluded that on balance the economy is evolving as expected. That includes CPI still falling to around 3% by midyear. It was at 5.9% in January, though the core measures were closer to 5%.  The Bank of Canada is putting emphasis on the cumulative effect of the tightening and the weaker growth to drive down inflation. Still, the market is doubtful that the pause is the peak. The swaps market is pricing about a 25% chance of a hike at next meeting on April 12, down a little bit from Tuesday. However, it is completed discounted by the July 12 meeting, slightly more confident than earlier in the week. That said, the market is still in flux and tomorrow's jobs report is an important data point, though the Bank of Canada will see the March figures (due April 6) before it meets, as well as the February CPI (March 21). In addition, the Bank of Canada may feel less comfortable if the policy rate with the Fed exceeds 100 bp.  Mexico reports February CPI today. It is expected to have slowed to 8.35% on the headline (from 8.45%) and 7.68% at the core level (from 7.91%). Headline CPI peaked slightly above 8.50% last November. The core rate peaked last August and September at 8.70%. The stickiness of price pressures spurred the central bank to lift the overnight target rate by 50 bp at its February 9 meeting. Most had expected a quarter-point move. Banxico meets on March 30 and the risk of another 50 bp hike has increased primarily because of the shift in Fed expectations. The median forecast in Bloomberg's survey sees inflation ending the year around 5.8%.  The US dollar marginally extended yesterday's gains against the Canadian dollar to a little through CAD1.3815 before coming back offered in the European morning and trading to almost CAD1.3790. It is consolidating in a narrow range just inside the upper Bollinger Band (~CAD1.3825). A break of the CAD1.3750 is needed to help stabilize the technical tone. That seems unlikely ahead of tomorrow's jobs reports. Fed Chair Powell's initial comments on Tuesday saw the greenback spike up to almost MXN18.18. However, this was greeted with fresh dollar sales and peso purchases. The dollar recorded a marginally new five-year low today near MXN17.90. It is difficult to talk about meaningful support, but the next important chart area is near MXN17.50. The lower Bollinger Band is near MXN17.85 today.  Disclaimer

USD/CAD continues scaling higher on Friday and touches its highest level since October. Bearish crude Oil prices undermine the Loonie and remain supportive of the momentum. The risk-off mood benefits the USD’s relative safe-haven status and acts as a tailwind. Traders now look to the monthly jobs data from Canada and the US for a fresh impetus. The USD/CAD pair adds to its strong weekly gains and climbs to its highest level since October 17, 2022, around the 1.3860 area during the first half of the European session on Friday. The selling pressure around Crude Oil prices remains unabated for the fourth straight day, which undermines the commodity-linked Loonie and acts as a tailwind for the USD/CAD pair. In fact, the black liquid remains on track to register its worst fall since early February amid worries that slowing global economic growth will dent fuel demand. Apart from this, the fact that the Bank of Canada (BoC) became the first major central bank to pause its rate-hiking cycle on Wednesday is seen as another factor weighing on the Canadian Dollar. The aforementioned factors, to a larger extent, helps offset a modest US Dollar weakness and continue to push the USD/CAD pair higher. Data released on Thursday showed a larger-than-expected rise in the US Weekly Jobless Claims, which was seen as the first sign of a softening labor market. This, in turn, forced investors to re-evaluate the possibility of a  50 bps lift-off at the upcoming FOMC meeting on March 21-22, leading to a further decline in the US Treasury bond yields and exerting some follow-through pressure on the Greenback. That said, the prevalent risk-off environment - amid looming recession risks - helps limit losses for the safe-haven buck, at least for the time being. The market sentiment remains fragile in the wake of worries about economic headwinds stemming from rising borrowing costs, which is reinforced by a further deepening of the yield curve. Adding to this, the incoming softer Chinese macro data dashed hopes for a strong recovery in the world's second-largest economy. This, in turn, tempers investors' appetite for perceived riskier assets. The USD/CAD bulls, meanwhile, might prefer to take a breather amid a slightly overbought Relative Strength Index (RSO) on the daily chart and ahead of the closely-watched US monthly employment details. The popularly known NFP report is more likely to overshadow the Canadian jobs data and play a key role in influencing the pair's near-term trajectory. The focus will then shift to the latest US consumer inflation figures, due for release next Tuesday.

The Canadian dollar continues to sag and has dropped 1.9% this week. Hold onto your hats, as we could have some further volatility from USD/CAD in the North American session, with the release of the US and Canadian employment reports. All eyes on NFP The highlight of the day is the US nonfarm payrolls report, which is expected to head back to earth after a blowout gain of 517,000 in January. The consensus for February stands at 205,000 and a wide miss of this figure on either side will likely shake up the US dollar.  A weak reading would fuel speculation of a Fed pivot and likely weigh on the US dollar, while a strong figure would support the Fed’s hawkish stance and should be bullish for the greenback. The ADP payroll report, which precedes the nonfarm payroll release, improved to 242,000, up from an upwardly revised 119,000 and above the estimate of 200,000. The ADP reading is not considered all that reliable at forecasting the nonfarm payrolls report so I wouldn’t read too much into it. Still, the US labour market remains strong despite the Fed’s tightening, and I would not be surprised to see nonfarm payrolls follow the ADP’s lead and beat the estimate. In addition to nonfarm payrolls, the Fed will also be keeping a close eye on wage growth. Average hourly earnings is expected to rise to 4.7% y/y in February, up from 4.4% y/y in January. The Fed is focussed on lowering inflation and an acceleration in wage growth could prompt the Fed to be more aggressive with its pace of rate increases. Canada also recorded a sharp gain in new jobs in January, with a reading of 150,000, up from 104,000 prior. The markets are braced for a small gain of 10,000 in February, and a soft print of 5,000 or lower would likely weigh on the Canadian dollar. The unemployment rate is expected to tick up to 5.1%, up from 5.0%.   USD/CAD Technical There is support at 1.3787 and 1.3660 1.3927 and 1.4190 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

USD/CAD takes offers to extend pullback from five-month high. US regulators unveil plans to tame SVB, Signature Bank inflicted risk. Fed rate hike expectations ease amid looming fears on US banks. Oil price cheers softer US Dollar with eyes on EIA, OPEC monthly reports. USD/CAD stands on slippery grounds, declining nearly 0.80% intraday to 1.3720 heading into Monday’s European session. In doing so, the Loonie pair sellers cheer the broad US Dollar weakness, as well as the recent recovery in prices of Crude Oil, Canada’s key export item. US Dollar Index (DXY) drops to the lowest levels in a month, down 0.80% near 103.80, as risk-on mood joins easing hawkish Fed bets to drown the greenback’s gauge versus the six major currencies. On the other hand, WTI crude oil rises for the second consecutive day, up 0.50% intraday near $77.00 at the latest. After witnessing the stock and bond market rout on Friday, the market sentiment improved as the US Treasury Department, Federal Reserve and the Federal Deposit Insurance Corporation (FDIC) took joint actions to tame the risks emanating from the Silicon Valley Bank (SVB) and Signature Bank during the weekend.  “All depositors of Silicon Valley Bank and Signature Bank will be fully protected,” said the authorities in a statement released afterward. While reacting to the US regulators’ actions, US President Joe Biden said, “American people and American businesses can have confidence that their bank deposits will be there when they need them.” It should be noted, however, that the latest fallout of the SVB and Signature Bank flagged fragile conditions of the US bank, which in turn pushed back hopes of more rate hikes from the US Federal Reserve (Fed). With this in mind, Goldman Sachs expects to rate hike in March while the Fed Fund Futures also cut previously upbeat odds favoring a 0.50% rate lift in the Fed rate in March. Alternatively, China’s dislike for the US interference in Taiwan matters and the better-than-expected US Nonfarm Payrolls (NFP) join the Bank of Canada’s (BoC) dovish play to weigh on the Loonie prices. On Friday, US Nonfarm Payrolls (NFP) grew more than 205K expected to 311K in February, versus 504K (revised), while the Unemployment Rate rose to 3.6% for the said month compared to 3.4% expected and prior. Further, the Average Hourly Earnings rose on YoY but eased on monthly basis for February whereas the Labor Force Participation increased during the stated month. At home, Canada’s Net Change in Employment rose to 21.8K versus 10K market forecasts and 150K prior while the Unemployment Rate remained unchanged at 5.0% compared to 5.1% expected. Looking ahead, Tuesday’s US Consumer Price Index (CPI) for February to direct immediate market moves. Following that, the Retail Sales and preliminary readings of the Michigan Consumer Sentiment Index for March, up for publishing on Wednesday and Friday, will be crucial for clear directions of the USD/CAD traders. Technical analysis Friday’s Doji at multi-day high joins overbought RSI to favor USD/CAD pullback towards the late 2022 peak surrounding the 1.3700 round figure.