Bank of England meeting

Details of the economic calendar on June 21 UK inflation rate for May amounted to 8.7%, remaining at the level of the previous month. Analytical agencies had predicted a slowdown in price growth to 8.4%. Given this data, there is confidence that the Bank of England will increase its key interest rate. The speeches of representatives of the Federal Reserve System and the European Central Bank have become the main leverage for speculators. The speech by ECB board member Isabel Schnabel at the conference

 

"New challenges for the Economic and Monetary Union in the post-crisis environment" caused a wave of speculation on the euro. Schnabel clearly indicated that a high level of inflation may persist for a prolonged period. This will lead to subsequent increases in the key interest rate.

Almost at the same time as the ECB representative, the head of the Federal Reserve, Jerome Powell, spoke in Congress, but he did not say anything new, only reiterating that most members of the Federal

Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Fed Is Not Facing The Problem Of A Falling Economy But The Same Cannot Be Said About The Bank Of England

InstaForex Analysis InstaForex Analysis 31.10.2022 08:20
The first of the three meetings of central banks has been left behind, and now the market will closely monitor the Fed's meeting, which will be held on Wednesday. All three banks continue to follow the path of tightening monetary policy, but the moment is approaching when rates will rise too much, and their further growth will no longer be necessary. Or the economy will slow down too much, which is why the regulator may refuse new increases. However, this is unlikely to happen in the next month or two, as inflation in the European Union, the UK, or the US remains well above the 2% target. Thus, I doubt that the Fed and the Bank of England will raise rates this week. Fed decision ahead In the case of the Fed, the situation is twofold. The US regulator has already raised the rate to 3.25%, and this Wednesday, it will likely rise to 4%. With one or two more increases, the rate will reach a level at which inflation will accelerate its slowdown. It has been declining for three months, but not yet at a high enough pace, so the regulator will not stop there in November. From my point of view, the demand for the US currency may begin to grow again in November-December 2022 since the factor of tightening the Fed's policy is still one of the most significant. The wave marking of the instruments can be transformed again, and the downward section of the trend can resume its construction. Lower probability of a recession in the United States Demand for the dollar may also begin to grow due to the decreasing likelihood of a recession in the United States. The quarterly US GDP report showed that the economy grew by 2.6%, although the previous two quarters were negative. Thus, the slowdown of the US economy is indisputable, but it cannot constantly grow and constantly accelerate its growth. In my opinion, everything is going well for the US economy. The fall wasn't strong enough to sound the alarm. It almost painlessly survived the increase in rates to 3.25%. Inflation has already started to decline, and there are not so many rate hikes left ahead to expect a major reduction.  Janet Yellen US Treasury Secretary Janet Yellen also believes the US economy is strong and the financial system remains stable. She noted that the situation in the global economy is "too dangerous" at the moment and poses risks to America's financial stability. However, according to her, the administration of President Biden is closely monitoring the situation in the economy and is ready, if necessary, to take certain measures to reduce risks. For the Fed, a strong economy allows it to continue raising rates almost painlessly and fight inflation. The Fed is not currently facing the problem of a falling economy, which may not allow it to raise the rate to the desired level.  The Bank of England The same cannot be said about the Bank of England, which recently had to launch an emergency asset purchase program to stabilize financial markets. Although it will continue to raise the rate, for now, there are big doubts that it will be able to bring the matter to an end without significant damage to the economy. Based on the analysis, I conclude that the construction of an upward trend section has begun, but it may not last very long. At this time, the instrument can build a new impulse wave, so I advise buying with targets near the estimated mark of 1.0361, which equates to 261.8% by Fibonacci, by MACD reversals "up." However, by the end of this trend section, you must be ready now.     Relevance up to 06:00 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/325728
Australia Is Expected To Produce A Bumper Year Of Crops

Grain Prices May Rise As A Result Of Russia's Actions | Stock Markets Increased Profit

Saxo Bank Saxo Bank 31.10.2022 08:58
Summary:  Equities closed higher on Friday on the Wall Street, sending a bid tone to Asian stocks to start the new week. However a host of risks ahead including the Fed meeting which will see another jumbo rate hike but focus is also whether the members send out signals of a downshift in rate hike path. WSJ Timiraos has now hinted at higher for longer interest rates in his latest article, and this has helped a bid tone in US dollar to return in early Asian trading hours. Geopolitics also took an ugly turn with Russia backing off from grain export deal, threatening food crisis again. What is happening in markets? Need to know Asian stocks look to build on last week's US gains, though investors may be cautious ahead of the FOMC meeting. The S&P 500 jumped 2.5% on Friday in another turbulent session, buoyed by tech shares and some modestly positive economic data. Treasuries snapped a three-day rally, with 10-year yields rising back to around 4%, while the dollar inched up. Russia pulls out of the agreement to allow Ukrainian crop shipments, meaning its ready to halt Ukraine Wheat exports. Chinese President Xi Jinping will host a flurry of foreign leaders this week, making a return to the world stage after China's Covid Zero restrictions. On Thursday some Chinese cities ramped up COVID-19 restrictions and the IMF downgraded China’s growth expectations to 3.2%, after a 8.1% rise in 2021. Oil and gold both retreated. The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) trade near 6-week highs Apple (AAPL) shares rocked up 7.6% after it reported mostly better than expected results last week, and the sentiment buoyed technology shares, helping the S&P 500 and the Nasdaq 100 notch their longest weekly rising streak since August. Plus, economic data showed small signs of improvement in the battle against inflation. This week, the most prominent companies to report quarterly results include; Exxon Mobil, Berkshire Hathaway, Advanced Micro Devices, Qualcomm, UBER, PayPal, and Starbucks. If you are looking for inspiration this week, here is the Five Stocks To Watch video. Australia’s ASX200 (ASXSP200.1) futures suggest a bullish 1.3% rise on Monday AM The Reserve Bank of Australia on Tuesday is expected to deliver a 2nd straight quarter of 0.25% hikes on Tuesday’s meeting, according to Bloomberg. Australia’s corporate bond market is showing signs of succumbing to the global volatility in fixed income, unleashed by central bank tightening. And this is causing Australian tech stocks to remain pressured. Focus today is on earnings from Nickel Mines (NIC), Origin Energy(ORG), and coal company Corando Global (CRN). Elsewhere, pressure will likely be on iron ore giants, which might expect their selling rout after China increased covid-19 restrictions. Focus will be on Fortescue Metal, BHP and Rio Tinto which are all trading under their 200-day moving average. Crude oil (CLX2 & LCOZ2) trades at $88. Iron ore (SOCA) erases 3-years of gains Oil fell on Friday with WTI (CLX2 & LCOZ2) settling near $88 but posting a 3.4% weekly gain, despite the biggest crude importer, China, widening its COVID-19 curbs. This week; OPEC unveils its 2022 World Oil Outlook at the ADIPEC conference Monday. Plus, there is a swathe of energy ministers from Saudi Arabia, Kuwait, Iraq and Nigeria will also weigh in, as well as CEOs from BP and Occidental. Meanwhile, Iron ore (SCOA) now trades at its lowest level since 2019, US$78.40 after China confirmed it will maintain its covid-19 policies. Markets, businesses, commodities with high exposure to China see heavy selling this week. Will it continue?  Assets with exposure to China are being heavily penalized as it seems investors are realigning their portfolios somewhat with the priorities of President Xi and his policy on stronger state control over the economy, which means markets could be challenged for years. Xi confirmed this stance on Sunday 24 October, and on top of that China increased covid-19 curbs, which is why Hong Kong’s Heng Seng suffered at 8.3%, drop last week, while the iron ore (SCOA, SCOX2) price fell ~15% last week, and now traded at $78.40 its lowest level since Feb 2019, on concerns that the biggest iron ore consumer will further slow demand, all while iron ore seems oversupplied. The biggest pure play iron ore company in the southern hemisphere, Fortescue (FMG) shares fell 10% last week, plus what added to the selling was that Fortescue affirmed it is increasing its spending, while its margins are tightening. Fortescue says it will ramp up iron ore production at its expanded facility in March, instead of June. Meaning, this could likely further push the iron ore market into greater oversupply. Some investors are concerned Fortescue Metals technical indicators show that perhaps more selling could be ahead, despite the stock trading somewhat in oversold territory. US dollar back on the front foot in Fed week The US dollar was seen returning to mild gains against most major currencies after Fed-pivot bets picked up last week. A turnaround in comments from Fed whisperer Nick Timiraos who is now suggesting higher-for-longer rates (read below) may be one of the reasons. The uptick in geopolitical worries with Russia pulling out of the grain deal may however also play a part in bidding safe haven flows to the dollar. Fed is expected to hike rates by another 75bps this week, and pricing for December is also close to 75bps still. This will likely revive pressure on the JPY this week, while GBP seems to have priced in all the good news for now. USDJPY heading to 148 in early Asian hours while GBPUSD testing 1.1600. Wheat futures (ZWZ2) gap higher Wheat futures (ZWZ2) gapped up 7% to open at $8.88/bushel after Russia pulled out of the UN brokered black sea grain deal over the weekend after Ukraine carried out an attack on Russia’s Black Sea fleet off Sevastopol. Corn has also gained 2.5% to open at $6.96/bushel. What to consider? US core PCE sends no clear signal to the Fed The US core PCE, Fed’s preferred inflation gauge, remained elevated for September as expected. The core measure came in at 5.1% YoY from 4.9% previously, but remained a notch softer than expected at 5.2% YoY. On a m/m basis, gains were flat at 0.5% as expected. While the case for November’s 75bps rate hike from the Fed is still intact, it still remains hard to argue a downshift with the kind of strength we are seeing in the US economy. WSJ Fed whisperer now signalling higher-for-longer rates Nick Timiraos, who is seen as the Fed’s messenger, had sent shivers across markets last week with a report suggesting that the November FOMC meeting may be used to signal a downshift to smaller rate hikes. This saw equity markets extending gains while the USD was on the backfoot last week, but now he has come out with another article saying that higher savings buffers and lower interest expenses could make the Federal Reserve raise rates higher and keep them there for longer. Russia exits Ukraine grain deal Russia suspended its participation in the Ukraine grain export deal after a swarm of drones targeted at least one Russian warship from the Black Sea navy. This will block the passage of millions of tonnes of grain via southern Ukraine and may lead to a fresh jump in prices. The report is especially catastrophic as it comes together with massive wheat crop damage with the US crop belt seeing La Nina for its third consecutive year. Putin is getting desperate after losing ground militarily and in terms of Europe’s winter gas requirement, so he has likely gone back to using the food crisis as another tool. Fed, BOE, RBA meet – what can you expect The Fed and BOE and RBA are expected to hike this week, with robust labour markets defying efforts to tamp down inflation, despite predictions of a imminent recession. Companies are complaining of chronic worker shortages, and a persistent mismatch between hiring demand and supply is supporting wages and shielding consumers from slowdowns. Consensus expects the RBA to take the cash rate from 2.6% to 2.85% on Tuesday. On Wednesday the Fed meets and consensus expects to take rates up by 0.75% to 4%. All in all, Goldman Sachs raised its peak Fed rate prediction to 5% from 4.75%, citing "uncomfortably high" prices will keep rates higher for long. On Thursday the Bank of England meets, and consensus expects to take the rate from 2.25% to 3%. This means FX markets are expected to be quite volatile along with equity market, especially interest rate sensitive parts of the market, tech, consumer spending and real estate stocks. Lula’s comeback in Brazilian presidential elections Luiz Inácio Lula da Silva claimed a victory in Brazil’s presidential election on Sunday, defeating incumbent rightwing leader Jair Bolsonaro by less than two percentage points and setting the stage for a return to leftwing governance in Latin America’s largest nation. Brazilian ETFs including such as EWZ:arcx, IBZL:xams, RIO:xpar, BRZU:arcx, or BRQ:arcx may be the ones to watch, as will be the BRL later in the day. BRL has been the best performer in the EM basket (excluding Russian rouble) against the USD so far this year. Lack of economic plans from Lula may make a case for market outperformance somewhat weaker, however. China PMIs out today at 9:30am SGT/HKT China’s October PMIs are due for a release today and expectations are for the manufacturing number to dip into the contractionary territory with Bloomberg consensus expecting a 49.8 print from 50.1 in September. A slowdown is also expected in the non-manufacturing print, but it still may remain in expansion.   For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/market-insights-today-31-oct-31102022
The Commodities Feed: Stronger Oil Prices Boost US Oil Production and Supply

Escalating Tensions With Russia | This Week Focus On The Fed, RBA And The Bank Of England Decisions

Swissquote Bank Swissquote Bank 31.10.2022 10:09
Despite the broadly disappointing Big Tech earnings, and the heavy selloff we saw in most Big Tech stocks, US equities ended last week on a positive note, thanks to record profits from US Big Oil companies, and a much better than expected reaction to Apple results. American crude consolidates above the 50-DMA, but failed to clear the $90 offers last week, as recession fears prevent a further rally from developing. Fed, RBA & Bank of England This week, attention shifts to Federal Reserve (Fed), expected to raise rates by another 75bp. The Reserve Bank of Australia (RBA) and the Bank of England (BoE) are also expected to hike by 25bp, and 75bp respectively.Elsewhere, news is not great. Russia decided to pull out of a deal to allow Ukrainian crop shipments; wheat futures jumped more than 5% this morning. China China’s manufacturing and services PMI slipped below 50, to the contraction zone in October due to Covid restrictions in major cities, and many cities are still dealing with lockdown measures, and Xi Jinping made sure to emphasize that he will continue to fight… the virus. Brazil In Brazil, Lula won the election bearing Bolsonaro by less than 2 percentage points. The latter said he refuses the defeat, which means that we will see some more political uncertainty in Brazil in the coming weeks. Watch the full episode to find out more! 0:00 Intro 0:24 Big Oil earns Big 4:07 Big Tech disappoints 5:41 Don’t look at Powell to make you feel better 7:19 Russia scraps wheat deal, China slows, Brazil elections 8:32 Watch Fed, BoE, RBA decisions, US jobs & EZ inflation 9:30 …and some more earnings… 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. #ExxonMobil #Chevron #Shell #BP #earnings #crudeoil #natural #gas #Fed #RBA #BoE #monetary #policy #decision #USD #GBP #AUD #EUR #ECB #inflation #wheat #futures #Ukraine #Russia #war #Brazil #elections #Lula #Bolsonaro #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
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

Major Currency Pairs (EUR/USD And GBP/USD) Are Now Subject To A Future Fed Decision

InstaForex Analysis InstaForex Analysis 31.10.2022 11:02
According to a preliminary estimate released by the Bureau of Economic Analysis, U.S. real GDP increased at an annualized rate of 2.6 percent in the third quarter of 2022, well above expectations. The main contribution to GDP growth was from data on foreign trade, other indicators turned out to be noticeably less positive. Take note that the US stock indexes were impressed by the strong reporting of companies, the S&P 500 index rose 2.5%, exceeding the cumulative fall of 1.35% over the previous two days, ending the week up 3.95%, which was the second consecutive weekly gain. In general, the US economy looks quite confident, which gives reason to expect that the Federal Reserve will not give clear signals about the slowdown in tightening, and the dollar may well win back the positive data, continuing to strengthen. In any case, the probability of a rate hike by the same 0.7% in December remains high. European stock indices showed mixed dynamics, high inflation and the threat of an energy crisis are still the main negative factors for the euro, which will prevent it from resuming growth. EURUSD As expected, the European Central bank raised interest rates by 0.75%, but did not give any signal that the pace of rate hikes will continue to be high. Most likely, the ECB is inclined to slow down the pace of rate hikes, as it noted "substantial progress" in the revision of monetary policy, plans for quantitative tightening will be determined at the December meeting, which came as a surprise to markets that were waiting for specifics. The insufficiently hawkish stance of the ECB provoked a decline in global bond yields, European ones suffered the most, and amid accelerating inflation. Germany's overall consumer price index reached an annualized rate of 11.6% in October, well above the 10.9% expected by economists, while Italy (11.9% vs. 9.5% experience) and France (7.1 % vs 6.5% experience) also exceeded expectations. The net long position on the euro increased during the reporting week by 3.4 billion to 9.3 billion, this is a very strong growth, indicating an increase in the positive relative to the euro. However, despite such a strong change, the settlement price turned down, the reason being that even the apparently hawkish decision of the ECB did not lead to an increase in European bond yields, and the yield differential between European and US bonds did not decrease, but even slightly increased. This discrepancy between the long-term positioning in the futures and options market, which is reflected in the CFTC report, and current yields does not yet allow us to break the trend towards the weakening of the euro. EURUSD, as we suggested a week earlier, made a successful attempt to corrective growth, it passed the resistance of 0.9920/40, however, short positions resumed in the area above parity. We assume that the euro will be under slight pressure ahead of the Federal Reserve meeting, growth above the local high of 1.0092 is unlikely, trading will go in a sideways range with a downward trend. The main target is the support zone of 0.9820/40. This scenario can be canceled if the Fed shows more pronounced weakness on Wednesday than the markets have been laying down so far. GBPUSD The Bank of England will hold a regular meeting on Thursday, and the rate is expected to rise by 0.75%. The government change has calmed the markets, yields have pulled back, and now the focus will be on inflation forecasts, as they directly affect the position of the BoE. The net short position on the pound slightly decreased during the reporting week by 0.2 billion to -3.4 billion, positioning, unlike the euro, remains confidently bearish. The yield differential widened sharply in favor of the dollar, resulting in a rapid decline in the settlement price. The pound on the wave of rumors about the easing of the Fed's position still went higher than we expected, and reached the upper limit of the long-term bearish channel. We assume that a high will be formed here, an attempt to test the strength of the local high of 1.1735 is not ruled out, but a downward reversal from current levels is much more likely. Technical support at 1.1336 and 1.1147 can also act as immediate targets. High volatility is unlikely before the announcement of the results of the Fed meeting.   Relevance up to 09:00 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/325776
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The Currency Markets This Week Will Be Dominated By Fed Decisions

ING Economics ING Economics 31.10.2022 11:58
It is a busy week for FX markets, with key policy rate meetings on both sides of the Atlantic and some tier-one data releases. The question to be answered this week: is the Federal Reserve ready to pivot? We would argue that the Fed has less cause than many to pivot. And weak growth overseas should mean that it is too early to unwind long dollar positions In this article USD: Wednesday's FOMC will dominate EUR: Markets still price a 75bp ECB hike in December GBP: Thursday's BoE could do some damage CEE: Tough times are back USD: Wednesday's FOMC will dominate FX markets this week will be dominated by Wednesday's FOMC meeting and whether the Fed provides any oxygen to the idea of a pivot - or a shift to a slower pace of tightening. As we discuss in our FOMC preview, the Fed faces several challenges here, but we suspect the bar is quite high for a pivot and we feel it is too early to call time on the dollar's rally. After all, the market in effect already prices the pivot (pricing a 75bp hike this week and a 50bp hike in December) and we suspect the chances of another 75bp hike in December are under-priced. In addition, this week sees a whole raft of US data culminating in Friday's nonfarm employment data. We forecast 220k in job gains and an unemployment rate of 3.6% - still below the 3.8% the Fed forecast for year-end. Recall that even with the unemployment rate rising to 3.8%, the Fed's dot plots had assumed that a policy rate in the 4.25-4.50% area would be appropriate for the end of this year. As always there are two sides to the dollar story - what's going on at home and what's going on abroad. High beta currencies like the Norwegian krone, New Zealand dollar and British pound have been some of the best performers against the dollar over the last month. That has largely been due to the turnaround in sterling. But as my colleague James Smith discusses in his Bank of England (BoE) preview, the BoE may well disappoint with just a 50bp hike.  A weaker tone in sterling could undermine the recent renaissance in European currencies and push more wind back into the dollar's sails. At the same time, Chinese data continues to disappoint, with the October composite PMI dropping back into contraction territory for the first time since May. In short, it looks as though the dollar's month-long, 4.5% correction could have ended last Thursday and events this week could prove a catalyst to send the dollar back towards the highs. Our base case does see the dollar retesting the highs later this year. A break of 111.00/10 in DXY today could open up a move to the 111.80 area. Chris Turner EUR: Markets still price a 75bp ECB hike in December The eurozone continues to battle with inflation and today should see the release of a new cycle high in CPI at 10.3% year-on-year - and potentially even higher given the German CPI release. Today we will also get a first look at 3Q22 eurozone GDP, expected at 0.1% quarter-on-quarter. The news may temporarily push eurozone rates higher, even though a 75bp hike is virtually priced for the 15 December ECB meeting. Ultimately, however, our macro team believes the ECB will only hike 50bp in December and that the terminal rate for this cycle proves to be in the 2.25% area rather than the 2.80% currently priced by the markets. And bluntly, the ECB has far more cause than the Fed to pivot. With global growth under pressure from tighter rates and a misfiring Chinese economy, we think the eurozone and the euro will continue to struggle. That is why last Thursday's high of 1.0089 in EUR/USD could have been significant. A close back under the 0.9900/9910 area this week would support our preferred view of EUR/USD retesting the lows near 0.95. Chris Turner GBP: Thursday's BoE could do some damage GBP/USD is consolidating above the important 1.1500 level, holding onto recent gains. The highlight this week will be Thursday's Bank of England meeting. The market firmly prices 75bp, but we think the risk of a softer 50bp is under-priced as the BoE prepares for the coming recession. As we have argued previously - now that a lot of the fiscal risk premium has come out of sterling - the forthcoming tighter fiscal and more dovish than expected monetary policy could prove a bearish combination for sterling. We are dollar bulls and would thus favour GBP/USD breaking back under 1.1500 based on this week's confluence of events. This would also point to current EUR/GBP losses under 0.8600 proving short-lived. Chris Turner CEE: Tough times are back This week we have a busy calendar not only at the global level but also in Central and Eastern Europe. Today we start with Polish inflation, which will be crucial for next week's National Bank of Poland meeting. We expect a jump from 17.2% to 18.1% year-on-year, slightly above market expectations, mainly due to higher fuel, energy and food prices. Tomorrow in the Czech Republic, 3Q GDP data, October PMI and the state budget result will be released. The first GDP result in the region should show a contraction in the economy and confirm the start of a shallow recession. On Wednesday, we will see October PMIs in Poland and Hungary, which will confirm the downward trend in industrial sentiment. On Thursday, the highlight of this week is the Czech National Bank meeting. In line with the market, we expect interest rates to remain unchanged. A new forecast will be presented which will show lower inflation but higher wage growth, which together with the cost of FX intervention is the main risk for us in terms of a possible additional interest rate hike at the coming meetings. However, we consider the CNB hiking cycle to be finished. The FX market in the region will be dominated by global events in the coming days. Already last week, the positive trend in CEE was halted by the ECB meeting. This week will see a series of central bank meetings led by the Fed. Therefore, we see both support from high-interest rate differentials in the region and EUR/USD as being at risk. In addition, gas prices have been rising again in the last two days and many of the reasons for the strengthening trend in the CEE region over the past two weeks are now dissipating. Of course, at the local level, we will be watching the inflation numbers in Poland and the CNB meeting in particular but this week speaks strongly against CEE FX.  We see the Czech koruna as the most vulnerable at the moment, which will again be the focus of short positioning ahead of the central bank meeting. We will likely see a move towards the 24.60-24.70 EUR/CZK levels. The Hungarian forint is likely to look above 415 EUR/HUF again. On the other hand, the Polish zloty should be best positioned this week, supported by a high inflation number and an increase in NBP rate hike bets. Frantisek Taborsky 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
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

The Great Britain Needs Foreign Investment To Finance Current Deficit

InstaForex Analysis InstaForex Analysis 31.10.2022 12:06
Slow and steady wins the race? If at the time of the announcement of £45bn fiscal stimulus by the Liz Truss government, the derivatives market estimated the repo rate ceiling in the current monetary tightening cycle above 6%, then it has now decreased to 4.5% by May 2023. However, in September, the pound plunged to a historic low against the US dollar, and by the end of October it recovered by 12%. Will a small move by the Bank of England in November push GBPUSD even higher? If at the peak of the market turmoil the derivatives market believed in a giant 150 bps increase in the repo rate, then as the MPC meeting approaches, we are talking about 75 bps. The probability of such an outcome is estimated at 90%, and it should be noted that this is already so much. As a result, the cost of borrowing will rise to 3%, the highest level since 1989. Dynamics of expectations for the REPO rate According to Barclays, a larger move of 100 bps can be justified by a strong labor market, which accelerates inflation due to the rapid growth of wages. At the same time, 75 bps is the optimal solution, since there are no contradictions between fiscal and monetary policy in Britain now. On the contrary, ING and Citigroup believe that BoE Governor Andrew Bailey and his colleagues are able to surprise investors by raising the repo rate by 50 bps. This will potentially further ease the pressure on the bond market after the collapse caused by unjustified tax cuts from the Liz Truss government. In my opinion, the markets have already calmed down. The combination of Rishi Sunak as prime minister and Jeremy Hunt as Chancellor of the Exchequer is working in their favor. Britain needs foreign investment to finance its current account deficit, and the return of confidence in the government provides these flows, contributing to the growth of GBPUSD quotes. Another thing is that the fate of the pair does not entirely depend on the BoE. The day before its verdict, the Federal Reserve will announce its decision, and a day after the MPC meeting, a report on the US labor market will be released. The +200,000 expected by Bloomberg analysts for non-agricultural employment is a very decent figure, which will indicate the resilience of the US economy to monetary tightening and will allow the Fed to continue what they started. The position of the FOMC is of paramount importance. If it changes amid deteriorating macroeconomic statistics, the markets will smell a dovish turn, which will negatively affect the US dollar. I don't think falling Treasury yields, a weaker dollar and a rally in stocks are in the plans of Fed Chairman Jerome Powell and his colleagues. Surely the Fed will continue to talk about the determination that will support the US currency. Technically, the 1-2-3 reversal pattern continues to be realized on the GBPUSD daily chart, which can be transformed into a Dragon. This requires consolidation. If we consider this scenario as a baseline, a decline below 1.15 is a reason for short positions, followed by longs from 1.143 and 1.139.     Relevance up to 10:00 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/325796
China's Position On The Russo-Ukrainian War Confirmed At The G20 Meeting

Positive Signals In Global Markets Helped The Asian Stock Market

TeleTrade Comments TeleTrade Comments 01.11.2022 09:15
Chinese equities are enjoying significant gains after upbeat Caixin Manufacturing PMI data. The market mood has turned cheerful which has weighed on the DXY. Oil prices have picked bids despite the soaring fears of a slowdown in overall demand. Markets in the Asian domain have extended their recovery on Tuesday amid positive cues from global markets. More traction in risk-perceived assets has trimmed the US dollar index (DXY) appeal. The DXY has slipped to near 111.30 as investors have shrugged off uncertainty ahead of the interest rate decision by the Federal Reserve (Fed). At the press time, Japan’s Nikkei225 added 0.10%, ChinaA50 soared 2.60%, Hang Seng jumped 2.37%, and Nifty50 gained 0.74%. Chinese equities are having a ball after the release of the upbeat Caixin Manufacturing PMI data. The economic data landed higher at 49.2 vs. the projections of 49.0 and the prior release of 48.1. The PMI data has remained solid despite the continuation of the no-tolerance approach to Covid-19 by the Chinese administration. Also, the official manufacturing data from the China National Bureau of Statistics (NBS) was weaker than projections. Outside Asia, Reserve Bank of Australia (RBA) Governor Philip Lowe hiked its Official Cash Rate (OCR) by 25 basis points (bps) for the second time to 2.85%. Australian central bank policymakers have adopted a less hawkish approach, keeping in mind that economic prospects could not be sacrificed entirely in achieving price stability. On the oil front, oil prices have rebounded firmly after sensing buying interest around $85.00. Black gold has witnessed demand despite a fresh rate hike cycle by western central banks. This week, the Bank of England (BOE) and the Fed will announce their monetary policies. As per the projections, the central banks will announce a rate hike of 75 bps. This may trigger fears of a slowdown in overall demand and may also dampen the demand for oil.
Bestway Might Have Larger Designs On The UK's Second Biggest Supermarket

Eyes On Bank Of England (BoE) | Gold Is Under Pressure

Swissquote Bank Swissquote Bank 03.11.2022 10:35
Jerome Powell abated the latest risk rally yesterday, saying that the rate hikes will slow down, but the levels will go higher. Equities sold off, the yields jumped, the dollar gained, and hopes of seeing the end of the market turmoil got completely dashed. US Stock Market The US 2-year yield soared to 4.90%. The Dow Jones lost more than 1.50%, the S&P500 dived 2.50% and Nasdaq fell more than 3%. Forex In the FX, the prospect of higher terminal rate from the Fed boosted the USD appetite. The dollar index gained yesterday, as the EURUSD slipped again below its 50-DMA, Cable slipped below 1.14, the dollar-franc is back above parity, the dollar-yen is set for another advance to 150 on the back of the diverging rate prospects between the Fed that is now set to increase rates slower, but higher, and the Bank of Japan (BoJ), set to do nothing, for now. Gold & Bitcoin Gold is also under the pressure of a stronger US dollar and the higher US yields. Bitcoin, on the other hand, is surprisingly resilient to the broad risk selloff. Crude Oil The barrel of American crude rose to $90, as the latest EIA data showed that the US crude inventories fell by more than 3-million-barrel last week, much faster than a 200’000 barrel decline expected by analysts. Bank Of England Today, the Bank of England (BoE) is also expected to raise rates by 75bp today, but that expectation is down from around 100-150bp hike expected when Liz Truss was busy shaking the financial markets with her crazy mini budget. The BoE should no longer act twice as aggressively to compensate for the actions of an irresponsible government, but it still must fight the rising inflation in Britain. Watch the full episode to find out more! 0:00 Intro 0:25 Powell points at slower but higher rates, investors sell assets 4:13 Oil up on falling inventories 5:00 USD up against majors 7:05 BoE to hike by 75bp today 8:13 Gold under pressure, but Bitcoin surprisingly resilient 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 #FOMC #rate #decision #USD #ADP #US #jobs #report #crudeoil #Apple #Amazon #Meta #Google #ExxonMobil #selloff #UK #inflation #BoE #GBP #EUR #XAU #Bitcoin #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
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

Saxo Bank's Podcast: The Reaction Of The Markets To The Fed's Decision

Saxo Bank Saxo Bank 03.11.2022 11:58
Summary:  Today we look at the hawkish Fed Chair Powell press conference delivering a hammer-blow to sentiment as he managed to both pull off the idea that the Fed may indeed soon pivot to a slower pace of rate hikes as soon as December, but that any talk of a pause is "very premature". The result? Sentiment thrashed and the USD going vertical as the market takes Fed rate expectations and the terminal rate next year higher still. Incoming US data could further aggravate this move if the data remains even resilient, much less hotter than expected. We also talk through the reaction to the FOMC in gold, risks to sterling today if BoE fails to take the hawkish hint from Powell, stocks to watch, perspective on where we are with equity valuations and more. Today's pod features Peter Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting an on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app:           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.
"Private investors will be required to increase their gilt exposure by at least £268bn in FY2023-24"

The Bank Of England (BoE) Will Likely Hike Rates By 75bps

Craig Erlam Craig Erlam 03.11.2022 12:02
Equity markets are coming under some pressure on Thursday, with Asia mostly in the red and Europe poised to open almost a percentage point lower. Chinese stocks are among the worst hit after the National Health Commission sought to quash rumours on social media that the country is studying ways to exit Covid-zero. That sparked a strong rally earlier this week which has only partly been reversed following the clarification. Perhaps that’s a sign of how low stocks have fallen that investors are keen to jump back in on any bullish story, well-founded or not. Maybe there’s a view that there’s no smoke without fire and the denial is not entirely honest. We’ll see over the coming days whether other officials seek to put an end to those rumours but it is interesting how few rejections there have been and a number of days have now passed. The Fed gives with one hand and takes with the other Just as investors believed they’d secured the dovish pivot they so craved, Chair Powell stepped up to deliver another crushing blow to the markets. Well, that’s how it’s been perceived initially but that could change once the dust settles. The acknowledgment that future decisions will take into account cumulative tightening and policy lags was a strong nod to slowing the pace of tightening in December, barring some frankly terrible data in the interim. That is exactly what investors wanted to hear. What they didn’t want was the claim that rates could go higher than they previously thought and they still have some way to go. This is still a net positive as a slower pace buys them time to see an improvement in the data and ease off the brake ensuring the least economic cost. That’s not to say a recession will be avoided but maintaining 75bps makes that job much harder. There are two jobs and inflation reports to come before the December meeting. By that time, things may look a little more promising and less uncertain. ​ Who’d want to be at the BoE right now? The Bank of England will likely join the Fed in raising rates by 75bps later today. The central bank has had the unenviable job of fighting soaring inflation amid enormous economic and political uncertainty. In recent months the country has had three prime ministers, three very different economic agendas, and no budgets outlining them. Not ideal for a central bank that’s fighting double-digit inflation. It hasn’t handled things perfectly this year either, that’s clear. It’s taken a far more cautious approach than others leaving it in the situation now that it must raise rates aggressively and publish economic forecasts with little insight into government spending and tax plans. The outlook is uncertain enough without that. A crushing blow Bitcoin also saw its hopes crushed as Powell took to the stage and spoiled the party. An initial rally to $20,800 was quickly wiped out and the sell-off didn’t stop there. Bitcoin ended the day lower but managed to survive a run at $20,000. Whether it can hold above here will depend on tomorrow’s jobs data. Another red-hot report could weigh heavily on risk appetite and see bitcoin slip back below $20,000 once more. ​ For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ 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.
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

The Market Will Remain Balanced With The Option Of The GBP/USD Pair Growth

InstaForex Analysis InstaForex Analysis 03.11.2022 12:54
In my morning forecast, I paid attention to the 1.1380 level and recommended deciding on entering the market there. Let's look at the 5-minute chart and figure out what happened. The bears did not keep waiting long and continued actively selling the pound. The breakthrough of 1.1380 took place without a reverse test, so I failed to enter short positions there and from 1.1307. In the afternoon, the technical picture was completely revised. To open long positions on GBP/USD, you need the following: It is difficult to say what the Bank of England should do to influence the situation somehow. Whatever decisions the regulator resorted to today, it is unlikely that the bulls will be able to buy off the morning fall. In the afternoon, I advise you to wait for Andrew Bailey's statement and only then look for convenient entry points into the market. I told you more about what the central bank governor can say in the morning forecast. In case of further fall of the pair, only a false breakdown in the area of 1.1210 will give a buy signal with a return to the resistance of 1.1276 formed by the results of European trading. Practically nothing depends on this area, so bulls can easily get above this range. A breakdown of 1.1276 and a reverse test from top to bottom will open the way to 1.1341. You can reach the resistance of 1.1416, where the moving averages are playing on the sellers' side. It will become more difficult for buyers to control the market there. A more distant target will be the 1.1489 area, which will lead to a fairly large capitulation of sellers - I recommend fixing profits there. If GBP/USD falls and there are no buyers at 1.1210, we may reach another low of 1.1137. Therefore, do not rush to enter the market. Only a false breakdown at 1.1137 will ensure the presence of major players. It is possible to open long positions on GBP/USD immediately for a rebound from 1.1066, or around the minimum of 1.1013, with the aim of correction of 30-35 points within a day. To open short positions on GBP/USD, you need the following: Bears keep everything under their control, which can only strengthen after the data is scheduled for the afternoon. Reports are expected on the number of initial applications for unemployment benefits and the balance of the US foreign trade balance. But much more important will be ISM's index of business activity in the service sector. If it grows, the pressure on the pound will likely only increase. At the moment, sellers need to defend the resistance of 1.1276 with all their might, where a false breakdown against the background of weak US statistics will give a sell signal based on the return of pressure on the pound and its downward movement to the next support of 1.1210. A breakout and a reverse test from the bottom up of this range will already give an entry point for sale with an update of the minimum of 1.1137. A more distant target will be the 1.1066 area, where I recommend fixing profits. The market will remain balanced with the option of GBP/USD growth and the absence of bears at 1.1276 in the afternoon. In this case, it will be possible to count on an upward movement to the maximum of 1.1341. Only a false breakout at this level forms an entry point into short positions in the expectation of a new downward movement of the pair. If there is no activity there, there may be a jerk up to the maximum of 1.1316, where I advise you to sell GBP/USD immediately for a rebound, counting on the pair moving down by 30-35 points inside the day. The COT report (Commitment of Traders) for October 25 recorded a reduction in short positions and an increase in long ones. Political changes in the UK are playing on the side of buyers of the pound. Still, many are waiting for how the Bank of England will behave about rates and a new economic program from British Prime Minister Rishi Sunak. Do not forget that the pound, as a risky asset, largely reacts to the decisions of the Federal Reserve System on interest rates. A committee meeting will be held this week, where the rate will be increased by 0.75%, which may weaken the position of GBP/USD and lead to a larger decline. However, only the Fed's commitment to maintaining a super-aggressive policy in the near future will be able to change the upward trend in the pound. Otherwise, observing the next pullback of the pound will be possible. The latest COT report indicates that long non-commercial positions increased by 3,183 to 43,511. In contrast, short non-commercial positions decreased by 223 to 91,316, which led to a slight decrease in the negative value of the non-commercial net position to -47,805 versus -51,211 a week earlier. The weekly closing price rose to 1.1489 against 1.1332. Signals of indicators: Moving Averages Trading is conducted below the 30 and 50-day moving averages, indicating a bear market's development. Note: The author considers the period and prices of moving averages on the hourly chart H1 and differ from the general definition of the classic daily moving averages on the daily chart D1. Description of indicators Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 50. The graph is marked in yellow. Moving average (moving average determines the current trend by smoothing out volatility and noise). Period 30. The graph is marked in green. MACD indicator (Moving Average Convergence / Divergence - moving average convergence/divergence) Fast EMA period 12. Slow EMA period 26. SMA period 9 Bollinger Bands (Bollinger Bands). Period 20 Non-profit speculative traders, such as individual traders, hedge funds, and large institutions, use the futures market for speculative purposes and to meet certain requirements. Long non-commercial positions represent the total long open position of non-commercial traders. Short non-commercial positions represent the total short open position of non-commercial traders. Total non-commercial net position is the difference between the short and long positions of non-commercial traders.   Relevance up to 12:00 2022-11-04 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/326174
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

A Dovish Bank Of England (BoE) Can Make A Downward Pressure On The British Pound (GBP)

TeleTrade Comments TeleTrade Comments 03.11.2022 13:08
BoE Monetary Policy Decision – Overview The Bank of England (BoE) is scheduled to announce its monetary policy decision this Thursday at 12:00 GMT. The UK central bank is widely expected to lift interest rates by 75 bps - the biggest hike since 1989. Meanwhile, the worsening outlook for the UK economy might have already set the stage for a dovish pivot. Hence, the market focus will be on the accompanying statement that provides the Monetary Policy Committee's (MPC) economic and inflation projections. Apart from this, investors will scrutinize BoE Governor Andrew Bailey's comments at the post-meeting press conference at 12:30 GMT. Analysts at TD Securities offer a brief preview of the key central bank event risk and write: “We look for a 75 bps hike from the BoE in November. While the labour market has tightened further, inflation has matched the MPC's forecasts. Moreover, the several fiscal U-turns and change of PM and Chancellor should lower the risk of a larger hike. The delay of the fiscal event shouldn't mean much for the decision as the broad characteristics of fiscal policy are already known.” How could it affect GBPUSD? Ahead of the BoE's Super Thursday, the GBPUSD pair tumbles to a two-week low, below mid-1.1200s on Wednesday amid post-FOMC strong follow-through US dollar buying interest. A dovish BoE tilt could exert additional downward pressure on the British Pound and set the stage for an extension of the pair's recent pullback from a multi-week high. Meanwhile, a decision to frontload the rate hike might do little to provide any respite to bulls amid looming recession risks, suggesting that the path of least resistance for the GBPUSD pair is to the downside. Eren Sengezer, European Session Lead Analyst at FXStreet, outlines important technical levels to trade the major: “GBPUSD trades within a touching distance of 1.1250, where the 200-period SMA on the four-hour is located. In case the pair falls below that level and starts using it as resistance, additional losses toward 1.1200 (psychological level) and 1.1100 (psychological level) could be witnessed.” “On the upside, 1.1300 (Fibonacci 61.8% retracement) aligns as first resistance ahead of 1.1350 (Fibonacci 50% retracement, 100-period SMA) and 1.1435 (Fibonacci 38.2% retracement),” Eren adds further. Key Notes   •  Bank of England Preview: Why Super-Thursday is set to sink sterling, even in case of a big hike   •  BoE Interest Rate Decision Preview: A close call between 50 bps and 75 bps, GBP/USD set to suffer   •  GBP/USD Forecast: Pound looks vulnerable as BoE decision looms About the BoE interest rate decision The BoE Interest Rate Decision is announced by the Bank of England. If the BoE is hawkish about the inflationary outlook of the economy and raises the interest rates it will be positive, or bullish, for the GBP. Likewise, if the BoE has a dovish view on the UK economy and keeps the ongoing interest rate, or cuts the interest rate it will be seen as negative, or bearish.    
UK Budget: Short-term positives to be met with medium-term caution

Committee Of The Bank Of England (BoE) Is Very Divided

ING Economics ING Economics 03.11.2022 14:34
The Bank of England has hiked interest rates by 75 basis points for the first time. But its policy statement and new forecasts signal very plainly that the Bank rate is unlikely to rise as far as investors expect over coming months. We expect a 50bp hike in December, so it's unlikely to go above 4% next year The Bank of England has stepped up the pace of hikes The Bank of England faced a choice today between a ‘hawkish’ 50 basis-point rate hike and a ‘dovish’ 75bp – and in the event, it chose the latter path. Unlike the Fed and the European Central Bank, this is the first time the BoE has hiked by 75bp in this cycle. But there are no good options for the Bank, and the central message from its latest communications is clear: investors are expecting too much tightening at future meetings. We think today’s 75bp move is likely to be a one-off. The BoE’s new projections show that, if policymakers were to follow investor expectations and hike rates to 5%, the size of the economy would shrink by roughly 3 percentage points over several quarters. Inflation would be at zero in 2025. The Bank of England is forecasting a deep recession regardless of whether it hikes any further Source: Macrobond, ING, Bank of England   Curiously the message is similar – though far less extreme – in the Bank’s projections based on interest rates staying flat at 3% from now on. Not only does that suggest markets are overdoing tightening expectations, but at a pinch you could also say this hints at potential rate cuts somewhere down the line. Admittedly the Bank has been telling this story to a more limited extent for several months now in its forecasts. Governor Bailey also highlights that there’s an upward skew to its inflation forecasts, and policymakers are unsurprisingly nervous about putting too much weight on its models at a time of such uncertainty. A 75bp hike is likely to be a one-off Nevertheless, Andrew Bailey was very forthright in his press conference that rates are unlikely to rise as far as markets expect (currently just shy of 5%). What's more, the committee is very divided. One policymaker, Silvana Tenreyro, voted for just 25bp worth of tightening today. The Bank may have stepped up the pace this month, but central banks globally are having to assess whether ongoing aggressive rate hikes can be justified at a time when housing and corporate borrowing markets are beginning to creak. The choice the Bank faces at coming meetings is one of hiking aggressively to protect sterling, or moving more cautiously to allow mortgage rates to gradually fall. With around a third of UK mortgages fixed for just two years, we suspect the latter option will increasingly be seen as more palatable. The dovish messages littered throughout today’s statement and forecasts are a clear sign of that. We're pencilling in a 50bp rate hike in December and we think the Bank rate is unlikely to rise above 4% next year.   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  
OPEC+ Meeting: Saudi Arabia Implements Deeper Voluntary Cuts to Boost Oil Prices

Supply Outlook Of Crude Oil Remains Challenged | The Norges Bank (NB) Took The Dovish Path

Saxo Bank Saxo Bank 04.11.2022 08:44
Summary:  While the Fed surprised hawkish this week, most other central banks have been surprising dovish, with the latest being Bank of England which tried to cool down the aggressive market pricing for their terminal rate. Meanwhile, Norges Bank also took the less hawkish path, and this has made USD the king again with sterling suffering the heaviest blow. US stocks and bonds were lower, and oil prices, as well as precious metals, also suffered in the aftermath of Fed’s hawkish tilt. Focus turns to NFP today which should continue to suggest a tight labor market. What is happening in markets?   The Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) continued to slide on hawkish Fed and weaker outlook U.S. stocks continued to adjust for the second day to the increased prospect of interest rates being higher for longer following Powell’s pushback to the market’s speculation for Fed pivot on Wednesday, with S&P falling 1.06% and Nasdaq 100 down 2%. For a discussion on the implication of Powell’s hawkish comments on equities, please refer to Peter Garnry’s article here. Information technology, falling 3%, was the worst-performing sector in the S&P 500 while energy, up 2%, and industrials, up 1% were the outperformers. Announcements of hiring or headcount freezes from Amazon (AMZN:xnas), Apple (AAPL:xnas), Lyft (LYFT:xnas), and Morgan Stanley stirred concerns among investors about the outlook of the economy and corporate earnings. After closing, Starbucks (SBUX:xnas) reported above expectations revenues and earnings while a number of software companies, including Atlassian (TEAM:xnas), Twilio (TWLO:xnys), Appian (APPN:xnas), missed revenues guidance. 10-year U.S. treasury yields (TLT:xnas, IEF:xnas, SHY:xnas) The U.S. yield curve bear flattened as the 2-year yield jumped to as high as 4.74%, before finishing the session at 4.71%, the highest level since 2007. It brought the 2-10 year spread to was wide as -58 and close at -56, the most inverted level in 40 years. The market has brought another 75bp hike in December back to the table, pricing in a slightly more than 50-50 chance. Hong Kong’s Hang Seng (HSIX2) China’s CSI300 (03188:xhkg) Being hit by the double whammy of the reiteration from China’s National Health Commission that dynamic zero-Covid is the primary pandemic control strategy and a hawkish Fed Chair Powell hinting at higher terminal rates, Hang Seng Index tumbled 3.06% and the Hang Seng Tech Index (HSTECH.I) dropped 3.8% on Thursday. China Internet, EV, healthcare and property stocks dragged the benchmark indices lower. Following the hike by the U.S. Fed overnight, five leading commercial banks in Hong Kong raised their prime rates by 25bps. On the data front, Caixin China PMI Services came in at 48.4 in October (consensus: 49.0; Sep: 49.3), falling further into contractionary territory. CSI300 performed relatively more resilient and pared some losses in the afternoon to finish the day losing only 0.8%. Semiconductors, defence and basic chemicals gained. Buying emerged overnight in the U.S. hours, Nasdaq China Golden Dragon Index jumped more than 3% and Hang Seng futures were nearly 1.5% higher from Hong Kong closing. FX: GBPUSD suffered on BOE-Fed differential The USD is seeing another leg higher not just on the back of Powell’s hawkishness this week, but also with the other central banks taking the less hawkish path. Both Norges Bank and BOE surprised dovish yesterday, in continuation of the trend that we have seen from Reserve Bank of Australia, Bank of Canada and the ECB earlier. GBPUSD fell over 2% to sub-1.12 on the announcement that BOE thinks market’s current pricing is too aggressive. December pricing is still at another 50bps rate hike but it won’t be a surprise if it is pulled lower after we had two dovish dissenters on Thursday. NOK saw a selloff as well, while USDJPY continues to find trouble to overcome 148.50 despite the fresh surge in US yields. Crude oil (CLX2 & LCOZ2) worried about demand After a hawkish FOMC, commodity markets have once again started to focus on demand weakness that could come as a result of Fed’s rapid tightening pace. Meanwhile, any hopes of a recovery in Chinese demand have also been crushed for now with authorities still standing by their zero Covid strategy. WTI futures traded close to $88/barrel while Brent futures were below $95. Supply outlook remains challenged however going into the winter, with OPEC+ having announced production cuts followed by EU sanctions on Russian crude flows from December. Gold (XAUUSD) and Silver (XAGUSD) to face short-term pressures Our Head of Commodity Strategy Ole Hansen wrote yesterday on how gold and silver turned sharply lower yesterday after Fed Chair Powell delivered a hammer-blow to sentiment across markets as he managed to both pull off the idea of the Fed may indeed soon pivot to a slower pace of rate hikes, but that any talk of a pause is “very premature”. Gold touched sub-1620 levels yesterday before a slight recovery later in the session while Silver took a look below $19. There is likely to be more pressure in the short term, but as yields get closer to a peak or as the possibility of central bank policy mistake increases, while inflation continues to run higher, the outlook for the precious metals could revert to being positive.   What to consider? Bank of England’s dovish hike The BOE hiked by 75bps to 3%, as expected by the consensus, but strongly pushed back against expectations for the scale of future moves, saying that the terminal rate priced in currently by the markets would induce a two-year recession. There were also two dovish dissenters at the meeting, one calling for 50bps rate hike and another for a mere 25bps. New forecasts were also released, which gave a particularly grim outlook for the economy, looking for a GDP print of -0.5% QoQ in Q3 2022 vs -0.1% expected in September. The inflation forecast now shows a peak around 11% in Q4, which is marginally hotter than the prior meeting’s projection. US weekly jobless claims tick lower, ISM services softened There was a slight decline in initial jobless claims to 217k from previous 218k, coming in marginally below the expected at 220k. Still, labor market remains tight despite some signs of cooling and continues to provide room to the Fed to continue its tightening cycle. Meanwhile, the ISM services index fell more than expected to 54.4 in October from 56.7 previously, however the prices paid gauge increased by 2% pts to 70.7 and remains elevated. Norges Bank hiked by 25bps With expectations split between a 25 or 50bps rate hike, Norges Bank took the dovish path as well despite a deteriorating inflation outlook. However, the Committee continues to place emphasis on the growth situation writing "there are signs that some areas of the economy are cooling down" and acknowledging the tightening effect that the higher policy rate is beginning to have. For the December gathering, the Committee points to a further hike being likely. Australia to double its Royal Australian Airforce cargo fleet in a $10 billion US military deal US officials are looking to approve the sale of $10 billion of iconic cargo aircraft, including 24 Hercules planes, to Australia. The US Defence Security Co-operation Agency says Australia is one of its most important allies in the western Pacific and its location and economic power ‘contributes significantly to ensuring peace and economic stability in the region’. Australia has operated the Hercules aircraft for decades, with the aircraft playing a major role in moving troops and equipment in and out of war zones and evacuating civilians after the fall of Kabul last year. It has also performed countless missions flying humanitarian supplies to countries hit by natural disasters. Australia trade surplus swells on surging energy exports Australia’s trade surplus swelled to $12.4 billion in September, smashing expectation of a $8.75 billion surplus. It comes as exports rose far than expected, up 7% vs the 1% consensus expected thanks to greater demand for mineral fuels for energy, while iron ore exports also rose. Imports remained unchanged month on month. Multiple reports of hiring freezes emphasizing margin pressures Apple paused all hiring for roles outside research and development. Amazon will pause new incremental hires in its corporate workforce, citing an "uncertain" economy and its recent hiring boom. Lyft will eliminate 13% of staff, or around 683 people.   For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/market-insights-today-4-nov-04112022
Only Ugly US Data Could Reverse Sentiment | Gilt Yields In UK Were Steady To Lower

Only Ugly US Data Could Reverse Sentiment | Gilt Yields In UK Were Steady To Lower

Swissquote Bank Swissquote Bank 04.11.2022 11:30
Investors got the policy pivot they were looking for this week; unfortunately, not from the Federal Reserve (Fed), but from the Bank of England (BoE) instead. Bank of England In a confusing way, the Bank of England raised its interest rate by 75bp yesterday, but announced that the city analysts have got the BoE’s terminal rate wrong, and that the future rate hikes from the BoE will be softer, given that the economic situation is alarming. Sterling dived, while gilt yields were steady to lower. Mareket Reaction Elsewhere, in an extended market reaction to Wednesday’s Fed decision, the US dollar gained across the board, as investors repositioned for a more aggressive Fed tightening. Fed The thing that could throw cold water on burning hot Fed expectations is soft jobs data from the US. That’s also the only thing that could save the rest of the world from the worsening Fed aggression: rapidly deteriorating economic conditions in the US. Due today, the NFP is expected to reveal 200’000 new nonfarm jobs in October, for an average hourly pay rise steady around 0.3%. Watch the full episode to find out more! 0:00 Intro 0:26 Confusing action & statement from the BoE 2:39 The dollar rally continues post-Fed, pre-US jobs 5:20 Stock selloff intensifies 7:10 Only ugly US data could reverse sentiment 8:22 Stoxx600’s 30% discount to S&P hides risk 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. #US #NFP #jobs #wages #data #Fed #hawks #UK #BoE #GBP #dovish #hike #Netflix #Disney #BasicWithAd #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
Unraveling UK Inflation: The Bank of England's Next Move

The Dovish Decision Of The Bank Of England (BoE) Puts A Heavy Burden On The GBP

Saxo Bank Saxo Bank 04.11.2022 13:39
Summary:  The FOMC meeting this week forced the market to adjust to the idea that the Fed could continue to take rates higher than had previously been priced. But clearly, to drive tightening expectations higher still, we’ll need to continue to see hotter than expected US data, with today’s US jobs report the next test on that. Elsewhere, sterling is in a world of hurt after BoE’s very dovish guidance. FX Trading focus: US incoming data focus after hawkish FOMC. BoE in dovish pushback against market hike expectations. The US dollar followed through stronger yesterday on the momentum off the back of the hawkish Powell presser Wednesday, but has come in for a chunky reversal overnight and today since a somewhat softer than expected ISM services survey yesterday (nudged lower to 54.4 vs. 55.3 expected and 56.7 in September, with the employment sub-index dipping back below 50 at 49.1 vs. 53.0 in September). Wouldn’t it be ironic if we also were to get a soft US jobs report today that takes US yields back to their starting point of the week, making Powell’s hawkish message so much noise, at least until the next incoming data point jerks the market the other way? Interestingly, the USD is selling off ahead of today’s US data releases even as short US yields are posting new highs for the cycle Specifically in today’s jobs report, in addition to any strong directional surprise in payrolls (multi-month grain of salt needed with this data series, as single releases require further corroborating evidence), we should keep both eyes on the average hourly earnings survey. Arguably, if we get the expected 0.3% month-to-month average hourly earnings print today after a couple of prior prints of a similar size, observers may begin to judge that the annualized rise in earnings is beginning to look far less threatening at sub-4.0%. The year-on-year is expected to drop to a 15-month low of 4.7% today. A significant upside surprise in earnings is perhaps could generate significant volatility. Chart: EURGBPWorth considering how the dovish Bank of England meeting yesterday (see more below) is weighing heavily on sterling, as it should, with the Bank of England reluctant to signal much tightening energy when it sees an incoming recession. Sterling is down sharply across the board, with EURGBP suddenly well backed up within the old range and now far away from the sub-0.8600 range support. The next area between the 0.8800 and pivot high of 0.8870 area looks key for whether sterling weakness is set to become a bit more unhinged, and the next key event-risk test is likely how the market greets an austere Autumn budget statement on November 17. Bank of England wrap. The BoE hiked by 75 bps to 3%, as most expected and as was mostly priced in, but Bailey and company strongly pushed back against expectations for the scale of future moves, saying that the terminal rate priced in currently by the markets would induce a two-year recession. There were also two dovish dissenters at the meeting, one calling for 50 bps rate hike and another for a mere 25 bps. New forecasts were also released, which gave a particularly grim outlook for the economy, looking for a GDP print of -0.5% QoQ in Q3 2022 vs -0.1% expected in September. The inflation forecast now shows a peak around 11% in Q4, which is marginally hotter than the prior meeting’s projection. Sterling was crushed lower, having already fallen heading into the meeting, and it speaks volumes that even though the BoE pushed back against the forward implied expectations for further tightening, which it said would trigger a 2-year UK recession, the market did not budge those expectations. In short: the market refuses to acknowledge what the BoE thinks it might do, probably figuring that the BoE will have no choice due to sterling weakness but to pursue the path to 4.50% or higher rates before mid-next year. I was surprised by the lack of discussion or journalist questioning in the press conference around the risk that currency weakness drives worse inflationary outcomes if the BoE fails to do as much as the market is pricing. Sterling remains in a heap of trouble. Table: FX Board of G10 and CNH trend evolution and strength.The USD needs to stick the move off the back of the FOMC meeting after the US jobs data today, otherwise we’ll suddenly be back to square one. The hottest movement in FX was clearly the sterling sell-off yesterday on a very clearly dovish Bank of England meeting. CNH is making waves on a lot of movement overnight and noise (unconfirmed) of an eventual opening up. Table: FX Board Trend Scoreboard for individual pairs.While the US dollar flipped to a positive trend in many places, we must still consider the risk that incoming data complicates the plot. GBP is already registering a negative trend in many new GBP pairs after yesterday’s BoE meeting. Interesting that the NOK failed to roll over to the downside in a couple of key pairs after the small hike from the Norges Bank yesterday. Upcoming Economic Calendar Highlights 1215 – UK Bank of England Chief Economist Huw Pill to speak 1230 – US Oct. Nonfarm Payrolls Change 1230 – US Oct. Unemployment Rate 1230 – US Oct. Average Hourly Earnings 1230 - Canada Oct. Unemployment Change/Rate 1400 – Canada Oct. Ivey PMI 1400 – US Fed’s Collins (Voter 2022) to speak Source: https://www.home.saxo/content/articles/forex/fx-update-us-incoming-data-sterling-pays-price-after-dovish-boe-04112022
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

U.K. GDP Is Projected To Decline, Recession Is On The Horizon?

Kamila Szypuła Kamila Szypuła 06.11.2022 10:53
The outlook for Britain’s economy is very challenging. Slowing economic growth and a changing fiscal policy are a major concern for the British. Previous data and expectations of downward Monthly GDP changes suggest a downward trend. After the reading in September, the GDP M/M index returned to the level of zero. It is expected to decline from -0.3% to -0.4%. As shown by the data, for a significant part of the year the monthly change was weak, even negative. Source: investing.com The quarterly change of the index, despite the fact that it is currently in a positive position, it is expected that the next reading will be negative. the downward trend in GDP q / q continues and has recently reached the level of 0.2%, the current expectations are at -0.5% The annual change is also in a downward trend. GDP Y / Y is expected to reach 2.1%. Since the end of 2021, it has been at a low level of less than 10%, but despite several positive and quite high readings this year, the British economy shows signs of weakening. The official data about the indicator will be announced on Friday, November 11. Source: investing.com Generla outlook The Bank of England's forecasts are particularly difficult to put together, given the government's as yet unclear fiscal strategy. The Bank of England forecast last month that Britain would slip into a recession at the end of 2022 and not come out of it until early 2024. Food and energy prices have jumped, in part because of the Ukraine war, which has left many households facing hardship and started to drag on the economy. A recession is defined as when a country's economy shrinks for two three-month periods - or quarters - in a row. Typically, companies make less money, pay falls and unemployment rises. This means the government receives less money in tax to use on public services such as health and education. The unemployment rate is now at its lowest in 50 years, but is expected to rise to almost 6.5%. The forecast predicts an increase in the unemployment rate and a decline in household income. It is a picture of a painful economic period in which the UK is doing worse than the US and the euro area. Recession For most people, economic growth is good. It usually means there are more jobs. Companies are more profitable and can pay employees and shareholders more. The higher wages and larger profits seen in a growing economy also generate more money for the government in taxes. When the economy shrinks, all these things go into reverse. This is signal that recession is coming. However, the pain of a recession is typically not felt equally across society, and inequality can increase. Some people may lose their jobs, and unemployment could rise. Graduates and school leavers could find it harder to get their first job. Others may find it harder to be promoted, or to get big enough pay rises to keep pace with price increases. The results are already visible after the recent decisions of the Bank of England. Higher loan costs are already affecting households. Home buyers with tracking or floating rate mortgages will immediately feel the pain of an interest rate hike. These are just a few simple examples, but a recession can have long-term consequences for the citizen and the economy as a whole. Source: investing.com
There Are No Obvious Reversal Of GBP/USD Pair Signs Yet

Monetary Policy Divergences Makes Negative Views On Sterling (GBP)

InstaForex Analysis InstaForex Analysis 07.11.2022 11:34
In early November, the Fed and the Bank of England sent clear statements to the markets. Don't underestimate the potential for higher federal funds rates. And there is no need to overestimate the peak values of the repo rate. Different rates of monetary tightening seemed to convince investors that the GBPUSD pair has decided on the direction of further movement. It must go down. Alas, the market reaction to the US employment data for October turned everything upside down. After Rishi Sunak replaced Liz Truss as prime minister, the risk of a mismatch between fiscal and monetary policies disappeared from the pound, causing the GBPUSD to soar from 1.04 to 1.16. Speculators significantly reduced their bearish rates on sterling, but after the Bank of England became the focus of investors' attention, the sellers got down to business again. Dynamics of speculative positions on the pound Despite the increase in the repo rate by 75 bps to 3%, which was the BoE's widest move since 1989, Governor Andrew Bailey, at a press conference, preferred "dovish" rhetoric. According to him, market expectations of the borrowing cost ceiling are too high, while the UK economy is already in the deepest recession since 1990. Chief Economist Huw Pill confirmed his opinion a little later. Pill noted that rates will certainly continue to rise, but not to 5.25%, as expected by the futures market. The BoE is obviously trying to slow down sterling fans by all means. And their statements about the recession have the same purpose. At first glance, rumors of a recession spread by the regulator are counterproductive because, in such conditions, households can restrain spending, and enterprises can slow down investments. On the other hand, if the recession finally makes itself felt, the Bank of England may pause in the process of tightening monetary policy, explaining this by implementing its own plans. Dynamics of recessions in the UK economy Thus, despite the decisiveness shown in November in the form of a 75 bps increase in the repo rate, Bailey and his colleagues are moving towards gradualism, which, on paper, should support the GBPUSD bears. Especially in conditions when the Fed is ready to raise the cost of borrowing to almost 5.25%. Monetary policy divergences allow large banks and investment firms to hold negative views on sterling. Thus, Mitsubishi UFJ, Deutsche Bank and Rabobank predict that it will fall to $1.1 or lower. To their dismay, the collapse of the US dollar in response to the seemingly strong statistics on the US labor market was a real blow to the plans. In the coming days, the market will decide what it was: a dead cat bounce or a change in trend. Technically, on the GBPUSD daily chart, the pair's inability to consolidate above the fair value at 1.135 and within the corrective ascending channel indicates the weakness of the bulls and gives rise to sales in the direction of 1.12 and 1.11.   Relevance up to 09:00 2022-11-12 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/326384
UK Budget: Short-term positives to be met with medium-term caution

Sunak (UK Prime Minister) May Have Won Back Investor Confidence

ING Economics ING Economics 06.11.2022 11:34
Prospects of fiscal tightening, limited energy support, and sky-high mortgage rates look set to reduce the size of the UK economy by roughly 2% over several quarters In this article The new prime minister has succeeded in calming markets Energy support to become less generous A recession looks inevitable Source: Shutterstock The new prime minister has succeeded in calming markets The appointment of Rishi Sunak as the new UK prime minister heralds a very different fiscal approach to his predecessor. Promises of debt sustainability have succeeded in stabilising financial markets, and both the pound and gilt yields have gone full circle since the mid-September ‘mini budget’. The political risk premium, as measured by the spread between German and UK 10-year yields, has narrowed back, although it is still wider than it was before the Conservative leadership contest started in July. Unfortunately, that’s where the good news stops. Sunak may have tentatively won back investor confidence, but he’ll need to find savings worth roughly £30-40bn/year to convince the independent Office for Budget Responsibility that debt won’t rise across the medium-term as a percentage of GDP. With very limited scope to cut day-to-day spending, we suspect he’ll have to chop back public investment plans and potentially also look at increases to personal taxes. Energy support to become less generous None of this will be good for growth, though the impact will be dominated by a decision to make the government’s flagship energy support programme less generous from April 2023. Under existing plans, the average household energy bill is capped at £2,500 for two years, but the government has signalled this will become more targeted. Aside from adjusting income tax rates, the only obvious way of doing this would be to make a distinction between those on welfare support and those that aren’t. One scenario could see most consumers move back to paying the Ofgem-regulated price from April. The cost of fixing household energy bills has collapsed Source: Refinitiv, Ofgem, ING calculations   Under that sort of policy, we'd expect most households to pay on average £3,300 in FY2023 for energy, without any government support. As the chart shows, the sharp fall in gas prices means that estimate has halved since August. But that would still leave the average household paying close to 10% of their disposable income on energy. Alongside that, mortgage rates look set to fall fairly gradually, against a backdrop of stubbornly high Bank of England expectations and a greater premium from lenders for high loan-to-value products. With roughly a third of mortgages fixed for two years, millions of homeowners look set to lock-in these higher rates. The two-year fixed rate recently peaked at 6.5%. A recession looks inevitable All of this suggests a recession is now inevitable, and we’ve once again downgraded our GDP forecasts. We now expect the size of the economy to shrink by roughly 2% over four quarters, concentrated in the first half of 2023. Admittedly these forecasts are still heavily contingent on how the government adjusts its energy support. If gas prices begin to rise, particularly for winter 2023/24 contracts, then the government will be under heavy pressure to once again extend its energy support to all households beyond April next year. TagsUK fiscal policy Energy crisis
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

In USA Inflation Is Showing Little Sign Of Slowing

ING Economics ING Economics 05.11.2022 09:13
We're now expecting the Fed Funds Rate to hit 5% early next year, albeit in more modest steps. We also think there are limits to how much further both the European Central Bank and Bank of England can hike rates amid a looming recession In this article Federal Reserve European Central Bank Bank of England People's Bank of China Central banks: Our forecasts Source: Macrobond, ING Federal Reserve After four consecutive 75bp Federal Reserve interest rate increases officials have opened to door to a slower pace of hikes from December. The harder and faster a central bank moves into restrictive territory, the less control over the outcome and the greater chance of an adverse reaction. Given the state of the residential real estate market and the deteriorating corporate and consumer outlook, recession in the US now looks unavoidable. However, inflation is showing little sign of slowing. We need 0.1% or 0.2% month-on-month core inflation readings to get the annual rate down to 2% rather than the 0.5% or 0.6% MoM increases in ex-food and energy prices we are seeing. So, while the pace of hikes may slow, the expected terminal rate keeps moving higher. Nonetheless, with housing rents and used car prices now falling, and corporate pricing power being squeezed by the downturn, we think a 5% Fed Funds Rate will mark the peak in February and the door will open for rate cuts through the second half of 2023. European Central Bank The ECB’s October meeting had something for everyone. Another jumbo rate hike of 75bp and the opening for more for the hawks, but also more recession warnings and an opening to a dovish pivot in December for the doves. Consequently, the times of uncontested decisions at the ECB seem to be over. The December meeting will be much more controversial with a looming recession and a high chance that the ECB’s longer-term inflation forecasts will point to a sharp inflation retreat in 2024 and 2025. These aren't really the best arguments to hike into restrictive territory. We expect the ECB to deliver rate hikes totalling 75bp at the December and February meetings. The balance sheet reduction has started with the announced changes to the ECB’s longer-term loans to banks and the option for earlier repayments. More will follow as a gradual phasing out of the reinvestments of asset purchases could become a substitute for additional rate hikes in 2023. Bank of England Markets have pared back interest rate expectations in light of a more stable fiscal backdrop but are still pricing Bank Rate to near 5% next year. Bank of England officials have begun to hint more explicitly that this would come with huge damage to the economy and is inconsistent with the amount of tightening needed to get inflation lower. Still, policymakers face an unpalatable decision. If they undershoot market rate expectations, the risk is that we see a renewed downside for the pound – not least because a full-blown pivot from the Federal Reserve seems at least a few months off. That helps explain why the BoE accelerated the pace of rate hikes in November. But doing so repeatedly risks baking in mortgage rates and corporate borrowing costs which risk material stress in the economy. Around a third of mortgages are fixed for two years, while small and medium-sized enterprises (SMEs) are typically on floating interest rate products. We therefore expect the Bank to undershoot market expectations and remain unconvinced Bank Rate will go above 4% next year. We think the 75bp hike was a one-off. People's Bank of China The PBoC seems to have abandoned the traditional monetary policy tool of policy rate cuts and Reserve Requirement Ratio (RRR) cuts as a means to support the economy. Instead, the central bank has increased liquidity via policy banks in China. These policy banks lend directly to local governments for a specific policy target, for example, to finish unfinished home construction projects. This should be more time efficient as commercial banks would not be able to lend to property developers due to the still restrictive policies set for property developers, and they would be reluctant to lend to construction companies. This kind of direct lending to local government avoids them having to increase bond issuance, and therefore reduces interest costs of local governments in general. We expect the central bank to increase liquidity injections through policy banks until all unfinished residential projects are completed. TagsPBoC Federal Reserve ECB Central banks Bank of England   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
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The GBP/JPY Pair Portrays The Market’s Indecision

TeleTrade Comments TeleTrade Comments 08.11.2022 08:46
GBPJPY fades two-day uptrend, remains sidelined of late. BOE witnessed a dim response of the first gilt sale, optimism surrounding UK’s fiscal policy fades. UK businesses fear gloomy Christmas amid inflation woes. Yields remain firmer as recession looms, China’s covid numbers escalate during a sluggish session. GBPJPY treads water around 168.80, pausing the two-day uptrend, heading into Tuesday’s London open. In doing so, the cross-currency pair portrays the market’s indecision amid mixed clues and a lack of major data/events. It should, however, be noted that a dim response to the Bank of England’s (BOE) first medium-term gilt selling operation seem to have teased the pair bears of late. On the same line was the recent survey for Barclays that suggest British businesses fear a gloomy Christmas ahead, as almost half of households plan to cut festive spending due to the soaring cost of living and sales are already falling sharply in inflation-adjusted terms. Furthermore, GBPJPY’s inaction could be linked to news suggesting that the UK Chancellor Jeremy Hunt is set to announce a new tax raid on inheritance, per the UK Telegraph. The news also mentioned that Chancellor Hunt and Prime Minister (PM) Rishi Sunak are understood to have agreed to freeze the threshold above which people must pay tax for another two years. Alternatively, chatters over likely positive outcomes from the next fiscal plan and UK Prime Minister (PM) Rishi Sunak’s efforts to justify his election keep the pair buyers hopeful. UK PM Sunak is poised to announce a major gas deal with America after the Cop27 climate change summit, The Telegraph can disclose. “Talks about the “energy security partnership” are in their final stages, with the US planning to sell billions of cubic meters of Liquefied Natural Gas (LNG) to Britain over the coming year,” the news adds. It’s worth mentioning that the Bank of Japan’s (BOJ) bond-buying operations and fears surrounding China’s higher covid counts since April, as well as a light calendar, restrict the GBPJPY pair’s moves. Moving on, a lack of major data/events could keep the quote sidelined but optimism surrounding the UK’s fiscal policies may allow the cross-currency pair to remain firmer ahead of the UK’s Gross Domestic Product (GDP) for the third quarter (Q3), up for publishing on Friday. Technical analysis GBPJPY bulls attack the 10-DMA hurdle surrounding 169.00 but the bearish MACD signals and steady RSI keeps sellers hopeful.
Upcoming Corporate Earnings Reports: Ashtead, GameStop, and DocuSign - September 5-7, 2023

Good Retail Sales Result In Europe | Household Spending In Japan Has Declined

Kamila Szypuła Kamila Szypuła 08.11.2022 11:14
There are no important reports scheduled for today that could significantly affect the markets. Today the attention is focused on the mid-term election in the USA and on the speeches of representatives of central banks on the old continents. Japan Household Spending Japan has published a report on household spending. The result of this report was not satisfactory. The current level of 2.3% was lower than expected. It was expected to drop from 5.1% to 2.7%. This year in Japan, spending is not looking very well. They reached the level below zero several times, and the last scare was a false signal. The monthly change in household spending is already more positive. The current score of 1.8% has increased from 1.7%. Which means that within a month there was an increase in expenses, but compared to last year, the result was negative. Household expenditure is an important factor in building the country's economy and has a significant impact on the GDP level. The less households spend, the smaller the turnover is, which affects the number of companies. The profits of companies in such a situation can sleep. This situation will significantly affect individuals. Observing this indicator, it can be concluded that households have started to save to a greater extent, and thus it gives a signal about the plunging situations of life in this country. BRC Retail Sales Monitor The value of same-store sales in BRC-member retail outlets in the U.K decreased from 1.8% to 1.2%. This is a negative result despite the fact that a decrease has been reported. this decline was 0.5% larger than expected. This year is not the best. After the record level in February, there were declines and sales were negative for several months. Speeches At 9:15 CET there were speeches from the old continent. Speakers were the German Buba President Nagel, member of German Buba Wuermeling and ECB's Enria. They probably spoke at 10:00 CET. Information provided in speeches that the focus is on closing inflation and thus on raising rates. At 10:30 CET, the SNB Gov Board Member Maechler also took the floor and thus gave instructions on Switzerland's moetary policy. At 11:00 CET a representative of the Bank of England also took the floor. The speaker was Huw Pill. His statement may turn out to be a signal for the motoring policy, and thus it may direct the pound's (GBP) situation in the present day. He is expected to speak again at 18:00 CET. Outside the European continent, a representative of the Reserve Bank of Australia (RBA) also spoke at 11:30 CET. The speaker was Governor Philip Lowe. As a key adviser to RBA board members, who decide short term interest rates, Lowe has considerable influence over the value of the Australian dollar. Traders scrutinize his public engagements for clues regarding future monetary policy. EU Retail Sales Retail sales figures from the European bloc were also published today. An improvement was expected in the monthly and in the annual shift. As a result of retail sales, y/y growth was expected from -2.0% to -1.3%. Also in the monthly change, the projected increase from -0.3% to 0.4%. The current readings are positive. The annual change in retail sales rose to 0.6%, and the monthly change met expectations. The current result in such a difficult economic situation is interpreted as a slight improvement, i.e. a positive report. Summary 1:30 CET Japan Household Spending 2:01 CET BRC Retail Sales Monitor 9:15 CET German Buba President Nagel Speaks 9:15 CET German Buba Wuermeling Speaks 9:15 CET ECB's Enria Speaks 10:30 CET SNB Gov Board Member Maechler Speaks 11:00 CET BoE MPC Member Pill Speaks 11:30 CET RBA Governor Lowe Speaks 12:30 CET EU Retail Sales (MoM) (Sep) 18:00 CET BoE MPC Member Pill Speaks Although there were no important reports today, one should watch the following days. Source: https://www.investing.com/economic-calendar/
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

High Inflation, The Aggressive Fed And Geopolitical Uncertainty Increases The Likelihood Of A US Recession

InstaForex Analysis InstaForex Analysis 09.11.2022 08:15
In my previous reviews, I pointed out that the wave structures of the two instruments I analyze daily were about to see the completion of the ascending sections of the trend. These sections will comprise 5 waves, and they won't be impulse ones. This is the most likely scenario because demand for the dollar may soar in the near term. Let's now analyze possible reasons for a stronger greenback. Future decisions This article is mostly about Goldman Sachs Group. Its analysts have downgraded their forecasts for EUR to $0.94 from $0.97 for the coming three months. In the course of its latest fall, the instrument approached $0.95. Given the latest forecast, we may expect the descending section of the trend to resume its formation or a new section to build up. According to Goldman Sachs, having a floating target, the US Federal Reserve may raise interest rates to 5% by March 2023, with one increase of 0.50% and two increases of 0.25%. Meanwhile, other central banks, including the Bank of England and the ECB, won't have any floating targets. Therefore, monetary policy divergence may deepen towards the US dollar. Economic growth in the United States In addition, Goldman Sachs says there is a 35% probability of the United States entering a recession in the coming 12 months, citing high inflation, the aggressive Federal Reserve, and geopolitical uncertainty. The company underlined that its forecast is more optimistic compared to the outlooks from other firms and banks because it foresees a realistic scenario of an economic path from high inflation to low inflation and without a recession. Economic growth in the United States is expected to fall below the trend line but remain above zero. The balance in the labor market is likely to be restored, and unemployment growth to be limited. The euro and the pound If it is an accurate forecast, the US economy is unlikely to get hurt badly. If a recession is weak and inflation gets back to 2% rather fast, there will be still no reason for an increase in demand for the dollar because analysts do not expect an easy path for the European or British economy. BoE Governor Bailey announced the British economy entered a recession in the third quarter, which may last for 2 years. Meanwhile, the ECB will hardly lift interest rates to 5% because the European Union is not a single country but a union of nations in different financial situations. Some countries will survive high rates painlessly, some may need economic support for quite a long time. By economic aid, we mean new allocations and stimulus programs, and this is something the ECB would like to avoid. Thus, the dollar again looks more promising than the euro and the pound. The sum up Based on the analysis, we may anticipate that the formation of the ascending trend section will become more complex and comprise up to five waves. It may be that the fifth wave of this section is now building up. Therefore, consider buying with targets located above the peak of wave c, based on the reversals of the MACD to the upside. The entire section of the trend after September 28th now has the a-b-c-d-e structure. However, once it is complete, the formation of a new downtrend section may begin.     Relevance up to 05:00 2022-11-10 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/326596
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

The Bank Of England's Gloomy Outlook Should Undermine The Pound (GBP)

TeleTrade Comments TeleTrade Comments 09.11.2022 09:13
EURGBP lacks any firm intraday direction and remains confined in a narrow trading band. Talks for aggressive policy tightening by the ECB underpin the Euro and offers support. The BoE’s gloomy outlook could weigh on the British Pound and favour bullish traders. The EURGBP cross struggles to capitalize on the previous day's modest gains and oscillates in a narrow trading band, just above the 0.8700 mark through the early European session on Wednesday. Talks of a more aggressive policy tightening by the European Central Bank (ECB) continue to benefit the shared currency and offer support to the EURGBP cross. In fact, several ECB policymakers said that higher rates are needed for longer to bring down double-digit inflation in the Eurozone back to its 2% target. This, in turn, pushes the rate-sensitive two-year German bond yield to its highest since December 2008 and is seen acting as a tailwind for the Euro. The British Pound, on the other hand, draws support from the recent slump in the US Dollar and keeps a lid on the EURGBP cross. That said, the Bank of England's gloomy outlook for the UK economy should undermine the Sterling and supports prospects for some upside for the cross. It is worth recalling that the UK central bank forecasts a recession to last for all of 2023 and the first half of 2024 while indicating a lower terminal peak than is priced into markets. The fundamental backdrop suggests that the path of least resistance for the EURGBP cross is to the upside and any slide below the 0.8700 round figure could be seen as a buying opportunity. Bulls, however, might wait for a sustained strength beyond the 0.8775-0.8780 resistance zone before placing fresh bets amid absent relevant market-moving economic releases. The market focus now shifts to the release of the Preliminary UK Q3 GDP report on Friday.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

The UK Demanding That The European Court Of Justice Be Stripped Of Its Role In Settling Brexit Disputes

InstaForex Analysis InstaForex Analysis 09.11.2022 12:09
UK and the European Union are rumored to be close to a major breakthrough in the months-long dispute over Northern Ireland's post-Brexit trading rules. Initially, the problem threatens a full-scale trade war, but the current crisis in which both regions experience record inflation seem to have made authorities do everything to find common ground. According to reports, the EU has begun testing the current UK database that tracks goods moving from the UK mainland to Northern Ireland. If they are satisfied with the system's performance, an agreement on customs checks in the Irish Sea may be signed. This recent upswing regarding negotiations allows Prime Minister Rishi Sunak's government to hope the deal will defuse tensions in the region and help the government resolve a number of problems. However, another key point to be addressed is the UK demanding that the European Court of Justice be stripped of its role in settling Brexit disputes in the region, which is not acceptable to the EU. The representative of the European Commission declined to comment on the progress of the talks, as did the British Foreign Office. Nevertheless, resolving the issue is beneficial as it would help correct supply chain disruptions and ease price pressures, especially if the Bank of England continues to increase rates at the current pace, which could push GDP down by up to 3.0% next year. GBP/USD In terms of GBP/USD, buyers are now focused on defending the support level of 1.1510 and breaking through the resistance level of 1.1590. This limits the upside potential as only a breakdown of 1.1590 will lead to a rise to 1.1690, 1.1730 and 1.1780. If pressure returns and sellers take control of 1.1510, the pair will drop to 1.1430 and 1.1360. EUR/USD In EUR/USD, sellers are not very active yet, so buyers have a chance to push the pair above 1.0090. A breakdown will spur growth to 1.0140, while a drop below 1.0030 will push euro back to 0.9970, 0.9920, 0.9880 and 0.9830.   Relevance up to 08:00 2022-11-10 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/326624
There Are No Obvious Reversal Of GBP/USD Pair Signs Yet

The Pound (GBP) Has Neither Economic Grounds For Growth

InstaForex Analysis InstaForex Analysis 10.11.2022 08:48
The GBP/USD currency pair also began to adjust on Wednesday but, at the same time, failed to overcome the moving average confidently. As in the case of the euro currency, the pair failed to update its last local maximum, so there are certain reasons to assume that the upward trend will be completed at this point. Recall that just a few days ago, the price overcame the Senkou Span B line on the 24-hour TF, which opens up good prospects for it. However, the fundamental and geopolitical backgrounds remain such that it is very difficult to believe in the pound's growth over a long distance. Moreover, we still believe that the growth of the British currency in the last few days was illogical. This week, there was no important macroeconomic event in the US or the UK. At the expense of what did the pound grow then? Thus, we still believe that the pair's fall is more likely than its growth. Recall that bitcoin has been around the important $18,500 level for several months, bouncing 15 or 16 times. But in the end, when everyone thought growth had begun, he took "acceleration" before breaking through the "reinforced concrete" level. Therefore, we can observe something similar in currency pairs. Perhaps the movement we are seeing now is illogical and groundless – it's just an attempt by traders to drive the pairs higher so that they can sell at a more favorable rate. Recall that the UK and its economy are no longer just on the verge of recession. They already have one foot in this "swamp." This Friday, a report on GDP for the third quarter will be published, likely to turn out negative and will be the first in a series of failed reports. Thus, the pound has neither economic grounds for growth nor the support of the Bank of England nor geopolitical grounds. Interim results of the US parliamentary elections One of the most interesting recent topics has been the US Parliament's midterm elections. We want to make a reservation right away that the fall of the dollar is unlikely to be related to them since, at the moment, it is not even clear who will establish control over both chambers. Yes, the interim results speak in favor of the Republicans, but this statement is true only for the lower house. Currently, 199 seats out of 435 go to Republicans and 172 to Democrats. That is, the fate of 64 more seats is still unknown, and even the current leadership of the Republicans can be lost easily. Experts note that the second round of voting may be required in some states, which will occur no earlier than December. In some states, the votes have not yet been fully counted, and the results are very close, so the scales may tilt in either direction. Experts also believe that final results should not be expected in the coming days because counting millions of votes is not a fast process. There are states where the results are obvious, and all votes need not be considered for intermediate results. But such a picture does not develop everywhere. As for the Senate, the Republicans are leading by a margin of 1 vote. However, the fate of 5 more senators remains unknown, so the Democrats can calmly level the gap here. Recall that with equal seats in the Senate, of which there are only 100, the decisive vote will remain with Kamala Harris, who is a representative of the Democratic Party. Therefore, Democratic senators need to get three votes out of the remaining 5 to win the election to the Senate. If Republicans win in the House of Representatives, they will be able to block some of the Democrats' decisions, but they will not be able to make their own decisions alone. Both ruling parties will have to negotiate with each other on all important issues, which is perhaps even good. The average volatility of the GBP/USD pair over the last five trading days is 228 points. For the pound/dollar pair, this value is "high." On Thursday, November 10, thus, we expect movement inside the channel, limited by the levels of 1.1152 and 1.1607. A reversal of the Heiken Ashi indicator upwards will signal a new round of upward movement. Nearest support levels: S1 – 1.1353 S2 – 1.1292 S3 – 1.1230 Nearest resistance levels: R1 – 1.1414 R2 – 1.1475 R3 – 1.1536 Trading Recommendations: The GBP/USD pair has started a new downward movement in the 4-hour timeframe. Therefore, at the moment, you should stay in sell orders with targets of 1.1230 and 1.1152 until the Heiken Ashi indicator turns up. Buy orders should be opened when fixing above the moving average with targets of 1.1536 and 1.1607. Explanations of the illustrations: Linear regression channels – help determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-11-11 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/326709
Bank of England survey highlights easing price pressures

The UK Central Bank (BoE) Expects A Recession To Last For All Of 2023

TeleTrade Comments TeleTrade Comments 10.11.2022 09:51
EURGBP lacks any firm intraday direction and oscillates in a range on Thursday. A combination of factors, however, continues to act as a tailwind for the cross. Talks for aggressive tightening by the ECB underpin the Euro and offers support. The BoE’s bleak outlook for the UK economy supports prospects for further gains. The EURGBP cross is seen oscillating in a range, around the 0.8800 round-figure mark through the early European session and consolidating the overnight strong gains to a nearly one-month high. The Bank of England's gloomy outlook for the UK economy turns out to be a key factor behind the British Pound's relative underperformance and acts as a tailwind for the EURGBP cross. In fact, the UK central bank expects a recession to last for all of 2023 and the first half of 2024. Moreover, the BoE last week indicated a lower terminal peak than was priced into the markets. The shared currency, on the other hand, continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). Several ECB policymakers, including President Christine Lagarde, indicated that the central bank will keep raising rates aggressively to tackle red-hot consumer inflation, which accelerated to a record high of 10.7% in October. This, in turn, pushed Germany’s short-dated yields to fresh multi-year highs earlier this week and adds credence to the near-term positive bias for the EURGBP cross. Even from a technical perspective, the previous day's sustained move and acceptance above the 0.8775-0.8780 supply zone support prospects for an extension of a nearly three-week-old uptrend. There isn't any major market-moving economic data due for release on Thursday, either from the Eurozone or the UK. Hence, the focus remains on the Preliminary UK Q3 GDP print on Friday. Investors will also look forward to British Finance Minister Jeremy Hunt's fiscal statement on November 17. Nevertheless, the fundamental backdrop seems tilted in favour of bullish traders.
Positive Shift in Inflation Structure: Core Inflation Falls in Hungary

RICS House Price Balance Is Below Zero | Inflation Data From Both Americas Are Ahead

Kamila Szypuła Kamila Szypuła 10.11.2022 11:30
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/
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The British Central Bank’s (BoE) Plan To Sell Gilts

TeleTrade Comments TeleTrade Comments 11.11.2022 08:42
GBPJPY struggles to extend the daily gains amid sluggish yields, pre-data anxiety. Optimism surrounding Brexit, BOE’s next move keeps buyers hopeful but fears of Japan’s meddling test upside. Yields dropped after US inflation data amplified risk-on mood. Fears that UK Q3 GDP will amplify recession woes weigh on the prices. GBPJPY prints mild gains around 165.80 while snapping a three-day downtrend at the lowest levels in a month. In doing so, the cross-currency pair struggles to cheer the Japanese Yen’s (JPY) weakness amid cautious optimism in the UK. The reason could be linked to the bank holiday in the US and anxiety ahead of the UK’s preliminary Gross Domestic Product (GDP) figures for the third quarter (Q3) of 2022. Firmer equities in the Asia-Pacific region join the hopes of Japan’s meddling to defend the JPY to exert downside pressure on the Yen. Also likely to have favored the GBPJPY price could be the mixed readings of Japan’s Producer Price Index (PPI) for October, stronger-than-expected on YoY but matching forecasts on MoM. Talking about the risks, an eight-month low print of the US Consumer Price Index (CPI) allowed the US Federal Reserve (Fed) policymakers to back easy rate hikes and drown the US Dollar, which in turn helped the market sentiment to bolster. Amid these plays, Asian stocks rise but the S&P 500 Futures struggles for clear directions around a two-month high. It should be noted that the US 10-year Treasury yields remain inactive around the monthly low near 3.81%, flashed on Thursday, after registering the heaviest slump since early December 2021. Also challenging the GBPJPY buyers, other than the sluggish yields, are fears emanating from China’s covid conditions and anxiety ahead of Monday’s meeting between US President Joe Bide and his Chinese counterpart Xi Jinping. At home, UK PM Rishi Sunak’s optimism to solve the Brexit issue appears to defend the GBPJPY buyers of late. “British Prime Minister Rishi Sunak said on Thursday he was pleased with the progress the government was making on resolving a long-running post-Brexit trade row with the European Union over Northern Ireland,” reported Reuters. Furthermore, headlines from the Bank of England (BOE), suggesting the British central bank’s plan to sell gilts, also favor the pair buyers. “The Bank of England said on Thursday that from Nov. 29 it would start to sell back to the market some of the 19 billion pounds ($22 billion) of long-dated and index-linked gilts which it bought last month to quell market turmoil,” said Reuters. Looking forward, the UK Q3 GDP is expected to print -0.5% QoQ figure versus 0.2% prior and may recall the pair bears. However, fears of a recession are already priced-in and hence a surprise positive could have a welcome reaction. Also read: UK GDP Preview: Barrelling toward recession. Pound Sterling set to fall? Technical analysis Although a downside break of the one-month-old ascending trend line, around 166.75 by the press time, keeps sellers hopeful, the 100-day EMA challenges the bears around 164.25.    
Bank of England survey highlights easing price pressures

September’s GDP In UK Hit Was Unrelated To The Funeral Of Queen

ING Economics ING Economics 12.11.2022 08:08
UK recession coming as economy begins to contract Not all of the latest weakness in UK GDP is explained away by September's extra bank holiday, and we're expecting further declines in output over the coming quarters. As the cost of living squeeze continues, we expect a 2% hit to GDP by next summer, though much depends on how the government's energy support evolves between now and then. Queen's funeral added to September's GDP hit The UK economy shrank by 0.2% in the third quarter of the year, marking the start of what’s likely to morph into a recession spanning several quarters. Admittedly that’s less bad than expected, partly because August’s data was revised more favourably. Unsurprisingly these latest figures are also somewhat skewed by the extra bank holiday in September, which marked the Queen’s funeral. Workplaces – including many that would typically be open on a bank holiday – were reported to be temporarily closed. GDP fell by 0.6% during September as a result. That muddies the water when it comes to assessing the underlying strength of the economy, and probably also means the fourth quarter figures will be a little higher than they otherwise would be, assuming the lost activity returns in October. Further weakness is coming Nevertheless, there are unmistakable signs that the economy is slowing. The ONS hints that at least some of September’s GDP hit was unrelated to the funeral, while retail sales have now fallen for two consecutive months. We expect a further decrease in data released next week. We also expect to see a similar trend in hospitality over the coming months, which has been operating well above pre-pandemic levels for some time on the back of renewed consumer interest. Lower consumer spending appetite is likely to help push GDP into a second-straight contraction during the fourth quarter. We’re pencilling in a 0.3% hit to economic activity, the same as the Bank of England. As the winter wears on, we also expect to see more strain emerge in manufacturing and construction – both of these sectors suffered noticeably during the 1990s and 2008 recession. The fall in manufacturing new orders, linked to falling global consumer demand for goods and rising inventory levels, as well as higher energy costs, point to lower production by early 2023. Likewise, the sharp rise in mortgage rates, and the very early signs of house price declines, point to weaker building activity through next year. A winter recession looks highly likely Wrapping that all together, we currently expect a cumulative hit to GDP of roughly 2% by the middle of 2023. That would be a comparable hit to the 1990s recession, and is somewhere between the Bank of England’s two forecasts released last week – one that was premised on no further rate hikes (rates constant at 3%), and one which assumed a terminal Bank Rate of 5%. We expect Bank Rate to peak at around 4%. Ultimately a lot will depend on next week’s budget announcements. A lot of the focus understandably will be on how the Chancellor closes the forecasted fiscal deficit in 2026/27. But above all, we’ll be looking for details on how the government will make its energy support less generous from April, something which has the greatest scope to reshape the 2023 outlook. The Chancellor has signalled support for households will become more targeted in a bid to make the policy less costly. The challenge here is that there’s no easy way of targeting support efficiently, and it may be that the Chancellor simply differentiates households by whether they receive means-tested income support. The upshot is that we could see the majority of households shift back to paying the Ofgem-regulated price, which is updated quarterly. The sharp fall in wholesale gas prices could see most households paying £3,300 on average during FY2023, compared to £2,500 annually under the government guarantee. That would equate to roughly 9% of household disposable income and would add a further drag to overall economic activity next summer. TagsGBP Energy crisis   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
Asia Morning Bites: Inflation Data in Focus, FOMC, ECB, and BoJ Meetings Ahead

The Polish Economy Is Clearly Slowing Down And Core Inflation Momentum Is High

ING Economics ING Economics 12.11.2022 08:15
Next week UK chancellor Jeremy Hunt will deliver his Autumn Statement. Exactly how the fiscal deficit will be closed remains uncertain – we believe there will be more noticeable cuts to investment spending. Data-wise, October's CPI reading will mark the peak in UK inflation, given energy will be fixed over the coming months In this article US: Fed officials will have to tread carefully regarding hiking expectations UK: Autumn Statement in focus amid busy data week Poland: inflation remains broad-based and core inflation momentum is high Source: Shutterstock US: Fed officials will have to tread carefully regarding hiking expectations The low CPI print from the US this week has boosted expectations that the Federal Reserve will raise interest rates by “only” 50bp in December after four consecutive 75bp hikes. However, the Fed will be nervous that Treasury yields fell so far as some market participants interpreted the number as an indication that the Fed’s work is nearly done. However, Fed officials won't want to signal that yet as it will reinforce a loosening of financial conditions that could undermine all the hard work in trying to constrain inflation. We expect to hear some fairly hawkish rhetoric over the coming days, messaging that while there likely will be a moderation in the size of rate hikes, inflation is not defeated and there is likely to be a higher terminal interest rate than the central bank signalled in September. In terms of data, we have retail sales, industrial production, producer price inflation, housing starts and existing home sales. Moderate growth is likely to be the order of the day in the activity reports, while the housing numbers will be soft due to the rapid rises in mortgage borrowing costs that have prompted a collapse in demand. PPI should come in on the softer side of expectations, thanks to falling commodity prices and freight costs plus the strong dollar and easing supply chain pressures. UK: Autumn Statement in focus amid busy data week Markets have generally given new UK prime minister Rishi Sunak and his chancellor Jeremy Hunt the benefit of the doubt when it comes to next week’s Autumn Statement. That’s partly because these announcements will be accompanied by new forecasts from the Office for Budget Responsibility – something that was lacking when the ill-fated mini-budget was announced in September. Investors no doubt expect the Chancellor to do enough to convince the OBR that debt will fall across the medium-term, closing a fiscal deficit that would probably otherwise be £30-40bn/year by 2026-27. Exactly how that will be achieved remains somewhat uncertain, and pretty much every possible lever available to the Chancellor has been touted in the press at some point over the past few weeks. Recent reports suggest the Treasury will rely more on spending than taxes to do the heavy lifting. But given the real-term cuts (in some cases sizable) already facing certain government departments, it may be that this means more noticeable cuts to investment spending. For the economy, much will depend on how much of the burden is placed on consumers via higher taxation, and how immediately those changes come through. But we’ll also be looking out for further detail on how the government intends to re-structure its flagship Energy Price Guarantee. The price cap, which had been due to last for two years, will be scaled back from April. Our working assumption is that most households will be shifted back to the Ofgem regulated price, which we estimate will average £3,300 annually based on current futures prices, up from £2,500 at the current government-guaranteed level. We also have a few key pieces of data: Jobs (Tue): Hiring indicators have begun to turn lower, but so far there’s been little-to-no sign of increased redundancies. Firms continue to face material staff shortages, driven in part by rising rates of long-term sickness in older workers. We expect the unemployment rate to remain low next week, and greater scope for "labour hoarding" compared to previous recessions could feasibly limit how far and fast unemployment rises over the coming month. Inflation (Wed): Famous last words but October’s inflation data is likely to mark the peak in UK CPI – or there or thereabouts. This data will include the latest rise in electricity/gas prices, but given they’re now being fixed by the government until at least April, their contribution has probably peaked. Still, headline inflation is unlikely to slip back into single digits until March/April next year. Retail sales (Fri): We expect a third consecutive month-on-month fall in sales as the cost of living squeeze continues to bite. Poland: inflation remains broad-based and core inflation momentum is high Current account (Sep): €-3025mn The external position remains under pressure and we expect another wide current account deficit for September amid a deep foreign trade imbalance and unfavourable secondary income balance, as September was a month when Poland paid more to the EU budget than received from it. On a 12-month cumulative basis, the current account is projected to have expanded to 4.1% of GDP vs. 3.9% of GDP in August. CPI (Oct): 17.9% YoY We expect the flash estimate of 17.9% year-on-year to be confirmed by the final data. Prices of petrol went up by 4.1% month-on-month and energy for housing by 2.0% MoM, so the energy crisis is not over yet. At the same time, prices of food and non-alcoholic beverages jumped up by 2.7% MoM as farmers, food manufacturers and retailers continue to pass on higher costs of energy and transport onto their final products. Inflation remains broad-based and core inflation momentum is high. We estimate that core inflation excluding food and energy prices went up by 1.2% MoM i.e. 11.2% YoY in October vs. 10.7% YoY in September. GDP (3Q22): +3.5% YoY The recent revision of national accounts point to an even stronger 1H22 and increases the upside risk to our forecast of 2022 GDP at 4.3%. We forecast that in 3Q22, GDP bounced back after declining by 2.1% quarter-on-quarter seasonally-adjusted in 2Q22, but annual growth moderated toward 3.5% YoY. The Polish economy is clearly slowing down and a strong performance in 1H22 has created a high reference base for 2022 so we expect dismal annual GDP figures at the beginning of 2023 and risks to our 1.5% forecast for the next year are increasingly skewed to the downside. Developed Markets Economic Calendar Source: Refinitiv, ING EMEA Economic Calendar Source: Refinitiv, ING This article is part of Our view on next week’s key events   View 2 articles TagsTreasury Federal Reserve EMEA   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
Economic Calendar Details and Trading Analysis - August 7 & 8

In India Headline Inflation Is Expected To Ease | How Quickly Growth Is Slowing In Europe

Craig Erlam Craig Erlam 12.11.2022 08:29
US After a round of soft inflation data triggered a buy-everything relief rally, Wall Street will focus on Fed speak and a plethora of data points that might show the economy remains resilient.  The key economic readings include manufacturing activity, retail sales, and housing data. There will be no shortage of appearances by the Fed this week. Brainard and Williams speak on Monday, while Tuesday includes speeches by Harker, Cook, and Barr. Wednesday brings Williams, Barr, and Waller, and on Thursday we will hear from Bullard, Bowman, Mester, Jefferson, and Kashkari. In addition to a swathe of economic releases, traders will also closely monitor big retail earnings from Walmart, Target, Macy’s, and Kohl’s. We should learn more about the health of the consumer and if we should expect a further easing of prices as we enter the holiday season. EU  It’s a relatively quiet week for the EU with the two standout economic releases being flash GDP and final HICP. With the economy facing a recession, the GDP data will be an interesting insight into how quickly growth is slowing going into an uncertain winter. The inflation data will naturally be of interest but it may take a significant revision to really grab investors’ attention. UK The Autumn statement has been a long time coming, it feels. The markets have calmed down a lot since the ridiculous mini-budget but it will still take time for the government to regain credibility and the confidence of the markets. It starts next week and all eyes will be on Parliament as we learn how the new government plans to balance the books while not piling more misery on the economy. The BoE monetary policy report hearing next week is another highlight but there’s also a lot of economic data due. The path for interest rates remains uncertain so it’s not just what policymakers have to say that matters, it’s whether the data allows them to slow the pace of tightening going forward as they so clearly want to do. CPI on Thursday is the obvious highlight but there’s plenty more throughout the week. Russia A quiet week with no economic data of note. South Africa Another quiet week with the only economic release being retail sales on Wednesday. Turkey No major economic releases next week, with investors still focused on the central bank and inflation. Switzerland Tier three data dominate next week. Focus remains on what the SNB will do in December, with Chair Jordan acknowledging on Friday that monetary policy isn’t restrictive enough to bring inflation back into the range of price stability over the medium term. The risk of a pre-meeting rate hike remains. China Weeks of speculation around China’s commitment to its zero-Covid policy have spurred a recovery in local stocks and we may be about to get more information on what that will entail. A relaxation of quarantine measures has been announced in recent days and a press briefing is now reportedly scheduled for Saturday. At the same time, China is seeing a steady rise in Covid cases resulting in more restrictions and mass testing.  China’s October retail sales, industrial production, and investment data will be released next week.  The PBOC is also expected to keep its one-year medium-term lending facility rate at 2.75% in November.   India A key inflation report could show pricing pressures are easing which might allow the RBI to be less aggressive with its tightening path.  Headline inflation is expected to ease from 7.4% to 6.7%.    Australia & New Zealand The focus for both Australia and New Zealand might stay on China and their weakening outlook due to their struggles with COVID.  Australian employment data is expected to show job growth continues, while unemployment remains at 3.5%. Wage pressures in the third quarter are expected to rise, but some of that is attributed to the increase in the minimum wage.    In New Zealand house sales data and producer prices will be released. Japan Japan’s third-quarter GDP reading is expected to show significant weakness as import costs skyrocketed.  Japan’s core inflation is also expected to surge from 3.0% to 3.5%, which should clearly weigh on consumer spending.  Given the weakness in the US dollar, the BOJ might save its ammunition and hold off intervening anymore in the foreign exchange market. Singapore It is expected to be a quiet week with the exception of non-oil domestic export data.   Economic Calendar Sunday, Nov. 13 Economic Data/Events China medium-term lending The ASEAN summit concludes in Cambodia. Monday, Nov. 14 Economic Data/Events Eurozone industrial production India trade, CPI, wholesale prices New Zealand performance services index Fed’s Williams moderates a panel at the Economic Club of New York ECB’s Fabio Panetta speaks in Florence ECB’s de Guindos speaks in Frankfurt. BOJ announces the outright purchase amount of Japanese government securities Tuesday, Nov. 15 Economic Data/Events US empire manufacturing, PPI France CPI Poland CPI  Eurozone GDP Hungary GDP Canada existing home sales China retail sales, industrial production, surveyed jobless France unemployment Germany ZEW survey expectations Japan industrial production, GDP Mexico international reserves New Zealand home sales, net migration South Korea export/import price index, money supply UK jobless claims, unemployment G-20 summit in Bali IEA monthly oil market report ECB’s Elderson speaks Fed’s Harker speaks at GIC Annual Monetary & Trade Conference Former US President Trump is due to make an announcement in Florida RBA releases minutes of its November interest rate meeting Wednesday, Nov. 16 Economic Data/Events US business inventories, cross-border investment, retail sales, industrial production Australia leading index Canada CPI, housing starts China property prices Israel GDP Italy CPI Japan machinery orders, tertiary index, department store sales Philippines Bloomberg economic survey Russia GDP South Africa retail sales UK CPI EIA crude oil inventory report G-20 summit in Bali BOE Gov Bailey appears before the Treasury committee   Fed’s Williams and Brainard, SEC’s Gensler speak at the 2022 Treasury Market conference ECB Financial Stability Review ECB President Lagarde speaks ECB’s Fabio Panetta speaks Thursday, Nov. 17 Economic Data/Events US housing starts, initial jobless claims Italy trade Singapore trade Australia unemployment China Swift payments Eurozone CPI, new car registrations Hong Kong jobless rate Japan exports, trade balance New Zealand PPI Singapore non-oil exports UK fiscal statement, economic forecasts Fed’s Kashkari and Jefferson speak at the Federal Reserve Bank of Minneapolis Fall Institute Research Conference Fed’s Mester speaks at the Federal Reserve Bank of Cleveland and the Office of Financial Research Annual Financial Stability Conference Fed’s Evans speaks ahead of his retirement BOE’s Silvana Tenreyro speaks SNB’s Maechler speaks at Money Market Event in Geneva BOE’s Huw Pill speaks at the Bristol Festival of Economics on ‘What Next for Central Banks’ Friday, Nov. 18 Economic Data/Events US Conference Board leading index, existing home sales Norway GDP Japan CPI Thailand foreign reserves, forward contracts, car sales ECB President Lagarde, Nagel, and Knot speak alongside BOE’s Mann Fed’s Collins speaks at the Federal Reserve Bank of Boston Economic Conference BOE’s Jonathan Haskel speaks Sovereign Rating Updates Italy (Fitch) Sweden (Fitch) Turkey (Fitch) Ireland (S&P) South Africa (S&P) Portugal (Moody’s) South Africa (Moody’s) Denmark (DBRS) 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 UK Economy Looks Worse Than The Rest Of The G7 Countries

UK Data Shows A Less Tragic Slowdown Trajectory

Alex Kuptsikevich Alex Kuptsikevich 12.11.2022 08:48
The pound rally gained new momentum on Friday morning, following a respite after the 3% rise in GBPUSD on Thursday. The British currency was supported predominantly by better-than-expected economic data and comments from the Governor of the Bank of England on the intention for further rate hikes. Forecast The UK economy contracted by 0.2% in the third quarter - noticeably less than the forecasted drop of 0.5%. One year ago, growth in the same period diminished to 2.4% after 4.4% in the second quarter and +2.1% expected. For September, the economy contracted by 0.6%, following a decline of 0.1% in August. Industrial production and manufacturing Industrial production added 0.2% in September, losing 3.1% y/y. Manufacturing is more challenging, holding on to volumes in September after contracting by a cumulative 2.9% in the previous three months. Separately, there is an improvement in the balance of foreign trade. The monthly deficit decreased to 15.6bn compared to 17.2bn a month before, 16.1bn a year ago and a peak of 23 in January. However, this is well above 'normal' levels from 2013 to 2019, near 12bn. Exports are up 46% y/y, or 11.8bn and imports are up 27% or 11.4bn. UK economy The UK economy has started to contract without surprises, evidenced by earlier labour market figures. Nevertheless, so far, it is a softer landing than previously feared. GBP/USD Nevertheless, it is essential for market participants that the published data shows a less tragic slowdown trajectory and that the decline in commodity prices in recent months is easing the pressure on imports and industry. In this environment, there are more and more reasons for long-term buying of the British pound, which renewed its historic low against the dollar in September. As a result, the GBPUSD is now above 1.1750, having beaten off losses since August. The rise in the British currency also shows signs of breaking the downtrend as GBPUSD has surpassed previous local highs and has consolidated above the 50-day average. On the technical analysis side, GBPUSD may encounter little resistance up to the 1.20 area by the end of the month, where the bulls will still have to prove their strength.
UK Budget: Short-term positives to be met with medium-term caution

Markets Have Challenged The Bank Of England's (BoE) Stance

ING Economics ING Economics 13.11.2022 09:50
2023 will be the year the UK yield curve re-steepens. Bank of England hike expectations are still too high and recession fears will bite. Long-dated gilts will continue to trade with a political risk premium but the 10yr will converge to 3% by the end of the year In this article The long and arduous road to regaining credibility Re-steepening in the cards Market liquidity remains a challenge Source: Shutterstock The long and arduous road to regaining credibility 2022 was a bruising year for gilts and GBP rates in general. The bar for a more stable 2023 is not a very high one to clear. Yet, it will take a long time to restore market confidence. UK markets had to deal with a uniquely adverse interplay between fiscal and monetary policy, effectively undoing each other’s work. We would love to say that this is a thing of the past and that the two main institutions in charge of the UK’s economy, the Treasury and the BoE, are now coordinating better. Sadly, this is far from certain. Sterling-denominated assets are justified to trade with a greater risk premium In letting the Treasury feel the force of market pressure, the BoE may have won a battle but left the persistent impression that it will only step back into the bond market when it absolutely has to, as it did in September 2022. Barring a more severe crisis of this sort, sterling-denominated assets are justified to trade with a greater risk premium than previously. Our base case is for the fiscal tightening promised by the incoming government to be delivered at least in part. This, in turn, will ultimately close the gap between hawkish market expectations for monetary policy, in part justified by hopes of intervention to defend the currency, and ours. Markets have challenged the BoE’s stance ever since the start of this tightening cycle. Tighter fiscal policy is a potential catalyst for this to happen although we’re not holding our breath here. A severe recession could also go some way to convincing market participants that rates aren’t heading as high as current pricing suggests. Gilt yields should decline to 3% in 2023, but will continue to trade with a political risk premium Source: Refinitiv, ING Re-steepening in the cards Our working assumption for 2023 is that we’ve seen the peak in market interest rate hike expectations. Markets routinely priced a terminal rate above 5% in late 2022 but we think a more realistic figure is between 3.5%-4%. Even in the case of persistent inflation, this leaves some margin for front-end rate rates to fall further, especially since the end of the BoE's hiking cycle will likely bring expectations of rate cuts, with Bank Rate ending this cycle above what most would describe as the neutral level. We expect 2Y Sonia swaps to fall below 4% by mid-2023 We expect 2Y Sonia swaps to fall below 4% by mid-2023 as cuts come into view but we think longer-dated rates will retain a significant risk premium. This implies that 10Y swap rates will struggle to fall as fast as their shorter equivalent even in the event of a more dovish BoE. Firstly, this is because the Sonia swap curve is already dramatically inverted, and so a re-pricing at the front end would likely re-steepen the curve. Secondly, because the scars of the long-end market meltdown in September/October will take time to heal and we think duration/term premium is here to stay. All this is to say we expect a comparatively smaller drop in 10Y swap rates over the course of 2023. Translating this to 10Y gilt yields, we think 3% is an achievable target by year-end. 2023 will see the GBP swap curve gradually dis-invert Source: Refinitiv, ING Market liquidity remains a challenge Market functioning will remain an issue for sterling-denominated markets for some time. Liquidity indicators in the gilt and swaption markets certainly point to decreased risk-taking ability on the part of participants, also pointing to greater transaction costs. Policy choices may have exacerbated market functioning issues in 2022 but the underlying cause, macroeconomic uncertainty, could persist for a quarter or two in 2023, provided our forecast for a gradual decrease in inflation proves correct.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsSterling Outlook Interest Rates   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  
Nasdaq 100 Underperforms and Faces Key Resistance - Technical Analysis and Market Outlook

Markets Are Left More Susceptible To Credit Events

ING Economics ING Economics 13.11.2022 10:00
The rapid tightening of monetary policy and significant outlook uncertainty is straining the system and testing the markets' capacity to absorb risks. The UK has shown how sketchy market liquidity can quickly lead to a solvency issue. Central bank ambitions to tighten could be frustrated if confronted with material pressure on the system In this article The financial system is vulnerable amid deteriorating market liquidity From home grown risks ... ... to outside triggers Suppression of money market risks about to fade The financial system is vulnerable amid deteriorating market liquidity As we approach the start of a new year, markets remain in a fragile state. At its foundation is the issue of market liquidity. Many of the common indicators of market liquidity are now at worse levels than they were at the peak of the Covid-19 pandemic. Take bid-offer spreads for government bonds, the go-to safe and supposedly most liquid of assets, which still reside at exceptionally wide levels. High realised and implied market volatility, while also an effect of central banks moving into action and a sign of the uncertainty surrounding the outlook, are straining the market’s capacity to absorb risk and lead to higher costs for market making. Wider gilt bid-offer spreads show that markets are increasingly dysfunctional Source: Refinitiv, ING   A liquidity problem can quickly morph into a solvency issue. This is what the UK recently experienced when the government’s expansionary fiscal plans sent shockwaves through gilt markets. Fears of higher issuance and a more hawkish Bank of England (BoE) reaction sent rates higher, but it was the pension funds' leveraged positions and ensuing margin calls that led to the situation spiralling out of control, eventually forcing the BoE to step in with purchases of long-end gilts, as well as forcing it to revisit fiscal plans.    From home grown risks ... On the back of the UK experience, the fiscal factor has received more attention as a potential trigger of market moves that could eventually put market liquidity to the test. The initial impact on rates can work via the sheer supply and credit channel, but currently also via the anticipated central bank response if the fiscal developments are seen to have a clear inflationary effect. A fiscal trigger for sudden moves may look less likely in the euro area and US political setups ... Substantial government programmes to support economies in light of surging energy prices have been set up or at least flagged in the euro area. One would think that the political decision process in the euro area – as well as in the US – as an aggregate makes the central bank response channel a trigger for sudden repricing less likely than what was witnessed in the UK. But if the economic slump deepens and another winter with potentially limited energy supply looms, one cannot exclude markets starting to focus on fiscal sustainability again. Euro sovereign spreads remain a cause for concern, but are holding up better than expected Source: Refinitiv, ING   This happens against the backdrop of central banks running down their balance sheets, leading to an increased net government debt supply that private investors will have to absorb. The Federal Reserve has been in the process of quantitative tightening (QT) for some time, the BoE just started this November – with the notable hiccup in gilt markets surrounding the pension funds – and the European Central Bank (ECB) is slated to begin in 2023. ... but sovereign debt crisis fears still linger amid ECB quantitative tightening It seems obvious to look at government bond auction metrics which have already suffered, though those are also a reflection of a limited desire for duration risk rather than the credit itself. However, with a view to the eurozone and its experience of the 2012 sovereign debt crisis burnt into collective memory, it is not too hard to imagine how a combination of political choices and geopolitical events could again sour investor confidence. The ECB has put in place a backstop – the Transmission Protection Mechanism – but being tied to conditionalities, its effectiveness could be blunted. ... to outside triggers Of the outside factors that could put the financial system’s capabilities to the test, geopolitical risks are one of the more obvious given the ongoing conflict in Ukraine. A sudden escalation, and in particular an immediate impact on energy prices, could put central banks in a tough spot as their inflation goals move further into the distance, requiring more forceful action while the economic backdrop takes a heavy blow, further straining public and private finances. One of the outside risk factors, however, relates to the policies of the Bank of Japan (BoJ) which so far has been an outlier amid the global charge of central banks tightening their policy reins. Importantly, the BoJ is conducting purchases at the long end of the Japanese government bond curve to cap yields. Any sign of the BoJ yield curve control ending could have large knock-on effects on yields outside of Japan. It could trigger another large and potentially sudden hike in global bond yields. Markets are already eying the end of the current BoJ governor’s (Haruhiko Kuroda) term in April 2023. Stable markets are no longer an argument for owning fixed income   Source: Refinitiv, ING Suppression of money market risks about to fade Money markets can be viewed as the plumbing of financial markets, which is also the reason why we have seen central banks acting quickly to intervene here in the past. We are still seeing the effects of this in the high levels of excess reserves within the banking system and the compression of money market spreads. The blanket provision of excess reserves is no longer compatible with the goal of tackling inflation But this suppression of risks is bound to be scaled back as the blanket provision of excess reserves is no longer seen as compatible with the broader policy goal of tackling inflation. Markets are left more susceptible to credit events or sudden dashes for liquidity.   For instance, the term funding provided to banks by the ECB via the targeted longer-term refinancing operations (TLTROs) and the excess of reserves flooding the system has led to a compression of Euribor rates over the risk-free 3m ESTR swap, a spread that has traditionally served as a measure of risks embedded in the banking system. In the United States, one indicator that we like to monitor is where banks print 3-month commercial paper as a spread over the risk-free rate (3mth term SOFR). It’s a simple measure of how easy it is for banks to fund themselves in the short-term market. Currently, this spread is at around 30bp (and European banks are printing at 50-60bp). That’s far wider than it was, but not yet enough to cause any material consternation.   The scaling back of central bank support is adding to the uncertainty investors are already facing as markets are perceived to be more prone to the materialisation of systemic risks, and the UK is considered a warning shot. The implication should be that risk measures can stay elevated or may even have to rise further. The above are only a selection, but it is especially relevant to monitor systemic risk measures while central banks are still tightening policies, in the sense that ambitions to do so will be frustrated if confronted with material negative pressure on the system. Anything that threatens to take the system down, or to risk doing so, is therefore out of the question. It’s also relevant as we progress through the 2023 slowdown/recession period, as any deep recession can pressure the system, as defaults can rocket. In that sense, it can act to accelerate a transition back to interest rate cuts. As such systemic risks could be a more credible reason for a “material pivot” than recessionary fears. After all, tighter policies from central banks are designed to slow growth and tend to accept the risk of recession. But what central banks can’t accept is any threat to the functioning of the system. No need to panic yet, but this is what we really need to be cognisant of.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsRates outlook   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
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

The Bank of England Is Well Advanced On The Way To Quantitative Tightening

ING Economics ING Economics 13.11.2022 10:03
Quantitative tightening and a reduction in central bank liquidity will add upward pressure to long rates. Money market rates were suppressed in 2022. In 2023, they will be free to reflect systemic risks In this article The age of quantitative tightening Counterintuitive and delayed effect on duration The age of quantitative tightening The Federal Reserve will continue to allow US$95bn of bonds per month to roll off its balance sheet over the course of 2023. At the end of 2022, the balance sheet will have shrunk by a little over US$0.5tn, and then a further US$1.1tn is scheduled to be rolled off by the end of 2023. That would be a cumulative reduction of over US$1.6tn if all goes to plan. One issue here, however, is the roll-off over the second half of 2023 would co-exist with interest rate cuts from the Fed. While these may seem at odds with one another, remember that balance sheet roll-off is not outright selling bonds (hard quantitative tightening), it’s just allowing the Fed’s balance sheet to normalise. That can be viewed as a separate exercise to interest rate cuts, at least for a period. QT can be viewed as a separate exercise to interest rate cuts, at least for a period. The Bank of England is also well advanced on the way to quantitative tightening. The first non-reinvestment of a gilt reaching maturity occurred in March 2022, and the first gilt sale took place in November. Overall, the Bank intends to shrink its balance sheet by £80bn a year in the first year through a mix of passive (non-reinvestments) and active (outright sales) QT. This pace may accelerate in future years, but we assume that this is the relevant pace in the near term which, in FY 2023-24, should result in roughly half of that amount in passive and half in active QT. Net QT flow out of key European government bonds in 2023 should be limited   Source: ECB, Refinitiv, ING   The European Central Bank is only at the beginning of this process. QT will start in 2023 with a gradual phasing out of its Asset Purchase Programme redemptions (one of its two QE bond portfolios), followed by the same process for the Pandemic Emergency Purchase Programme (the other portfolio) in 2025. Assuming a 50% APP reinvestment cap for the second and third quarters, and an end in the fourth, the balance sheet reduction should amount to €156bn. Counterintuitive and delayed effect on duration The main effect of QE on markets is to suppress duration premium, the extra yield investors demand as compensation for taking interest risk over long periods of time. There are a variety of models that show how much lower yields are as a result of QE. In the case of the 10yr Bund, our own estimate stands at 230bp. It should also be noted that the effect of QE has typically been priced into yields before purchases actually happened. Markets are, after all, forward looking. We’ve already seen part of the increase in yields that QT should trigger As a general rule, we think it is fair to think of QT as QE in reverse. In our view, central bank balance sheet moves have been well-telegraphed months in advance, and so we’ve already seen part of the increase in yields that this should trigger. Much, however, depends on how long QT lasts. In a world where the process of balance sheet reduction is allowed to continue for years, the upward pressure on yields should gradually build up. QE has supressed Bund yields by 230bp, but don't expect a sharp reversal Source: Refinitiv, ING   We’re more circumspect, however. We think QT poses financial stability risks and central banks will struggle to carry on once their policy focus shifts to easing. As a result, we suspect most of the upward effect on yields has already been felt. This is at least true for treasuries and gilts, and less so for euro rates. If we’re wrong, however, and central banks manage to significantly reduce their balance sheets, then some upside risk to our forecasts will have to be reckoned with. If central banks manage to significantly reduce their balance sheets, then some upside risk to our forecasts will have to be reckoned with What these models have in common is that the impact of QE is greater at longer maturities. At face value, this means QT should exert a steepening effect on the curve. In practice, it hasn’t. The reasons are manifold, but the main one is that the QT effect has been drowned out by central bank hiking cycles, typically a flattening influence on the curve. In places where the sequencing between hikes and QT is clearer, like in the eurozone, there is a better chance of that steepening effect to be visible once the ECB ends its hiking campaign over the course of 2023.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsQuantitative tightening Outlook Interest Rates   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  
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

There Is Ample Room For The Fed To Maintain The Roll-Off

ING Economics ING Economics 13.11.2022 10:09
Central bank balance sheet reduction started in 2022, but it is in 2023 that its effect will be felt in money markets. Expect a better reflection of credit and term premia, and for repo rates to normalise, with liquidity being swapped for collateral In this article US reverse repo volumes and bank reserves to fall in 2023 Repo could see a material move higher as reverse repo volumes drop The end of abundant liquidity Collateral shortage becoming a monetary policy issue US reverse repo volumes and bank reserves to fall in 2023 The way to think about the Fed’s balance sheet in round numbers is to start with its current size at almost $9trn. Of that, there is $2.25trn showing up at the reverse repo facility, $3trn in bank reserves, and most of the rest is cash in circulation (apart from other bits and pieces). So what comes out of reserves has been going into the reverse repo facility. And as the Fed’s balance sheet falls in size through bonds rolling off the front end (soft quantitative tightening), there must be a corresponding fall in bank reserves and/or in usage of the reverse repo facility. How much balance sheet roll-off is required for better balance? We think US$2trn The question then is how much balance sheet roll-off is required in order to bring about a sense of equilibrium between collateral and liquidity. A measure of this need is the $2trn of liquidity that routinely gets shovelled back to the Fed in its overnight reverse repo facility. The large use of this facility is reflective of an ongoing liquidity overflow that manifests in market repo rates struggling to match the rate being offered by the Fed (at 5bp above the fed funds floor). In fact, at times, the SOFR rate (effectively the general collateral rate) has been trading below the funds rate floor, which is not a great look. To help rectify the situation, more available collateral will help, and the counterpart to this is a better balance versus liquidity. The rise in usage of the reverse repo window has coincided with a fall in bank reserves, which are now running at $3trn. These peaked at $4.25trn in the fourth quarter of 2021. The previous low for bank reserves was $1.4trn in 2019, having come from a prior peak of $2.75trn in 2014. Back then, the Fed’s financial crisis-inspired bond-buying programme came to a conclusion (2014), and a bond roll-off then ran through 2018/19. Part of the fall in reserves reflected an uptick in economic activity and an increase in currency in circulation, and a requirement to build a buffer of high-quality liquid assets, the other part was a reduction in the Fed’s balance sheet as bonds rolled off. Fast forward to today and bank reserves are down from the highs, still at a relatively elevated $3trn, but primed to ease lower through 2023. Reverse repo balances should be the Fed liabilities that shrink the fastest in 2023 Source: Refinitiv, ING Repo could see a material move higher as reverse repo volumes drop For 2023, we can see the bond roll-off continuing throughout the year. If things get really tough macro-wise, there may be an argument for the roll-off to be put on pause. But barring the unexpected, there is ample room for the Fed to maintain the roll-off. That could have the direct effect of reducing the use of the Fed’s reverse repo facility. It does not have to, but this facility can wind all the way down to zero, which would be a desirable outcome as the market should not require recourse to repo away from the market. Should things get tight liquidity-wise, the Fed now has a permanent repo facility, where liquidity can be supplied back to the market (with bonds posted to the Fed). Ideally, the Fed should not be required to do large volumes through either of these windows. But they are there as a buffer - a buffer in both directions. 2023 should see an accelerated reduction in usage of the Fed’s reverse repo facility Overall, 2023 should see an accelerated reduction in usage of the Fed’s reverse repo facility. This should coincide with a rise in general collateral rates to above the reverse repo rate, ideally towards the effective fed funds rate. This is typically 8bp above the fed funds floor, compared with 5bp above for the reverse repo rate. Something like 8-10bp over the fed funds floor would be a good area for SOFR to settle at, correlating with a drying up of the usage of the Fed’s reverse repo facility. 2023 should also see bank reserves falling to US$2.5trn, or lower Beyond that, there could also be pressure for bank reserves to ease lower, but these should ease lower by far less than the contraction in the reverse repo volumes. We think reserves could slip down to the $2.5trn area, and if they go lower, we’d be surprised to see them dip below $2trn. This leaves them likely some $1trn above the lows seen before the pandemic but in any case at least $0.5trn above those lows. Lower eurozone liquidity will make Euribor fixings more sensitive to credit risk Source: Refinitiv, ING The end of abundant liquidity Most of the decisions pertaining to the withdrawal of central bank liquidity were taken in 2022, but the effects should only become evident in 2023. Even with central banks in various stages of the QT process, it is clear that their preference would be for a faster withdrawal of liquidity than that produced by a simple reduction of their bond portfolios. In cases where some of that liquidity stems from other policies than QE, for instance, in the case of the ECB’s Targeted Longer-Term Refinancing Operation loans to banks, faster liquidity withdrawal is simply a matter of creating incentives for early repayments. The ECB has taken steps to that end at its October meeting and we’re expecting around half of the €2.1tn TLTRO balances to be repaid by March 2023. You’d be hard-pressed to show the effect of shrinking liquidity in money markets in 2022. This will change The Bank of England has an arduous task at hand. The basic principle is to introduce new facilities to absorb liquidity from banks. This, in effect, is what the Fed’s reverse repo facility is doing in exchange for collateral. The BoE has taken no such steps yet but the repo rates and short gilt yields' reluctance to fully reflect rate hikes might trigger calls for faster liquidity absorption. Truth be told, you’d be hard-pressed to show the effect of shrinking liquidity in money markets in 2022. This will change in 2023. Regardless of the currency zone, the liquidity situation can still be described as plentiful. This, in turn, has resulted in suppressed money market rates. In the case of government bonds and repo, these have diverged further, to the downside, from policy rates. In the case of supposedly credit-sensitive money market rates, they have failed to reflect growing systemic risk and the looming recessions. UK and German bond scarcity is stretching valuations against swaps Source: Refinitiv, ING Collateral shortage becoming a monetary policy issue The other side of the abundant liquidity problem is the shortage of high-quality collateral evident across developed markets, but most prominently making the headlines in the eurozone and UK due to ever-widening swap spreads. On one level, collateral shortage and abundant liquidity are two sides of the same coin: too much money chasing too few assets. On another, regulations and falling unsecured interbank volumes mean the availability of collateral is becoming a problem of money market functioning, which is likely to persist even after liquidity is withdrawn. Both excess liquidity and collateral shortages can be solved with the same tools The good news is that both excess liquidity and collateral shortages can be solved with the same tools, as the Fed's experience has shown. The BoE and ECB both have securities lending facilities, but their use is more anecdotal, and insufficient to keep repo rates close to the policy rates. There have been calls for more ambitious facilities to be put in place. The BoE can point to the existing standing and special repo facilities although the lending rate would have to be raised and gilts would have to be borrowed from the Asset Purchase Facility (QE) portfolio. As is the case in the UK, the ECB can also point to efforts by some institutions, more notably the German Treasury, to release more bonds on repo. More is likely to come, including to finance energy-related spending. Combined with QT, and TLTRO repayments, they will chip away at the collateral scarcity in the eurozone, but we expect the effect to be backloaded to the second half of 2023.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles   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
Soft PMIs Are Further Signs Of A Weak UK Economy

October's Inflation Print May Be Market Moving

Kamila Szypuła Kamila Szypuła 13.11.2022 12:30
Every month a team of specialists in UK collects around 180,000 separate prices of over 700 items covering everything a typical family might buy, such as milk, bread and bananas. The results of analysis is published evry month as CPI report. The October reading report will be published on November 16. Previous data The Consumer Prices Index including owner occupiers’ housing costs (CPIH) rose by 8.8% in the 12 months to September 2022, up from 8.6% in August and returning to July’s recent high. The largest upward contributions to the annual CPIH inflation rate in September 2022 came from housing and household services (principally from electricity, gas and other fuels, and owner occupiers’ housing costs), food and non-alcoholic beverages, and transport (principally motor fuels). On a monthly basis, CPIH rose by 0.4% in September 2022, compared with a rise of 0.3% in September 2021. The Consumer Prices Index (CPI) rose by 10.1% in the 12 months to September 2022, up from 9.9% in August and returning to July’s recent high. Rising food prices made the largest upward contribution to the change in both the CPIH and CPI annual inflation rates between August and September 2022. Inflation Returning to double-digit inflation will be difficult for ministers and the Bank of England. It shows that price increases have not yet reached their peak, despite the energy price guarantee that will reduce gas and electricity bills this winter. September's inflation figures highlight the severity of the UK's inflation crisis and comes as the country is going through a period of economic instability. The central bank will assess rising price pressures against the government's recent changes to unfunded tax cuts, which could help ease inflation in the coming months. Double-digit inflation is expected to continue. And it will increase again to the level of 10.6%. The monthly change is also forecast to increase by 1.2%. Source: investing.com The Outlook Inflation has been on an upward trajectory, and since May this year the pace has accelerated to double digits. Gross domestic product fell 0.2% from the second quarter, a slightly better outcome than the 0.5% decline feared. Overall in the third quarter, service sector output was flat, driven by a fall in consumer-facing services. Retail sales volumes in particular fell 1.9% in the period. The negative data adds to the country’s dampened economic outlook and already depressed consumer sentiment. Some model predicts the UK to enter a recession as early as this year. This is largely due to surges in inflation as the cost of living crisis impacts all demographic groups. The central bank of England expects GDP to continue falling through 2023 and into the first half of 2024. Expectatiosn Here are few reasons why we expect inflation in the UK to fall sharply from the middle of next year. First, the price of energy won’t continue to rise so quickly. The Government has introduced a scheme that caps energy bills for households and businesses for six months. Second, Bank Of England don’t expect the price of imported goods to rise so fast. That’s because some of the production difficulties businesses have faced are starting to ease. Third, there can be less demand for goods and services in the UK. That should mean the price of many things will not rise as quickly as they have done. Source: https://www.ons.gov.uk/, investing.com
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

It Is Very Difficult For The Bank Of England To Make Responsible Decisions

InstaForex Analysis InstaForex Analysis 14.11.2022 09:28
Whatever problems the government and the Bank of England face, they all pale in comparison with the market's belief in slowing down the process of tightening the Fed's monetary policy. The decline in the growth rate of US consumer prices in October from 8.2% to 7.7% and core inflation from 6.6% to 6.3% was the catalyst for large-scale sales of the US dollar. And even the pound, vulnerable due to the weakness of the British economy, managed to soar above $1.18.—last seen at these levels in late August. The sterling rally was much less violent than the euro or the yen due to the presence of significant uncertainty in monetary and fiscal policies of the UK. On November 17, the government is due to present a new plan showing how it intends to close the £50 billion budget gap. Tax hikes will be likely, which, in a recession already in place, looks like cutting the branch you're sitting on. Indeed, the UK GDP sank by 0.2% QoQ in the third quarter. The final figure was less than Bloomberg experts predicted, but Britain remains the only G7 economy that has not yet recovered from the pandemic. Dynamics of the G7 economies In such circumstances, the appearance of "dovish" speeches from representatives of the Bank of England does not look surprising. Silvana Tenreyro believes that repo rate was in restrictive territory even before the 75 bps increase in November to 3%. It's just that monetary restrictions affect the economy with a time lag, and the current level of borrowing costs is enough to bring inflation back to the 2% target. Personally, I have serious doubts about her words, considering the forecasts of Bloomberg experts about the acceleration of consumer prices in the UK in October from 10.1% to 10.4%. According to Investec, this time, the main driver of the CPI acceleration will be energy: in the second month of autumn, electricity bills for British households rose by 27%. At the same time, economists believe that core inflation has slowed from 6.5% to 6.2% amid weakening domestic demand. Thus, it is very difficult for both the government and the Bank of England to make responsible decisions against the backdrop of a recession, the need to put public finances in order and high inflation. However, the GBPUSD is at risk of further gains due to massive sell-offs in the US dollar. Unlike in Britain, inflation in the United States continues to slow down and, most likely, has already passed its peak. This allows the futures market to assume that the federal funds rate will never reach the 5% mark that everyone expected. If so, then the top of the USD index is left behind. Technically, the Three Indians pattern has formed on the GBPUSD daily chart. However, its implementation requires a drop in quotes below 1.155. Until that happens, the sentiment remains bullish. We use the pair's pullbacks followed by a rebound from the supports at 1.175 and 1.165 for purchases.   Relevance up to 07:00 2022-11-19 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/327014
Apple Q3 2023 Results – Surpassing Expectations and Aiming for New Heights

US Dollar (USD) Recovery Keeps A Lid On Any Meaningful Upside For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 14.11.2022 10:58
EURGBP gains some positive traction for the second straight day, though lacks any follow-through. A modest USD rebound is weighing on the common currency and acting as a headwind for the cross. Traders also seem reluctant ahead of this week’s UK macro data and Chancellor Hunt’s statement. The EURGBP cross edges higher for the second successive day on Monday and sticks to its modest intraday gains through the early European session. The cross is currently placed above the mid-0.8700s, though lacks any follow-through buying or bullish conviction. The shared currency continues to draw some support from bets for a more aggressive policy tightening by the European Central Bank (ECB). The British Pound, on the other hand, is undermined by the gloomy outlook for the UK economy. In fact, the National Institute of Economic and Social Research (NIESR) expects the UK GDP growth to be flat in Q4 and noted that the risk of a contraction remains elevated. This, in turn, is seen lending some support to the EURGBP cross. That said, the prospects for further interest rate hikes by the Bank of England act as a tailwind for the Sterling. Apart from this, a modest US Dollar recovery from a nearly three-month low exerts some pressure on the Euro and keeps a lid on any meaningful upside for the EURGBP cross, at least for now. Traders also seem reluctant to place aggressive bets ahead of this week's important UK macro data - the monthly jobs report on Tuesday and the CPI report on Wednesday. Investors will further take cues from the BoE's Monetary Policy Report Hearings on Wednesday and Chancellor Jeremy Hunt’s Autumn Statement on Thursday. This will play a key role in influencing the near-term sentiment surrounding the GBP and determine the next leg of a directional move for the EURGBP cross. In the meantime, spot prices seem more likely to consolidate in a range amid absent relevant market-moving economic releases, either from the Eurozone or the UK.
Riksbank's Role in Shaping the Swedish Krona's Future Amid Economic Challenges

Eurozone Continue To Expect Weaker Production

ING Economics ING Economics 14.11.2022 13:41
The third quarter saw remarkably strong production as easing supply problems helped production growth. Don’t expect this to continue much from here on as new orders, production expectations and increasing inventories point to weakening production ahead Industrial production increased by 0.9% in September and that resulted in a total quarterly increase of 0.5% for 3Q. This was a surprise that added to the positive GDP figure for the quarter. It is most likely caused by fading supply side problems which industry has battled since mid-2020. This is helping backlogs of work to be dealt with, which is boosting production, despite survey data having disappointed consistently over recent months. In September, production categories were a mixed bag, so there was no broad-based improvement in production. Capital goods and non-durable consumer goods production saw strong growth – just like last month – while intermediate, durable consumer goods, and energy production all declined. Germany was the only large country that recorded growth, while France, Spain and Italy all saw production contract. While August and September both saw surprisingly strong production, there is little hope for this to be the start of a strong recovery. Businesses continue to report falling new orders as demand is fading and inventories have increased. For the winter months we, therefore, continue to expect weaker production as the catch-up effect for production is unlikely to last much longer. TagsGDP Eurozone   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
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

The Value Of The Cable Makret (GBP/USD Pair) Is Very High

InstaForex Analysis InstaForex Analysis 15.11.2022 08:03
The GBP/USD currency pair also showed no desire to move volatile on Monday. The price continues to be above the moving average line, and at least one linear regression channel is already directed upwards. As in the case of the euro currency, the pound overcame the important lines of the Ichimoku indicator on the 24-hour TF, so it has technical grounds for continuing growth in the medium term. However, there are a lot of questions about the "foundation" and geopolitics. What will happen if the conflict in Ukraine escalates with renewed vigor? What will happen if the Bank of England stops raising the rate in the near future? Recall that the military conflict between Ukraine and Russia has not been completed or frozen, and peace talks are not even "smelling" now. The APU is gradually moving forward, but this hardly means that the Russian army will turn back, which would end the conflict. New rocket attacks on Ukrainian cities are not excluded, the use of new weapons is not excluded, and the intervention of third countries directly into the conflict is not excluded. I don't even want to talk about sanctions because the parties have already introduced almost everything that could have been introduced. We can assume that the worst is over, but the probability of this is not 100%.  Bank of England The same is true with the Bank of England and its monetary policy. The British regulator has already raised the rate eight times in a row, and inflation has been growing and continues to grow. The key rate at the moment is already 3%; this is the value at which it is possible to expect at least a slight slowdown in price growth. However, this week, the next inflation report will be published and judging by the forecasts, there is no point in expecting something good from it. Currently, inflation in the UK is 10.1%, and forecasts for October indicate a new increase to 10.7–11.0%. Consequently, the Bank of England can be expected to tighten monetary policy by another 0.75% in December, but to what extent can it raise the rate? After all, its economy is also going through hard times. The British government So far, it is unclear how the British government will close the "hole" in the budget by 50 billion pounds. The corresponding financial plan from Jeremy Hunt and Rishi Sunak will be presented only on November 17. Most likely, taxes will be raised, which may cause serious discontent among the British population and significantly lower the ratings of the Conservative Party. Therefore, the BA does not have the opportunity, like the Fed, to raise the rate as much as it wants. British inflation British inflation is the most important report of the week. Unemployment rate In the UK, the unemployment rate, changes in average wages, and retail sales will also be published this week. Of course, these reports do not match the inflation report, so we associate the main market reaction with this report. A new increase in the consumer price index can support the pound, as it will likely mean a new increase in the BA rate in December by another 0.75%. But this is just a theory and an assumption, and the market can react as you like. And also, no one can know if this report has not already been worked out because it is very easy and simple to expect a new acceleration of inflation in Britain now. UK Data In the US, retail sales, industrial production, and data on applications for unemployment benefits will be released this week. Also, quite secondary are the reports. With such a macroeconomic background, it will be difficult for the pair to continue growing, which now largely depends on traders' expectations for the Fed and BA rates. We expect a tangible correction after the "take-off" last week. The pound has recovered from its absolute lows by 1400 points and is regularly adjusted downwards. Therefore, this week is a good time for a rollback. As for the longer-term prospects, the pound may continue to grow, but we do not expect a rapid recovery after losses over the past year and a half. Most likely, periods of growth and rather deep corrections will alternate. The pound still needs to look like a stable and safe currency. GBP/USD The average volatility of the GBP/USD pair over the last five trading days is 222 points. For the pound/dollar pair, this value is "very high." On Tuesday, November 15, thus, we expect movement inside the channel, limited by the levels of 1.1516 and 1.1954. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement. Nearest support levels: S1 – 1.1719 S2 – 1.1597 S3 – 1.1475 Nearest resistance levels: R1 – 1.1841 R2 – 1.1963 Trading Recommendations: The GBP/USD pair has started a minimal correction in the 4-hour timeframe. Therefore, at the moment, buy orders with targets of 1.1841 and 1.1960 should be considered in the case of a reversal of the Heiken Ashi indicator upwards. Open sell orders should be fixed below the moving average with targets of 1.1475 and 1.1353. Explanations of the illustrations: Linear regression channels – help to determine the current trend. The trend is strong if both are directed in the same direction. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.       Relevance up to 01:00 2022-11-16 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/327097
Mexican Rate Spread: Tight vs. Central Bank's Rate Spread and Implications for Dis-inversion

Aggressive Bearish Bets Has Arrived Around The EUR/GBP Pair

TeleTrade Comments TeleTrade Comments 15.11.2022 10:04
EURGBP comes under some selling pressure on Tuesday, though the downside remains cushioned. The mixed UK employment figures reaffirm further BoE rate hikes and underpin the British Pound. Talks for a more aggressive tightening ECB  benefit the shared currency and lend support to the cross. The EURGBP cross extends the previous day's modest pullback from the 0.8820-0.8830 resistance zone and edges lower through the early European session on Tuesday. The cross remains on the defensive around the 0.8770-0.8765 region and moves little following the release of the latest UK employment details. The UK Office for National Statistics reported that the jobless rate unexpectedly ticks higher to 3.6% during the three months to September from 3.5% previous. Adding to this, the number of people claiming unemployment-related benefits came in at 3.3K against consensus estimates pointing to a fall of 12.6K. The disappointment, however, was offset by stronger wage growth figures. In fact, the Average Earnings Excluding Bonuses rose to 5.7% from 5.5%, beating estimates for an uptick to 5.6%. The data reaffirms market bets for a further policy tightening by the Bank of England, which is seen offering some support to the British Pound. That said, a modest pickup in demand for the shared currency acts as a tailwind for the EURGBP cross and limits the downside. Against the backdrop of talks for a more aggressive policy tightening by the European Central Bank (ECB), the emergence of fresh selling around the US Dollar offers support to the Euro. This, in turn, warrants some caution before placing aggressive bearish bets around the EURGBP cross and positioning for any further intraday losses ahead of the German ZEW Economic Sentiment.
Bank of Japan to welcome Kazuo Ueda as its new governor

The Results Of Japanese GDP Is Negative | US PPI Ahead

Kamila Szypuła Kamila Szypuła 15.11.2022 11:10
It is busy day. Reports will be from many economies CPI from European countries and PPI from America. And also Asian countries shared their GDP and Industrial Production reports. Japan GDP Events on the global market started with the publication of GDP in Japan. The results turned out to be negative. GDP fell from 1.1% to -0.3% quarter on quarter, while GDP y/y fell even more sharply, from 4.6% to -1.2%. Both results were below zero, which proves that the recession is starting in this country. RBA Meeting Minutes From Australia came a summary of the economic situation, i.e. Minutes of the Monetary Policy Meeting of the Reserve Bank Board. Members commenced their discussion of international economic developments by observing that inflation abroad. Members also noted that Australian financial markets had followed global trends. Such a summary can help to assess the condition of the country and its sub-sectors and determine next steps. Industrial Production in China and Japan China and Japan have published reports on their Industrial Production. Comparing October this year to October last year, a decrease was recorded in China. The current Industrial Production level was 5.0%, down 1.3% from the previous reading. In Japan there was also a decline, but in Industrial Production M/M. The indicator fell from 3.4% to -1.7%. Which means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has dropped drastically. This is a consequence of high inflation and, as far as China is concerned, the fight against the Covid pandemic. UK data The UK released the reports at 9am CET. Two of them were positive. Only the unemployment rate turned out to be negative as it increased slightly from 3.5% to 3.6%. The change in the number of unemployed people in the U.K. during the reported month fell. U.K. Claimant Count Change dropped from 3.9K to 3.3K. This may turn out to be a slight decrease, but in the face of the forecasts of 17.3K, it turns out to be very optimistic. Average Earnings Index +Bonus, although it fell from 6.1% to 6.0%, is a positive reading as it was expected to fall to 5.9%. Which may mean that despite the forecasts, the decline is milder and personal income growth during the given month was only slightly lower, which is good news for households. CPI Two Western European countries, France and Spain, published data on CPI. In France, CPI y/y increased from 5.0% to 6.2%. The opposite was the case in Spain where consumer inflation fell from 8.9% to 7.3%, moreover meeting expectations. Despite high inflation, which is still higher than the expected level of 2%, these European countries, can be said, are doing well and their economies are not facing recession. Speeches Today's attention-grabbing speeches will be from the German Bundesbank. The first one took place at 10:00 CET, and the speaker was Dr. Sabine Mauderer. The next speeches will take place in the second half of the day at 16:00 CET. The speakers will be: German Bundesbank Vice President Buch and Burkhard Balz ZEW Economic Sentiment Economic sentiment in Germany rose once again. Currently, they have risen to the level of -36.7. Previously, they rose from -61.0 to 59.2. Although ZEW have increased but are still below zero, which means that the general mood is pessimistic US PPI The most important event of the day is the result of inflation from the producer side in the US, i.e. U.S. Producer Price Index (PPI). The previous level of 0.4% is expected to hold. This may mean that from the producers' point of view, the situation in price changes tends to stabilise, which may have a positive impact on the dollar as well as on the US economy in general. Canadian data Canada will release its Manufacturing Sales and Wholesale Sales reports at 15:30 CET. Both are expected to be below zero. Manufacturing Sales is projected to increase from -2.0% to -0.5%. This means that progress in this sector is expected. The wholesale sales level is forecasted at -0.2% vs. the previous 1.4%. Summary 1:50 CET Japan GDP (Q3) 2:30 CET RBA Meeting Minutes 4:00 CET China Industrial Production (YoY) 6:30 CET Japan Industrial Production (MoM) (Sep) 9:00 CET UK Average Earnings Index +Bonus (Sep) 9:00 CET UK Claimant Count Change (Oct) 9:00 CET UK Unemployment Rate (Sep) 9:45 CET French CPI 10:00 CET German Buba Mauderer Speaks 10:00 CET Spanish CPI 12:00 CET German ZEW Economic Sentiment (Nov) 12:00 CET EU ZEW Economic Sentiment (Nov) 15:30 CET US PPI (MoM) (Oct) 15:30 CET Canada Manufacturing Sales (MoM) (Sep) 16:00 CET German Buba Balz Speaks 16:00 CET German Buba Vice President Buch Speaks Source: https://www.investing.com/economic-calendar/
The RBA Will Continue At A 25bp Pace At Coming Meetings

Reserve Bank of Australia (RBA) Could Move Back To 50bps Should The Data Warrant It

Craig Erlam Craig Erlam 15.11.2022 11:45
Equity markets are looking slightly positive in early trade on Tuesday, adding to modest gains at the start of the week. While the rally is perhaps slowing a little after the strong gains of recent weeks, there doesn’t appear to be much appetite at this stage to bail on it. Perhaps the experience of the last year and the huge declines in equity markets have left investors seeing substantial value and they’ve become excited at even the prospect of a bull run. Perhaps there’s some FOMO at play after a long time of such opportunities being few and far between. Not a great UK labour market report I’m not entirely sure who will look at the UK labour market and be able to take many positives from it. The unemployment rate ticking up when job vacancies have fallen for the fourth month may suggest to the BoE that slack is appearing. But at the same time, the rate remains very low and wages excluding bonuses rose by 0.2% to 5.7%, exceeding expectations, which will be a concern when inflation is already above 10% and rising. Inactivity is another negative takeaway as this makes the job of increasing slack in the labour market all the more difficult. Whichever way you look at it, this isn’t a great report and it will likely keep the pressure on the BoE to keep hiking aggressively, creating further headwinds for the economy. Sensible RBA minutes move away from the era of forward guidance The key takeaway from the RBA minutes overnight was that forward guidance will no longer be a tool the central bank leans on unless there is value in doing so. The RBA wants to maintain a flexible approach based on the incoming data rather than be tied to its guidance, which makes a lot of sense in these highly uncertain times. It highlighted the benefits of explicit and specific guidance in certain situations but the current one simply doesn’t tick any of those boxes. As such, while a 25 basis point hike was appropriate at the last meeting – and I assume will be at the next – the central bank could move back to 50bps should the data warrant it. That all sounds very sensible. Traders may be tempted to sidestep cryptos for a while Bitcoin is fighting back this morning but it remains very much on the ropes. Gains of more than 2% barely offset the losses since Friday, let alone what came earlier that week. Cryptos remain very vulnerable, not just to the fallout from FTX – the full extent of which remains a cloud of uncertainty over the industry – but also to what else may be uncovered as the environment becomes ever more challenging. What we’ve seen recently will be discouraging to some who may have become tempted in recent years but with rates no longer at zero and more traditional assets arguably becoming attractive once more, traders may be tempted to sidestep cryptos and wait for the storm to pass. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ 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 UK Economy Looks Worse Than The Rest Of The G7 Countries

UK Hiring Demand Is Undoubtedly Falling Back Now

ING Economics ING Economics 15.11.2022 13:05
Hiring appetite is undoubtedly past its peak, but there isn't much sign that the acute labour shortages are easing. We expect the Bank of England to pivot back to 50bp rate hikes from December, though if we’re looking for signs that the Bank is about to halt its tightening cycle, the jobs data probably isn’t the place to look UK hiring demand is clearly slowing The UK jobs market is clearly past its peak. The question is whether we will see a significant deterioration as the economy slips into recession over the winter – and so far the signs are mixed. Hiring demand is undoubtedly falling back now, and we can see that most clearly in a downtrend in unfilled vacancy numbers. But so far this is manifesting itself more as a hiring freeze rather than via layoffs. Redundancy numbers, be they planned or actual, are showing little-to-no sign of increasing from their lows – albeit we’d expect that to start to change fairly soon. UK labour market dashboard Source: Macrobond, ING, Bank of England Worker shortage data is based on a question in the Bank of England's Decision Maker Panel survey   The unemployment rate edged higher too – from 3.5% to 3.6% – though given the sharp rise in inactivity numbers through the pandemic, this perhaps isn’t the best gauge of hiring demand right now. This rise in inactivity – ie those neither employed nor actively seeking a job – is increasingly linked to long-term sickness numbers, which rose yet again in the latest data. There are now almost half a million additional people registered as out of the workforce due to long-term illness than before the pandemic began. Unnervingly, this seems to be a fairly UK-specific issue, and most countries have seen inactivity rates resume a long-term downtrend as the Covid shock has faded. Recent ONS analysis confirmed that there’s no single condition that's causing all this, though it’s hard to escape the conclusion that ballooning NHS waiting lists are a contributing factor. Those workers that have left a job due to illness are predominantly in lower-paid sectors and roles, most noticeably in consumer services. That suggests it may well be a contributing factor to the worker shortages we’re seeing in hospitality. But generally those sectors with the highest ratio of vacancies to existing employee numbers – the likes of IT and professional/scientific/technical roles – are the ones less affected by the loss of workers to long-term sickness. In other words, sickness isn’t the only factor driving labour shortages right now. Immigration is also playing a role, and the latest quarterly data showed that the number of EU nationals working in the UK fell again in the third quarter. These numbers are down by roughly 9% since late 2019, though interestingly, the number of non-EU (and non-UK) nationals employed in Britain is up by a third over the same period. The number of EU nationals working in the UK has fallen through the pandemic Source: ONS   The bottom line for the Bank of England is that skill shortages are unlikely to be resolved quickly. Its own surveys have shown that the percentage of firms reporting difficult hiring conditions has stayed resolutely high, and wage growth expectations have climbed to almost 6%. If we’re looking for signs that the Bank is about to halt its tightening cycle, the jobs data probably isn’t the place to look. Nevertheless, with inflation close to a peak and the economy headed for recession, we still think investors are overestimating the scope for further rate rises – albeit less so than a few weeks ago. We expect a 50bp hike in December and the Bank rate to peak around 4% early next year. TagsUK jobs Bank of England   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  
Saxo Bank Podcast: The Risk Of An Escalation In The US-China Confrontation, The Risk Of An Escalation In The US-China Confrontation And More

Russian Missiles Fell To Poland | China Home Prices Fall

Swissquote Bank Swissquote Bank 16.11.2022 10:36
US stocks extended rally yesterday, as the unexpected easing in producer prices beefed up the optimism that the Federal Reserve (Fed) would soften the monetary tightening and the better-than-expected New York Empire State Manufacturing index hinted that the US economy is holding up well. The geopolitical fears News that Russian missiles fell to Poland somehow killed a part of that falling-inflation, resilient growth optimism. But escalation of the tensions has been avoided so far, with US President Joe Biden saying that the missile was ‘unlikely’ fired from Russia. On the index level, the geopolitical fears remained short-lived, and the S&P500 finally rebounded to close the session a touch below the 4000 psychological mark. Crude Oil On the individual level, TSM jumped on Warren Buffet and Apple news, as Walmart gained on earnings, revenue beat and $20-billion buyback. In energy, US crude gained on the geopolitical concerns after the Poland attack, and on a more-than-5-million-barrel decline in US oil inventories last week. In the FX, the US dollar eased after the mixture of soft PPI and solid Empire Manufacturing revived the dovish Fed expectations. The EURUSD traded briefly above its 200-DMA, and Cable hit the 1.20 for the first time since this summer. UK  On the data front, UK inflation data showed that inflation in the UK hit 11.1% in October vs 10.7% penciled in by analysts, revived the hawkish Bank of England (BoE) expectations but not GBP-appetite. Watch the full episode to find out more! 0:00 Intro 0:24 US stocks extend rally on encouraging data 2:17 Poland hit by missiles, but Biden contains escalation 3:37 Market update 4:13 TSM, Walmart gain 5:51 Latest on US midterms 6:28 Oil recovers 6:50 FX: USD down, UK CPI exceeds 11.1%! 8:49 China home prices fall 9:21 What else you can watch today? 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. #Poland #attack #crude #oil #Fed #US #inflation #Walmart #earnings #TSM #Apple #USD #EUR #GBP #UK #Bbudget #China #property #rally #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 Bank Of England Will Be Under Pressure To Continue Hiking Aggressively

The Bank Of England Will Be Under Pressure To Continue Hiking Aggressively

Kenny Fisher Kenny Fisher 16.11.2022 12:28
The British pound has moved higher on Wednesday. In the European session, GBP/USD is trading at 1.1934, up 0.56%. The pound roared on Tuesday, gaining close to 1% and punching past the 1.20 line for the first time in three months. It has been a busy time for sterling, which has been marked by sharp swings that would make an exotic currency blush. The pound’s volatility has been especially pronounced in the month of November. The US dollar has hit a rocky patch and the pound has taken full advantage, climbing 3.5% this month. It’s up, up, up for UK inflation UK inflation continues to rise and hit a staggering 11.1% in October, a 41-year high. The upward trend continued despite the government introducing an energy price guarantee. Inflation jumped from 10.1% in September and ahead of the consensus of 10.7%. Core CPI remained unchanged at 6.5%, but was higher than the forecast of 6.4%. The Bank of England hasn’t been able to stem rising inflation despite tightening policy but will be hoping that its jumbo 0.75% hike earlier in November will take a bite out of the next inflation report. The UK economy is facing a double-whammy of high inflation and a recession, and all eyes will be on Finance Minister Jeremy Hunt, who will announce the government budget on Thursday. Hunt will aim to restore the government’s credibility and stability, after the recent political soap opera which resulted in three different prime ministers in a matter of months and significant financial instability. The UK employment report on Tuesday was lukewarm, with unemployment ticking higher to 3.5%, up from 3.4%. The Bank of England will be concerned about the increase in wage growth, which will create even more inflation. Wages excluding bonuses rose to 5.7%, up from 5.5% and ahead of the consensus of 5.6%. The BoE will be under pressure to continue hiking aggressively, even though this will hurt the struggling UK economy.   GBP/USD Technical GBP/USD has pushed above resistance at 1.1878. The next resistance is 1.2030 1.1767 and 1.1660  are providing support 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.  
Indonesia's Inflation Slips, Central Bank Maintains Rates Amidst Stability

The Impact On The Volatility Of The Forex Market Is Mainly Geopolitical Risk In Europe

ING Economics ING Economics 16.11.2022 13:03
FX markets are maintaining very high levels of realised volatility. Driving markets in the very short term is the stand-off between geopolitical risk in Europe and the powerful short squeeze in risk assets on the back of softer US price data. On the calendar today are US retail sales, industrial production, and a host of Fed and ECB speakers In this article USD: Buy-side wants and needs a weaker dollar EUR: Ongoing correction GBP: BoE speakers in focus JPY: Wild ride continues Source: Shutterstock USD: Buy-side wants and needs a weaker dollar Realised levels of FX volatility remain near the highs of the year. For example, one-month EUR/USD realised volatility, at 14%, is back to levels not seen since April 2020. The dominant near-term theme is the aggressive position adjustment in FX, perhaps more so than in other asset classes, on the back of softer US price data. The dollar took another sharp leg lower on yesterday's release of soft October PPI data. Clearly, US price data is the hottest commodity in the macro space right now. Dollar price action does suggest the market is caught long dollars at higher levels and that corrective rallies in the dollar are tending to be relatively shallow. There is also a lot of buy-side interest in expectations (and hopes) that the dollar has peaked. If so, that will release some handsome gains for emerging market local currency bond and equity markets. For example, were it not for the recent dollar correction, returns in the EM local currency bond index would be a lot lower than the current -10% year-to-date figures, and EM hard currency bond indices are down closer to 20% year-to-date.  Given the weight of long dollar positioning after a major 18-month bull trend, it looks too early to expect that this position adjustment has run its course. Yet developments in Poland late yesterday have somewhat clouded the picture. The market will await any announcement from NATO representatives today on the source of the explosion - although President Biden has partially defused the situation by suggesting the missile was not fired from Russia.  Beyond geopolitics today, the focus will be on US retail sales and industrial production data. Both should be reasonably strong, but less market-moving than price data. We will also hear from the Federal Reserve's John Williams and Mary Daly around 16CET. For the DXY today, we did note that the dollar seemed to find a little natural buying interest after the PPI data, but before the Polish news broke. That might tend to favour a 106.00-107.20 DXY trading range today. In terms of the bigger picture, the question is whether 105 is a large enough correction for DXY.   Chris Turner EUR: Ongoing correction EUR/USD turned from a high of 1.0480 yesterday - driven there by the softer US PPI data. By comparison, today's US data is second tier and might prove a weak dollar positive if retail sales and industrial production emerge on the strong side. Attention may also return to the energy markets given events in Poland. And this will also serve as a reminder of the upcoming embargo on Russian oil exports due to start in early December. This potentially is a downside risk to European currencies should energy prices take a leg higher. On the calendar today are plenty of European Central Bank speakers. The ECB will also release its semi-annual financial stability report. Expect plenty of focus on the regulation of the non-bank financial sector after the recent debacle amongst the UK pension fund industry with its LDI hedges in the UK Gilt markets. Remarks earlier this week from the ECB relating to this report drew a conclusion that financial risks had increased. We noted yesterday that EUR/USD seemed to turn naturally from 1.0480, suggesting the corrective rally might have run its course - at least for the very short term. But the bottom of the short-term range has now been defined at 1.0270 - pointing to a 1.0270-1.0500 range over coming sessions. This assumes no major escalation in geopolitics. Bigger picture, we are in the camp that something like 1.05/1.06 may be the best EUR/USD levels between now and year-end. Chris Turner GBP: BoE speakers in focus Bank of England speakers will be in focus today after the release of the October CPI data. This is expected to be peaking around the 11%year-on-year level around now.  BoE Governor Andrew Bailey and colleagues testify to the Treasury Select Committee at 1515CET today. We suspect the message will be very much the same as that given at the policy meeting earlier this month - i.e. do not expect 75bp hikes to become common and that the market pricing of the tightening cycle is too aggressive.  GBP/USD briefly peaked over 1.20 yesterday. We think 1.20 is a good level to hedge GBP receivables. Equally, we have a slight preference for EUR/GBP staying over 0.8700. Tomorrow is the big event risk of the autumn budget - which on paper should be sterling negative. Chris Turner  JPY: Wild ride continues USD/JPY continues to deliver 20% annualised readings in volatility (as do the high beta commodity currencies and those in Scandinavia). We suspect the next five big figures in USD/JPY come to the upside. We see this because the US 10-year Treasury yield typically only trades 50-75bp below the Fed funds rate towards the end of the tightening cycle. And given that our team is looking for the policy rate to still be taken 100bp higher, we think US 10-year Treasury yields will probably return to the 4.25/4.35% area before the end of the year. Equally and once position adjustment has run its course, the yen rather than the dollar should become the preferred funding currency should market conditions begin to settle. Although that does seem an unlikely prospect right now. Chris Turner 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
Soft PMIs Are Further Signs Of A Weak UK Economy

The Bank Of England Is Undoubtedly Worried About Inflation

ING Economics ING Economics 16.11.2022 13:10
With the government fixing energy prices until at least April, it looks like October's 11.1% inflation rate could mark the peak. But it's unlikely to fall below double-digits until early next year, and the Bank of England is undoubtedly worried about inflation linked to the tight jobs market. Still, a pivot back to a 50bp hike in December looks likely The latest rise in household energy costs was enough to take UK inflation up to 11.1% in October. That’s a bit higher than was expected, and seems to be partly explained by another punchy 2% month-on-month increase in food prices, and a little bit of upside at the core level. All of this is marginally hawkish for the Bank of England in that its closely watched measure of ‘core services’ inflation, which excludes some volatile components and the impact of VAT changes, came in a few percentage points higher than they’d pencilled in. By our calculation, that sits slightly above 6% YoY, compared to a forecast of 5.7% by the BoE a couple of weeks ago.   As we noted yesterday, worker shortages are proving to be a persistent issue for firms, and that potentially points to stickier inflation rates for service-sector firms where pay is a key pricing input. Still, with hiring demand falling, we suspect we’re near the peak for wage growth. In fact – famous last words – it looks like UK headline inflation is at its peak too, or there or thereabouts. The fact that the government is effectively fixing electricity/gas unit prices below wholesale costs until next April means this is probably as high as it will get, though admittedly we expect headline rates to stay in double-digits until at least February next year. From there, we think there are compelling reasons to expect headline inflation to drift lower through the year, ending up closer to the Bank of England’s 2% target by early 2024. That’s especially true of goods categories, where lower input/shipping prices, stalling consumer demand and rising inventory levels not only point to lower inflation rates, but potentially also outright price falls in certain areas as retailers are forced to become more aggressive with discounting. The story, as we discussed earlier, is less clear-cut for services inflation. UK inflation in 2023 will depend a lot on how energy support evolves after April   Source: Macrobond, ING   The 2023 inflation outlook will also heavily depend on how the government adapts energy support next year. We’re still awaiting detail, but one possibility is that the majority of households switch back to paying the Ofgem regulated price from April. Based on our latest estimates using wholesale energy costs, the average household would pay £3300 in fiscal-year 2023 without any government support, compared to £2500 if prices remain capped. That would initially bump up inflation rates after April by roughly 2pp. While it’s tempting to say that higher headline inflation rates in that scenario would be hawkish for the Bank of England, in practice the opposite is probably true. Reduced energy support would amplify the UK recession that most, including ourselves, now expect. That would imply lower core inflation further down the line. With signs that inflation – both in core and headline terms – is close to or at a peak, and signs of recession mounting, we think the Bank of England is likely to pivot back to hiking in 50bp increments in December. Assuming another 25-50bp hike in February, we think the peak for Bank Rate is likely to be around 4%, a little below what markets are now pricing.   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
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

Softer Japanese Yen (JPY) Continues To Lend Support To The GBP/JPY

TeleTrade Comments TeleTrade Comments 17.11.2022 09:24
GBPJPY is seen oscillating in a narrow trading band around the 166.00 mark. Expectations for further rate hikes by the BoE continue to lend some support. Bulls now await the UK government's financial plan before placing fresh bets. The GBPJPY cross struggles to gain any meaningful traction and seesaws between tepid gains/minor losses through the early European session on Thursday. The cross is currently placed near the top end of its weekly range, just above the 166.00 mark, awaiting the UK government's financial plan before the next leg of a directional move. Chancellor Jeremy Hunt will unveil his Autumn Statement later today and is expected to reduce the size of the fiscal gap. This will play a key role in influencing the sentiment surrounding the British Pound and help determine the near-term trajectory for the GBPJPY cross. In the meantime, growing acceptance that the Bank of England will continue raising borrowing costs to combat stubbornly high inflation acts as a tailwind for the Sterling. The bets were reaffirmed by Wednesday’s release of hotter-than-expected UK consumer inflation figures, which showed that the headline CPI accelerated to a 41-year high of 11.1% in October. Furthermore, BoE Governor Andrew Bailey said on Wednesday that Britain's very tight labour market was a key reason why further interest rate increases were likely. This, along with a softer Japanese Yen, continues to lend some support to the GBPJPY cross. The initial market reaction to the latest geopolitical development fades rather quickly after early findings point to the missile that hit Poland on Tuesday being accidentally fired by Ukrainian forces. Apart from this, a more dovish stance adopted by the Bank of Japan is seen undermining the safe-haven JPY. In fact, Governor Haruhiko Kuroda said on Thursday that it is important to continue monetary easing to support the economy. The fundamental backdrop supports prospects for a further near-term appreciating move for the GBPJPY cross, though bulls prefer to wait on the sidelines ahead of the key event risk. This makes it prudent to wait for some follow-through buying before positioning for additional intraday gains. That said, any meaningful downtick could attract some buyers near the 100-day SMA support, which should now act as a key pivotal point.  
Saxo Bank Podcast: Nvidia And Siemens Earnings, The Budget Statement From UK And More

Saxo Bank Podcast: Nvidia And Siemens Earnings, The Budget Statement From UK And More

Saxo Bank Saxo Bank 17.11.2022 11:01
Summary:  Today we look at risk sentiment taking a breather after a particularly strong US October US Retail Sales report, although long US treasury yields fell on the day and took the yield curve inversion to its most negative in over forty years as markets continue to price a recession ahead. The key incoming data doesn't start rolling in for another couple of weeks, so we wonder if a possible shift in weather into proper winter mode could change the complacent stance in energy markets. Elsewhere, we wonder if the Budget Statement from UK Chancellor Hunt can continue to support sterling, look at the plunge in coffee prices, Nvidia and Siemens earnings, and more. Today's pod features Peter Garnry on equities and John J. Hardy hosting an 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: https://www.home.saxo/content/articles/podcast/podcast-nov-17-2022-17112022
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

European CPI Reached 10.6% | UK Budget Ahead

Kamila Szypuła Kamila Szypuła 17.11.2022 11:54
At the beginning of the day positive data came from Australia. GBP traders eyes will be on the UK budget release. Behind the assessment, there will also be important reports and speeches that may affect the situation on the currency market. Australian Labour Market In October, there was an improvement in the employment sector. The number of people employed increased from a negative level (-3.8K) to 32.2K. The unemployment rate also turned out to be positive. The reading was lower than expected and will reach 3.4% against the previous 3.5%. Strong employment data may help the Australian currency (AUD) and also influence the RBA's future monetary policy decisions. EU CPI Inflation in Eurozone turned out to be slightly lower than expected. The current reading showed that inflation rose from 9.9% to 10.6%. It was expected to reach 10.7%. Core inflation reached the expected level of 5.0%. Read more: Forecast For The Eurozone Are Not Optimistic, Inflation Can Reach A Record High| FXMAG.COM Autumn UK Forecast Statement Chancellor Jeremy Hunt will deliver the statement to MPs. The government is set to announce tens of billions of pounds worth of spending cuts and tax rises. It is expected about 55% of the measures will be spending cuts, but confirmation of this will appear at 14:30 CET. The Autumn Statement will affect the take-home pay and household budgets of millions of people, as well as money for key public services. Some of the Autumn Statement will affect the whole of the UK. However, the governments of Scotland, Wales and Northern Ireland also make some tax and spending decisions independently. UK Speeches In connection with the publication of budget data, speeches from the UK are also expected. The first speech will take place at 14:30 CET with MPC Member Huw Pill as the speaker. The next speaker will be Silvana Tenreyro, his speech is scheduled for 16:30 CET. US Building Permits Building permits are a key indicator of demand in the housing market. The change in the number of new construction permits issued by the government last time increased to 1,564M. It is expected that there will be no further increase and the number of permits will fall to the level of 1,512M. Observing the data from the beginning of the year, we see that the downward trend continues, and the few rebounds from the trend suggest better temporary periods. Source: investing.com Initial Jobless Claims The weekly report on he number of individuals who filed for unemployment insurance for the first time during the past week will appear today. Previously, this number increased significantly from 218K to 225K. The figure from the previous reading is expected to hold. Philadelphia Fed Manufacturing Index The Philadelphia Federal Reserve Manufacturing Index rates the relative level of general business conditions in Philadelphia. We have been seeing negative results since May. And the last two readings were below zero, and it is expected that this time the level will be below zero, but will increase slightly. Forecasts show that the indicator may increase from -8.7 to -6.2. This may mean that a bad situation may slowly improve. Source: investing.com FOMC speeches Fed officials will also speak today. The first speeches will take place at 15:00 CET. The Federal Reserve Bank of St. Louis President and Federal Open Market Committee (FOMC) voting member James Bullard. At 16:15 CET, Michelle W. Bowman, member of the Board of Governors of the Federal Reserve System, will speak. U.S. Federal Open Market Committee (FOMC) Member Mester also speaks at 16:40 CET. Summary: 2:30 CET Employment Change 2:30 CET Unemployment Rate (Oct) 12:00 CET EU CPI (YoY) (Oct) 14:30 CET Autumn UK Forecast Statement 14:30 CET BoE MPC Member Pill Speaks 15:00 CET FOMC Member Bullard Speaks 15:30 CET US Building Permits (Oct) 15:30 CET Initial Jobless Claims 15:30 CET Philadelphia Fed Manufacturing Index (Nov) 16:15 CET FOMC Member Bowman Speaks 16:30 CET MPC Member Tenreyro Speaks 16:40 CET FOMC Member Mester Speaks Source: https://www.investing.com/economic-calendar/
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Rates: 50bp As Next Likely Move By Central Banks

ING Economics ING Economics 17.11.2022 12:12
Markets outside the US are also increasingly leaning towards 50bp being the next probable moves by central banks. European Central Bank speakers turning less hawkish and the rediscovered UK austerity should validate the rally in rates In this article 50bp is becoming the new norm Gilts benefit from both fiscal tightening and the need for less BoE hikes Today’s events and market view 50bp is becoming the new norm Looking at the Fed, markets have converged on a 50bp hike in December following the US CPI data. Fed officials have attempted – with some success – to push back against the pricing of the terminal rate dropping too much, and it has since hovered just below 5%, but it hasn’t prevented longer rates such as the 10Y UST slipping below 3.7%. Appetite seems to have returned to longer durations with yesterday’s 20Y auction also posting very decent metrics. In the eurozone, ECB officials also appear to have dialed down their hawkishness. When arch-hawk Holzmann of the Austrian central bank is mindful that too strong tightening would not just lead to stagnation but to a recession, then markets should take note. Even with its new ECB reaction function, there appears only so much pain officials are willing to tolerate. Renewed appetite for duration risk is flattening yield curves Source: Refinitiv, ING   The ECB’s hawks might ask for more progress on quantitative tightening The ECB's shift was later corroborated by a Bloomberg story suggesting that momentum for a further 75bp move was lacking. With the market still eyeing a 20% probability of a larger move in December, there is still room to test a little lower. Alongside central bankers seemingly more mindful of the recessionary risks appears to validate the rally in rates that has also pushed the 10Y Bund yield below 2%. But mind you, that the ECB could eventually slow once the key rate approaches a neutral level – seen around 2% – is not news. With a view to the December meeting we caution that the ECB’s hawks might ask for more progress on quantitative tightening in return for less aggressive action on rates. The tightening of monetary policy could thus just rely to a growing degree on the balance sheet. That could eventually test the current  indiscriminate rally across sovereign credit in the eurozone.   Gilts benefit from both fiscal tightening and the need for less BoE hikes When it comes to the Bank of England, the next expected policy moves have become more interlinked with fiscal policies. This puts the attention squarely on today’s Autumn Statement that will outline the government’s fiscal plans. The government’s main task with a view to financial markets will be to rebuild credibility lost in September’s ill-fated mini budget. To that end much is already achieved by having forecasts of the independent Office for Budget Responsibility accompany the new plans. And looking at 10Y gilt yields, they have indeed already slipped back towards levels seen before the September budget just now. The government’s main task will be to rebuild credibility lost in September’s ill-fated mini budget Perhaps the greater risk is that the government decides to push austerity too far under the impression of the rattling experience in the wake of the last budget. That could see markets further pricing out their Bank of England hike expectations. Long-end yields could also decline further, though our expectation would be that of an overall steeper curve. Keep in mind that the effective debt that private investors will have to absorb will see a considerable increase nonetheless. A Reuters survey among gilt dealers sees issuance in the 2022/23 financial year falling to £185bn compared to DMO’s September plans, but issuance in 2023/24 will rise towards £240bn. Crucially, one has to add the Bank of England’s quantitative tightening.      Private investors will be required to increase their gilt holdings by a record amount in FY2023-24 Source: Refinitiv, ING Today’s events and market view Main event on the calendar is the UK government’s Autumn Statement. The FT has reported that up to £60bn of savings may be required, which is higher than had been expected. Reports also suggest the Chancellor will more heavily focus on spending cuts than tax rises. As our economist notes, the impact on the economy will depend on how much of the burden is placed on consumers via higher taxation, and how immediately those changes come through. A fair amount of pain could be delayed until after the 2024 election. Another point to watch are details on how the government intends to restructure its flagship Energy Price Guarantee, which can have more direct bearing on funding needs. Away from the UK the focus remains on central bank speakers and how they bridge the gap between signaling a slower pace and ensuring that financial conditions don’t already ease too much. Scheduled today are the Fed’s Bullard, Mester, Jefferson and Kashkari.   In data the focus is on the US housing market where numbers should be softer due to the rapid rises in mortgage borrowing costs that have prompted a collapse in demand. Also on the calendar are initial jobless claims as well as Philadelphia and Kansas Fed activity indices. The eurozone see the final CPI for October. Today’s supply comes from France in shorter dated bonds as well as inflation linked securities, as well as Spain with taps in 3Y to 20Y bonds. 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
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

UK Retail Sales Offer Support To The GBP/JPY Cross

TeleTrade Comments TeleTrade Comments 18.11.2022 10:28
GBPJPY struggles to preserve its modest gains to the weekly high and retreats below mid-166.00s. Stronger domestic inflation figures, the cautious mood underpin the safe-haven JPY and cap gains. A bleak outlook for the UK economy overshadows upbeat UK Retail Sales and acts as a headwind. The GBPJPY cross surrenders a major part of its intraday gains to the weekly high and retreats below mid-166.00s during the early European session on Friday. A combination of factors provides a modest lift to the Japanese Yen, which, in turn, acts as a headwind for the GBPJPY cross. Data released on Friday showed that Japan’s core consumer inflation (excluding volatile fresh food prices) accelerated to the highest level in 40 years and rose 3.6% YoY in October. This, along with the cautious mood, is seen driving some haven flows towards the JPY. That said, the Bank of Japan's dovish stance keeps a lid on any meaningful upside for the JPY and helps limit the downside for the GBPJPY cross. In fact, BoJ Governor Haruhiko Kuroda reiterated on Friday that the central bank will stick to its monetary easing to support the economy. In contrast, the Bank of England is expected to continue raising rates to combat stubbornly high inflation. The bets were reaffirmed by Wednesday's release of hotter-than-expected UK consumer inflation figures, which showed that the headline CPI accelerated to a 41-year high in October. Furthermore, BoE Governor Andrew Bailey said on Wednesday that Britain's very tight labour market was a key reason why further interest rate increases were likely. This, along with mostly upbeat UK monthly Retail Sales figures for October, offer support to the GBPJPY cross. That said, a bleak outlook for the UK economy is holding back bullish traders from placing aggressive bets around the GBPJPY cross. After processing Chancellor of the Exchequer Jeremy Hunt's new figures in the Autumn Statement, the UK Office for Budget Responsibility (OBR) has published new forecasts that predict UK GDP to shrink by 1.4% next year, as opposed to the 1.8% growth in its previous foercast, in March. The mixed fundamental backdrop warrants caution before positioning for an extension of the recent bounce from the 163.00 mark, or the monthly low touched last Friday. Traders now look to speeches by BoE's external MPC members - Catherine Mann and Jonathan Haskel - for some impetus. Nevertheless, the GBPJPY cross remains on track to register its first weekly gains in the previous three.
Kuroda Stayed On The Sidelines And The Yen Responded With Losses

High Inflation Print In Japan | Most Fed Members Remain Relatively Hawkish

Swissquote Bank Swissquote Bank 18.11.2022 10:57
Inflation in Japan soared to the highest levels in more than 30 years, to 3.7% in October, up from 3% printed a month earlier. High inflation print sure revived the Bank of Japan (BoJ) hawks, and the calls for a policy rate hike, and kept the dollar-yen below the 140 level, but it’s unsure whether the BoJ will give up on its ultra-soft policy stance. Therefore, if the US dollar picks up momentum, which will certainly be the case, the USDJPY could easily rebound back above its 50-DMA, which stands near 145. US And the reason I think the US dollar will recover is because most Fed members remain relatively hawkish regarding the Fed’s policy tightening. Plus, option traders are building topside structure over the one-month tenor that covers the next US inflation report and the Fed’s next policy meeting in December. Stock market So, the ambiance in the stock markets is not as cheery as it was at the end of last week. UK In the UK, the autumn budget statement went happily eventless. Gilts rallied, pound saw limited sell-off, while energy companies’ reaction to windfall taxes remained muted. Watch the full episode to find out more! 0:00 Intro 0:30 Japan inflation soars, Mr. Kuroda! 1:34 Should you prepare for another USD rally? 3:32 Market mood turns… meh. 4:01 The retail roundup 6:11 The happily eventless UK budget 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.   #hawkish #Fed #USD #recovery #US #retail #sales #Walmart #Target #Macys #HomeDepot #Lowes #Alibaba #earnings #UK #Budget #GBP #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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Attention Turns Back To The Economic Data And The Riksbank Policy Rate

ING Economics ING Economics 18.11.2022 13:35
With the UK's Autumn Statement out of the way, attention turns back to the economic data which are deteriorating – UK PMIs are likely to re-emphasise the worsening condition and that a recession is coming. In Sweden, the Riksbank is expected to hike by 75bp next week, raising the policy rate to 2.5% In this article US: Ongoing weakness in housing data UK: Focus switches back to the data and Bank of England Sweden: Riksbank expected to hike by 75bp Source: Shutterstock US: Ongoing weakness in housing data Thanksgiving means a holiday-shortened week in the US with the focus set to remain on the outlook for Federal Reserve policy. Market pricing has switched markedly since the surprisingly soft October CPI print but Federal Reserve officials continue to suggest there is more work to be done to ensure the inflation front is defeated. Indeed, we continue to hear comments suggesting the risk of doing too little outweighs the consequences of doing too much in terms of interest rate increases. Expect more next week. Data-wise we are looking at ongoing weakness in housing data, but durable goods orders should rise given firm Boeing aircraft orders. Nonetheless, it is doubtful this will be market moving in any meaningful way. The November jobs report on 2 December and the November CPI print on 13 December are the big releases to watch. UK: Focus switches back to the data and Bank of England The key takeaway from the UK’s Autumn Statement was that much of the anticipated fiscal pain has been pushed back until after the next election. Chancellor Jeremy Hunt has calculated that calmer financial markets and the announcement of certain tax rises mean he can push back some of the tougher spending decisions, without sparking a fresh crisis of confidence in UK assets. No doubt the Treasury is banking on less aggressive Bank of England rate hikes to lower future debt interest projections, giving scope to water down some of the cuts further down the line. Read more about the Budget announcements here.  With the fiscal event out of the way, attention turns back to the economic data which is clearly deteriorating. Next week’s PMIs are likely to re-emphasise that more companies are seeing conditions worsen than improve right now, the latest sign that a recession is coming. There’s also the question of whether the Bank of England will pivot back to a 50bp rate hike in December, and we think it will, despite some mildly hawkish inflation data in recent days. We’ll hear from a couple of rate-setters next week to help shape expectations ahead of that meeting in a few weeks' time. Sweden: Riksbank expected to hike by 75bp Back in September, the Riksbank hiked the policy rate by a full percentage point but signalled that it expected to pivot back to a 50bp rate hike in November. Since then, core inflation has exceeded the central bank’s forecasts by half a percentage point, while the jobs market has remained relatively tight. Given that the ECB has continued with its 75bp rate hikes – and the Riksbank has been vocal about staying out in front of the eurozone’s interest rate policy – we expect further aggressive tightening by Swedish policymakers next week. Remember this is the Riksbank’s last meeting before February, and we therefore expect a 75bp hike on Thursday. We’d expect the new interest rate projection published alongside the decision to pencil in at least another 25bp worth of tightening early next year, but ultimately there are limits to how far it can go given the fragile housing market. Key events in developed markets next week Refinitiv, ING TagsUS UK fiscal policy Sweden Riksbank 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
Forex: What to expect from British pound against US dollar - January 17th

There Was Justification For The Pound (GBP) To Increase This Week

InstaForex Analysis InstaForex Analysis 20.11.2022 12:29
Long-term outlook. The GBP/USD currency pair has risen by only 30 points in the current week. Remember that a week ago, the increase was 500 points. As you can see, traders ignored the report on American inflation, which caused the dollar to fall sharply in recent weeks. Rather than inflation, the decrease in the likelihood of aggressive tightening of the Fed's monetary policy is to blame. But remember that this was known even before the inflation figures were released because the Fed cannot keep raising interest rates indefinitely. It is currently 4%, with a maximum level of 5% considered. As a result, a "slowdown" had to occur in any case, and the market had to be prepared for it. Another issue is the Bank of England and the British pound. Sincerely speaking, traders have no interest in the work being done in Britain by the regulator. Remember that at least seven of the BA's eight rate hikes went unheeded, and this week the UK's inflation rate updated a record set 40 years prior without causing the pound to make a significant rise or decline. The report on British inflation is generally identical to the report on American inflation. If the consumer price index continues to rise, the Central Bank's aggressive monetary policy will be more likely to be maintained. There was justification for the pound to increase this week. In the end, neither the first nor the second occurred. As a result, this report was ignored by the market. The same is true of the budget proposal that UK Treasury Chief Jeremy Hunt unveiled on November 17. Taxes won't significantly increase, but the cutoff points for applying various tax rates will be adjusted. In other words, because their annual incomes are now considered higher than before, those who previously paid at a lower rate will now pay a higher rate. Additionally, it was revealed that Liz Truss had underestimated the amount of money given to the British people as compensation for their electricity bills. Even so, this news did not significantly impact the pair's movement. Technically speaking, the pound and the euro are trading almost identically once again and continue to have the same chances of growth. COT evaluation. The "bearish" sentiment continued to weaken, according to the most recent COT report on the British pound. The non-commercial group closed 1,900 buy contracts and 8,800 sell contracts for the week. As a result, non-commercial traders' net position increased by 7,000. The net position indicator has been gradually increasing over the past few months. However, the major players' outlook is still "bearish," and despite the pound's recent rise, it is not yet clear that it is getting ready for a protracted upward trend. Furthermore, if the situation with the euro is anything to go by, it is improbable that the pair will experience significant growth based on COT reports. The market is waiting for new geopolitical shocks to return to dollar purchases, as demand for the US currency remains very high. The non-commercial group has now opened 67,500 sales contracts and 34,500 purchase contracts. As we can see, the difference is still significant. Remember that the euro cannot show strong growth while major players are "bullish." In terms of the total number of open buy and sell positions, the bulls have a 17-thousand-position advantage. However, as we can see, this indicator only helps the pound a little. Despite technical grounds for doing so, we remain skeptical of the British currency's long-term growth. Fundamental event analysis This week, several significant reports were released in the UK. Naturally, the inflation report comes first. It has already increased to 11.1% y/y and should, in theory, cause a significant market response. Additionally, there were reports on average wages (+6%), retail sales (+0.6% m/m in October), and unemployment (growth to 3.6%). The other reports, on the other hand, were even less likely to elicit a response if inflation did not. The growth potential of the pound sterling has been reached at this point. We stated a week ago that all technical indicators supported the pair's medium-term growth, but now we require a slight downward correction. The outcome is unchanged as of right now. Trading strategy for the week of November 21–25: 1) The pound/dollar pair has broken through the Ichimoku indicator's key lines, giving it the technical support necessary to establish a new long-term upward trend. We continue to be dubious about this possibility because we must see clear fundamental and geopolitical justifications. Still, we also understand that the couple can survive on nothing but technology. 1.2080 and 1.2824 are the closest targets; 2) The pound has advanced significantly, but it is still challenging to wait for rapid growth. The pair's decline can resume with targets in the range of 1.0632-1.0357 if the price fixes back below the Kijun-sen line. Sales, though, are no longer important. Explanations of the illustrations: Price levels of support and resistance (resistance and support), Fibonacci levels – target levels when opening purchases or sales. Take Profit levels can be placed near them. Ichimoku indicators (standard settings), Bollinger Bands (standard settings), MACD (5, 34, 5). The net position size of each trading category is represented by Indicator 1 on the COT charts. The net position size for the "Non-commercial" group is indicated by indicator 2 on the COT charts. 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/327566
Equity Markets Rise, VIX at 12 Handle After ECB Rate Hike and US Economic Resilience

The Fed, ECB And Bank Of England's Upcoming Data Will Be More Key In Determining The Rate Pricing

Saxo Bank Saxo Bank 21.11.2022 09:48
Summary:  With FOMC meeting minutes out and two Fed speakers to stand up, the USD is on watch along with equities that could be at risk of taking a haircut. Any hint of more hawkish comments could spark a knee-jerk reaction to the upside in the USD, which means equities could move into a risk-off mode. Focus is also on NZD with RBNZ to poised to hike by 0.75%. The NZDAUD is worth watching given the RBNZ is hiking harder than the RBA can, which theoretically supports NZDAUD. In China, attention will be on how local authorities respond to outbreaks and how commodities respond. Equites that make most of their revenue from China are also in focus like Fortescue Metals (FMG). Plus why buy now pay later equities are again on notice, plus the Saxo Strats 2022 World Cup Predictions.   FOMC minutes and more Fed speakers to be key for terminal rate pricing The FOMC minutes from the November 2 meeting are scheduled to be released on Wednesday, just ahead of the Thanksgiving holiday. The key message delivered by Powell at this meeting was that the pace of rate hikes will slow down as needed, and that will likely remain the highlight of the minutes as well. However, Powell managed to deliver this message hawkishly at the press conference, but the risk from the minutes remains tilted to the dovish side. There is likely to be little consensus about whether the rates are in restrictive territory or there’s still room for that, and the divide within the committee remains key to watch as investors remain on the edge to expect a Fed pivot sometime in 2023. We have heard multiple Fed speakers over the past week, after a significant downside surprise in US CPI prompted a move lower in Fed’s terminal rate projections and fuelled significant easing of financial conditions as equity and bond markets rallied and the US dollar weakened. Waller and Bullard have tilted on the hawkish side, while the usual-dove Brainard remained more balanced as she repeated the message on cumulative tightening and being data-dependent. Daly, Mester, George and Bullard will be on the wires this week. In China, attention will be on how local authorities respond to outbreaks and implement pandemic control measures. Watch how commodities respond The economic calendar in China is light this week. However authorities may respond to China’s first Covid-related death in almost six months and the surge in new cases, which have hit their highest levels since April last year. There is concern there could be tighter restrictions, while China implements its new 20-point tweaking covid restriction plan, aimed at minimising disruptions to people’s daily lives and the economy, while adhering to zero-Covid. Officials will find it difficult to balance this, as well as the surge in cases. As such, commodities pegged to Chinese demand are front and centre again this week. The iron ore price is lower on Monday down 4% on fears China could increase restrictions, but the key steel ingredient holds onto a gain of 23% this month. This means stocks that make most of their revenue from China are also in focus like Fortescue Metals (FMG) which is up 30% this month, after China announced a somewhat property rescue package. Oil prices will continue to remain volatile as well as global growth and China lockdowns remain on watch, and the deadline for European sanctions on Russia crude also looms. Flash PMIs on the radar for US, UK and EU The S&P flash PMIs for the US, EU and UK will be released in the week, and will likely test the soft landing rhetoric that has been gaining traction. We will likely see further broad-based easing in the metrics from the October prints, as consumer spending remains constrained amid high inflation and a rise in interest rates. While expectations for December remain tilted towards a downshift in rate hikes for the Fed, ECB and the BOE, the upcoming data point will be more key in determining the terminal rate pricing. Markets are now back at pricing 5% levels for the Fed, but the ECB’s pricing for the terminal rate is still sub-3% while UK’s is 4.7% with fiscal austerity being delayed. RBNZ’s hawkishness to continue to outperform while Riksbank to play catchup The monetary policy decision from the Reserve Bank of New Zealand (RBNZ) will be key on Wednesday to determine the direction of NZD, which has seen strong gains over the past month from higher hawkishness. After a series of 50bps rate hikes, there are some expectations that RBNZ could deliver a 75bps rate hike this week, as inflation and labour market conditions support the case for further front-loading. Inflation has reached 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target. Most members of the RBNZ shadow board also supported a 75bps rate hike. Meanwhile, the Riksbank has been lagging other G10 central banks in tightening policy and is now playing catch up after delivering a 100bp hike in September. The Riksbank is expected to deliver a 75bps hike on Thursday while another 100bps hike can’t be ruled out. Key earnings to watch this week; from Virgin, to Dell to two Chinese companies  Virgin Money, which is one of the UK’s biggest banks reports earnings this week, as well as the agricultural giant Deere & Co and the PC juggernaut, Dell. Separately, as discussed in Peter Garnry’s note, the highlight may be from Kuaishou Technology and Xioami, as Chinese equities have recently rallied amid the country’s fine-tune pandemic control measures. Nonetheless, increasing regulation in the private and technology sectors have still caused headwinds. The two Chinese earnings results are not expected to be blockbusters, but their outlooks may give investors a glimpse through the curtain. Buy now pay later equities again on notice Buy now pay later (BNPL) companies could be further bruised this week, with the Australian government considering policies that could see BNPL firms subject to the same rules as credit card providers. This could not only affect Australian firms but global companies which operate in Australia, such as Block (SQ, SQ2) - which owns Afterpay and Affirm (AFRM). The Australian government is weighing up options to strengthen the BNPL Industry Code, and perhaps introduce an affordability test or put the BNPL companies under the Credit Act. Such a move would ensure BNPL companies that operate in Australia, would work within the guardrails as other credit providers. Companies to watch include Zip, Block and Affirm. Sentiment could also flow to other BNPL companies including Japan’s GMO Payment Gateway and India’s Paytm. Saxo Strats 2022 World Cup Predictions: the Netherlands has the highest probability of being the champion In this article, Peter Garnry, Saxo’s Head of Equity Strategy shows how Saxo Strats used quantitative analysis to predict the winner of the 2022 World Cup and came up with a non-consensus result: expecting the Netherlands to win.   Key economic releases & central bank meetings this week Monday, Nov 21 Germany Producer Prices (Oct) Taiwan Export Orders (Oct) Tuesday, Nov 22 New Zealand Trade (Oct) Eurozone Consumer Confidence (Nov, flash) Wednesday, Nov 23 Japan Market Holiday Australia S&P Global Flash PMI, Manufacturing & Services UK S&P Global/CIPS Flash PMI, Manufacturing & Services Germany S&P Global Flash PMI, Manufacturing & Services France S&P Global Flash PMI, Manufacturing & Services Eurozone S&P Global Flash PMI, Manufacturing & Services US S&P Global Flash PMI, Manufacturing & Services New Zealand Cash Rate (23 Nov) Singapore Consumer Price Index (Oct) United States Durable Goods (Oct) United States Initial Jobless Claims United States UoM Sentiment (Nov, final) United States New Home Sales (Oct) US Fed FOMC Meeting Minutes (Nov) Thursday, Nov 24 US Market Holiday Japan au Jibun Bank Flash Manufacturing PMI South Korea Bank of Korea Base Rate (Nov) Japan Leading Indicator (Sep) Germany Ifo Business Climate (Nov) Friday, Nov 25 US Market Holiday (Partial) New Zealand Retail Sales (Q3) Singapore GDP (Q3, final) United Kingdom GfK Consumer Confidence (Nov) Germany GDP (Q3) Germany GfK Consumer Sentiment (Dec)   Key earnings releases this week Monday: Virgin, Compass, Agilent Technologies, Zoom Video, Dell Technologies Tuesday: Kuaishou Technology, Medtronic, Analog Devices, VMware, Autodesk, Dollar Tree, Baidu, HP, Best Buy Wednesday: Xioami, Prosus, Deere Friday: Meituan, Pinduoduo Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-21-nov-2022-21112022
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

The EU And UK's Currencies Do Not Significantly Outperform The US Dollar (USD)

InstaForex Analysis InstaForex Analysis 22.11.2022 08:10
The foreign exchange market may currently be undergoing significant structural changes. Recall that the market has been busy creating a downward trend section for the past two years. This section ended up being very lengthy and complex. Since in this section, we have yet to see any classical structures (5 waves down - 3 up) or at least structures resembling them, some waves still need to be identified. The geopolitical situation in Ukraine and rising Fed rates were the main drivers of the increase in demand for US currency in 2022. Regarding geopolitics, nothing changes, but things start to go the other way when it comes to Fed interest rates. If the market responds favorably to the FOMC's rate hike, then the ECB and the Bank of England will likely raise interest rates more quickly in the coming months than the FOMC. As a result, the gap, which widened in favor of the dollar, will now close and no longer favor the dollar. This reasoning leads to the conclusion that the new environment will favor the euro and the pound in the next three to six months. Of course, geopolitics will also play a significant role, but making predictions in this area is much more challenging. The only way to prevent a protracted decline in the US dollar is for the ECB and the Bank of England to eventually raise their rates less than the Fed. The ECB rate, for instance, will be 4%, while the Fed rate will be 5%. The US dollar would then be able to avoid a sharp decline. The Bank of England operates similarly. The dollar will only fall in value if the rates eventually equalize, but it won't have a significant advantage either. Since the Fed rate is no longer rising faster than the ECB or the Bank of England rate, the market is pulling both instruments away from the lows reached a few months ago. However, we need more than this element to detect a long-term upward trend section. Additionally, the upward trend that is currently in place is not an impulse. It is five waves long and corrective at the same time. Even now, the EU and UK's currencies do not significantly outperform the dollar, preventing them from smiling as they look to the future. Based on everything stated above, I do not anticipate both instruments to experience significant growth over the next six months. The likelihood is that descending structures will be constructed after the current corrective ascending structures are finished. The news background is unlikely to be appropriate for impulsive downward trends, so the instruments can alternate the trend's correction sections one after the other. All of this implies that the euro and the pound can live comfortably for a long time in an area that is 700–800 base points wide. Based on the analysis, the upward trend section's construction has been complicated into five waves. However, because the wave markup does not suggest a further increase, I cannot advise purchasing euros. If there is a successful attempt to break through the 1.0359 level with targets near the estimated 0.9994 level, which corresponds to the 323.6% Fibonacci, I advise selling.   Relevance up to 06:00 2022-11-23 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/327742
The Bank Of England Has Warned That Negative Growth Will Extend All The Way

The Bank Of England Has Warned That Negative Growth Will Extend All The Way

Kenny Fisher Kenny Fisher 24.11.2022 11:33
The British pound has steadied on Thursday, after soaring 1.4% a day earlier. In the European session, GBP/USD is trading at 1.2074, up 0.17%. The pound has enjoyed a splendid November, gaining 5.3%. The upswing has been impressive but is more a case of a broad pullback in the US dollar rather than newfound strength in the pound. The UK economy is likely in a recession, and the outlook is as gloomy as a rainy November day in London. The October Manufacturing and Services PMIs remained mired in negative territory, pointing to contraction. The labour market has been a bright spot but that could soon change, with the Bank of England projecting that unemployment will double to 6.5%. The UK economy declined by 0.2% in Q3, and the BoE has warned that negative growth will extend all the way to the first half of 2024. With these formidable economic headwinds, it’s difficult to make a case for the pound continuing its upswing. Inflation has hit a staggering 11.1%, despite the BoE raising the cash rate to 3.0%. The bank pressed harder on the rate pedal at the last meeting, raising rates by 75 basis points. The BoE expects rates to peak at 5%, which means there’s a lot more tightening on the way. The bank will have to tread carefully in order not to choke off economic growth as it continues to tighten in order to curb red-hot inflation. Fed says pace of hikes will ease The Fed minutes reiterated what the Fed has been telegraphing for weeks; namely, smaller rates are on the way. Fed members agreed that smaller rate increases would happen “soon”, as they continue to evaluate the impact of the current policy on the economy. Members also noted that inflation was yet to show any signs of a peak. The markets aren’t completely convinced that we’ll see lower rates at the December meeting – the odds of a 75 basis point move are at 65%, with a 35% chance of a 50 bp increase. GBP/USD Technical 1.2040 and 1.1875 are the next support levels There is resistance at 1.2192 and 1.2357 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.  
Bank of England survey highlights easing price pressures

Inflation In The UK May Therefore Start To Slow Down Soon

InstaForex Analysis InstaForex Analysis 25.11.2022 08:25
Currently, the Bank of England is a "dark horse." It is difficult to predict how much longer the British regulator will raise its rate, even though it is doing so slower than the Fed and the ECB. It decided to increase the rate by 75 basis points at the most recent meeting, a record increase over the previous 12 to 13 years and the first increase during the current tightening monetary policy cycle. Although the Bank of England rate has already increased to 3%, inflation in the UK is still rising, and there are currently no signs that it will slow down. One could anticipate at least a slight slowdown in the consumer price index with such a rate value, but keep in mind that there is a "time lag" that could take up to 3–4 months for the economy to fully adjust to the most recent (and subsequent) PEPP tightenings. Inflation in the UK may therefore start to slow down soon, but I believe it will only be able to disappear at a 3% rate, even below the 10% threshold. It increased to 11.1% in October, and Andrew Bailey recently predicted that the peak value might reach 13% or 15%. The fact that British inflation has yet to display any discernible slowdown that would be considered the start of a fall is a major disadvantage. Based on this, it can be assumed that the Bank of England's relatively high rate is already impacting the economy and inflation. However, no one can say with certainty how significant this impact is. There may be an impact, but it is probably insignificant in light of the factors that drive monthly price increases. A 3% rate may only stop prices from increasing even more quickly. Since I cannot respond, it is too early to discuss the Bank of England's final interest rate. In light of the current situation, the regulator should increase the rate by 75 basis points at least twice more, bringing it to 4.5%. After that, he can follow the Fed's lead and raise the rate gradually while he waits for inflation to respond to three or four rounds of extremely strict PEPP tightening. However, given the current state of the British economy, analysts now have serious doubts about the Bank of England's ability to take such actions. According to Andrew Bailey, the recession "has already begun" and at the same time "has just begun" due to the most recent GDP report for the third quarter showing a contraction. It can last for up to two years (assuming no further economic shocks), and it is difficult to predict how much the British GDP will decline due to high rates. According to Dave Ramsden, the deputy governor of the Bank of England, it is imperative to respond to the state of the British economy. If things continue to go poorly, it will be prudent to lower the rate to prevent making the already challenging financial situation for households even worse. The objective of bringing inflation back to 2% remains the same, but the Bank of England will need to monitor economic expansion. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I cannot suggest purchasing the instrument immediately because the wave marking already permits the development of a downward trend section. Sales are more accurate now that the targets are close to the 200.0% Fibonacci level.     search   g_translate     Relevance up to 05:00 2022-11-26 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/328102
There Are No Obvious Reversal Of GBP/USD Pair Signs Yet

Rejection Of Scotland's Candidacy For The Independence Referendum

InstaForex Analysis InstaForex Analysis 25.11.2022 08:42
The GBP/USD pair tested the 21st figure on Thursday - for the first time since the beginning of August. This is mainly due to the dollar getting weaker, as it stopped moving upward across the market. U.S. trading floors were closed yesterday (Thanksgiving Day in America), and the minutes of the November FOMC meeting, published the day before, were interpreted against the dollar. Such a fundamental background made it possible for GBP/USD bulls to hit a new multi-month high, marking 1.2152. Take note that the bulls were getting closer to the area of 20 figures during the last two weeks. After almost a week-long flat in the range of 1.1800-1.1950, the bulls decided to make a swift upward move, which enabled them not only to cross the level of 1.2000, but to also probe the area of the 21st figure. Do remember that the pound's growth was caused not only by the dollar getting weaker, but because it also had political overtones. The fact is that this week the British Supreme Court rejected the Scottish referendum bid for independence. According to the court's verdict, the Scottish government cannot initiate a second referendum without the UK Parliament's approval. In other words, the Supreme Court put an end to a long-playing story that has emerged (making GBP/USD traders nervous) and then disappeared into oblivion. Therefore, this court ruling is strategically important for the British currency. The pound got rid of a threat that had been hanging over it for several years, threatening to collapse. After all, if the Supreme Court verdict had been the opposite, next year the UK could have experienced events comparable to those of 2016, when the historic referendum on Brexit was held. As mentioned, the so-called "Scottish issue" has been hyped from time to time in the global press, going beyond local discussions in the local media. The last time this topic was actively discussed was at the end of last year, when the problems associated with the Coronavirus receded into the background. Back in September 2021, Scottish Prime Minister Nicola Sturgeon confirmed at the Scottish National Party conference that she was planning to hold a second independence referendum before the end of 2023. She stressed that these plans, put on pause because of the pandemic, are "unchanged." Recall that in the 2014 Scottish independence referendum, 45% of those who voted "for" and 55% voted "against." That is, the majority voted for union with Great Britain. This plebiscite was held two years before another - historic - referendum, where the majority of British residents (though by a slim margin) voted for secession from the European Union. The Scots, in turn, were unequivocal: nearly 70% of the region's population voted against Brexit. After that "separatist" sentiments intensified in the region. According to experts, Scotland is now essentially divided 50/50 on independence. But analysts don't rule out a possibility that many politically neutral residents of Scotland can mobilize if necessary and use the chance that fell out. After all, it would obviously present itself to them next time in several decades. That is why sociologists have repeatedly warned that at the "X hour", when hypothetical plans for a new referendum take shape, the scales will tip in favor of the region's independence. But to the disappointment of supporters of Scottish independence, the Supreme Court did not allow the local authorities to organize a second vote without an approval from the British Parliament. Downing Street has already rushed to say that the Cabinet will not allow another plebiscite. According to the government, this is a "once in a generation" event. It is obvious that the Conservatives, who control the House of Commons (and will control it at least until 2024) will not allow the Scottish nationalists to realize the idea of another referendum. Therefore, this issue can be considered closed: for the foreseeable future, all slogans and calls for Scottish independence will have no effect on the pair. However, despite the importance and significance of the Supreme Court ruling, the pair's fate now depends on the dollar's behavior. The "Scottish issue" usually flares up brightly, but fades quickly. And it looks like this time it will fade today and for a long time. Next week traders of dollar pairs will focus on the Federal Reserve representatives' rhetoric. The market's tumultuous reaction to the minutes of the November FOMC meeting suggests that the dollar continues to "rule" the currency pairs of the major group. Traders in the second round played back the news that the U.S. central bank will slow down the pace of monetary policy tightening as early as December. But at the same time, the question of what level of the rate the central bank will stop at in the current cycle is still a matter of debate. And this discussion, the degree of "hawkishness" of which will be determined by members of the Fed, will allow GBP/USD traders to determine the vector of price movement. In my opinion, the Fed's minutes will fade into the background at the beginning of next week (Fed representatives have already announced all the theses of this document). The focus will be on U.S. statistics (Nonfarm) and comments of the Fed members. If they reiterate that it is not the speed of rate hikes that matters but the end of the current cycle, then the dollar may come out on top again. The probability of this scenario is quite high, given the earlier statements of Fed Chairman Jerome Powell and many of his hawkish wing colleagues. Bulls on GBP/USD, who are taking advantage of the moment (shortened trading session on Friday, low liquidity), may try to cross the resistance level of 1.2150 (the upper line of the Bollinger Bands on the D1 timeframe) again. However, taking into account the current fundamental background, it is better to wait for the upward momentum to end, and by next week, you should consider short positions with the first target being 1.1940 (the Tenkan-sen line on D1) and the main target at 1.1700 (the middle line of Bollinger Bands on the same timeframe). Relevance up to 03:00 2022-11-26 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/328094
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The Actions Of The ECB May Be A Factor Providing Some Support For The EUR/GBP Cross

TeleTrade Comments TeleTrade Comments 25.11.2022 09:35
EUR/GBP stages a modest recovery from the monthly low touched on Thursday. A combination of factors underpins the shared currency and offers some support. Rising bets for additional BoE rate hikes benefit the GBP and seem to cap gains. The EUR/GBP cross gains some positive traction on Friday and reverses a part of the overnight slide to a fresh monthly low. The cross maintains its bid tone through the early European session, though seems to struggle to capitalize on the strength beyond the 0.8600 mark and remains below the 100-day SMA. The shared currency's relative outperformance could be attributed to talks of a more aggressive policy tightening by the European Central Bank (ECB). This, in turn, is seen as a key factor offering some support to the EUR/GBP cross. The ECB Governing Council member Isabel Schnabel said on Thursday that the central bank will probably need to raise rates further into restrictive territory. Schnabel added that the incoming data suggests that the room for slowing down the pace of interest rate adjustments remains limited. Adding to this, the prevalent selling bias around the US Dollar, along with an upward revision of the German Q3 GDP print, benefit the Euro and act as a tailwind for the EUR/GBP cross. According to the final reading, the Eurozone's economic powerhouse expanded by 0.4% during the three months to September and the annual growth rate in Q3 2022 stood at 1.3% vs. the 1.2% estimated. The intraday uptick, however, lacks bullish conviction and remains capped amid the underlying bullish sentiment surrounding the British Pound. The recent sharp decline in the UK government bond yields represents an easing of financial conditions, which should allow the Bank of England to continue raising borrowing costs to tame inflation. This, in turn, is seen underpinning the Sterling Pound and keeping a lid on any further gains for the EUR/GBP cross, at least for the time being. Hence, it will be prudent to wait for strong follow-through buying before confirming that spot prices have bottomed out and positioning for any meaningful appreciating move.
BSP Maintains Rates Amid Moderate Inflation; Eyes Further Tightening if Needed

FX: The US Dollar (USD) Is Getting Close To Some Decent Support Levels

ING Economics ING Economics 25.11.2022 10:33
FX markets are becalmed by holiday trading conditions in the US and a very light data calendar. A further unwinding of long dollar positioning remains the risk, but we think the dollar is getting close to some decent support levels. Elsewhere, 75bp rate hikes are still going through in the likes of Sweden and South Africa In this article USD: Focus on 'Cyber Five' retail sales EUR: A little less pessimism GBP: BoE stays hawkish JPY: Set for out-performance into 2023   US retailers have come up with the 'Cyber Five' sales promotion campaign which should boost retail sales    USD: Focus on 'Cyber Five' retail sales Today sees another holiday-shortened US session following the Thanksgiving public holiday. Innovative US retailers have come up with the 'Cyber Five' sales promotion campaign which stretches from Thursday's Thanksgiving all the way through to Monday. Expect to hear reports as to how this has gone, although high levels of employment and lower levels of petrol prices (now $4.30/gallon versus a high of $5.50 in June) suggest retail sales may hold up despite talk of the looming 2023 recession. FX markets are becalmed and the only stand-outs yesterday were the large 75bp rate hikes in Sweden and South Africa, plus the 150bp rate cut in Turkey in preparation for elections next year. We also note the further legacy of this year's rise in dollar and US yields, where Ghana looks set to impose a 30% haircut on Eurobond holders as it seeks a deal with the International Monetary Fund (IMF). Back to the dollar – buy-side surveys taken right before the big sell-off on 10/11 November still had long dollar positions as 'the most crowded trade' and saw the dollar as the most over-valued on record. We doubt those views will have changed that much and the buy-side will now be eager to sell any dollar rallies, believing the dollar may well have peaked. That may be the case, but as we discuss in our 2023 FX outlook, we doubt conditions will be in place for a major dollar bear trend.  We mentioned earlier that the dollar may be nearing some decent support levels. We think DXY has strong support near 105.00, marking the 200-day moving average, important lows in early August and a big 38.2% retracement level of the whole rally from summer 2021 (when the Fed started this dollar rally with its more hawkish Dot Plots). For those needing to buy dollars, DXY levels near 105 may be as good as any. Chris Turner  EUR: A little less pessimism Business surveys in Germany and France released yesterday showed a little less pessimism. And increasingly there is a view that the forthcoming downturn will be mild because of issues like a) strong employment b) large government support and c) strong household savings. Our eurozone team, however, are a bit more pessimistic. Certainly, Europe's large exposure to the manufacturing cycle and what should be weaker export markets make us sub-consensus on European growth prospects.  Despite the looming eurozone recession, ECB hawks such as Isabel Schnabel suggest it may be premature to scale back rate increases. Currently, the market prices 61bp of hikes on 15 December (we expect 50bp). Clearly, the 50bp versus 75bp debate will continue to run. For EUR/USD, it still looks like the big dollar story is dominating. We cannot rule out a further correction into the 1.05-1.06 region but would see these as the best levels before year-end. These levels could be seen next week should Fed speakers or November US jobs data prove the catalyst. Chris Turner GBP: BoE stays hawkish Recent speeches have seen the Bank of England (BoE) staying pretty hawkish despite the fiscally tight budget and broadening consensus of recession. We think positioning has played a major role in this sterling recovery and GBP/USD could see some further, temporary gains to the 1.22/23 area – which we would again see as the best levels before year-end.  Equally, EUR/GBP has good support in the 0.8550/8600 area, and given our view of a difficult risk environment into year-end and early 2023 as central banks raise rates into recessions, sterling should remain vulnerable. Chris Turner  JPY: Set for out-performance into 2023 Probably the best chance of the dollar having peaked is against the Japanese yen (JPY). USD/JPY is now nearly 10% off its high near 152 in late October. Next week we will find out whether Japanese authorities sold FX in November – having sold a combined $70bn in September and October. So far intervention can be considered to be exceptionally well-timed and effective.   If the dollar is to move lower in 2023, USD/JPY would be the best vehicle to express the view, in our opinion. This is based on the view that the positive correlation between bonds and equities can break down – bonds rally, equities stay soft – and that the US 10-year Treasury yield ends 2023 at around 2.75%. USD/JPY could be trading at 125-130 under that scenario. We now suspect that any dollar rally between now and year-end stalls at 142/145. In addition, USD/JPY will be facing a change in the ultra-dovish Bank of Japan governor next April – a big event risk for local and global asset markets. Chris Turner TagsYen FX Dollar   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
Metals Update: Gold Demand Declines Marginally, Copper and Aluminium Positions Adjusted

Cabel Market (GBP/USD): A New Downward Trend Segment Is Predicated

InstaForex Analysis InstaForex Analysis 27.11.2022 14:25
The wave marking for the pound/dollar instrument currently appears quite confusing, but it still needs to be clarified. We have a completed downward trend section consisting of five waves (a-b-c-d-e). We also have a five-wave upward trend section, which has taken the form a-b-c-d-e and can be completed. As a result, the instrument's quotes may continue to rise for a while. Still, the European currency has already begun (presumably) constructing a new downward section, and the British should do the same. As both central banks recently increased interest rates, the news backdrop could have been interpreted in any way. The week before last, we witnessed a decline in the dollar value relative to the news backdrop, which may have contributed to its potential new growth (Nonfarm Payrolls report). Then came the inflation report, which decreased demand for the dollar even though the opposite outcome might have occurred. The internal wave structure of wave e has been complicated due to the rise in quotes this week, but so far, only this wave and only part of the trend section have done so. This wave might have a longer form. Nicola Sturgeon will research alternate exit strategies from the UK. The expected wave e could continue to build because the pound/dollar instrument's exchange rate rose by several hundred points. The ruling of the Supreme Court of the United Kingdom on the petition for a second Scottish independence referendum was the week's main event. The court ruled that the Scottish Parliament cannot pass legislation calling for a new referendum without the British Parliament's consent. In addition, the court determined that Scotland lacks the authority to organize an "advisory" referendum. Let me remind you that First Minister Nicola Sturgeon has scheduled a purportedly "consultative" referendum for the second half of 2023. This referendum aims to determine the percentage of Scots who favor independence from the UK. The Act of 1998, according to the court's chairman, Lord Robert John Reed, places all constitutional-related matters solely within the purview of the British Parliament. Based on this act, the Scottish Parliament resumed its session in 1999 and is endowed with limited authority. Nicola Sturgeon has previously said that she respects the court's decision but is disappointed. Because Scottish citizens did not support Brexit in greater numbers in 2016, she also said that Scotland would continue to look for ways to hold a referendum. The Scottish authorities "will find another way to express the will of the Scottish people," according to Sturgeon. But as of now, I can only confirm one thing: Scotland does not currently possess the legal authority to hold a referendum and will not do so anytime soon. Therefore, the union between Scotland and Britain will not be broken. At the same time, Nicola Sturgeon plans to keep looking for ways to sever ties with Britain, but it isn't easy to envision what this path might entail given that all strands of the British government are connected in London. Conclusions in general The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I cannot suggest purchasing the instrument immediately because the wave marking already permits the development of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer shape. The Euro/Dollar instrument and the picture look very similar at the larger wave scale, which is good because both instruments should move similarly. The upward correction portion of the trend is currently almost finished. If this is the case, a new downward trend will soon develop.     Relevance up to 11:00 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/328234
RBA Pauses Rates, Australian Dollar Slides 1.3% on Economic Concerns; ISM Manufacturing PMI Expected to Remain Negative

Switzerland Gross Domestic Product (GDP) And Spanish CPI Fell Sharply

Kamila Szypuła Kamila Szypuła 29.11.2022 12:09
Markets await the release of the EU CPI, but before that event we are looking at the CPI reports in Germany and Spain. From North America there are also reports from both the USA and Canada. Switzerland Gross Domestic Product Switzerland Gross Domestic Product fell again. This time it was a drastic drop from 2.2% to 0.5%. On the other hand, the quarterly change in this indicator was higher than the previous reading. GDP Q/Q increased from 0.1% to 0.2%, but was lower than expected (0.3%). Spanish CPI At the beginning of the day, the inflation report from Spain appeared. The readings turned out to be lower than expected and also down compared to previous readings. CPI Y/Y dropped from 7.3% to 6.8%. Natmosiat CPI from month to month fell by as much as 0.6% and reached the level of 6.6%. Growth was expected in both cases. A decrease in this indicator may suggest an improvement in the situation, i.e. prices are not rising but have started to fall. Another reading may confirm this direction. Harmonised Index of Consumer Prices, is the same as CPI, but with a joint basket of products for all Eurozone member countries. The HICP also fell to 6.6%. German CPI The German CPI report is yet to come. CPI Y/Y is expected to maintain its previous level of 10.4%. On the other hand, CPI M/M will fall from 0.9% to -0.2%. As for the German HICP, it is expected to fall in both cases, ie year-on-year and month-on-month. The HICP M/M is expected to reach a horizontal 0.1% and if confirmed, it will be lower than the previous one by 1%. HICP Y/Y is expected to decline slightly by 0.3%. The previous reading was 11.6%. Canada GDP Canada's Gross Domestic Product report comes out today. The monthly change in GDP is expected to be at the same level as last time, ie 0.1%. This may mean that the Canadian economy is stagnating. Source: investing.com On the other hand, the quarterly change shows that the goposadraka is shrinking as it is expected to fall from 0.8% to 0.4%. Speeches Today, markets and traders are also waiting for speeches from the ECB and from the UK. Luis de Guindos, Vice-President of the European Central Bank has already given speeches. This speech took place at 9:10 am CET. The next speech from the European Central Bank is scheduled for 14:30 CET. Isabel Schnabel, member of the Executive Board of the European Central Bank, is set to speak. Two speeches are also scheduled from the Bank of England. The first will take place at 13:25 CET. Dr Catherine L Mann, a member of the Monetary Policy Committee (MPC) of the Bank of England, will speak. The next speech is scheduled for 16:00 CET. This time will be Bank of England (BOE) Governor Andrew Bailey. Bailey has more influence over sterling's value than any other person. Traders scrutinize his public engagements for clues regarding future monetary policy. CB Consumer Confidence The level of consumer confidence in economic activity expects a drop from 102.5 to 100.0 It is a leading indicator as it can predict consumer spending, which plays a major role in overall economic activity. Higher readings point to higher consumer optimism. But this time pessimistic sentiment is expected, once again. The last worsening took place in October and it may happen again this time. Summary: 9:00 CET                Spanish CPI (YoY) 9:00 CET                Switzerland Gross Domestic Product 9:10 CET                ECB's De Guindos Speaks 13:35 CET                BoE MPC Member Mann 14:00 CET                German CPI (Nov) 14:30 CET                Canada GDP 14:30 CET                ECB's Schnabel Speaks  16:00 CET                BoE Gov Bailey Speaks 16:00 CET                CB Consumer Confidence   Source: https://www.investing.com/economic-calendar/
The Data May Keep The British Pound (GBP) From Rising

GBP/USD Pair: Drop Does Not Even Appear To Be A Correction

InstaForex Analysis InstaForex Analysis 30.11.2022 08:01
The new week began with a decline for the GBP/USD currency pair. This drop does not even appear to be a correction thus far. Any "big," though, always begins with something "small." Recall that for the next week and a half, we anticipate a strong downward correction. While the market has been continuously seeking out new reasons to purchase the pound sterling, unlike the European currency, the pound had good reasons to increase in value. For instance, it was significant that Nicola Sturgeon's request for the right to hold an independence referendum was denied by the Supreme Court of Great Britain. The market also acknowledged for the first time that the Bank of England is actively tightening monetary policy. The resignation of Liz Truss as prime minister and the inauguration of Rishi Sunak may also be advantageous for the pound. Well, it's hard to forget that the initiative to cut taxes was rejected. Taxes will now be increased and spending will be cut, but the economy will benefit from this. The reduction of subsidies and increases in taxes will cause financial difficulties for average Britons, but it is better for the economy if the national debt does not increase by 50 billion pounds. If not more. So, in recent weeks and months, there have been good reasons to buy the pound, but eventually, everything comes to an end. We are currently only discussing correction; however, none of us are aware of the future. We are unable to predict how much the Bank of England will increase the rate. Perhaps it will even go above the Fed rate, in which case the pound will have new justification for an increase of 500–600 points. The possibility of a new escalation in the conflict in Ukraine or between the West and the Russian Federation will raise demand for the dollar, as it did frequently in 2022. We want to emphasize that making forecasts for more than a few weeks out is currently simply impractical. We anticipate that the pair will still start a downward trend correction that could last a few weeks. What will happen next will be heavily influenced by the decisions made by central banks at their most recent meeting this year, as well as inflation data. Is Jerome Powell able to defend the dollar? In general, we don't anticipate Jerome Powell to make any revelations or alter the tone of his rhetoric. We already believe that there are valid reasons to repurchase the dollar from the market because several Fed policymakers have stated that the rate may rise faster and for a longer period than initially anticipated. It's excellent that Jerome Powell most likely shares this viewpoint. Any positive news for the US dollar could act as a "trigger" because, in our opinion, it has already been oversold in some respects. Powell's assertion and confirmation that inflation can remain high for a long time imply the need to exert pressure on it with the aid of monetary policy tools for a long period, and this could serve as the foundation for the US currency's appreciation. Strong labor market data can reassure investors that a recession is not imminent for the US economy. And it is weak if it threatens. The US dollar may benefit from this as well. As a result, we are leaning more and more toward the possibility that both major pairs will start to fall soon. We also want to point out that any fundamental hypothesis is just that—a hypothesis. They shouldn't be worked out without specific technical signals. We frequently discuss tools like bitcoin and concentrate on the fact that many "crypto experts" simply never stop mentioning the exorbitant heights of the value of the original cryptocurrency. But if these predictions come true in a few years and bitcoin itself falls to a point where it is no longer valuable, who would be interested in them? Currency pairs are the same way. Not in a few months, but in the near future, how they move is crucial. Thus, overcoming the moving will make it possible to descend. We anticipate a 500-600 point total decline from the maximum of 1.2153. The pound has been known to fluctuate by that much in recent months. Over the previous five trading days, the GBP/USD pair has averaged 137 points of volatility. This value is "high" for the dollar/pound exchange rate. Thus, on Wednesday, November 30, we anticipate movement that is constrained by the levels of 1.1855 and 1.2130 to occur inside the channel. The Heiken Ashi indicator's upward reversal indicates that the upward movement has resumed. Nearest levels of support S1 – 1.1963 S2 – 1.1902 S3 – 1.1841 Nearest levels of resistance R1 – 1.2024 R2 – 1.2085 R3 – 1.2146 Trading Suggestions: In the 4-hour timeframe, the GBP/USD pair is still corrected. In light of this, new buy orders with targets of 1.2130 and 1.2146 should currently be taken into account in the event of an upward turn in the Heiken Ashi indicator or a recovery in the price from a move. With targets of 1.1902 and 1.1855, open sell orders should be fixed below the moving average. Explanations of the illustrations: Linear regression channels – help determine the current trend. If both are directed in the same direction, then the trend is strong now. The moving average line (settings 20.0, smoothed) – determines the short-term trend and the direction in which trading should be conducted now. Murray levels are target levels for movements and corrections. Volatility levels (red lines) are the likely price channel in which the pair will spend the next day, based on current volatility indicators. The CCI indicator – its entry into the oversold area (below -250) or into the overbought area (above +250) means that a trend reversal in the opposite direction is approaching.     search   g_translate     Relevance up to 01:00 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/328514
Bank of England survey highlights easing price pressures

The ECB And The Bank Of England Still Have A 75% Chance Of Tightening Monetary Policy

InstaForex Analysis InstaForex Analysis 04.12.2022 10:38
The wave marking for the pound/dollar instrument currently appears quite confusing, but it still needs to be clarified. We have a five-wave upward trend section, which has taken the form a-b-c-d-e and may already be complete. As a result, the instrument's price increase may last a while. Therefore, both instruments are still in the process of developing an upward trend segment, which will be followed by the start of a mutual decline. Recently, the British pound's news background has been so varied that it is challenging to sum it up in one word. The British pound had more than enough reasons to rise and fall. As you can see, it primarily went with the first option. The internal wave structure of wave e has become more complicated this week due to the rise in quotes over the previous week. I am currently waiting for the decline of both instruments. Still, these trend sections may take an even longer form because the wave marking on both instruments allows the ascending section to be built up to completion at any time. The Fed is indicating that monetary policy will be tightened. The pound/dollar exchange rate on Friday increased by 45 basis points. The dollar displayed positive dynamics for a brief period, and all three US reports were positive, but it wasn't enough to support further gains. The market did not react as it should have on Friday. Given that the number of payrolls turned out to be high, unemployment did not rise, and wages increased more than anticipated, it was anticipated that demand for US currency would increase significantly. However, as I previously stated, the US dollar could not take hold of the hard-won positions. Thus, yet another excellent opportunity to finish building the suggested wave e, and the upward portion of the trend has yet to be recovered. Even though the news context is not calling for sales for the first time, we are once more observing an increase in the instrument. The ECB, Fed, and Bank of England meetings will occur in December. In anticipation of these meetings, the market is already moving its instruments. Recall that the Fed will raise interest rates by only 50 basis points, or almost 100%, while the ECB and the Bank of England still have a 75% chance of tightening monetary policy. As a result, the market favors the euro and the pound more. However, the ECB and the Bank of England will raise their interest rates by 50 basis points and abandon their aggressive stance. In this instance, the recent spike in instrument sales was unfounded. Even though the news background does not support it, I anticipate the development of a new downward trend segment. The market's reluctance to raise demand for the dollar contradicts this. As a result, the current wave markup fails, and sometimes it is difficult to explain why the US dollar is falling. Conclusions in general The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the construction of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form. The euro/dollar instrument and the picture look very similar at the larger wave scale, which is good because both instruments should move similarly. The upward correction portion of the trend is currently almost finished. If this is the case, a new downward trend will soon develop.   Relevance up to 13:00 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/328884
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The Pace Of Interest Rate Increases Will Be Slowed Down In The Near Future

InstaForex Analysis InstaForex Analysis 06.12.2022 08:28
After a string of similarly bizarre days, Monday was very strange. Many people are already perplexed as to why the euro and the pound continue to rise even on days without justification. If almost all factors point in this direction, why isn't the creation of a correction set of waves for both instruments started right away? If there is no explanation, why is the demand for US currency decreasing almost daily? Remember that last week, although he said nothing fundamentally novel in his speech, Jerome Powell brought down the dollar's value, demonstrating the validity of these questions. The dollar rose for an hour before falling again, making Friday's payrolls appear paradoxical. Additionally, nonfarm payrolls revealed that everything is fine with the US labor market. There is no need to worry about a recession, and the Fed can keep raising rates to the currently planned level of 5%. What do we ultimately have? The ECB may increase the interest rate by 2% or 2.5%, but there is little difference between those increases. The Fed will increase interest rates by at least 1%, and the Bank of England and ECB will likely do so. All three central banks will increase interest rates to slow inflation, at least for the foreseeable future. The pace of interest rate increases will be slowed down in the near future by all three central banks following the same trend. The situation is unchanged, but demand for US dollars is steadily declining while demand for the euro and the pound is rising. When it was widely believed in the market a few weeks ago that only the Fed would slow the tightening of monetary policy in December, more and more analysts are now inclined to think that the Bank of England and the ECB will do the same. All three banks are now anticipated to increase rates by 50 basis points. In this scenario, there will be even fewer factors supporting the rise of the euro and pound, as one of the few causes of the dollar's decline at the moment could be characterized as the highest likelihood of convergence with the most abrasive PEPP tightening strategy. The euro and the pound will lose this advantage if the ECB and the Bank of England do not raise their rates by 75 basis points. Even without the abovementioned condition, I have long anticipated a quote decline. With the circumstances mentioned above, it ought to be even faster and stronger. The further both instruments go, the more painful and powerful their eventual fall will be. The market may trade in very challenging ways to comprehend, but eventually, everything returns to equilibrium. Additionally, the European and British currencies might not find this balance appealing. I conclude that the upward trend section's construction is complete and has increased complexity to five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. The likelihood of this scenario is increasing, and there is a chance that the upward portion of the trend will become more complicated and take on an extended form. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the current structure of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form Relevance up to 06:00 2022-12-07 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/329040
Analysis And Trips For Trading The GBP/USD Pair In Short And Long Positions

Despite Grim Background the Bank OF England Will Have To Keep Raising Rates

Kenny Fisher Kenny Fisher 08.12.2022 14:54
The British pound is in negative territory on Thursday. In the European session, GBP/USD is trading at 1.2174, down 0.29%. We’ll get a look at inflation expectations in both the UK and the US on Friday, ahead of the key US inflation report next week. It has been a rather quiet week on the economic calendar, save for the November PMIs out of the US and the UK. The PMIs reflect the different directions taken by the UK and US economies. In the UK, the Services PMI remained in negative territory, unchanged at 48.5. This points to contraction in the services sector, which has been hit by the cost-of-living crisis and economic uncertainty, which has dampened consumer spending. In the US, Services PMIs rose to 56.5, above the previous read of 54.4 and the consensus of 53.5. The services sector is showing expansion and this will lend support to the argument that the US economy is resilient enough to absorb additional rate hikes, as the Fed continues to battle high inflation. BoE expected to raise by 50 bp Like the Federal Reserve, the BoE has also circled inflation as public enemy number one, but Governor Bailey doesn’t have a strong economy to work with. With GDP in negative territory and inflation at a staggering 11.1%, the economy may already be experiencing stagflation. Despite this grim background, the BoE will have to keep raising rates in order to get the upper hand on inflation and keep inflation expectations in check. The BoE is expected to raise rates by 50 bp next week, which would raise the cash rate to 3.50%. As rates continue to rise, there is the danger of the recession becoming deeper and lasting longer. This winter is likely to bring a rash of strikes from public workers, which will keep the BoE on guard for signs of a wage-price spiral, which could complicate the Bank’s efforts to curb inflation.   GBP/USD Technical 1.2169 and 1.2027 are the next support levels GBP/USD is testing support at 1.2169. Below, there is support at 1.2027 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.  
UK Budget: Short-term positives to be met with medium-term caution

Thursday's Bank Of England Meeting Will Have Too Much Impact On Sterling (GBP)

ING Economics ING Economics 09.12.2022 10:57
Despite higher-than-expected inflation in October, we expect the Bank of England to revert to a 50bp hike at its December meeting. Gilts are back to pre-budget crisis levels. They should outperform Bunds but not Treasuries. Sterling has recovered strongly but will struggle to make further gains in a challenging investment environment We expect the Bank of England to revert to a 50bp hike at its December meeting The 75bp November hike was a one-off, but we may see one more hike in February When the Bank of England (BoE) hiked by 75 basis points (bp) for the first time back in November, it seemed obvious that it would be a one-off move. The clear signal was that markets were – at the time – overestimating the scope for future tightening. The forecasts released back then suggested that keeping rates at 3% would see inflation overshoot (just) in two years, while raising them to 5% would see an undershoot. In other words, we should expect something somewhere in the middle, and that’s why we think Bank Rate is likely to peak at 4% early next year. We think Bank Rate is likely to peak at 4% early next year We shouldn’t totally rule out a repeat 75bp move on Thursday, and the data flow has leaned slightly hawkish since November’s meeting. The Bank’s favoured measure of core services inflation, by our estimates, came in slightly higher than it expected – and jobs market data has also shown few signs of cooling just yet. Inflation and jobs data due out in the days prior to the meeting will be important. Then again, Chancellor Jeremy Hunt probably did just about enough in his Autumn Statement to calm BoE concerns that fiscal policy is working at cross purposes with monetary. While much of the fiscal pain was delayed to future years, the government did still scale back energy support for households next year. With sterling also materially stronger, and markets geared up for a 50bp hike, there’s little need to rock the boat with a more aggressive move. Assuming we’re right, we then expect another 50bp move in February which will likely mark the end of the tightening cycle. But with wage pressures unlikely to fully abate even if the jobs markets begin to weaken, we think the BoE will be less swift to cut rates than the US Federal Reserve. For now, we’re pencilling in that the first rate cut will come in the first few months of 2024. The swap curve has dramatically pared down its BoE hike expectations Source: Refinitiv, ING The BoE hikes, but the swap curve is focused on cuts The gilt market has practically shaken off all of the additional risk premium relative to other ‘core’ government bond markets that appeared around the ill-fated mini-budget. Whilst we would stop short of sounding the all-clear, this is an encouraging sign. The rally has stalled at the 3% level, roughly where 10Y yields were in early September. Spreads to 10Y Bund are back to just above 120bp but the Treasury rally has brought that spread to -25bp after a trough of -50bp. More cuts being priced out of the GBP curve would bring the spread to Bund to 100bp but we think Treasuries would outperform in any rally, meaning we can no longer exclude Treasuries trading through gilts. More cuts being priced out of the GBP curve would bring the spread to Bund to 100bp Unlike the USD curve, the focus on rate cuts in 2024 is nothing new. What’s interesting is that forwards have inverted more even as hikes were being priced out. This is a notable development because one would expect that higher hikes now also mean less room to cut later. In any event, we think this forward curve inversion is only a transitional state of affairs until either the dovish re-pricing shaves more hikes off the front-end, or more stubborn inflation contradict cut expectations. At 3%, gilts could still tighten to Bund but we think Treasuries would outperform in a rally Source: Refinitiv, ING Sterling will struggle to make further gains The BoE's trade-weighted measure of sterling has recovered nearly 8% from its lows in September and is now trading back to levels seen in early August. It looks as though about half of that rally has come from the improvement in the UK's fiscal credibility since the dark days of September. And the other half has come from the broad sell-off in the dollar, where the US currency makes up about 20% of the BoE's sterling basket. We doubt Thursday's BoE meeting will have too much impact on sterling, where a 50bp hike looks priced. But heading into 2023, we suspect sterling will struggle to make substantial further gains. Here, we doubt GBP/USD can sustain gains over the 1.23 area given our view that the next sizable move in the dollar is probably stronger as the Fed stays hawkish through the first quarter of next year, in spite of the looming recession. And we feel that EUR/GBP will find good support below the 0.85/86 area and favour a return to the 0.87/88 region. Here two-year euro versus sterling swap spreads should remain pretty steady in the 130-150bp area. But a call on a challenging investment environment – central banks hiking into recessions – suggests sterling should under-perform given its higher sensitivity to global equity markets.  Read this article on THINK TagsInterest Rates Foreign exchange Bank Of England 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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

A 50bp Hike By The Fed And The ECB Is Firmly Expected Next Week

ING Economics ING Economics 10.12.2022 08:58
A 50bp hike by the Fed is firmly expected. With concerns over the recent steep falls in treasury yields and the dollar, we are likely to end up at a higher ultimate interest rate than the bank indicated back in September. For the ECB, we think the risk of a 75bp hike has increased – still, we expect a 50bp hike, supported by hawkish communication as a compromise In this article US: A hawkish Fed message will likely fall on deaf ears UK: Hectic data week proceeds key Bank of England decision Eurozone: Another jumbo rate hike has become more likely in recent days   Shutterstock US: A hawkish Fed message will likely fall on deaf ears Markets are firmly expecting the Federal Reserve to opt for a 50bp hike at the 14 December Federal Open Market Committee (FOMC) meeting after already implementing 375bp of rate hikes, including consecutive 75bp moves at the previous four meetings. The central bank has been at pains to point out that despite smaller individual steps, we are likely to end up at a higher ultimate interest rate than the central bank indicated was likely back in September. Its forecasts are likely to show the Fed funds rate rising above 5% with potential slight upward revisions to near-term GDP and inflation and a lower unemployment rate to justify this. Officials have been suggesting they may not cut rates until 2024 and we suspect Fed Chair Jerome Powell will echo this sentiment. Nonetheless, this “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads, is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. In terms of our view, we continue to expect a final 50bp rate hike in February, but with recession risks mounting, which will dampen inflation pressures further, we look for rate cuts from the third quarter of next year. Ahead of that announcement, we will have consumer price inflation data. The surprisingly soft core CPI print was the catalyst for the recent moves lower in Treasury yields and the dollar, and a second consecutive low reading would reinforce the market conviction that rate cuts are going to be on the agenda for the second half of 2023. This means Powell will have to battle hard with his commentary in the post-FOMC press conference to prevent financial conditions from loosening too much before inflation is defeated. UK: Hectic data week proceeds key Bank of England decision There’s probably just about enough in the latest UK data and recent Autumn Statement for the Bank of England to pivot back to a 50bp rate hike at its meeting next Thursday. Inflation looks like it has peaked, although BoE hawks will be keeping a close eye on the data due a day prior to its announcement. Headline CPI is likely to dip, however core could be more sticky, and last month’s data saw core services inflation come in slightly higher than the bank had forecast in November. Jobs data has also hinted at persistent labour shortages, which will keep the pressure on wage growth. Still, Chancellor Jeremy Hunt probably did enough last month to lower concerns that the BoE and the Treasury are working at cross-purposes, even if the fiscal tightening announced won’t have a huge bearing on the economy, relative to the Bank’s forecasts released last month. We expect a 50bp hike next week, and another 50bp hike in February, which is likely to mark the peak of this tightening cycle. Read our full Bank of England preview here. Eurozone: Another jumbo rate hike has become more likely in recent days Macro data since the European Central Bank's October meeting has shown resilience in the eurozone economy in the third quarter but also confirmed a further cooling of the economy in the last few months of the year. The drop in headline inflation, as little as it says about the impact of the rate hikes so far, could at least take away some of the urgency to continue with jumbo rate hikes. At the same time, the ECB seems to be increasingly concerned that the fiscal stimulus and support measures announced could extend the inflationary pressure. ECB Executive Board Member Isabel Schnabel has been one of the more influential voices to watch, definitely since the summer with her Jackson Hole speech. Judging from her recent comments that “incoming data so far suggest that the room for slowing down the pace of interest rate adjustments remains limited, even as we are approaching estimates of the 'neutral' rate", 75bp is clearly still on the table. We think that the risk of a 75bp rate hike at next week’s ECB meeting has clearly increased. Next to the rate hike, the ECB is likely to set out some general principles of how it plans to reduce its bond holdings. We expect the ECB to eventually reduce its reinvestments of bond purchases but to refrain from outright selling of bonds. Besides the ECB, industrial data for the eurozone are out on Wednesday. Don’t expect anything that will influence the governing council meeting too much. While a tick down in production is to be expected, the fact that industry has outperformed recent expectations is likely to uphold. The Friday data are just as interesting as the PMI will show how the economy is faring at the end of the fourth quarter. Expect it to continue to signal a contraction, but just how deep is the question relevant for markets and policymakers. Finally, trade-in goods data are also out on Friday and will provide a clue on how the trade deficit is faring, which is very important for euro fair value. Read the full ECB preview here. Key events in developed markets next week Refinitiv, ING Read the article on ING Economics TagsUS Federal Reseve ECB Bank of England 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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Raising Policy Rate By The Fed, The ECB, The Bank Of England And The SNB Ahead, China Is Facing A Potential Surge In Cases As COVID Rules

Craig Erlam Craig Erlam 10.12.2022 11:47
US Two blockbuster events will have Wall Street on edge as the disinflation trade may have gotten ahead of itself. The last major piece of economic news before the Fed meets will be the November inflation report which is expected to show pricing pressures are decelerating.  The headline reading from a month ago is expected to rise 0.3%, a tick lower from the pace in October.  On a year-over-year basis, inflation is expected to decline from 7.7% to 7.3%. There is still a lot more work that needs to be done with bringing inflation down, but for now, it seems the trend is headed in the right direction.  The FOMC decision will be “Must See TV” as the Fed is expected to downshift to a half-point rate-hiking pace and yet still reiterate that they are not done raising rates.  The Fed will likely show that rates could rise anywhere from 4.75-5.25%, which will be very restrictive and should lead to a quicker cooling of the labor market.   EU  The ECB meeting next week promises to be a defining moment in the bloc’s fight against inflation. It was late to the party, very late in fact, but once it arrived it quickly started playing catch up culminating in a 75 basis point rate hike last week. The belief is that it won’t have to go as far as others in raising rates, with the terminal rate currently believed to be around 3%. That means the central bank is expected to already slow the pace of tightening on Thursday, with a 50 basis point hike, followed by another 100 over the first three meetings in the new year.  It’s not just the decision that investors will be focused on. The press conference and new macroeconomic projections will tell us everything we need to know about where the central bank sees itself in the tightening cycle and whether it is aligned with the markets. UK It’s all going on in the UK next week. The third week of the month brings a variety of major economic indicators including inflation, employment, retail sales, GDP and PMIs. This month has the added spice of the BoE meeting, the central bank that is arguably most stuck between a rock and a hard place among its peers. The economy is suffering and probably already in recession, inflation is 11.1% – although that is expected to drop slightly ahead of the meeting – and the cost-of-living crisis in squeezing those households least able to cope with it most. And yet the BoE is of the belief that the only policy response is to keep hiking rates. Markets expect another 50 basis points on Thursday and a further 100-125 in the first half of next year. The central bank has previously pushed back against market positioning and we may see language to the same effect in the statement, not to mention more dovish dissent.  Russia A week of no change is on the cards, it would appear. The CBR is expected to leave the Key Rate unchanged at 7.5% on Friday, the second consecutive hold after many months of hikes and then cuts following the invasion of Ukraine. On Wednesday, the third quarter GDP reading is also expected to be unchanged at -4% annualized.  South Africa The political environment appears to have cooled a little but President Ramaphosa isn’t necessarily safe yet. The focus will remain on this but there’s also inflation and retail sales data in the middle of the week that will be of interest. Turkey A few notable data releases next week although maybe not anything that will move the needle under the circumstances. Unemployment and industrial production stand out. Switzerland The SNB is expected to raise its policy rate by 50 basis points to 1% next week as it attempts to get a grip of inflation. It’s currently running at 3%, above its target of below 2% and the SNB has been clear in its determination to bring it down.  China China is facing a potential surge in cases as COVID rules are loosened. Following the protests over the zero-Covid policy in several Chinese cities last week, the Chinese government is pivoting its policy.  The elimination of key tenets of its virus elimination plan suggests they will try to learn to live with the virus. It will be a busy and not-so-good week of Chinese economic data. At some point this week we will see the release of aggregate financing, new yuan loans, and money supply data.  On Thursday, industrial production, retail sales, fixed assets, and the surveyed jobless rate will be released, with most expecting a softer print. The PBOC is also expected to hold its 1-year medium-term lending facility rate at 2.75% as volumes (CNY) could decline from 850 billion to 500 billion.     India All eyes will be on the November inflation report which could show a deceleration in pricing pressures coming closer to the upper boundaries of the RBI’s 2-6% target. Given the growth slowdown that is forming, inflation could continue its decline next quarter which should help finish the job of bringing it back to target.  India is also expected to see industrial production drop from 3.1% to -0.6%.   Australia & New Zealand Following the recent RBA rate decision, investors expect the bank to be nearing the end of its tightening cycle.  The focus for Australia now shifts to business conditions/confidence and the labor market.  The Australian economy is expected to add 15,000 jobs, a slower gain than the 32,000 seen in the prior month.   New Zealand’s GDP growth will quickly cool as the latest tourist boom eases. Third quarter GDP on a quarterly basis is expected to soften from 1.7% to 0.8%.   Japan Investors will have to be patient until the spring when the new leadership team has been created. The BOJ policy review could lead to the end of a decade-long ultra-loose monetary policy. The upcoming week is filled with economic data releases. The main highlights include the BOJ’s Tankan report which will show big manufacturers are struggling and non-manufacturing activity got a boost on easing covid rules. The November PPI report will show minimal pricing relief, while the trade deficit is expected to narrow.  The preliminary PMIs could show both manufacturing and service activity are weakening.     Singapore It could be mostly a quiet week for Singapore with the exception of the release of non-oil domestic exports.    Economic Calendar Saturday, Dec. 10 Economic Events The annual Bund Summit continues in Shanghai The International Coffee Organization conference takes place in Vietnam Sunday, Dec. 11 China FDI, Aggregate Financing, Money Supply, and New Yuan loans expected this week Monday, Dec. 12 Economic Data/Events India CPI, industrial production Japan PPI, machine tool orders Kenya GDP New Zealand net migration Mexico industrial production Turkey current account UK industrial production Brazil’s presidential election is expected to be certified Tuesday, Dec. 13 Economic Data/Events US November CPI M/M: 0.3%e v 0.4% prior; Y/Y: 7.3%e v 7.7% prior Australia consumer confidence, household spending Germany CPI, ZEW survey expectations Hong Kong industrial production, PPI Israel trade Italy industrial production Japan Bloomberg economic survey New Zealand home sales, food prices Philippines trade South Korea money supply Turkey industrial production UK jobless claims, unemployment The Bank of England releases its financial stability report US House Financial Services Committee holds an initial hearing on FTX’s collapse US President Joe Biden hosts the US-Africa Leaders Summit New Zealand’s government releases its half-year economic and fiscal update Wednesday, Dec. 14 Economic Data/Events FOMC Decision: Expected to raise the target range by 50bps to 4.25-4.50% Eurozone industrial production India trade, wholesale prices Japan machinery orders, industrial production Mexico international reserves New Zealand current account GDP ratio, BoP Russia GDP South Africa CPI, retail sales South Korea jobless rate Spain CPI UK CPI EIA crude oil inventory report The European Union and the Association of Southeast Asian Nations will celebrate the 45th anniversary of their partnership at a summit in Brussels US Senate Banking Committee holds a hearing on FTX’s collapse The US-Africa Leaders Summit continues with keynote remarks from Biden The Bank of Japan will announce the outright purchase amount of Japanese government securities RBA Gov Lowe delivers an address at the 2022 AusPayNet Annual Summit Thursday, Dec. 15 Economic Data/Events US Retail Sales, cross-border investment, business inventories, empire manufacturing, initial jobless claims, industrial production ECB Rate Decision: Expected to raise Main Refinancing rate by 50bps to 2.50% BOE Rate Decision: Expected to raise rates by 50bps to 3.50% Switzerland rate decision: Expected to raise rates by 50bps to 1.00% Norway rate decision: Expected to raise rates by 25bps to 2.75% Mexico rate decision: Expected to raise rates by 50bps to 10.50% Australia unemployment, consumer inflation expectation Canada existing home sales, housing starts China medium-term lending, property prices, retail sales, industrial production, surveyed jobless Eurozone new car registrations France CPI Japan tertiary index, trade New Zealand GDP Nigeria CPI Poland CPI Spain trade Friday, Dec. 16 Economic Data/Events US deadline for a new funding deal to avert a federal government shutdown US markets observe “Triple witching”, which is the quarterly event where the expiry of stock and index options occur with those of index futures US preliminary PMIs Australia preliminary PMI readings  European flash PMIs: Eurozone, Germany, UK, and France   Hong Kong jobless rate Italy CPI, trade Japan PMIs, department store sales New Zealand PMI Russia rate decision: Expected to keep rates steady at 7.50% Singapore trade Thailand foreign reserves, forward contracts, car sales Bank of Finland Governor Rehn speaks on the Nordic nation’s economy South Africa’s governing party begins its five-yearly elective conference in Johannesburg Sovereign Rating Updates Luxembourg (Moody’s) 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.  
Bank of England Faces Dilemma: Will They Raise Rates by 25bps or 50bps?

Cable Market (GBP/USD): The Uptrend Is Still Present

InstaForex Analysis InstaForex Analysis 10.12.2022 15:38
After falling during Friday's Asian trading session, the dollar then rose at the beginning of the European session. Thursday's story seems to be repeating itself. After hitting an intraday local low of 104.44, the DXY futures were back on the rise, climbing to the proverbial 105.00 mark. The dollar and its DXY index remain under pressure despite dollar bulls' attempts to regain control. There are 3 weeks left till New Year, but the situation in the financial markets is not becoming less tense, though some big players of the financial market have already summed up the results of the year and are gradually closing positions, balancing their investment portfolios and going out of the market. Due to this, the volume of trades has already started to decline. However, this does not mean that volatility is also declining. Next week we will have another powerful breakthrough in this respect: besides the release of important reports, 4 major world central banks (USA, Switzerland, UK and eurozone) will announce their decisions on monetary policies. British reports will open the upcoming week (at the beginning of the European trading session): the British National Statistics Office will release data on industrial production and GDP for October. This report shows the aggregate economic data and will have a strong impact on the Bank of England's monetary policy decision (the BoE is set to meet on Thursday, December 15). GDP growth means an improvement in economic conditions, which makes it possible (with a corresponding increase in inflation) to tighten monetary policy, which, in turn, usually has a positive effect on the quotes of the national currency. Monthly GDP data (as opposed to quarterly reports) does not affect the pound so much. Nevertheless, traders, who follow the dynamics of its quotes, are likely to pay attention to this report. Indicators in the manufacturing industry and industrial production in the UK are expected to fall, and GDP growth will decrease, which should have a negative impact on the pound, including in the GBP/USD pair. In the meantime, GBP/USD has been on an uptrend for the third consecutive month, having recovered from a deep fall in August and September. Back then, as we remember, the ill-conceived policy of the then Prime Minister Lisa Truss' cabinet to reduce taxes and increase spending led to a sharp drop in the market for British government bonds and the pound. Economists said that the British financial system was hours away from a grand collapse or just a collapse in general. The BoE had to intervene to prevent the pound and the British stock market from plunging even further: in late September, according to Bloomberg, the central bank purchased British government bonds (conventional gilts) with a residual maturity of more than 20 years in the secondary market from September 28, and promised to buy long-term government bonds worth another 65 billion pounds. "The purchases will be carried out on whatever scale is necessary," the BoE said at the time. However, GBP/USD has also been rising in the last 3 months and amid the weakening U.S. dollar. The DXY index reached a local high of 114.74 in September (since June of 2002), but then started falling in November by more than 5.0%. And the DXY has fallen another 1.1% since early December, to its current high of 104.81. And so far, as we noted at the beginning of this article, the dollar and its DXY index remain under pressure. As for GBP/USD, the pair was trading near 1.2240, bullish in the medium-term (above the support levels of 1.2110, 1.1930 and 1.1875) when this article was written. The uptrend is still present for the time being: steady growth to the area above the long-term resistance level of 1.2250. 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/329414
Gold's Hedge Appeal Shines Amid Economic Uncertainty and Fed's Soft-Landing Challenge

Inflation Rates In Asia Look To Be Peaking Out, Picture Of The CEE Region For Next Year Is A Shallow Recession Driven Mainly By A Fall In Household Consumption

ING Economics ING Economics 11.12.2022 09:48
The global economy at a glance In this article US: Markets doubt the Fed’s intent Eurozone: Lower energy prices have temporarily stopped the downturn UK: Calmer markets and delayed fiscal pain not enough to stop recession China: Still dire from rising number of Covid cases Rest of Asia: No recession, but certainly slowdown CEE: Geopolitical misfortune  Rates: To reverse higher first, and then collapse lower as a theme for 2023 FX: Everyone is asking whether the dollar has topped   Shutterstock The World Reimagined globes in London, UK - 20 Nov 2022   1US: Markets doubt the Fed’s intent The economy is experiencing a strong second half of 2022. Jobs are being created in significant number, wages continue to rise and household keep spending as the Fed signals a step down to 50bp incremental rate hikes, but with a higher ultimate rate than they indicated was likely back in September. Officials suggest they may not cut rates until 2024 given their concern about stickiness in key service sector components of inflation, but their forward guidance needs to be taken with huge handfuls of salt given their recent track record. The “hawkish” rhetoric is likely the result of concern that the recent steep falls in Treasury yields and the dollar, coupled with a narrowing of credit spreads is loosening financial condition – the exact opposite of what the Fed wants to see as it battles to get inflation lower. Nonetheless, the softer core inflation prints seen in October, combined with bad housing market data and weaker business confidence has led the market to anticipate rate cuts from second half of 2023 – in line with our long-held view. 2Eurozone: Lower energy prices have temporarily stopped the downturn With lower natural gas prices on the back of the unusual warm autumn weather the downturn in sentiment has been temporarily halted, though most indicators are still weak. With retail sales falling sharply in October a recession over the winter quarters still looks very likely, albeit perhaps not as deep as we previously pencilled in. Thereafter, growth will be subdued at best, as higher interest rates will start to bite, energy prices are likely to remain at elevated levels, while budgetary stimulus is bound to peter out in the course of 2023. Headline inflation fell back in November to a still high 10%, while underlying inflation remains stuck at 5%. The ECB is therefore likely to lift the deposit rate to 2% in December, considered by some members of the Governing Council as the neutral rate. The first quarter might see another 50 bp further tightening, as well as the start of gradual reduction of the balance sheet, though at a very slow pace in the beginning. 3UK: Calmer markets and delayed fiscal pain not enough to stop recession Calmer financial markets and some fresh tax rises allowed the Chancellor to put off some of the painful spending cuts until after the next election in 2024/25 in his Autumn Statement. Nevertheless, energy support will become considerably less generous for most households from April, and the housing market is showing very early signs of faltering. Despite the sharp fall in swap rates since September’s mini-budget crisis, mortgage rates have fallen much more gradually. A recession now looks virtually inevitable, though it might not be until the first quarter until we see more material signs of slowing. The Bank of England has begun to talk down market rate hike pricing, and investors have taken the hint, but are still probably overestimating what is to come. We expect the BoE to pivot back to a 50bp hike in December, and expect one further 50bp move in February, which is likely to mark the top of this tightening cycle. 4China: Still dire from rising number of Covid cases Even the government offers property developers to increase funding channels, uncompleted home projects are yet to be finished. Most of those projects are left in the hands of local governments to find a private company to finish the construction work. This takes time to finish. The housing market is therefore quiet as home price continues to fall. On Covid, more local governments have subtly changed to slightly softer practices to implement Covid measures. But the higher number of Covid cases means that there is limitation on how fine-tuning can benefit the economy. Sporadic lockdowns would continue and still affect retail sales and production adversely. We have already seen retail sales fell into yearly contraction in October, and PMIs showed that could easily repeat for the rest of 4Q22. More, exports should continue to show weaknesses due to high inflation in US and Europe. The only support to the economy is now fiscal spending, which has been in the area of advanced technology and new energy. 5Rest of Asia: No recession, but certainly slowdown On the positive side, inflation rates in Asia look to be peaking out, and at levels well below comparable rates in Europe and the US. And this has also meant that although central banks across the region have been raising policy rates, they have not gone up alarmingly, and it feels as if in many cases, we are nearing a peak after the next one or two hikes. On the negative side, Asia is highly geared to global growth through global trade, and so with Europe contracting, China in as weak a state as we have seen it, and the US slowing, it is not surprising to see Asia export figures swinging sharply negative, with Korea and Taiwan the bellwethers for the North Asia, and Singapore’s Non-oil domestic export declines performing the same barometer role for SE Asia. Not entirely independently, the global semiconductor downturn is heaping further downward pressure on the region, which is the key production centre for most global technology hardware, weighing on industrial production and exacerbating the export downturn. 6CEE: Geopolitical misfortune  In addition to the global story of high energy prices and headline inflation, the CEE region is suffering from its own problems. The common denominator is the region's unfortunate geographic location in the current geopolitical landscape and historically strong labour market. The result is significantly higher inflation than in Western Europe, but also high and persistent core inflation, underpinned by a still massively tight labour market that shows no signs of easing despite the coming recession. Moreover, in response to the energy and migration crises at the same time, governments across the region have come up with another wave of household support spending, resulting in massive twin deficits. However, this has been countered by central banks tightening monetary conditions through interest rate hikes, well above global peers, but also often through the FX channel. The resulting picture of this wild mix for next year is thus a shallow recession driven mainly by a fall in household consumption, only gradually slowing inflation with a possible upside surprise, and cautious central bank foot-dragging around the timing of the start of monetary policy normalisation.  7Rates: To reverse higher first, and then collapse lower as a theme for 2023 2022 is shaping up to be the biggest bear market for bonds in modern times. This might help explain why market rates have reversed lower in recent weeks. But it’s also to do with position squaring, as a decent rump of investors square up on bear market positions taken in 2022. That requires the buying of both duration and risk. However, this stores up problems for the turn of the year. Arguably, financial conditions (especially in the US) are prone to loosening too much, driven there by falls in market rates. But the Fed is still hiking and needs tighter financial conditions. That should force market rates back up first. But the biggest narrative for 2023 will be one of big falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. 8FX: Everyone is asking whether the dollar has topped At top of everyone’s minds in the FX market is the question as to whether the dollar has topped. Softer US inflation data and some hints of softer Covid policy in China have combined to knock the dollar some 8% off its late September highs. Those arguing for a continued dollar decline are wholly focused on the Fed story and the extension of a Fed pivot into a full-blown easing cycle. We certainly agree that a dovish turn at the Fed – a turn that finally sees short-dated US yields start to fall – is a necessary condition for a drop in the dollar. But a sufficient condition requires investment destinations in Europe and Asia being attractive enough to pull funds out of dollar deposits yielding 4%+. It remains questionable whether either of these necessary or sufficient conditions are met in 2023 and we remain sceptical that EUR/USD will be able to sustain gains above the 1.05 level. Elsewhere, sterling has recovered after November’s fiscal U-turn – a sign that policy credibility has a big role to play in FX markets. And finally, Japanese policy makers will be looking at back at some incredibly effective FX intervention to sell USD/JPY in September and October. Read the article on ING Economics   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 Challenge to the Dollar: De-dollarisation and Geopolitical Shifts

The Second Half Of 2023 Will Be About Rate Cuts By The Fed, But Do Not Expect The People’s Bank Of China To Cut The RRR Or Interest Rates

ING Economics ING Economics 11.12.2022 10:19
Global central banks are facing unprecedented challenges. Here's our focus on the main ones In this article Federal Reserve European Central Bank Bank of England People's Bank of China Shutterstock   Developed markets: Our calls at a glance ING Central and Eastern Europe/EMEA: Our calls at a glance ING Asia (ex Japan): Our calls at a glance ING Central banks: Our forecasts Macrobond, ING Federal Reserve After 375bp of rate hikes since March, including four consecutive 75bp moves, the Federal Reserve has concluded that it is now time to move in smaller increments. Nonetheless, the market doubts the Fed’s intent and the recent falls in Treasury yields and the dollar are undermining the central bank's efforts to defeat inflation. Officials have been trying to convince the market that the ultimate/terminal interest rate will be above where they had signalled in September, but this is falling on deaf ears. The market is focused on soft inflation readings, coupled with a sense that recession is around the corner. While we agree that the second half of 2023 will be about rate cuts, we think there is the risk of a more aggressive response to inflation in the near term, with upside potential to our call for 50bp rate hikes in December and February. We could even see the Fed consider a faster run down of its balance sheet in an effort to re-steepen the Treasury yield curve at a higher level. European Central Bank Eurozone inflation is close to its peak, unless energy prices surge again next year, but the road towards the ECB’s 2% target will be long and bumpy. The pass-through of wholesale gas prices, as well as still high selling price expectations, suggest that there is still inflationary pressure in the pipeline. It could take until 2024 before inflation has returned to 2%. For the ECB, this means that its job is not done, yet. At the same time, the looming recession, the risk of a subdued recovery and increasing government debt bring the ECB closer to the point at which rate hikes become overly restrictive. As a consequence, we expect the ECB to bring the deposit rate to a maximum of 2.5% in the first quarter of 2023. The reduction of the balance sheet, a.k.a reducing the ECB’s bond portfolio, could become the ECB’s main policy instrument to fight inflation. Bank of England The Bank of England may have hiked by 75bp in November but it made it abundantly clear that this was likely to be a one-off, and that investors were overestimating future tightening. Admittedly, recent data has been slightly hawkish, and the committee is alive to the risk that services/wage inflation may only fall gradually despite the forthcoming recession. But the Chancellor’s Autumn Budget probably did just about enough to assuage the BoE's concerns about fiscal and monetary policy working at cross purposes. While much of the fiscal pain was delayed to future years, the government still scaled back energy support for households next year. We expect 50bp rate hikes in both December and February, marking a peak Bank Rate of 4%. With labour shortages unlikely to disappear next year, and wage growth therefore likely to stay more elevated than in past recessions, we suspect the BoE’s first rate cut may not come until 2024, and after the Federal Reserve.  People's Bank of China The PBoC cut the reserve requirement ratio (RRR) by 0.25 percentage points, effective in December, following a cut in April. There were also two 10bp cuts in the 7D reverse repo policy rate and 1Y Medium Lending Facility (MLF) rate back in January and August this year. The loosening of monetary policy has been mild relative to the slow rate of growth, which averaged 3.0% over the first three quarters of 2022. We believe that Covid measures are more likely to ease in 2023. But external demand could be weaker compared to 2022. Overall, growth in the domestic market should outpace the potential contraction of exports. Still, inflation should be absent in China. As such, the PBoC may choose to stay on hold next year as the central bank has hesitated to lower the 7D interest rate to near the 1% level to avoid falling into a liquidity trap. We do not expect the PBoC to cut the RRR or interest rates in 2023. That said, the re-lending programme for specific targets, e.g. SMEs and unfinished home projects, should continue at least in the first half of 2023.  TagsPBoC Federal Reseve ECB Central banks Bank of England Read the article on ING Economics   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 China’s Covid Containment Continued To Negatively Impact The Output At The End Of 2022

China’s New Aggregate Financing May Bounce | Monetary Policy Decisions Ahead

Saxo Bank Saxo Bank 12.12.2022 09:07
    Softer US CPI to offer mixed signals and considerable volatility Last month’s softer US CPI report was a turning point in the markets and inflation expectations have turned markedly lower since then. Consensus is looking for another softer report in November, with headline rate expected at 7.3% YoY, 0.3% MoM (from 7.7% YoY, 0.4% MoM) while the core is expected to be steadier at 6.1% YoY, 0.3% MoM (from 6.3% YoY, 0.3% MoM). While the case for further disinflationary pressures can be built given lower energy prices, easing supply constraints and holiday discounts to clear excess inventory levels, but PPI report on Friday indicated that goods inflation could return in the months to come and wage inflation also continues to remain strong. Easing financial conditions and China’s reopening can be the other key factors to watch, which could potentially bring another leg higher in inflation especially if there is premature easing from the Fed. Shelter inflation will once again be key to watch, which means clear signs of inflation peaking out will continue to remain elusive. Why volatility in equites could pick up this week and what we learnt from prior inflationary out outs Will the inflation read show CPI fell to 7.3% in November as the market expects, down from 7.7% YoY? The risk is that inflation doesn’t fall as forecast, and that may likely push up bond yields and pressure equites lower. We saw this set up play out on Friday. November’s producer price index showed wholesale prices rose more than expected, which spooked markets that this week’s CPI could be bleak. As such bonds were sold off on Friday, pushing yields up; with the 10-year bond yield rising 10bps to 3.58%, while equities were pressure lower. Consider over the past six months, the S&P 500 has seen an average move of about 3% in either direction on the day US CPI has been released, according to Bloomberg. We haven’t seen these moves since 2009. Also consider, the S&P 500 has fallen on seven of the 11 CPI reporting days this year. December FOMC and dot plot may have little new to offer, so focus remains on Powell’s press conference The Fed is expected to lift its Federal Funds Rate target by 50bps to 4.25-4.50%, according to the consensus as well as the general commentary from Fed officials signalling a downshift in the pace of rate hikes. The updated economic projections will also be released, and are expected to show a higher terminal rate than the September projections (4.6%), as has been alluded to by Chair Powell at the November FOMC and in remarks made in December. But that means little room for market surprise as the Fed funds futures are pricing in a terminal rate of 4.96% in May 2023. Easing financial conditions and expected China stimulus could mean Fed continues to chase the inflation train from the back into the next year as well, so Powell’s press conference remains key to watch. There will have to be a lot of focus on pushing out the rate cuts of ~50bps that are priced in for next year, and emphasise that the Fed will not ease prematurely if Powell and committee want to avoid further easing of financial conditions. China is expected to convene the Central Economic Work Conference this week The Chinese Communist Party is expected to have its annual Central Economic Work Conference this week to formulate the macroeconomic policy framework for 2023. Investors are expecting supportive initiatives including measures to ease the stress in the ailing property sector. The conference will set out directions and blueprints but short of releasing key policy targets which will be for the National People’s Conference to be held next March. A weak set of Chinese activity data is expected Economists surveyed by Bloomberg are forecasting that China’s retail sales shrank sharply by 3.9% Y/Y in November. The potential weakness is likely attributed to poor performance of auto sales, dining-in activities, and sales during the “double-11” online shopping festival in the midst of Covid-19 lockdowns during the best part of November. November auto sales in China fell by 9.2 %Y/Y and by 10.5% M/M. Courier parcels processed on Nov 11 fell 20.7% Y/Y. The growth in industrial production is expected to fall to 3.7% Y/Y in November from 5% to 3.7%, following a weak November NBS manufacturing PMI and soft high-frequency data of steel production. Year-to-date fixed asset investment is expected to edge down to 5.6% from 5.8%, dragged by stringent pandemic control practices. ECB also likely to downshift to a smaller rate hike The European Central Bank (ECB) is also expected to slow down its pace of rate hikes to a 50bps increase this week. Headline inflation eased slightly in November, coming in at 10.0% YoY (exp. 10.4%), but was overshadowed by an unexpected rise in core inflation 6.6% YoY (exp. 6.3%, prev. 6.4%). While there is likely to remain some split in ECB members at this week’s meeting, the central bank’s Chief Economist Lane remains inclined to take into account the scale of tightening done so far. There is also uncertainty on the announcement of quantitative tightening. Bank of England may remain more divided than the other major central banks The Bank of England is also expected to follow the Fed and the ECB and downshift to a smaller rate hike this week, but the decision will likely see a split vote. A host of key data, including GDP, employment and inflation will be due this week in the run up to the BOE decision, and significant positive surprises could tilt the market pricing more in favour of a larger move which also creates a bigger risk of disappointment from the central bank. Headline annualised inflation advanced to 11.1% Y/Y in October, while the core rate remained at an elevated level of 6.5%. Consensus expects inflation to cool slightly to 10.9% Y/Y in November, but the core to remain unchanged at 6.5% Y/Y. Wage pressures are also likely to be sustained, and the cooling in the labor market will remain gradual. In Australia, this week the focus will be on consumer confidence and employment data There are a couple of economic read outs that could move the market needle, the ASX200 (ASXSP200.1) this week. Weakening confidence is expected; starting with Consumer Confidence for December (released on Tuesday), followed by Business Confidence for November. Employment reports are due on Thursday for November, and likely to show employment fell; 17,000 jobs are expected to be added, down from the 32,200 that were added in October. So focus will be on the AUD and a potential pull back if the data is weaker than expected. Iron ore equites to see volatility China reopening talk vs shut downs pre lunar new year The iron ore (SCOA) trading at four month highs $110.80 rallying as China has been easing restrictions, plus there are whispers Chinese property developers could get more support, which would support demand for iron ore rising. However we mentioned on Friday, why iron ore could pull back, as buying volume appears slowing. So be mindful of potential pull back in iron ore pricing and mining equities. Secondly, consider seasonable halts of Chinese steel plants ahead of the Lunar New year holiday. Restocking typically occurs 5-8 weeks before the holiday, but plants could be closed earlier, due to poor profits and weaker demand. This could cause volatility in iron ore and iron ore equities. So, keep an eye on iron ore majors, Vale, Fortescue Metals, Champion Iron, BHP and Rio as they could see profit taking after rallying ~25-55% from October.   China’s new aggregate financing and RMB loans are expected to have bounced in November Market economists, as surveyed by Bloomberg, are expecting China’s new aggregate financing to bounce to RMB 2,100 billion in November from RMB 907.9 billion in October and new RMB loans to rise to RMB 1,400 billion in November from RMB 615.2 billion as People’s Bank of China urged banks to extend credits to support private enterprises including property developers. Less bond issuance by local governments and corporate and weak loan demand however might have weighed on the pace of credit expansion in November. Key earnings to watch: Adobe (ADBE:xnas), Trip.com (TCOM:xnas) In his note for key earnings this week, Peter Garnry highlights Adobe and Trip.com. The past five earnings releases have all led to a negative price reaction in Adobe shares as growth has come down while the cost of capital has gone up. Can Adobe buck the trend next when the company reports earnings? Another question investors will be asking is an update on the company’s $20bn acquisition of the industry challenger Figma, which was delayed due to a US Department of Justice investigation of the deal. Adobe reports FY22 Q4 (ending 30 November) earnings on Thursday with revenue growth expected at 10% y/y and EPS of $3.50 up 36% y/y as cost-cutting exercises are expected to improve profitability. Adobe is expected to end the fiscal year with revenue of $17.6bn and strong free cash flow generation of $7.3bn which translates into 5% free cash flow yield. Recently the Chinese government has chosen to move ahead with reopening the economy taking on the associated Covid risks and this could be good for the outlook for travel activity and thus Trip.com. The Chinese online travel agency platform is expected to report earnings on Wednesday with analysts expecting revenue growth of 22% y/y. Analysts expect revenue to increase 50% y/y in 2023 to CNY 29.6bn. •          Monday: Oracle•         Tuesday: DiDi Global•          Wednesday: Lennar, Trip.com, Nordson, Inditex•          Thursday: Adobe•          Friday: Accenture, Darden Restaurants   Key economic releases & central bank meetings this week Monday 12 December United Kingdom monthly GDP, incl. Manufacturing, Services and Construction Output (Oct)United Kingdom Goods Trade Balance (Oct)India CPI and Industrial Output (Nov)China (Mainland) M2, New Yuan Loans, Loan Growth (Nov) Tuesday 13 December Germany CPI (Nov, final)United Kingdom Labour Market Report (Oct)Hong Kong Industrial Production, PPI (Q3)Germany ZEW Economic Sentiment (Dec)United States CPI (Nov) Wednesday 14 December Japan Tankan Survey (Q4)United Kingdom Inflation (Nov)Eurozone Industrial Production (Oct)United States Fed Funds Target Rate (14 Dec) Thursday 15 December New Zealand GDP (Q3)Japan Trade Balance (Nov)South Korea Export and Import Growth (Nov)Australia Employment (Nov)China (Mainland) Industrial Output, Retail Sales, Urban Investment (Nov)Philippines Policy Interest Rate (15 Dec)Switzerland SNB Policy Rate (Q4)Norway Key Policy Rate (15 Dec)United Kingdom BOE Bank Rate (Dec)Eurozone ECB Deposit and Refinancing Rate (Dec)United States Initial Jobless ClaimsUnited States Retail Sales and Industrial Production (Nov)Taiwan Discount Rate (Q4) Friday 16 December Australia Judo Bank Flash PMI, Manufacturing & ServicesJapan au Jibun Bank Flash Manufacturing PMIUK S&P Global/CIPS Flash PMI, Manufacturing & ServicesGermany S&P Global Flash PMI, Manufacturing & ServicesFrance S&P Global Flash PMI, Manufacturing & ServicesEurozone S&P Global Flash PMI, Manufacturing & ServicesUS S&P Global Flash PMI, Manufacturing & ServicesUnited Kingdom GfK Consumer Confidence (Dec)Singapore Non-Oil Exports (Nov)United Kingdom Retail Sales (Nov)Eurozone Total Trade Balance (Oct)Eurozone HICP (Nov, final)   Sign up for our Outrageous Predictions 2023 webinar - APAC edition: Wed, 14 Dec, 11.30am SGT Source:Saxo Spotlight: What’s on the radar for investors & traders for the week of 12-16 Dec? A flurry of central bank meetings from Fed to BOE to ECB, US/UK CPI, China’s reopening and Adobe earnings | Saxo Group (home.saxo)  
Assessing 'Significant Upside Risks to Inflation': Insights from FOMC Minutes

US CPI & FOMC Decision Will Mark The Week! | The ECB, The Norges Bank, The Swiss National Bank And The BoE Interest Rates Decisons Arrive This Thursday

Swissquote Bank Swissquote Bank 12.12.2022 10:04
Friday’s US PPI print was soft, but not soft enough to meet market expectations. The US dollar spiked following the data, closed the week on a strong footage in America and opened the week on a strong footage in Asia. Trend and momentum indicators turned positive last week, and the dollar could gain more field before two important events that will mark the trading week: US November CPI on Wednesday, and the FOMC decision on Wednesday. Interest rates It's important to remember that there is a gap between what the Fed says it will do, and what the market thinks, and prices the Fed will do, even a tiny hawkish message could already weigh on the mood before Xmas. Elsewhere, the European Central Bank (ECB), the Bank of England (BoE), the Swiss National Bank (SNB) and Norges Bank are all due to raise interest rates this Thursday, and most of them are expected to follow the Fed with a 50bp hike. How could it impact the euro, sterling and the franc? Watch the full episode to find out more! 0:00 Intro 0:31 US PPI softened but not enough 1:10 US CPI & FOMC decision will mark the week! 6:15 Then, ECB is expected to hike 50bp 7:26 BoE is expected to hike 50bp 8:36 And SNB is also expected to hike 50bp … but a hawkish Fed statement and the dot plot could boost the USD appetite before Xmas. 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. #USD #CPI #inflation #data #FOMC #Fed #ECB #BoE #SNB #rate #decision #EUR #GBP #CHF #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
Monitoring Hungary: Glimmering light at the end of the tunnel

FX: More Pain For The Forint (HUF) Can Be Expected, The Correlation Between US 10-year Yields And G10 Dollar Crosses Has Picked Pp

ING Economics ING Economics 12.12.2022 12:31
A heavy event risk calendar this week stands to define the core themes for 2023. First and foremost is the question of how quickly US inflation decelerates (CPI on Tuesday) and how the Fed will respond (FOMC Wednesday.) A whole host of central bank meetings around the world, including the ECB on Thursday, will provide insights on how long policy stays tight USD: How long does policy need to stay tight? A pivotal week for FX and global asset markets lies ahead of us. The week will play a major role in determining whether central banks (particularly the Federal Reserve) need to keep policy tighter for longer, or can (as the market prices) start to relax a little over inflation and can consider rate cuts in the second half of next year to ensure a soft landing. The two key event risks here are tomorrow's US November CPI reading and Wednesday's FOMC meeting - including the release of a fresh set of dot plots. Going into these event risks the market is pricing the Fed tightening cycle peaking in the 4.90/5.00% area next spring and then 50bp of rate cuts being delivered in the second half. And consensus is for another relatively soft 0.3% month-on-month core CPI release tomorrow, which would tend to support the market's pricing. We look at a range of Fed scenarios in our FOMC preview. As noted previously here, December is typically a soft month for the dollar and probably a more dovish set out of outcomes and a weaker dollar does the most damage to positioning, which is probably still long dollars. However, we do feel that market consensus still underappreciates the risk of inflation staying higher longer and also is dangerously second-guessing the Fed in terms of 2H23 rate cuts. The Fed has said that it feels there is good forward guidance value in its dot plots and it may choose to get across its current message of tight policy staying in place for longer through those dot plots. Our rates team also sees upside risks to US 10-year yields from the 3.50% area, with outside risk to the Fed discussing outright US Treasury sales (rather than just roll-offs) if it does think the long end of the curve is too stimulative. Notably, the correlation between US 10-year yields and G10 dollar crosses has picked up substantially since the soft October CPI release on 10 November. The long end of the curve is therefore going to be a key battleground for the dollar. Event risks this week will therefore determine whether 2023 starts with a focus on the inflation battle being won and the prospect of stimulative, reflationary policy coming through - a dollar negative. Or whether sticky inflation ties the hands of central bankers, the US yield curve remains steeply inverted and the dollar continues to perform well in a challenging risk environment. We do see the latter scenario as more likely, but this week should certainly give one of the scenarios a big lift. There is very little on the US calendar today and we would expect DXY to go into tomorrow's CPI release near its current 105 levels. Chris Turner EUR: A big week for central bank meetings in Europe This week sees central bank meetings in the eurozone, Switzerland and Norway, where 50bp hikes are expected in the former two and a 25bp hike in the latter. Please see our full European Central Bank preview here and our Swiss National Bank preview here. On the former, we note there is still a slight risk of the ECB doing 75bp rather than 50bp - which would probably help the euro. But this of course comes after the US CPI/FOMC risk. Given the 10% EUR/USD correction off the late September lows, our preference would be that EUR/USD struggles to hold any gains over 1.06 this week and could end the week lower should US events oblige.  Chris Turner GBP: BoE to hike 50bp this week This week's highlight will be the Bank of England meeting on Thursday. Please see our full preview here. We expect the BoE to revert to a 50bp hike (55bp hike priced) as it tries to balance high inflation against growing evidence of a prolonged downturn - with little signs of stimulus.  Our game plan assumes that GBP/USD struggles to hold any gains over 1.23, while EUR/GBP should find support in the 0.85/0.86 area. A winter of discontent should see sterling underperform should central bankers need to keep rates tight(er) into a recession.  Chris Turner CEE: Asymmetric response to global developments A busy week at the global level will be accompanied by several data points from the Central and Eastern Europe region. This week's headline number will be November inflation in the Czech Republic. We expect inflation to accelerate from 15.1% to 15.9% year-on-year, slightly above market expectations. The number will have the market's attention not only because of the Czech National Bank meeting next week but also because of the surprising slowdown in inflation in October when government measures against high energy prices came into play. After this number, we can then expect more headlines coming from the CNB given Thursday's start of the blackout period. Also today, Hungary's assessment is expected to be discussed at the European Council level. However, early rumours suggest that the European Commission's conclusion remains unchanged. November inflation in Romania will be published on Tuesday. We expect an increase from 15.3% to 16.6%, above market expectations. Although we have already seen inflation slowing in previous months, this result would thus raise the peak again. We do not expect another rate hike from the National Bank of Romania in January, but either way, it will be a close call, and tomorrow's number could be key. In the second half of the week, we will then see secondary data across the region such as the current account balances in Poland and the Czech Republic and the final inflation estimate in Poland, including the core number. In the FX market, this week we will be watching the impact of global events on the region. Our baseline scenario of a stable EUR/USD should not bring too much change for the region, but risks both ways are significant and higher volatility compared to previous rather quiet weeks in the CEE FX market can be expected. As we mentioned earlier, interest rate differentials have fallen significantly over the past weeks in the region leaving FX vulnerable to global shocks. Also, the gas story is creeping back and with higher gas prices we see growing signs of a renewed relationship with FX. The region's reaction would thus be asymmetric in the direction of weaker FX in our view, if the US dollar ends up as a winner this week. The Hungarian Forint will be following a separate story in addition to the EU developments and the newly lifted fuel caps. Given the negative rumours, more pain for the forint can be expected and the question is whether EUR/HUF will make another march towards the 430 level as it did in October, which led the central bank to an emergency rate hike in the middle of that month. In our view, the long positioning has fully unwound, and the market is leaning towards the short side again, but we don't think that the negative outcome of the EU story is fully priced in, so it is likely that we will test new highs this week. 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
Hungary's Central Bank to Maintain Base Rate at 13%, Eyes on Effective Rate Amid Forint's Performance

The EUR/GBP Pair Is Displaying A Sideways Auction Profile

TeleTrade Comments TeleTrade Comments 13.12.2022 09:40
EUR/GBP is auctioning below 0.8600 as investors await UK Employment data. Increment in households’ earnings data could be a double-edged sword for the UK economy. The ECB is expected to hike its interest rates by 50 bps to 2.50%. The EUR/GBP pair is displaying back-and-forth moves marginally below the crucial hurdle of 0.8600 in the early European session. The cross is displaying a sideways auction profile as investors are awaiting the release of the United Kingdom Employment data. The asset remained topsy-turvy on Monday despite upbeat UK Gross Domestic Product (GDP) data. The monthly GDP data (October) reported an expansion of 0.5% while the street was expecting a contraction of 0.1%. Also, Industrial and Manufacturing Production data remained better than anticipation but were contracted on an annual basis for October month. Now, investors have shifted their focus to the UK Employment data. As per the projections, the jobless claims gamut will witness a decline of 13.3K. While the quarterly Unemployment Rate (October) is seen higher at 3.7% against the former release of 3.6%. Apart from that, Quarterly Average Earnings data excluding Bonuses is seen higher at 5.9% vs. the former release of 5.7%. An increment in households’ earnings could be a double-edged sword. No doubt, higher earnings will delight households in offsetting inflation adjusted-payouts but will also increase retail demand, which will escalate inflation further. This week, the interest rate policy by the Bank of England (BOE) will hog the limelight. Analysts from Danske Bank are expecting a 50 basis point (bps) rate hike announcement.  On the Eurozone front, investors are awaiting a monetary policy announcement from the European Central Bank (ECB), which is scheduled for Thursday. Analysts at Rabobank think that the ECB is likely to raise the policy rate by 50 basis points in December but note that they are not fully discounting the possibility of a 75 bps hike. They have forecasted a terminal rate of 3%.
The Commodities Digest: US Crude Oil Inventories Decline Amidst Growing Supply Risks

Focus On US CPI | In Cryptocurrency Market The Drama Continues With Binance

Swissquote Bank Swissquote Bank 13.12.2022 10:37
European equities traded in the red at the start of the week, but equities in the US rebounded as investors are hanging on to hope of slower inflation and reasonably hawkish Federal Reserve (Fed) by their fingernails. US CPI Today and tomorrow will tell whether they are right to be optimistic or not. If, by any chance, we see a softer CPI figure, then the S&P500 could easily jump above its 200-DMA, and even above the ytd descending channel top. But, but, but… today’s US CPI data, unless there is a huge surprise, will probably not change the Fed’s plan to hike the interest rates by 50bp this week. Therefore, even if we see a great CPI print and a nice market rally today, it may not extend past the Fed decision on Wednesday. US In energy, US nat gas prices jumped more than 30% since last week due to a powerful Pacific storm bringing cold and snow to the norther and central plains in the US. UK In the UK, power prices hit another ATH yesterday. European nat gas futures Happily, we haven’t seen a significant rise in the European nat gas futures, which in contrary kicked off the week downbeat. Crude Oil But crude oil rallied as much as 2.60% on Monday on several factors that could however not lead to sustainable gains in the mid-run. Watch the full episode to find out more! 0:00 Intro 0:29 US CPI: possible scenarios 2:50 But the Fed may not care much about the data 4:10 Opportunity to sell the latest crude oil rally? 6:17 Is it time for Chinese stocks to recover… sustainably? 8:03 UK grows more than expected, but… 8:43 Binance may have processes $10bn illegal funds. Bitcoin stable. 9:11 Amgen buys Horizon Therapeutics, Microsoft takes 4% stake in LSE 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. #USD #CPI #inflation #data #FOMC #Fed #rate #decision #dotplot #enery #crisis #natgas #crudeoil #Russia #China #Covid #reopening #HangSeng #Alibaba #Amgen #HorizonTherapeutics #Microsoft #LSE #acquisition #Bitcoin #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      
Bank of England Confronts Troubling Inflation Report; Fed Chair Powell's Testimony Echoes Expected Path

The Pound (GBP) Is Relatively Steady After The Release Of The UK Jobs Data

Craig Erlam Craig Erlam 13.12.2022 12:28
Stock markets are tentatively higher in Asia while Europe and the US are poised for a similarly modest start to trade in what is the start of a hectic 72 hours in the markets. For so many weeks now, the December Fed decision has dominated the minds of traders, while sentiment in the markets has been dictated by how small changes in various data points influence the outcome of the meeting. When a meeting or event generates this much hype, it can often disappoint and be something of an anticlimax but I’m not sure that will be the case this time. It’s not so much the decision itself but what accompanies it that will set the stage for next year. For so long the question has been will the Fed hike into a recession. In that time it’s remained convinced that a soft landing can be achieved and the resilience of the economic data has supported that but unfortunately, the same resilience has also supported the case for more hikes and a higher terminal rate. Last month’s CPI release gave investors real hope that in much the same way that inflation’s acceleration higher this year blew expectations out of the water, the path lower may also not be as gradual as feared. Unfortunately, some of the data since then hasn’t been so favourable – most notably the wages component of the jobs report – so a lot is now hanging on today’s release. Another number below forecasts of around 7.3%, year on year, could get the excitement flowing once more. Jobs data keeps pressure on BoE The pound is relatively steady after the release of the UK jobs data that was in line with market expectations. Unemployment rose marginally to 3.7% while wages rose by 6.1%. While the data does indicate some additional slack in the labour market, the wages number – despite falling well short of inflation – will be of concern to the BoE and ensure its foot remains firmly on the brake in the short term. Steady despite FTX developments and Binance concerns Bitcoin continues to trade around $17,000, undeterred by reports of Sam Bankman-Fried’s arrest and possible charges for money laundering against Binance. Withdrawals on the platform highlight the uncertainty and shattered confidence in the space, a desperation not to be caught up in another FTX event. Even when the situation looks very different. But that’s what fear does, especially in a situation where confidence has been so severely damaged, as it has in recent weeks. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ 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.  
Bestway Might Have Larger Designs On The UK's Second Biggest Supermarket

The Bank Of England Is Likely To Continue Raising Rates Despite Weak Economic Conditions

Kenny Fisher Kenny Fisher 13.12.2022 13:35
The British pound remains calm this week and is trading at 1.2286, up 0.20%. It is a busy week on the economic calendar, but GBP/USD isn’t showing much interest. Today’s UK employment data was within market expectations, which resulted in a muted reaction from sleepy sterling. The unemployment rate ticked upwards to 3.7%, up from 3.6%. Wage growth climbed to 6.1%, up from 5.9% and above the consensus of 5.8%. Wages remain well below the inflation level of 11.1%, but will still be of concern to Bank of England policy makers, who will want to avoid the spectre of a wage-price spiral, which would make the battle against inflation that much more difficult. This may not be something that the BoE can control, with the threat of public workers going on strike to demand more pay. The BoE is likely to continue raising rates, despite weak economic conditions, as defeating inflation remains its first priority.  The BoE meets on Thursday and is expected to raise rates by 50 basis points, which would bring the cash rate to 3.50%. US CPI expected to dip All eyes are on the US inflation report for November, which will be released later today. The consensus stands at 7.3%, following a 7.7% gain in October. The timing of the report is interesting, as it comes just one day before the Federal Reserve meeting on Wednesday. Inflation fell in October and was softer than expected, and the US dollar took a plunge, as the markets became hopeful of a dovish pivot from the Fed. If inflation is again lower than expected, the dollar could find itself under pressure, although the markets could be more cautious with a Fed meeting just around the corner.   GBP/USD Technical 1.2240 and 1.2136 are the next support levels There is resistance at 1.2374 and 1.2478 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.  
US Inflation Slows as Spending Stalls: Glimmers of Hope for Economic Outlook

Headwinds Are Mounting For Tesla As EV Demand Is Coming Down In China | Risk Sentiment Rushed Higher

Saxo Bank Saxo Bank 14.12.2022 08:57
Summary:  Risk sentiment rushed higher on the soft US November CPI data yesterday, although sentiment rapidly turned more cautious as traders recognize the risk that the Fed may be less willing to react as quickly to signs of easing inflation as the market in today’s FOMC meeting, which will refresh the Fed’s latest economic projections and the “dot plot” of projected Fed rates for coming years. Four G10 central bank meetings follow tomorrow, including the BoE and ECB.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The US November CPI report was exactly what the market was hoping for, sending S&P 500 futures on a rally to the 4,180 level before being sold off declining 3% from the high to the close. This rejection indicates that the market is doubting itself despite the lower US core inflation print. A weak session by Tesla suggests that while inflation fears might be disappearing growth fears will begin to take hold instead posing a new threat to the equity market. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and Chinese stocks edged up higher. The news about a delay in China’s central economic work conference due to a surge in Covid inflections in Beijing. Investors are encouraged by signs that the Chinese authorities are not reversing course despite outbreaks after the easing of restrictions. China will stop reporting infections without symptoms as mandatory testing has been dropped. Hang Seng Index climbed 0.7%, led by technology names. Chinese educational services providers were among the top gainers. In A-shares, CSI 300 gained 0.3%, with tourism, lodging, Chinese liquor, and semiconductor outperforming. FX: USD dumped after another soft CPI print The US dollar sold off on Tuesday on the softer November CPI print in the US taking US treasury yields sharply lower. AUDUSD pared some of the gains in early Asian trade and slid below 0.6840 amid concerns on China’s Covid cases ramping up further which also led to the postponement of the Central Economic Work Conference. USDJPY took a brief look below 135 after the CPI release but some of the move was erased later. EURUSD surged to 1.0673 and remains supported above 1.0620 ahead of the FOMC meeting today and ECB meeting tomorrow. Crude oil (CLF3 & LCOG3) pauses ahead of FOMC Crude oil trades softer ahead of FOMC after rallying 6% over the previous two sessions, driven by an improved risk appetite following Tuesday's CPI print and encouraging signs from China where easing restrictions eventually will boost demand. The rally however slowed after the API reported a 7.8 million barrel rise in crude inventories versus expectations for a +3 million barrel draw from EIA later, and OPEC urged caution as it cut its Q1 23 oil demand forecast. The IEA will publish its monthly report later today. Goldman cut its Q1 price forecast by $20 to $90/bbl siting weak demand while saying “The structural oil cycle has taken a pause this year”. Apart from IEA, also focus on a potential Russian response to the price cap and not least today’s FOMC result. Gold (XAUUSD), silver (XAGUSD) and copper (HGH3) all rallied strongly following the lower-than-expected US CPI print Gold closed at its highest level since July above $1808 while silver reached an 8-month high above $24. The recovery in silver has been impressive with the market only requiring 15 weeks to recover half of what it lost during an 82-week period from Feb 2021 to Sept this year. Copper meanwhile briefly traded above its 200-day moving at $3.913/lb before finding stiff resistance ahead of the $4/lb area. All metals finding support from a weaker dollar and lower bond yields on signs that the worst inflation has likely passes, suggesting the Fed could further slow the pace of rate hikes next year. US 10-year treasury benchmark rebounds further (TLT:xnas, IEF:xnas, SHY:xnas) Immediately after the release of the soft CPI data which increased the chance of further downshift to a 25bp hike instead of 50bps in February, the whole yield curve shifted down with the 2-year at one point shedding 24bps to 4.13% and the 10-year 20bps richer to as low as 3.41%. The money market curve now prices the terminal rate at around 4.82% in 2023, down from 4.98%. The long-end however did not manage to keep their gains after some large block selling in the 10-year contracts and a weak 30-year auction. The 10-year gave back nearly half of the gain to close the session 11bps richer at 3.50%. The 2-10-year curve steepened to 72bps. The yield on the 30-year long bonds finished the day only down 4bps at 3.53%. What is going on? Another softer US CPI print The November CPI report was cooler-than-expected across the board, highlighted by the headline cooling to 7.1% from 7.7% (exp. 7.3%), with a M/M gain of 0.1%, slowing from the prior 0.4% and beneath the expected 0.3%. Core metrics saw Y/Y print 6.0% vs 6.3% prior and beneath the 6.1% expectation, while the M/M saw a 0.2% gain, lower than the prior and expected 0.3%. The market pricing has shifted towards a 25-bp rate hike from the Fed for February after we are nearly certain to get a 50bp hike today, while the terminal rate forecast has drifted lower to 4.82%. If we dig into the details, the disinflation is clearly driven by goods and energy, while services prices continue to rise further. This means wage pressures will continue and provides room for the Fed to continue to beat the drum on rates being higher-for-longer. Tesla shares down another 4% Headwinds are mounting for Tesla as EV demand is coming down in China and VW CEO said yesterday that EV sales in Europe is slowing down due to high price points and elevated electricity prices. Tesla shares closed just above the $160 level, which is just below the 200-day moving average at $164, the lowest levels since November 2020. High battery materials prices are also weighing on the outlook for EV makers. Finally, CEO Elon Musk’s endeavour at Twitter is potentially pressuring Tesla shares as he might be forced to put up Tesla shares as collateral for refinanced Twitter debt. Inditex Q3 results in line with estimates The European fast fashion retailer has delivered nine-months results (ending in October) with revenue at €23.1bn and EBIT at €4.2bn in line with estimates. Apple to allow alternative App Stores on its devices This move is a response to new European Union requirements under the Digital Markets Act that are set to go in effect in 2024. The move will initially only apply to the European market unless regulators elsewhere make similar moves. This will allow app developers to avoid paying Apple up to 30% of revenues for payments made through Apple’s app store. Several large app makers’ shares, including those for streaming service Spotify and dating services app Match group jumped on the news. New Zealand forecasts a recession starting Q2 2023 New Zealand Treasury Department issued 2022 half-year economic and fiscal update, forecasting three quarters of negative GDP growth from Q2 2023. Overall, the forecast calls for 0.8% contraction in 2023. Still, comments from RBNZ this morning suggested inflation focus will continue to drive more rate hikes, even as spending slows and unemployment levels increase as more people join the workforce over the coming year, partially helped by improving migration levels. Bank of Japan’s Tankan survey shows weakening business sentiment Sentiment among Japan's large manufacturers deteriorated slightly in the three months to December amid concerns over the global economic slowdown. The main index for sentiment among large manufacturers was +7, compared with +8 in Q3, according to the Bank of Japan's quarterly Tankan survey. Non-manufacturers still took a more positive view as the economic reopening gathered momentum, and large non-manufacturer index rose to 19 in Q4 from 17 previously. US places 30 additional Chinese companies on Entity List, a trade blacklist The companies included Yangtze Memory Technologies, China’s top memory chip producer and others and will prevent them from purchasing selected American components. This expands the original Entity List of companies that were blacklisted back in October for their connection with China’s military. What are we watching next? December FOMC and dot plot may have little new to offer, so focus remains on Powell’s press conference The Fed is expected to lift its Federal Funds Rate target by 50bps to 4.25-4.50%, according to the consensus as well as the general commentary from Fed officials signalling a downshift in the pace of rate hikes. The updated economic projections will also be released, as will the latest “dot plot” projections of the Fed policy rate, which are expected to show a median terminal rate that is higher than the September projections (4.6%, with the market currently projecting 4.32%), as has been alluded to by Chair Powell at the November FOMC and in remarks made in December. Easing financial conditions and an anticipated China stimulus could see the Fed Chair Powell remaining in hawkish mode, so Powell’s press conference remains key to watch. There will have to be a lot of focus on pushing back against the market’s anticipation that the Fed will be trimming rates by Q4 of next year, emphasising that the Fed will not ease prematurely if Powell and committee want to avoid further easing of financial conditions. Four more central bank meetings tomorrow The Swiss National Bank, Norway’s Norges Bank, Bank of England and the European Central Bank will all meet tomorrow, with the Norges Bank expected to hike 25 basis points and the three others expected to hike 50 basis points.  Markets will look for the relative degree to which the central banks signal that they are ready to declare at least a pause in the hiking cycle soon. The Norges Bank has hinted that it sees its tightening cycle near an end and the BoE has said that the peak rate will likely prove lower than the market was forecasting around the time of its last meeting. With the late dollar weakness, a dovish shift is more likely. Earnings to watch Inditex has reported its Q3 results in early European hours (see review above) which extends today’s earnings focus to the US session where our focus will be on Lennar, a US homebuilder. Lennar is expected to show 20% revenue growth y/y in its FY22 Q4 period (ending November), which is expected to decline to 5% y/y in FY23 Q1 (ending February). Today: Lennar, Trip.com, Nordson, Inditex Thursday: Adobe Friday: Accenture, Darden Restaurants Economic calendar highlights for today (times GMT) 0900 – IEA's Monthly Oil Market Report 1000 – Euro Zone Oct. Industrial Production 1330 – Canada Oct. Manufacturing Sales 1530 – EIA's Weekly Crude and Fuel Stock Report 1900 – US FOMC Meeting 1930 – US Fed Chair Powell Press Conference 2145 – New Zealand Q3 GDP 0030 – Australia Nov. Employment Change / Unemployment Rate 0120 – China Rate Decision 0200 – China Nov. Retail Sales 0200 – China Nov. Industrial Production Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 14, 2022 | Saxo Group (home.saxo)
Saxo Bank Podcast: A Massive Collapse In Yields, Fed's Tightening Cycle And More

Rates Spark: A Hawkish 50bp Hike Is Still Expected From The Fed Today

ING Economics ING Economics 14.12.2022 10:41
While US CPI seems to have collapsed, a lot of this is from exceptional factors. The real underlying number is closer to 0.4% MoM in services. Bond yields will test further lower, but there is a limit to that (c.3.25%). A reversion higher (to 3.75%) remains a risk as we move into the first quarter. Look for 50bp from the Fed today, and more to come in Q1. US inflation not as straightforward as seems Falls in real rates and inflation expectations were seen post the CPI number. This solidifies the remarkable recent move in the 10yr from 4.25% to 3.5%, and now approaching 3.4%. The terminal fed funds rate discount has also been shaved lower. It was comfortably discounting a peak at 4.75-5%. It is still in that range, but now toying with pulling that lower, to 4.5-4.75%. The 10yr is more than100bp below this still, which is quite a yield discount. It limits the room for a big move to the downside from here. The marketplace has done a remarkably good job at anticipating this number It feels like the marketplace has done a remarkably good job at anticipating this number, but as always we need to see some repeats before we can conclude that the inflation fighting job is done. The 20bp fall in the 2yr yield to sub-4.2% reflects the same theme, and is now at a sizeable 75bp discount to the market discount for the terminal funds rate. The bond market is trading as if the Fed delivers 50bp today, and then they are done. In all probability the Fed is not done, but if this number proves to be the beginning of a theme of low inflation prints, its increasingly likely that any hikes in the first quarter will be insurance ones, a far cry from the panic stations of previous months that saw consecutive 75bp hikes. Real yields have led the move lower in USD rates Source: Refinitiv, ING Downside to 10Y yields is more limited from here The market has been increasingly sensing this, with the 5yr trading remarkably rich to the curve now, and the 2/10yr segment showing the beginning of a tendency to steepen / dis-invert (from a state of deep inversion). Despite all of this, it is questionable how much room there is to the downside for yields. Anything below 3% for the 10yr looks too low here.  Market rates could still decide to trend higher. Yesterday’s 10yr auction did suggest some resistance to buying at these levels. It will be interesting to see whether the Fed might frustrate things with any suggestion of bond selling (hard QT) going forward. The rationale would be to limit the ability for long yields to go too low too fast, and to downsize it's balance sheet. The inflation flight is still on On the CPI report itself, the 0.2% MoM outcome was largely pulled there by exceptionally large moves in certain components (e.g. used car prices). 60% of the index is "services less energy services", and that is running at a steady 0.4% MoM (which annualises to 6% inflation). That will be tougher to shift lower fast. The inflation flight is still on, the Fed is set to hike, and the bond market could well get a fright at a CPI report not too far from here. For that reason, a hawkish 50bp hike is still expected from the Fed today. They could even contemplate some discussion of bond selling, or even simply entertaining that posibility. That would reverse things quite quickly, allowing the Fed to get more value from the delivered hike. Leaving the market braced for another hike in February 2023 is also probable. European rates have less room to fall, with domestic inflation still not under control Source: Refinitiv, ING European rates struggle to join the US party A striking feature of the post-US CPI bond rally is how sterling-denominated bonds struggled to follow their USD peers higher (lower in yields). The underperformance of EUR bonds relative to Treasuries was less spectacular but speak to an important theme as we head into 2023: it looks like the Fed is getting a grip on inflation much earlier than its European peers, and so US rates are in a better position to outperform until more tangible evidence of lower inflation emerges in the UK and eurozone. It is much less clear European inflation has seen a peak yet In the case of UK bonds, their underperformance was made worse by stronger labour and GDP data this week, and by a warning from Andrew Bailey against second round inflation effects. We see hawkish risk at both the Bank of England (BoE) and European Central Bank (ECB) meetings on Thursday. The difference with the US is that there is a greater chance that these hawkish warnings have a market impact as it is much less clear that European inflation has seen a peak yet. Today's events and market view The main release this morning is eurozone industrial production although this comes on the back of national measures which have taken the surprise out of the eurozone-wide measure. Spain’s CPI reports is a final reading, and Italian unemployment completes this list. US data has a few interesting releases too, including import prices and mortgage applications, but it is the FOMC meeting that will attract the most attention, especially after the second consecutive surprise slowdown in CPI in November (see above). With regards to primary markets today the German debt agency will announce its issuance plans for 2023. There is a significant upside risk to this year’s 230bn in bond issuance. To what degree the higher funding needs feed through to the bond target also depends on what other sources the agency will tap into, i.e. bills, repo or cash reserves. In any case, the market should expect more collateral. 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
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

There Are Now Many More Uncertainties Surrounding The Bank Of England

InstaForex Analysis InstaForex Analysis 15.12.2022 08:30
The Fed meeting took place (and ended) last night, but the Bank of England meeting, whose outcomes will be made public to the market in a few hours, is now more crucial. How come? Since so many analysts, banks, and businesses in the financial sector had been discussing the Fed meeting's outcomes, the market was prepared for them. Additionally, the FOMC members themselves have stated time and time again that December will see a slowdown in interest rate growth. Only Jerome Powell's performance was intriguing. However, there are now many more uncertainties surrounding the Bank of England, and the direction of future monetary policy is obscured. 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 A lot of market participants believe that the Bank of England is unable to raise interest rates to a level that is "restrictive." As a result, the UK's inflation rate can return to 2% for a very long time. Given the recent slowdown, it might reach this level in the US within a year. Many people think that the British regulator will need to increase the rate even further, so it might need to be prepared. Andrew Bailey predicts that household debt will rise in the coming year. Real-world mortgage payments will rise. In the UK, wages are increasing much more slowly than other prices. Payments may become a significant issue for 70% of British people with "mortgages" in 2023. Many might start selling their homes, and landlords might raise the rent. The British economy will experience these issues in addition to a two-year recession. Long-term high inflation is expected, so the Bank of England may only raise interest rates by 50 basis points today. While the British regulator's decision will be good for economic growth, it will also lead to many other inflationary issues. Since there is no discernible difference in the rate of economic growth if people's real incomes are falling by double-digit percentages, economic growth is not currently a top priority. If we use the Fed's strategy to combat inflation, the rate should increase by 75 points for at least another couple of meetings. This might lend the Briton even more support. However, the "hard scenario" cancellation could result in the instrument's long-awaited collapse. 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 Additionally, I'd like to point out that although British inflation has started to fall, it has only retreated from its 41-year high. Only after three to four months will it be possible to accurately assess this decline and determine how much more the Bank of England should raise interest rates to slow price growth to levels close to 2%. The Bank of England controls the British pound's future in the interim. Due to a rate increase of only 50 points, the market might see a significant decline in demand for the pound sterling. Since both instruments have been circling and creating a descending set of waves for several weeks, this is the scenario I am hoping for. I'm also hoping for a drop in demand for the euro currency after a 50-point increase in the ECB rate. I conclude from the analysis that the upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. You should wait for a strong sales signal because the upward section of trend could become even more extended and complicated. The likelihood of this happening is still high. The construction of a new downward trend segment is predicated on the wave pattern of the Pound/Dollar instrument. I cannot advise purchasing the instrument at this time because the wave marking permits the construction of a downward trend section. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form Relevance up to 05:00 2022-12-16 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/329860
Weekly Commitment of Traders update - Buying of crude oil moderated, ICE gas oil net long reduced to a 30-month low

Overall Crude Consumption Is Expected To Rise Next Year | The ECB And The Bank Of England Are Expected To Follow The Fed

Saxo Bank Saxo Bank 15.12.2022 08:50
Summary:  The widely expected 50bps rate hike by the Fed came along with hawkish revision of the dot plot in which the terminal rate projection was increased to 5.1% from September’s 4.6%. Equities and bonds fell but the reaction faded later at Chair Powell’s presser where he hinted that policy is close to “sufficiently restrictive”. Dollar ended the day lower. Meanwhile, China’s plan to go ahead with the Central Economic Work Conference despite the surge in cases boosted sentiment. Crude oil prices were firmer on IEA expecting higher prices next year. A plethora of G10 central banks, including the BoE, ECB, SNB, & Norges Bank, meet today. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) erase part of the post-FOMC announcement declines Equity markets were in a whipsaw falling sharply after the announcement of a 50bps rate hike which was accompanied by a hawkish shift in the dot plot which brought the terminal rate projections to 5.1% for end-2023 from 4.6% at the September meeting. Some of the decline was however reversed later as Chair Powell press conference went underway. Fed Chair Powell started the press conference with a hawkish tone in which he noted there is still some ways to go and the Fed needs to see substantially more evidence to have confidence inflation is on a sustained downward path back to target, although there was some reprieve after Powell stated during the Q&A that he thinks policy is getting to a pretty good place and close to sufficiently restrictive. S&P 500 ended the session down 0.6% and Nasdaq 100 was down close to 0.8%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) edged higher in a lackluster session Hong Kong and Chinese stocks edged up higher. The Bloomberg story speculating about a delay in China’s annual Central Economic Work Conference due to a surge in Covid inflections in Beijing did not worry investors much. Investors were encouraged by signs that the Chinese authorities were not reversing course despite outbreaks after the easing of restrictions. China will stop reporting infections without symptoms as mandatory testing has been dropped. Hang Seng Index climbed 0.4%. CSPC Pharmaceutical (01093:xhkg), rising 6.5%, was the best performer in the benchmark index. Hengan (01044:xhkg), Sunny Optical (02382:xhkg), Techtronic Industries (00669:xhkg), Li Ning (02331:xhkg), and Baidu (09888:xhkg) were other outperformers, gaining between 3% and 6%. Previously battered Chinese educational services providers soared while online healthcare names pulled back from recent strength on profit-taking. Alibaba Health (00241) slid 7%. In A-shares, CSI 300 gained 0.3%, with semiconductor, tourism, lodging, and Chinese liquor stocks advancing. FX: Hawkish Fed unable to provide a lasting bid to the dollar The USD eventually settled lower on Wednesday following the FOMC rate decision and the press conference by Chair Powell. Initial positive reaction following the upside adjustment in the dot plot was erased as Chair Powell said he thinks policy is getting to a pretty good place and policy is getting close to sufficiently restrictive. GBPUSD tested the critical 1.2450 with UK CPI also coming in softer than expected at 10.7% and cooled from the prior 11.1%. EURUSD got in close sight of 1.0700 while USDJPY fluctuated between 135-136. Crude oil (CLF3 & LCOG3) extended the rally on IEA outlook Crude oil prices surged higher again on Wednesday with the IEA warning that prices may rise next year as sanctions squeeze Russian exports. It expects its output will fall by 14% by the end of the first quarter. It also increased estimates for global demand by 300kb/d, in a nod to China’s reopening. Overall crude consumption is expected to rise 1.7mb/d next year to average 101.6mb/d. A weaker US dollar despite the Fed’s hawkish shift in the dot plot also underpinned, while the unexpectedly large increase in US inventories was shrugged off. WTI futures rose above $77/barrel while Brent touched $83.  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 What to consider? FOMC sets the terminal rate forecast at 5.1%, above market expectations The Fed voted unanimously to lift the Federal Funds Rate target by 50bps to 4.25-4.50%, as expected, downshifting the pace of rate hikes. While the statement was broadly unchanged, the updated economic projections showed Fed Funds at 5.125% by December 2023 and core PCE still at 3.5% by that time. That implies 75bps of more tightening in this cycle, which will be seen in 2023, but the markets are still pricing in a peak rate of 4.87%. After that point, the dot plot is far more distributed, but the median projects the Federal Funds Rate target at 4.1% by the end of 2024, suggesting 100bps of rate cuts. Equities did see a negative reaction to the upside surprise in terminal rate projections, but this may remain short-lived as markets remain focused on incoming data. Bond markets had little reaction to the Fed’s updated dot plot. Dollar fell. Australia employment report better-than-expected Australia’s November employment rose 64k, higher than the +19k estimate and more than the revised +43k gains for October. Jobless rate was steady at 3.4% and participation rate came out higher to return to the record highs of 66.8% (vs. estimate 66.6%). The strength in the labor market will continue to provide room to the Reserve Bank of Australia to continue with its modest rate hikes, after it has already downshifted to a smaller rate hike trajectory. A weak set of Chinese activity data is expected Economists surveyed by Bloomberg are forecasting that China’s retail sales shrank sharply by 3.9% Y/Y in November. The potential weakness is likely attributed to poor performance of auto sales, dining-in activities, and sales during the “double-11” online shopping festival in the midst of Covid-19 lockdowns during the best part of November. November auto sales in China fell by 9.2 %Y/Y and by 10.5% M/M. Courier parcels processed on Nov 11 fell 20.7% Y/Y. The growth in industrial production is expected to fall to 3.7% Y/Y in November from 5% to 3.7%, following a weak November NBS manufacturing PMI and soft high-frequency data of steel production. Year-to-date fixed asset investment is expected to edge0 down to 5.6% from 5.8%, dragged by stringent pandemic control practices. ECB also likely to downshift to a smaller rate hike The European Central Bank (ECB) is also expected to slow down its pace of rate hikes to a 50bps increase this week. Headline inflation eased slightly in November, coming in at 10.0% YoY (exp. 10.4%), but was overshadowed by an unexpected rise in core inflation 6.6% YoY (exp. 6.3%, prev. 6.4%). While there is likely to remain some split in ECB members at this week’s meeting, the central bank’s Chief Economist Lane remains inclined to take into account the scale of tightening done so far. There is also uncertainty on the announcement of quantitative tightening. Bank of England may remain more divided than the other major central banks The Bank of England is also expected to follow the Fed and the ECB and downshift to a smaller rate hike this week, but the decision will likely see a split vote. A host of key data, including GDP, employment and inflation will be due this week in the run up to the BOE decision, and significant positive surprises could tilt the market pricing more in favour of a larger move which also creates a bigger risk of disappointment from the central bank. Headline annualised inflation advanced to 11.1% Y/Y in October, while the core rate remained at an elevated level of 6.5%. Consensus expects inflation to cool slightly to 10.9% Y/Y in November, but the core to remain unchanged at 6.5% Y/Y. Wage pressures are also likely to be sustained, and the cooling in the labor market will remain gradual. The U.S. is adding China’s top memory chips maker to the trade blacklist The U.S Department of Commerce is reportedly moving Yangtze Memory Technologies, a leading memory chip maker in China, together with 30+ other Chinese companies, from the Unverified List to the Entity List, after the expiry of a 60-day period for the company to answer requests for information about its business and customers. The Entity List is the official export control blacklist that restricts companies from access to American technologies. 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 New Zealand Q3 GDP comes in above expectations A big positive surprise in NZ Q3 GDP which came in at 2.0% Q/Q sa vs expectations of 0.9% and higher than last quarter’s revised 1.9%. With the possibility of a recession in 2023 highlighted yesterday, this print suggests that there is a substantial amount of work left to be done by the Reserve Bank of New Zealand to dampen demand in order to curb inflation. Bank of Japan policy review speculation gathers further pace Some reports suggested that the BOJ could review policy next year, after pay growth and any slowdown in the global economy are closely examined. The results of spring wage negotiations come in mid-March, after Governor Haruhiko Kuroda's final policy meeting, so an assessment would probably be done after he departs. The review could reaffirm the existing ultra-loose framework, but possibility of some tweaks to the yield curve control policy remains as inflationary pressures remain a concern.   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: FOMC’s hawkish dot plot; more G10 central bank meetings ahead – 15 December 2022 | Saxo Group (home.saxo)
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The European Central Bank (ECB), The Bank Of England (BoE) And The Swiss National Bank (SNB) Are Also Expected To Hike The Rates By 50bp

Swissquote Bank Swissquote Bank 15.12.2022 10:46
As expected, the Fed raised its interest rates by 50bp to 4.25/4.50% range, the dot plot showed that the Fed officials’ median forecast for the peak Fed rate rose to 5.1%. Forecasts Plus, the distribution of rate forecasts skewed higher, with 7 officials out of 19 predicting that the rates could rise above 5.25%. Moreover, the inflation forecast for next year was revised higher DESPITE the latest decline in inflation. 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 And the median rate forecast for 2024 was revised higher to 4.1%. In summary, the FOMC message was very clear: the Fed is not ready to stop hiking rates - even though they will be hiking by smaller chunks. Today's decisions Today, the European Central Bank (ECB), the Bank of England (BoE) and the Swiss National Bank (SNB) are also expected to hike the rates by 50bp to tame inflation in Europe. Watch the full episode to find out more! 0:00 Intro 0:36 Powell dashes dovish Fed hopes 2:40 Stocks fell, and could fall lower 4:30 USD gained, but may not gain much 5:33 ECB to hike by 50bp 7:27 BoE to hike by a dovish 50bp 8:50 SNB to hike by 50bp, as well! But a 50bp hike is not the same for all, as they don’t have the same inflation levels! 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. 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 #ECB #BoE #FOMC #Fed #SNB #rate #decision #dotplot #USD #EUR #GBP #CHF #CPI #inflation #growth #forecasts #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
UK Budget: Short-term positives to be met with medium-term caution

Bank Of England: Bank Rate May Peak At 4% In The New Year

ING Economics ING Economics 15.12.2022 14:36
The Bank of England's (BoE's) 50bp rate hike decision was coupled with signs that the Committee is prepared to move more cautiously over the coming months. We expect a final 50bp hike in the first quarter – which may ultimately be delivered in smaller 25bp chunks – although we think the UK will be slower to turn to rate cuts than the US Andrew Bailey, governor of the Bank of England Fed caution has given the Bank of England cover to slow rate hikes too The Bank of England’s inaugural 75bp rate hike back in November came accompanied by a strong signal that it was likely to be a one-off move. Since then, the Federal Reserve’s decision to slow the pace of rate hikes in the US, and the associated appreciation in the trade-weighted pound, has given the Bank of England the cover it needs to do the same. In a move that will come as little surprise, the Bank hiked rates by half a percentage point to 3.5% on Thursday. But the new policy statement – that this time isn’t coupled with either a press conference or new forecasts – contains some interestingly dovish signals. While the Committee is clearly divided, and the meeting saw another three-way vote-split, only one policymaker voted for a more aggressive 75bp hike at Thursday’s meeting, while two voted for no change at all. While it’s hard to say what the consensus for this would have been, one or two more voters in the 75bp camp, and the doves opting for a 25bp hike over no change, would have seemed more likely. We expect Bank Rate to peak at 4% in the new year Admittedly the Monetary Policy Committee is no longer warning investors that they’re pricing too much tightening for coming months, though perhaps this isn’t hugely surprising. Market rates have fallen markedly since the political drama and LDI (Liability Driven Investing) pensions issues in October. Markets expect Bank Rate to peak at roughly 4.5% next summer, and while that’s probably still a tad on the high side, this mispricing is much less significant than it was. The Bank is nevertheless still warning that it could act ‘forcefully’ if required, though curiously the meeting minutes suggest that a 50bp rate hike meets this definition. Not only does that suggest there’s a high bar for returning to 75bp rate hike increments, but at a stretch you could also say it lays the groundwork for a further slowdown in the pace of hikes to 25bp increments from the new year. Our view: 50bp in February and done For now, our best guess is the Committee implements another 50bp hike in February before calling it a day. The hawks can continue to point to 6% wage growth and the fact that core services inflation is running higher than expected in November. But today’s meeting is a further demonstration of the delicate balancing act facing the BoE, between mitigating the risks of a tight jobs market on the one hand against mounting concerns about the housing market and the health of corporate borrowers on the other. We expect Bank Rate to peak at 4% in the new year, although we aren’t yet convinced a rate cut will be as quick to follow as in the US (where we expect cuts shortly after the summer). Read this article on THINK TagsBank of England 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
Gold Stocks Have Performed Very Well Under Pressure

Oil Prices Fell, Gold Will Also Weaken Due To The Increase In US Dollar

Saxo Bank Saxo Bank 16.12.2022 08:51
Summary:  Equities tumbled across the world after the ECB and the Bank of England followed the footstep of the Fed in hiking 50bps, but the ECB gave a hawkish surprise by pulling forward QT and warning of more rate hikes to come as inflation remains high. The US dollar regained strength amid risk-off sentiment as US economic data deteriorated further but labor market strength was sustained. The US accounting regulatory body, PCAOB, successfully concluded an inspection on the audit work of eight U.S. listed Chinese companies and removed the delisting risks of Chinese ADRs for now. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) plummeted on Fed follow-through and hawkish ECB Nasdaq 100 tumbled 3.2% and S&P 500 declined by 2.5% on Thursday, as a rate hike plus hawkish comments from the ECT, and follow-through from a higher terminal rate on the Fed’s projection dot plot the day before weighed on equities. The decline in stocks was broad-based and all 11 sectors of the S&P 500 fell. The decline was led by the communication series, information technology, and materials sectors. Alphabet (GOOGL:xnas) declined 4.4%. Netflix (NFLX:xnas) tumbled 8.6%, following a media report saying the streaming giant is refunding advertisers because it missed viewership guarantees. Lennar (LEN:xnys) gained 3% and was among the top gainers in the S&P 500 on Thursday after the home builder said the cancellation rate for new homes had peaked in October and declined significantly in November. Adobe (ADBE:xnas) surged 4.7% in extended-hour trading on earnings beat. US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) turned more inverted on hawkish central banks and weak data Following a hawkish rate path dot plot from the Fed the day and hawkish remarks from ECB President Lagarde and pull-forward of QT by the ECB on Thursday but a weak U.S retail sales report, the Treasury yield curve flattened. The 2-year yield rose 3bps to 4.24% while the 10-year yield shed 3bps to 3.45%, bringing the 2-10-year inversion to more negative to -79bps. After Lagarde pledged Eurozone “interest rates will still have to rise significantly higher at a steady pace”, the German 2-year yields jumped as much as 30bps and closed 24bps higher at 2.36%, a 14-year high. The Treasury Department announced a USD12 billion 20-year auction and a USD19 billion 5-year TIPS auction next week. In the futures pit in Chicago, large-size curve flattening trades were seen on selling the five-year contracts versus buying the ultra-10-year contracts. The money market curve is pricing a terminal rate of 4.9% in 2023, significantly lower than the Fed’s dot plot of 5.1%. Hong Kong’s Hang Seng (HIZ2) retreated on Fed rate hike; China’s CSI300 (03188:xhkg) little changed Hong Kong opened sharply lower after the U.S. Fed raised the target Fed Fund rate the day overnight and traded sideways throughout the day to finish 1.6% lower. HSBC (00005:xhkg), down 1.8%,  raised its prime rate by 25bps to 5.625%, and Standard Chartered (02888:xhkg), down 1.4%, lifted its prime rate by 25bps to 5.875%. Other leading banks in Hong Kong also raised their prime rates by 25bps. Shenzhou (02313:xhkg), Wuxi (02269:xhkg), Baidu (09888:xhkg), and Alibaba (09988:xhkg), each declining more than 4%, were the top losers with the benchmark. China’s industrial production, retail sales, and fixed asset investments all came in worse than expected and pointed to Covid containment restrictions’ severe disruption to the economy in November. Investors tend to look beyond the weakness in November as the Chinese authorities have eased the pandemic containment practices substantially in December. China’s CSI300 (03188:xhkg) was little changed on Thursday. Semiconductor and new energy names gained. FX: Dollar strength returned amid weakness in risk sentiment After the markets reacting in a limited way after the hawkish shift of the dot plot by the FOMC on Wednesday, the USD strength returned the following day. Concerns that Fed will be hiking into a recession gathered pace as US economic data deteriorated further but labor market resilience prevailed. Money market pricing for the Fed has still not budged to catch up with the dot plot, suggesting that it is likely the risk sentiment weakness that led to the dollar surge. AUDUSD was the biggest loser on the G10 board, sliding lower to 0.67 from 0.6850+ as weak China activity data offset the impact from positive employment numbers in Australia yesterday. GBPUSD also plunged below 1.22 and EURGBP rose above 0.87 amid relative ECB hawkishness. USDJPY touched 138 again despite a lower in US yields. Crude oil (CLF3 & LCOG3) prices dip on global rate hikes and partial restart of Keystone pipeline Crude oil prices fell on Thursday after the fed’s hawkish tilt was followed by a slew of other G10m central banks especially the ECB which highlighted the struggle to get inflation under control and hinted at more rate hikes and QT was to come. Along with that, a partial restart of the Keystone Pipeline after last week’s oil spill eased some supply concerns. WTI futures tested the $76/barrel support while moved towards $81. However, there are tentative signs that key Russian oil exports from a port in Asia are dipping following G7 sanctions, and this may impede the supply relief, but demand weakness concerns still continue to remain the biggest worry as of now with China’s full reopening demand also likely to be delayed due to the vast spread of infections. Gold (XAUUSD) back below 1800 on central banks hawkishness The return of the strength of the US dollar on Thursday meant weakness in gold. Fed’s message from a day before finally seemed to have been understood by the markets, and hawkishness from other central banks, especially the ECB, further sounded the alarm on rates remaining higher for longer globally. Gold broke below the 1800-mark in the Asian session on Thursday, and the lows extended further to sub-1780 in the European/NY hours. Silver plunged as well to move back towards $23.   What to consider? Bank of England followed the Fed with a 50bps hike, likewise for SNB and Norges Bank The Bank of England opted to step down the pace of its rate hiking cycle to 50bps from 75bps, taking the Base Rate to 3.5%. The decision to move on rates was not a unanimous one with two dovish dissenters and one hawkish dissenter. The markets are pricing in a peak for the BOE at 4.25% in H1 2023, as inflation continues to cool. The MPC is of the view that CPI inflation has reached a peak, but is expected to remain high in the coming months. The Norges Bank and SNB also hiked 50bps, in-line with expectations. ECB surprises with a hawkish tilt The European Central Bank (ECB), much in line with the Fed and the BOE, stepped back from its 75bps rate hike trajectory and announced an increase of 50bps, taking the Deposit rate to 2.0%. It was reported that a third of the Governing Council favored a 75bps increase, and Christine Lagarde warned investors to expect more 50bps moves and not to see this as a ‘pivot’. The commentary was hawkish saying that "interest rates will still have to rise significantly at a steady pace to reach levels that are sufficiently restrictive". Moreover, the bank announced a start of QT in the first quarter of 2023, even though with a small amount. The APP portfolio will decline at an average pace of EUR 15bln per month until the end of Q2 with its subsequent pace to be determined over time. The inflation forecast also came as a surprise, with 2023 HICP raised to 6.3% from 5.5%, and 2024 and 2025 seen at 3.4% and 2.3% respectively and therefore indicative that further tightening will be required to bring inflation back to target over the medium term. On the growth front, 2022 GDP was upgraded to 3.4% from 3.1% and 2023 now seen at just 0.5% (prev. 0.9%) with the upcoming recession likely to be shallow and short-lived. US economic slowdown concerns continue to be offset by a strong labor market Several economic indicators in the US pointed to concerns of an economic slowdown. Headline retail sales declined 0.6% in November, deeper than the 0.1% expectation and paring from October's gain of 1.3%. The December NY Fed Manufacturing survey fell into contractionary territory at -11.2, deeper than the expected -1.0 from the prior +4.5. US manufacturing output fell -0.6% in November, well beneath the expected 0.1% decline and against October's rise of 0.3%, which was upwardly revised from +0.1%. However, labor market resilience was confirmed by jobless claims unexpectedly dropping to 211k from a revised 231k last week, well below the expected 230k. PCAOB concluded its inspection and removed the delisting risks of Chinese ADRs for now The Public Accounting Oversight Board (PCAOB) announced on Thursday that the U.S, accounting regulatory body has “conducted inspection field work and investigative testimony” of the audit work of KPMG Huazhen LLP in mainland China and PwC in Hong Kong on eight Chinese ADR issuers, “in a manner fully consistent with the PCAOB’s methodology and approach to inspections and investigations in the U.S. and globally.” The PCAOB was satisfied that its “investors and investigators were able to view complete audit work papers with all information included, and the PCAOB was able to retain information as needed” without consultation with, or input from Chinese authorities. The PCAOB’s conclusion removes the risk of forced delisting of Chinese ADRs for now. The PCAOB will continue to do regular inspections starting in early 2023. China’s retail sales, industrial production, and fixed asset investment were weak in November November activity data in China came in worse than the already low expectations. Retail sales shrank by 5.9% Y/Y in November (Consensus: -4.0%; Oct: -0.5%). The weakness partly reflected the high base last year and mostly as a result of the outbreaks of Covids and the relevant containment restrictions then were still the modus operandi. Revenue growth tumbled to -6% Y/Y for merchandise, -4.2% Y/Y for auto, and -8.4% Y/Y for catering. Industrial production growth slowed to 2.2% Y/Y in November (consensus: 3.5%; Oct: 5.0%). The manufacturing and utility sectors were weak while the mining sector improved in growth. Smartphone volume shrank by 19.8% Y/Y in November as Foxconn’s factory in Zhengzhou experienced disruption from Covid restrictions and labor unrest. The growth of fixed asset investment plummeted to 0.8% Y/Y in November from 5.0% Y/Y in October. The weakness of fixed asset investment was mainly in the manufacturing and property sectors. Infrastructure fixed asset investment climbed to 13.9% Y/Y in November from 12.8% in October. Adobe delivered earnings and guidance beating expectations Adobe (ADBE:xnas) reported a fiscal Q4 net income of USD1.176 billion, a 4.6% increase from last year and above the USD1.158 billion expected by analysts. Adjusted earnings per share came in at USD3.60, beating the USD3.50 consensus forecast. Revenues increased 10% from a year ago to USD4.525 billion, in line with expectations. The software giant gave an upbeat fiscal Q1 EPS guidance of USD3.65 to USD3.70 on revenue of USD4.60 to USD4.64 billion, above analysts’ estimates of USD3.64 on revenue of USD4.26 billion.   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: Fed’s message comes through; ECB outpaces other central banks on hawkishness – 16 December 2022 | Saxo Group (home.saxo)
Pound Slides as Market Reacts Dovishly to Wage Developments

European Stocks Posted Their Biggest Drop In Months

Saxo Bank Saxo Bank 16.12.2022 08:59
Summary:  Markets tanked yesterday in part on the very hawkish ECB meeting. Lagarde and company’s commitment to significant further tightening just as a recession is getting under way in Europe took short German yields to new highs for the cycle and pummeled European stocks, which posted their steepest drop in months. In the US, volatility has picked up significantly not only on this week’s big event risks, but also on the estimated $4 trillion of options set to expire today.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The market continues to lick its wounds following hawkish central bank messages across the US, UK, and Euro area with S&P 500 futures extending the declines since the late Wednesday to a close of 3,927 which is just below the 100-day moving average. Nasdaq 100 futures are under more pressure following the latest central bank messages, being more sensitive to the interest rate level and direction. Nasdaq 100 futures are trading around the 11,444 level this morning which is a critical level and the lower bound of the trading range since the US October inflation report on 10 November. Euro STOXX 50 (EU50.I) Ugly session yesterday following ECB’s hawkish outlook on the policy rate surprising most market participants. Stoxx 50 futures declined 3.6% to close at 3,835 erasing all the gains since the rally following the US October inflation report on 10 November. Today’s trading will be a key test of the market’s belief in ECB’s forecast. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese stocks had a choppy morning session. Hang Seng Index opened lower on the back of tumbling overseas markets overnight despite the positive news from the US accounting regulatory body removing the delisting risk of Chinese companies listed in the U.S. bourses for now. Stocks had a brief rally on market chatter of reopening of the border between Hong Kong and the mainland earliest next month before the gains waned and the Hang Seng Index was flat by noon. The front page editorial at the mouthpiece People’s Daily this morning is upbeat about growth in China but it does not catch much attention from investors. Leading Chinese property developers were the top gaining stocks, with Longfor (00960:xhkg) and Country Garden (02007:xhkg) each gaining around 3.7%. In A-shares, CSI300 was modestly lower, driven by profit-taking in semiconductor names and weaknesses in autos. Real estate and educational services outperformed. FX: Dollar strength returned amid weakness in risk sentiment USD strength returned, and in a big way yesterday after the markets hardly registered the hawkish shift of the dot plot by the FOMC on Wednesday. Concerns that Fed will be hiking into a recession gathered pace as US economic data deteriorated further but labor market resilience prevailed. Money market pricing for the Fed has still not budged to catch up with the dot plot, suggesting that it is likely the risk sentiment weakness that drove the dollar surge. AUDUSD was the biggest loser on the G10 board, sliding lower to 0.67 from 0.6850+ as weak China activity data offset the impact from positive employment numbers in Australia yesterday. GBPUSD also plunged below 1.22 on a dovish Bank of England and EURGBP rose above 0.87 amid relative ECB hawkishness. The ECB meeting saw EURUSD relatively unchanged on the day after a rally, while EURJPY was two figures higher on the day on the ECB impact on EU Yields. USDJPY touched 138 again despite a drop in US yields. Crude oil (CLF3 & LCOG3) trades lower as risk sentiment takes a fresh hit Crude oil traded sharply lower on Thursday, thereby reversing some of the strong gains seen earlier in the week, after the Fed’s hawkish tilt was followed by a slew of other G10 central banks, especially the ECB which highlighted the struggle to get inflation under control. However, there are tentative signs that Russian oil exports to Asia are dipping because of the price cap, a development that may support the 2023 outlook for tight supply, especially when China gets through a period of surging virus cases that my cloud the short-term outlook for demand. Given the current focus on recession potentially hurting demand, a supply side struggle may not positively impact prices until the second quarter, and with that in mind, the price of Brent may settle into a range below $90 until then. Gold (XAUUSD) continues to find support ... as the combination of a hawkish Fed and a steeply inverted yield curve points to an increased risk the FOMC will be hiking into a recession. This focus gathered pace on Thursday, the day after the hawkish shift of the dot plot by the FOMC, after weak US economic data supported the dollar as risk sentiment deteriorated across markets, not least the stock market, and bond yields softened. Gold looks ripe for a period of consolidation with some end of year profit taking emerging following the +200-dollar surge since the November 3 low and after the price got rejected above $1800. However, the prospect for a recession and the FOMC joining other central hiking into economic weakness – potentially without succeeding getting inflation under control - continues to strengthen the upside risk for investment metals in 2023.  US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) turned more inverted on hawkish central banks and weak data Following a hawkish rate path dot plot from the Fed on Wednesday, hawkish remarks from ECB President Lagarde on Thursday, and a weak U.S retail sales report, the Treasury yield curve flattened. The 2-year yield rose 3bps to 4.24% while the 10-year yield shed 3bps to 3.45%, bringing the 2-10-year inversion to more negative to -79bps. After Lagarde pledged Eurozone “interest rates will still have to rise significantly higher at a steady pace”, the German 2-year yields jumped as much as 30bps and closed 24bps higher at 2.36%, a 14-year high. The Treasury Department announced a USD12 billion 20-year auction and a USD19 billion 5-year TIPS auction next week. In the futures pit in Chicago, large-size curve flattening trades were seen on selling the five-year contracts versus buying the ultra-10-year contracts. The money market curve is pricing a terminal rate of 4.9% in 2023, significantly lower than the Fed’s dot plot of 5.1%. What is going on? ECB fails to impress market after hawkish meeting The ECB administered a hawkish broadside yesterday, raising its forecasts for headline inflation to 6.3% for next year and 3.4% for 2024 (From 5.5% and 2.4% previously, suggesting a far longer time frame with uncomfortably high inflation. The core CPI forecasts were raised to 4.2% ex food and energy for 2023 and 2.8% for 2024, versus 3.4%/2.3% in September). It also outlined its quantitative tightening plan to start rolling off EUR 15 billion of asset per month from March, with ECB President Lagarde claiming the willingness to continue to hike 50 basis points at several coming meetings if necessary, with far more rate tightening to do from here. But after an initial sprint higher that saw EURUSD trading well above 1.0700 despite relative USD firmness elsewhere, the EURUSD collapsed back toward 1.0600 before stabilizing closer to 1.0650. STill, the euro was very firm against most of the rest of G10 currencies as the German 2-year yield jumped a full 25 basis points on the day and closed the day at a cycle high (and high since 2008) of 2.39%. Bank of England followed the Fed with a 50bps hike, likewise for SNB and Norges Bank The Bank of England opted to step down the pace of its rate hiking cycle to 50bps from 75bps, taking the Base Rate to 3.5%. The decision to move on rates was not a unanimous one with two dovish dissenters favoring no rate hike and one hawkish dissenter. The markets are pricing in a peak for the BOE at 4.25% in H1 2023, as inflation continues to cool. The MPC is of the view that CPI inflation has reached a peak, but is expected to remain high in the coming months. The dovish expectation that inflation would return to below target in two years and guidance that further rate tightening would come in The Norges Bank and SNB also hiked 50bps, in-line with expectations. Adobe shares rise 5% on stronger than expected profitability FY22 Q4 revenue at $4.5bn was in line with estimates and adjusted EPS at $3.60 vs est. $3.50 was the positive surprise. The 2023 revenue outlook was $19.1-19.3bn vs est. $19.4bn and management reiterates expectations that its Figma acquisition will go through in 2023. US economic slowdown concerns continue to be offset by a strong labor market Several economic indicators in the US pointed to concerns of an economic slowdown. Headline retail sales declined 0.6% in November, deeper than the 0.1% expectation and paring from October's gain of 1.3%. The December NY Fed Manufacturing survey fell into contractionary territory at -11.2, deeper than the expected -1.0 from the prior +4.5. US manufacturing output fell -0.6% in November, well beneath the expected 0.1% decline and against October's rise of 0.3%, which was upwardly revised from +0.1%. However, labor market resilience was confirmed by jobless claims unexpectedly dropping to 211k from a revised 231k last week, well below the expected 230k. US oversight board concluded its inspection and removed the delisting risks of Chinese ADRs for now The Public Accounting Oversight Board (PCAOB) announced on Thursday that the U.S, accounting regulatory body has “conducted inspection field work and investigative testimony” of the audit work of KPMG Huazhen LLP in mainland China and PwC in Hong Kong on eight Chinese ADR issuers, “in a manner fully consistent with the PCAOB’s methodology and approach to inspections and investigations in the U.S. and globally.” The PCAOB was satisfied that its “investors and investigators were able to view complete audit work papers with all information included, and the PCAOB was able to retain information as needed” without consultation with, or input from Chinese authorities. The PCAOB’s conclusion removes the risk of forced delisting of Chinese ADRs for now. The PCAOB will continue to do regular inspections starting in early 2023. China’s retail sales, industrial production, and fixed asset investment were weak in November November activity data in China came in worse than the already low expectations. Retail sales shrank by 5.9% Y/Y in November (Consensus: -4.0%; Oct: -0.5%). The weakness partly reflected the high base last year and mostly as a result of the outbreaks of Covid and the relevant containment restrictions then were still the modus operandi. Revenue growth tumbled to -6% Y/Y for merchandise, -4.2% Y/Y for auto, and -8.4% Y/Y for catering. Industrial production growth slowed to 2.2% Y/Y in November (consensus: 3.5%; Oct: 5.0%). The manufacturing and utility sectors were weak while the mining sector improved in growth. Smartphone volume shrank by 19.8% Y/Y in November as Foxconn’s factory in Zhengzhou experienced disruption from Covid restrictions and labor unrest. The growth of fixed asset investment plummeted (FAI) to 0.8% Y/Y in November from 5.0% Y/Y in October. The weakness of FAI was mainly in the manufacturing and property sectors. Infrastructure FAI climbed to 13.9% Y/Y in November from 12.8% in October. What are we watching next? Enormous US options expiry today, as much as $4 trillion Many traders hedged portfolios or engaged in directional speculation on this week’s important event risks, including the US CPI release on Tuesday and the FOMC meeting Wednesday. Short terms options trading has taken on record proportions in recent months and today, some $4 trillion in options are set to expire, with today’s “witching” or expiry of quarterly financial futures also in the mix and potentially adding to directional volatility today. Earnings to watch Today’s US earnings focus is Darden Restaurants which is expected to deliver 7% y/y revenue growth for the quarter that ended in November highlighting the resilience of the US consumer in some types discretionary spending. Today: Accenture, Darden Restaurants Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Dec. Preliminary Manufacturing and Services PMI 0930 – UK Dec. Preliminary Manufacturing and Services PMI 1000 – Eurozone Final Nov. CPI 1445 – US Dec. Preliminary S&P Global Manufacturing and Services PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – December 16, 2022 | Saxo Group (home.saxo)
The ECB Has Made It Clear That Rates Will Remain High Until There Is Evidence That Inflation Is Falling Toward The Target

Surprise Hawkishness From Christine Lagarde | Netflix Ad-Supported Versions Have Poor Demand

Swissquote Bank Swissquote Bank 16.12.2022 12:28
The European Central Bank (ECB) raised its interest rates by 50bp as expected yesterday, and President Christine Lagarde said that the ECB will raise the rates by another 50bp at the next meeting. Then by another 50bp in the meeting after that. And another 50bp in the meeting after that. Then another one! Markets European yields spiked during Madame Lagarde’s speech. The DAX and the CAC fell more than 3%. The S&P500 slipped below its 100-DMA, as Nasdaq fell below its 50-DMA. The EURUSD spiked to 1.0736, the highest level since April. EU The significant hawkish shift in ECB’s policy stance, and the determination of the European leaders to shot inflation to the ground should continue giving some more support to the euro, therefore, price pullbacks in EURUSD could be interesting dip buying opportunities for a further rally toward the 1.10 mark. US And if the US dollar strengthened yesterday, it was certainly due to a heavy selloff in stocks and bonds that ended up with investors sitting on cash. Other than that, the data released in the US yesterday was not brilliant! The retail sales fell by most in a year; holiday shopping apparently didn’t help improve numbers. The Empire Manufacturing index tanked from 4.5 to -11, versus -1 expected by analysts. Both data hinted at a slowing economic growth in the US, which should normally boost recession fears and keep the Fed hawks at bay. And that could mean a further downside correction in the dollar in the run up to Xmas. Netflix In Individual stock news, Netflix slumped more than 8.5% on news that its new ad-supported versions didn’t kick off well, as most people preferred keeping ads away when they were in the middle of the Meghan and Harry drama! Watch the full episode to find out more! 0:00 Intro 0:35 Surprise hawkishness from Christine Lagarde 3:09 … sent sovereign bonds & stocks tumbling 5:13 … should help the euro recover 7:01 … at least against the British pound 8:14 Netflix falls as ad-supported versions sees weak demand 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. #hawkish #ECB #Lagarde #speech #BoE #FOMC #Fed #SNB #rate #decisions #USD #EUR #GBP #CHF #DAX #CAC #SMI #EuroStoxx50 #Netflix #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
EUR/USD: Looking beyond the market’s trust issues with the Fed and ECB

There Was A Rally Of Hawks This Week, Statement Of The President Of The European Central Bank Supported The Euro

Conotoxia Comments Conotoxia Comments 16.12.2022 12:35
Hawks are defined as those members of committees deciding on interest rates who are in favor of raising those rates. So there was a rally of hawks this week, as both the Fed and the ECB and the Bank of England and the Bank of Switzerland, among others, decided to raise the price of money and, moreover, are unlikely to change that for the time being. The king, or rather queen of the hawks, became the president of the European Central Bank, Christine Lagarde, and her statement supported the euro exchange rate. The European Central Bank yesterday raised interest rates by 50 basis points as expected, reiterated that there would be further increases and outlined plans for quantitative tightening. The common currency initially strengthened after the decision and reached a six-month high of $1.07. In the afternoon, however, it gave back some of the earlier gains, with market participants trying to assess how much additional rate hikes would hurt the already fragile economy. The ECB raised its inflation forecasts, while economic growth forecasts were sharply lowered. According to the latest forecasts by ECB economists, inflation is expected to reach 8.4 percent in 2022, only to fall to 6.3 and 3.4 percent in the next two years, respectively. Meanwhile, GDP is expected to grow by 3.4 percent in 2022, only to fall to 0.5 percent in 2023 and rise to 1.9 percent in 2024. However, that was not what seemed to be the most important statement. It was probably that the ECB needs to raise rates more than the market is currently pricing in. Christine Lagarde assumes that rates in the Eurozone can be raised at 50 bps for a longer period of time. Thus, the market has begun to expect the peak in eurozone rates to fall above 3 percent. Source: Conotoxia MT5, EURUSD, H1 As a result, the euro was above $1.07 at one point, and what's more, the eurozone may be coming out on top in terms of the pace of rate hikes in the future. Nevertheless, high interest rates and a weaker outlook for economic growth may leave their mark on other markets like the stock market. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Materials, analysis and opinions contained, referenced or provided herein are intended solely for informational and educational purposes. Personal opinion of the author does not represent and should not be constructed as a statement or an investment advice made by Conotoxia Ltd. All indiscriminate reliance on illustrative or informational materials may lead to losses. Past performance is not a reliable indicator of future results. CFDs are complex instruments and come with a high risk of losing money rapidly due to leverage. 75,21% of retail investor accounts lose money when trading CFDs with this provider. You should consider whether you understand how CFDs work and whether you can afford to take the high risk of losing your money.
WTI Oil Shows Signs of Short-Term Uptrend Amid Medium-Term Uptrend Phase

Forex Market Week Sum Up:The Overall Picture Of Major Currency Pairs Is Bearish

Kamila Szypuła Kamila Szypuła 17.12.2022 19:51
It was the most important week in 2022. Fed President Jerome Powell and ECB President Christine Lagarde reminded the markets that they are still committed to fighting inflation, rather than focusing on promoting economic growth. EUR/USD The pair ended the week at 1.0574, thus trading below $1.06. The close is similar to earlier this week, with the pair also trading above $1.05. Also on Monday it recorded a low of 1.0511. This week the most important event in the euro zone was the ECB's decision on interest rates. The central bank of the European Union made the same decision as the Fed and the Bank of England, i.e. it raised interest rates by 50 bp. But it was the president of the ECB who gave the euro strength. And on Thursday, after a hawkish statement, it reached its highest level of the week, hadel was close to 1.07 (1.0691 to be exact). A number of significant events took place in the European Union this week. The ECB meeting was adjourned; the remaining data must be resolved. Despite traders' expectations for a fall of 1.5-2.5%, industrial production fell by 2% in October. Instead of an increase of 10%, exactly as indicated by the first estimates of the index, inflation rose in November by 10.1%. The economic activity index in the manufacturing sector increased to 47.8, and in the services sector to 49.1. However, both indicators are still below the 50.0 threshold, so they cannot be considered positive at the same time. This week's macroeconomic reports from the EU seem to be disappointing. This problem has been around for a long time. In general, the euro continues to grow unreasonably, although it has already reached its peak. GBP/USD The GBP/USD pair started the week of December 12-16 at 1.2266. Then after the US data inflation traded between 1.2243-1.2300. The lowest level, similarly to the euro, was recorded by the cable pair at the beginning of the week, the lowest traded at 1.2217, and the highest at 1.2248 this week. The pair ended the week below $1.22 as fears of a recession increase. Overall, the British pound looks set to end the week under strong pressure against the US dollar, with weak economic data on Friday fueling fears of a recession in the national economy. Thursday's Bank of England rate hike of 0.5 percentage point pushed base rates to highs not seen since 2008 (3.5%).Markets interpreted the move as a dovish interest rate hike. The recent decision of the Bank of England revealed a three-way split of votes: six out of nine MPC members voted for a 50 bp rate hike, two members voted for no change, and the last member voted for another 75 bp rate hike. Recession fears are intensifying with prospects for the UK to be in recession for "an extended period" while inflation is expected to remain very high in the short term before falling sharply from mid-2023. Overall, the short-term outlook for the economy in the UK remain negative, which is starting to show in sterling now. AUD/USD The Aussie Pair started the week at 0.6780. The movements of the pair were similar to EUR/USD and GBP/USD. The pair recorded the lowest trade at 0.6678 and the highest at 0.6892. Ending the week at 0.6686. The Australian dollar was weakened last week after the US dollar posted an incredible rally amid growing fears of a recession. The Federal Reserve raised the interest rate by 50 basis points to a target of 4.25% - 4.50% on Wednesday. Read next: Assistance In Making Investment Decisions - Technical Analysis| FXMAG.COM Australia's unemployment rate remains at a multi-generational low of 3.4% after adding 64,000 jobs. jobs in November. This is in addition to the growing trade surplus from the previous week. The rest of the fundamental picture is a little mixed towards the end of the year, when building permits and retail sales data are disappointing. These figures appear to have been influenced by RBA interest rate hikes. USD/JPY USD/JPY started the week trading at 136.6790. The week's high is 138.15 and the low is 134.71. As you can see, the trade was very diverse and the price fluctuated rapidly. The pair ended the week at 136.69 Source: finance.yahoo.com, dailyfx.com, investing.com
Soft PMIs Are Further Signs Of A Weak UK Economy

Is The UK At Risk Of A Long-Term Recession? GDP Is Forecast For Economic Contraction

Kamila Szypuła Kamila Szypuła 17.12.2022 20:29
The economy has contracted in three months as soaring prices hit businesses and households, and the UK is projected to head into recession. The short-term outlook remains grim as consumers continue to grapple with the brunt of high inflation. Final GDP The final UK gross domestic product reading for the third quarter is likely to confirm that the UK economy contracted in the three months leading up to September. GDP is forecast to drop below zero to -0.2 percent. The 0.5% decline in household spending was one of the main obstacles in Q3. Meanwhile, monthly estimates suggest that GDP fell by 0.6% in September, partly due to the public holiday associated with the state funeral of Queen Elizabeth II. From an economic point of view, a level below zero suggests an incipient recession. In his autumn statement last month, Mr Hunt said the UK was already in recession. This is expected to be officially confirmed early next year when the October-December economic figures are released. Read next: Forex Market Week Sum Up:The Overall Picture Of Major Currency Pairs Is Bearish| FXMAG.COM Source: investing.com The overview of UK economy UK consumers are tightening their belts as business activity contracted for a fifth consecutive month, according to new figures that suggest the economy has entered a prolonged recession. UK retail sales fell by 0.4 percent between October and November. Meanwhile, a closely watched private sector health monitor, S&P Global's Preliminary UK Purchasing Managers' Index (PMI), rose to 49 in December from 48.2 in November. Despite the increase, the reading was below 50 for the fifth month in a row, indicating that most companies reported a decline. Purchases of non-food items and fuels also fell, with only food sales recording an increase from October to November. Consumer inflation fell slightly to 10.7 percent last month from a 41-year high of 11.1 percent in October. External demand also remained subdued in December and overall new export orders declined. Over the past three months, economic activity in the UK has slowed across all major sectors, including manufacturing, construction and services. The data fueled fears that the economy had already entered a long recession. Not only the recession is a problem - strikes In 2016, the British economy – like other large economies – was negatively affected by high inflation and falling real wages. In Britain, conflicts between governments and economic failures have exacerbated these problems. The UK faces more strikes over pay and working conditions this month and into the New Year. Some 40,000 train and rail workers will walk out on Tuesday in a series of strikes. Royal Mail workers will also continue industrial action this week with strikes What next? The economy is projected to contract for at least the rest of the winter and possibly longer. On the other hand, there is hope that inflation is close to its peak, which may mean that the Bank will be able to limit the increase in the cost of credit. But the question is not whether the economy will go into a recession, but how deep and how long that recession will be. When a country is in recession, it is a sign that its economy is doing badly. During a downturn, companies typically make less money and the number of people unemployed rises. Graduates and school leavers also find it harder to get their first job. Source: investing.com
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

It Is Impossible To Predict The Future Of The Rates Of The Fed. The ECB, The BoE Because Of The Current Course Of Action

InstaForex Analysis InstaForex Analysis 19.12.2022 10:18
A crucial week has come to an end. I anticipated that it would move around the two instruments I frequently review. Today, it is certain that no rearrangement has taken place: Over the past week, the expected peak of wave e has been updated on the EUR/USD instrument. Therefore, it was once more about strengthening the euro rather than the end of the upward trend section. The proposed wave e has already taken on a very elaborate and extended form. The market's indirect readiness to begin constructing a descending set of waves is only indirectly indicated by an unsuccessful attempt at the level of 200.0%. There were no surprises as central banks increased their rates by 50 basis points. It is impossible to predict the future of the rates of the three banks because of the current course of action, which prevents an accurate forecast for the beginning of 2023. So let's take a closer look at it. ECB. The rate rose by 50 points to reach 2.5%. According to Christine Lagarde, at least a few more increases of 50 points will be required. The market still needs to be clearer about one thing: will the ECB increase the rate as much as necessary to get inflation back to 2%, or will it only do so up to a certain point, which might not be sufficient to achieve the inflationary goal? The European regulator also announced the introduction of a program of quantitative tightening in 2023. I think the market was expecting more "hawkish" results, so I believe these statements offered little support for the euro. The Bank of England. They did not say anything and increased the rate by 50 basis points. There needs to be more information about inflation or the PEPP's upcoming tightening. Regarding the British regulator, the market is still asking the same question. The UK's inflation rate dropped by 0.4%, but this is only the indicator's first decline. The Bank of England rate is currently 3.5%, and it is currently 10.7%. The British economy is experiencing serious issues, which Jeremy Hunt, Andrew Bailey, and Rishi Sunak openly discuss. If the regulator raises the rate like the Fed, that is, as much as it needs to, then everything is fine. However, the Bank of England may raise the rate differently, given these issues. The Fed. They are prepared to increase the rate, and from this point forward, meetings will decide whether an increase is necessary. Although the rate is expected to rise to 5.1% according to the consensus forecast, some FOMC members have already stated that it may now rise higher than anticipated. As a result, only the American regulator publicly states that it will tighten monetary policy as much as is required. This should increase demand for American currency. Additionally, a set of corrective waves has long been a presumption in wave analysis. I'm still waiting for both instruments to stop working. The upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. It would be best if you waited for a strong sales signal because the upward section of trend could become even more extended and complicated. The likelihood of this happening is still high. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the construction of a downward trend section, I cannot advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. The wave e, however, can evolve into an even longer form Relevance up to 05:00 2022-12-20 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/330117
The British Pound Is Showing Signs Of Exhaustion Of The Bullish Force

The GBP/USD Pair Has Clearly Worked Out The Pair's Buying Strategy

Peter Jacimovic Peter Jacimovic 19.12.2022 10:29
Central banks-issuers of G10 currencies seemed to have conspired by raising the main interest rates by 50 bps, but the weakest link was the BoE. Andrew Bailey's statement that inflation in Britain has reached its peak and two MPC members who voted to keep the cost of borrowing at the same level provoked the second best daily EURGBP rally of the year. Sterling weakened against the U.S. dollar by 1.5%, against the Swiss franc by 1%. Dynamics of Central Bank Rates Despite the slowdown in consumer prices from 11.1% to 10.7% in November, it was premature to talk about victory over inflation. And although the head of the central bank tried in every possible way to smooth over the phrase about the peak of CPI with statements about the stability of inflationary pressure and about further decisive measures to tighten monetary policy, he failed. Futures market lowered its forecast for the repo rate ceiling to 4.52% by August, British bond yields declined, and GBPUSD quotes collapsed. While the Fed and the ECB signaled that they were ready to raise rates higher than investors expected, the Bank of England, on the contrary, did not convince that it could reach the peak predicted by the derivatives market. Should we be surprised at the weakening of the pound? GBPUSD could continue its pullback lower as investors adjust their BoE borrowing cost expectations for 2023, Credit Agricole said. Dynamics of expectations for the repo rate In comparison, the ECB has made it clear that it is going to add 50 bps to the deposit rate one or more times in the future, causing derivatives to raise their ceiling forecast to 3.7%. The Fed, in its forecasts, openly stated that the cost of borrowing is likely to rise to 5.25%. Different rates of monetary restriction pushed up the EURGBP quotes and dropped the GBPUSD pair. Curiously, the UK and the Eurozone economies are considered weak, but the latest data signal their greater resilience than previously thought. The ECB used this to support the euro, the BoE ignored it, sinking the pound. An additional driver of the weakening of sterling against the U.S. dollar was a portion of disappointing statistics for the United States, including retail sales, industrial production and business activity. The markets saw the specter of a recession in this, began to sell risky assets and buy safe haven assets, which accelerated the pullback of GBPUSD. As long as global risk appetite continues to fall, and the Bank of England does not begin to repent of its mistake about the peak of inflation, the pair will continue to be under pressure. Technically, on the daily chart, the GBPUSD has clearly worked out the pair's buying strategy from 1.2325, followed by a reversal and the formation of short positions on the rebound from the pivot point at 1.2425. The inability of the "bears" to overcome the support at 1.2065–1.2075 is a reason for profit taking. On the contrary, its successful assault will allow to increase the shorts in the direction of 1.198 and 1.184 Relevance up to 06:00 2022-12-24 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/330119
The Results Of The March Meeting Of The Bank Of Japan Are Rather Symbolic

The Bank Of Japan Remains Focused On Achieving Wage Inflation | European Nations' Deal To Cap Natural Gas Prices at €180 Per MWh

Saxo Bank Saxo Bank 20.12.2022 08:55
Summary:  US equities declined on rise in bond yield with noted weaknesses in big tech, even though the USD remained range-bound. The announcement from the Bank of England to include long-maturity gilts in the winding down of QE portfolio in Q1 pushed up yields. Bank of Japan decision will the focus today in Asia, along with China’s Loan Prime Rates, and the US PCE is due later in the week. Earnings from Nike and Fedex today may give investors insights into consumer spending and global economic activities. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) were dragged down by higher bond yields and tech weaknesses U.S. equities declined for a fourth consecutive session. Nasdaq 100 dropped 1.4% and S&P 500 was 0.9% lower on Monday. All sectors, except energy, within the S&P 500 declined, led by communication services, consumer discretionary, and information technology. The 10bp jump in the 10-year yield weighed on growth stocks. The NAHB Housing Market Index plunged to 31, approaching the March 2020 Covid-19 recession low. Key U.S. stock movers Warner Brothers (WBD:xnas), down 6.6%, Meta (META:xnas), down 4.1%, and Amazon (AMZN:xnas) were among the top losers in the Nasdaq 100. Warner Brothers said the entertainment company is to record a large restructuring charge. Meta was hit by news that the European Union antitrust regulators were probing the company for allegedly unfairly squeezing out rivals. Walt Disney (DIS) slid 4.8% after releasing the debut weekend box office of Avatar: the Way of Water, below expectations. Supported by the possibility that Musk stepping down from Twitter, the shares of Tesla were little changed despite general market weakness and a probe by German prosecutors on suspected illegal storage of hazardous materials. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) cheapened as UK yields surged on BOE QT The surge in yield across the pond in the U.K. and Eurozone dragged U.S. Treasury yields higher, with the yield on 2-year notes 8bps higher to 4.26% and that on 10-year notes up 10bps to 3.58%. At the futures trading pits, large selling was on the 10-year (ZNH3) and the ultra 10-year (TNH3) contracts. The 2-10-year curve steepened by 3bps to -68bps. The move was triggered by a 17bp jump in the yield on the U.K. 10-year Gilts after the Bank of England announced the Q1 2023 bond selling schedule for its Asset Purchase Facility portfolio (i.e. bonds accumulated during QE) starting from January 9, 2023, in five auctions for a total of GBP9.75 billion, dividing equally in short, medium, and long-maturity bonds (including the first time). Adding further to the upward pressure on yields were the remarks from ECB’s Simkus and Guindos on more 50bp rate hikes in the Eurozone. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) slid on surge of Covid cases in mainland China Hong Kong and Chinese stocks pared all the early gains and finished the session lower as investors turned cautious following media reports of rises in Covid inflections and death tolls across large cities in China. The lack of commitment to more large-scale economic stimulus measures from the Central Economic Work Conference was considered underwhelming by investors who had higher expectations ahead of the meeting. The positive development of shifting to a more conciliatory stance towards the private sector was buried in the risk-off sentiment. Alibaba (09988:xhkg), Tencent (00700:xhkg), and Meituan (03690:xhkg) gained between 0.7% and 1.7%. Online healthcare providers were among the largest losers, Alibaba Heath (00241:xhkg), JD Health (06618:xhkg), and Ping An Healthcare tumbled by 4% to 8%. Chinese pharmaceuticals and Macao casino operators were among the largest losers. In A-shares, pharmaceutical and biotech names led the decline while the new energy space bucked the broad market and rise. FX: Dollar range-bound ahead of key PCE data this week The US dollar saw mild selling on Monday in thin markets and lack of any tier 1 data or Fed speak. Focus remains on US PCE data due later in the week which remains the Fed’s preferred inflation gauge. EURUSD rose above 1.06 again supported by hawkish commentary from ECB's Kazmir. Kazmir noted rates will not only need to go to restrictive territory but they will need to stay there much longer, noting inflation requires a strong policy response. Meanwhile, Germany's IFO Business climate data came in better than expected on the headline, led by a rise in both expectations and current conditions. USDJPY saw a modest uptick to 137+ levels in the Asian morning hours on Tuesday as the BOJ policy announcement was awaited, and expected to remain dovish (read preview below). GBPUSD testing a break below 1.2150 following the BOE’s long-end QT announcement. AUDUSD was little changed ahead of the RBA minutes. Crude oil (CLF3 & LCOG3) prices modestly higher Crude oil prices continue to find it challenging to balance the varied narrative around the demand outlook. China demand faces short-term headwinds as the Covid wave spreads, but is likely poised for a rebound in the medium term as authorities remain committed to driving up consumption recovery. Meanwhile, global demand outlook faces headwinds amid the massive tightening seen by global central banks this year. Supply side volatilities also persist with US refilling its SPR and sanctions on Russian oil. Crude oil prices were slightly higher, with WTI futures above $75/barrel and Brent futures getting close to $80.   What to consider? BOE announces restart of long-end bond selling, triggering another sell-off in Gilts After pausing the sales of long-end bonds recently to help the market to stabilize after the September rout, the Bank of England has announced that it will now start selling evenly across short, medium and long maturity bonds starting from Jan 9, as part of its QT. 2yr gilt yields up 20bps and 10yr up 17bps. Still, gilt yields are well below the peaks near 5% struck in late September and early October, when prices slumped in response to plans for tax cuts and extra spending from former British Prime Minister Liz Truss's short-lived government. Further pressure on gilts cannot be ignored as BOE likely to raise rates by another 50bps at the Feb 3 meeting. EU energy ministers lower gas price cap European nations reached a deal to cap natural gas prices at €180 per MWh, in a measure that will be applicable for a year from Feb 15. The price cap is significantly lower than an earlier proposal by the European Commission, and will only take effect if the benchmark Dutch TTF gas prices are above €180 per megawatt-hour, and their price difference with global LNG prices is greater than €35 per megawatt-hour. While this may take the immediate pressure off the consumers who are reeling under the energy crisis, we think price caps rarely work and only transfer the pressure somewhere else. Watch for Bank of Japan’s policy review hints The Bank of Japan is set to announce its policy decision today, and no change is expected in its monetary policy stance. The BOJ is expected to keep rates unchanged at -0.1% while maintaining its cap on the 10-Year JGB at 0.25%. Even as inflation increased to 3.6% YoY in October, the BOJ remains focused on achieving wage inflation before it considers a shift in policy stance. However, keep an eye out for any comments about a monetary policy review, which can trigger a strong JPY correction. There have been some mentions by BOJ members regarding a review of how monetary policy is conducted, they have generally been dismissed. While the timeline is still expected to be closer or after Governor Kuroda’s retirement in spring, any notes on who will succeed him or what policy change can be expected would be critical. US December NAHB housing market index slips further The NAHB housing index fell for a 12th straight month from 84 in December 2021 to 31 this month. However, the rate of decline moderated to its slowest in 6 months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment. Of the index’s three components, current sales conditions fell 3 points to 36, buyer traffic was unchanged at 20, but sales expectations in the next six months increased 4 points to 35, also indicating an improved outlook. Better German business climate than expected in December The headline German IFO business climate index, which is based on 9,000 monthly survey responses from firms in the manufacturing, service sector, trade and construction, was out better than expected in December. It climbed to 88.6 versus prior 86.3 and expected 87.2. The current economic assessment and the expectations also improved to 94.4 and 83.2, respectively. Companies are slightly less pessimistic about the macroeconomic trajectory. Though a recession is certainly unavoidable in Germany, the impact of the energy crisis has been so far more limited than initially feared. On a flip note, ECB policymaker Gediminas Simkus, who serves as the Chairman of the Bank of Lithuania, indicated that a 50 basis points rate hike in February is a done-deal. This is aligned with comments from ECB president Christine Lagarde at last week’s ECB press conference. The market reaction was muted. Nike and FedEx earnings on watch today Recently sell-side analysts have raised their price targets on Nike (NKE:xnys), citing potential margin recovery. The sportswear giant reports FY23 Q2 (ending Nov 30, 2022) today and the street consensus is expecting its revenue to grow 11% Y/Y to USD12.6 billion. Peter Garnry suggests in his note that the focus will be on the outlook for the holiday season quarter ending in February 2023 which can give investors some ideas if consumers are still keeping up their spending on discretionary items. Analysts covering Nike seem more optimistic about consumer spending in 2023 than the US bank CEOs who recently suggested that US consumer spending has been coming down. FedEx (FDX:xnys) earnings are also key to watch today. FedEx is now on the other side of the pandemic boom in logistics and expectations for revenue growth have collapsed to zero revenue growth over the next two quarters which in real terms are very low given the inflation. This means that the bar is set low for FedEx when its earnings hit the wire today.   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: Markets grinding lower; BOE to restart long-end QT; Eyes on BOJ – 20 December 2022 | Saxo Group (home.saxo)
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

The Bank Of England Will Now Start Selling Bonds | A Shift In Bank Of Japan Policy Overnight

Saxo Bank Saxo Bank 20.12.2022 09:08
Summary:  The Bank of Japan surprised global markets overnight with a tweak to their yield curve control policy that came as a large shock to currency traders and even shook risk sentiment more broadly. Not only did the JPY surge broadly, especially against non-USD major currencies, but global yields jumped on the news as yields on Japanese government bonds rose in step-wise fashion on the shift higher in the yield cap on 10-year JGB’s from 0.25% to 0.50%.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) After a weak session yesterday that saw the major indices losing about a percent, futures traded lower still overnight after the Bank of Japan decision to tweak its policy (more below) took US long yields sharply higher overnight. The next technical focus lower could be the 61.8% retracement of the rally from the October low – which is at a rather lower level for the cash index at 3,724 because the wild spike higher in US equity futures on the CPI release last week was not traded in the cash market. Equity traders will keep at least one eye on treasury yields after the surge overnight. Euro STOXX 50 (EU50.I) STOXX 50 futures are some 1.5% lower this morning from yesterday’s close after the surprise BoJ policy shift overnight cratered sentiment and have tumbled over 5% since the ECB’s hawkish meeting last week. The next technical focus lower could be the 200-day moving average, which for the cash index comes in near 3,675. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Overnight U.S. stock market weaknesses, concerns about spreading of Covid-19, and the upward adjustment of yield cap by the Bank of Japan contributed to the risk-off sentiment in the Hong Kong and mainland Chinese stock markets.  Both the Hang Seng Index and CSI300 Index plunged around 2%. Technology stocks underperformed. Hang Seng TECH Index tumbled 4%, with Alibaba (09988:xhkg) and Tencent (00700:xhkg) dropping by more than 4% and Bilibili (09626:xhkg) tumbling more than 8%. Placement of shares at discount from two Hong Kong listed Chinese developers weighed on the property sector. Chinese banks fixed their 1-year and 5-year loan prime rates unchanged. FX: BoJ move sees massive JPY surge, particularly in the crosses The market was surprised to see a shift in BoJ policy overnight, as Governor Kuroda and company shifted the cap on the 10-year JGB to 0.50% from 0.25%, even as they left the base policy rate of -0.10% alone. The move took the JPY sharply higher, with USDJPY trading some 3% lower to new cycle lows below 133.00, while non-USD JPY crosses surged somewhat more as the BoJ’s move triggered a global surge in bond yields and took risk appetite down a few notches, helping support the US dollar elsewhere. Crude oil (CLF3 & LCOG3) prices modestly higher Crude oil prices continue to find it challenging to balance the varied narrative around the demand outlook. China demand faces short-term headwinds as the Covid wave spreads but is likely poised for a rebound in the medium term as authorities remain committed to driving up consumption recovery. Meanwhile, global demand outlook faces headwinds amid the massive tightening seen by global central banks this year. Supply side volatilities also persist with US refilling its SPR and sanctions on Russian oil with a government response close to being completed. In week to Dec 13 funds cut bullish Brent and WTI bets to lowest since April 2020 and it highlights the risk of large price swings as the short-term outlook remains very clouded. Crude oil prices were slightly higher, with WTI futures above $75/barrel and Brent futures getting close to $80. Gold (XAUUSD) maintains a bid near $1800 ... after Bank of Japan’s surprise tweak of its yield cap sent mixed signals for bullion as the dollar dropped and bond yields rose. Overall, however, the prospect of higher yields in Japan following years of artificially low rates could potentially be seen as gold negative given that the BOJ’s steadfast commitment to defending its 10-year yield cap has served as an anchor indirectly helping keep borrowing costs low around the world. Since the current run up in gold started in early November, the price has not dipped below its 21-day moving average, today at $1777. With momentum showing signs of slowing a break below may signal a period of consolidation ahead of yearend while a close above $1815 is needed for that risk to fade. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) drop on BOE and BOJ actions The surge in yield across the pond in the U.K. and Eurozone as well as the surprise announcement from the BOJ that it will lift the yield cap on 10-year JGB’s from 25 bps to 50 bps has driven U.S. Treasury yields higher, with the yield on 2-year notes rising to 4.27% and that on 10-year notes to 3.68%. In futures, large selling was seen on the 10-year (ZNH3) and the ultra-10-year (TNH3) contracts. The 2-10-year curve steepened to -60bps from the recent peak at -84bps. The move was supported on Monday by a 17bp jump in the yield on the U.K. 10-year Gilts after the Bank of England announced the Q1 2023 bond selling schedule for its Asset Purchase Facility portfolio. What is going on? Bank of Japan surprises with lift of yield cap on 10-year JGB’s The BoJ left the policy rate unchanged at -0.10%, but lifted the cap on 10-year JGB’s to 0.50% from 0.25%, triggering an avalanche of JGB selling that immediately took the 10-year JGB yields close to the new target. The market was caught very off-guard despite recent rumblings that the BoJ would likely eventually shift policy. Most observers assessed, given Governor Kuroda’s constant stout defense of the BoJ’s policy mix, that a change to BoJ policy would take place after Kuroda’s exit on April 8 of next year. This decision overnight finally shows a willingness to move that will have the market more likely to anticipate follow up moves after next April, even hikes of the policy rate. For now, this decision took the JPY some 3% higher overnight and sent global bond yields sharply higher and risk sentiment broadly lower as the tightening move comes at a time when many other central banks are shifting to a deceleration of their respective tightening regimes. Better German business climate than expected in December The headline German IFO business climate index, which is based on 9,000 monthly survey responses from firms in the manufacturing, service sector, trade and construction, was out better than expected in December. It climbed to 88.6 versus the prior 86.3 and expected 87.2. The current economic assessment and the expectations also improved to 94.4 and 83.2, respectively. Companies are slightly less pessimistic about the macroeconomic trajectory. Though a recession is certainly unavoidable in Germany, the impact of the energy crisis has been so far more limited than initially feared. On a flip note, ECB policymaker Gediminas Simkus, who serves as the Chairman of the Bank of Lithuania, indicated that a 50-basis points rate hike in February is a done deal. This is aligned with comments from ECB president Christine Lagarde at last week’s ECB press conference. US December NAHB housing market index slips further The NAHB housing index fell for a 12th straight month from 84 in December 2021 to 31 this month. However, the rate of decline moderated to its slowest in 6 months, indicating that we are possibly nearing the bottom of the cycle for builder sentiment. Of the index’s three components, current sales conditions fell 3 points to 36, buyer traffic was unchanged at 20, but sales expectations in the next six months increased 4 points to 35, also indicating an improved outlook. BOE announces restart of long-end bond selling, triggering another sell-off in Gilts After pausing the sales of long-end bonds recently to help the market to stabilize after the September rout, the Bank of England has announced that it will now start selling evenly across short, medium and long maturity bonds starting from Jan 9, as part of its QT. 2yr gilt yields up 20bps and 10yr up 17bps. Still, gilt yields are well below the peaks near 5% struck in late September and early October, when prices slumped in response to plans for tax cuts and extra spending from former British Prime Minister Liz Truss's short-lived government. Further pressure on gilts cannot be ignored as BOE likely to raise rates by another 50bps at the Feb 3 meeting. European nations reached a deal to cap natural gas prices at €180/MWh The deal that will apply for one year from February 15 have no impact on markets this winter given the timing of the implementation and ample supply with stock levels still up 290 TWh year-on-year, the equivalent of 39 days of peak winter demand. The Dutch TTF benchmark gas contract trades near €100/MWh in response to milder weather during the next week and increased power production from renewables reducing demand for gas. The price of gas for the winter 2023/24 period meanwhile has slumped to €110, further reducing the outlook for economic pain next year. Gas consumption in Europe is set to shrink by more than 50 billion cubic meters in 2022, a 12-15% drop and “the sharpest decline in history,” led by price-driven demand destruction and mild weather according to Bloomberg Intelligence. What are we watching next? Follow-on from Bank of Japan move overnight The Bank of Japan move overnight was an uncomfortable one for global markets as it sent global bond yields sharply higher, including the US 10-year yield, which jumped over 10 basis points at one point overnight. Yields also rose elsewhere and this sudden new development in less liquid markets here toward the end of the calendar year could aggravate volatility risks across equity and bond markets. Earnings to watch The bar is set high for Nike earnings as sell-side analysts have recently hiked their price target on the stock and increased their expectations for 2023 on margins. The stock recently tried to retake the 200-day moving average above 110.00, but that effort failed and closed yesterday near 103 ahead of today’s earnings report after today’s close. FedEx will also report after the close. Today: Nike, FedEx, General Mills, FactSet Research Systems Wednesday: Toro, Micron Technology, Cintas, Carnival Thursday: Paychex, CarMax Friday: Nitori Economic calendar highlights for today (times GMT) 1330 – US Nov. Housing Starts and Building Permits 1330 – Canada Oct. Retail Sales 1500 – Eurozone Dec. Consumer Confidence 2100 – New Zealand Dec. ANZ Consumer Confidence 2130 – API's Weekly Report on US Crude and Fuel Inventories  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – December 20, 2022 | Saxo Group (home.saxo)
Soft PMIs Are Further Signs Of A Weak UK Economy

Andrew Bailey Signaled The Start Of A Recession In The British Economy

InstaForex Analysis InstaForex Analysis 21.12.2022 08:38
It's fair to say that this week is a festive one. First off, it is Catholic Christmas this Sunday. Second, there won't be much historical context for the news. The most intriguing report of the week focused on the third quarter's GDP in the UK, in particular. This, however, will be the indicator's third estimate for the third quarter. The third estimate is not likely to differ significantly from the first two given that the previous two estimates showed a decrease of 0.2%, even though a 0.5% drop was initially anticipated. But as I've mentioned in earlier articles, a lot now depends on the interest rates set by the ECB, the Bank of England, and the Fed. The ECB and the Bank of England have not yet been able to approach the Fed rate, although rate-hike cycles are already coming to an end. In the United States, the rate is predicted to increase to 5.25%, while in the European Union, it is currently 2.5% and has already started to decline. Christine Lagarde has never discussed the ultimate rate at which the ECB aspires, and Luis de Guindos said yesterday that he is unsure of the level at which the interest rate must be raised. It sounded as though he was saying, "I don't know to what value the rate will rise," rather than, "I don't know to what value we will be able to raise the rate." The ECB's ambiguity is still half the problem, though. With great difficulty, the Bank of England in the UK managed to slightly lower inflation after raising the rate for eight straight meetings. In this scenario, the British regulator would need to maintain a pace of 75 basis points of tightening monetary policy, but in December, they dropped to 50 points, and a survey by the Bank of England revealed that the market does not anticipate rates to rise above 4.25%. I'm not sure what kind of survey the British regulator conducted or who took part in it, but bakers with movers were most definitely excluded. Analysts and economists, I suppose. And if they truly do not anticipate another rate increase of more than 75 basis points, this could have the most detrimental effects on the pound, which has been rising recently precisely because the Bank of England is catching up to the Fed, which means it will raise interest rates more strongly and for a longer period. However, in reality, it might be the opposite. Let me remind you that Andrew Bailey signaled the start of a recession in the British economy; consequently, with each new tightening of policy, the regulator runs the risk of making the recession worse. The slowdown and, going forward, the refusal of additional tightening are most likely related to this understanding. Notably, the Bank of England may stop raising rates at the same time as the Fed, which would be in February or March of the following year. The likelihood of completing the construction of an upward section of the trend, in my opinion, has increased. For the next two weeks, we may be in the "holiday trading" phase, but in January 2023, I will once again wait for the development of a minimum correction section of the trend for both of the instruments that I monitor daily. I conclude from the analysis that the upward trend section's construction has grown more intricate and is almost finished. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. Although there is a strong likelihood that the upward portion of the trend will become even more extended and complicated, there is currently a signal to turn lower. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. Since the wave marking permits the current construction of a downward trend section, I am unable to advise purchasing the instrument. With targets around the 1.1707 mark, or 161.8% Fibonacci, sales are now more accurate. Wave e is likely finished, though it could take on an even longer form.
Solid Wage Growth in Poland Signals Improving Labor Market Conditions

Saxo Bank And JP Morgan's Negative Views On The Outlook For British Economic Growth

InstaForex Analysis InstaForex Analysis 27.12.2022 08:03
Signs of a painful contraction in the British economy continue to accumulate, causing analysts to doubt whether the currency can extend or even maintain the recent rebound against the dollar. The options market is also showing paranoia, with traders still pessimistic over the long term. The pound sterling jumped from its lowest level ever in September, driven by the government changes that followed the ill-fated term of Liz Truss as the country's prime minister, in addition to the collapse of the dollar. Despite this, the pound sterling still recorded a decline rate of 11% in 2022, to achieve its worst year since the vote to leave Britain from the European Union "Brexit" in 2016. Opportunities for gains next year may be limited by diverging central bank policies, as the Bank of England looks increasingly pessimistic in comparison to other central banks. Moreover, the U.K. economy continues to falter, the budget deficit is skyrocketing, and double-digit inflation has led to the steepest drop in living standards on record, leading to curbs in spending and the worst economic turmoil in decades. The housing market also looks vulnerable to a sharp correction. "The UK is at the forefront of economies teetering on the verge of collapse," said John Hardy, Head of FX Strategy at Saxo Bank. He explained that the pound sterling "could witness further declines in light of the combination of the Bank of England's slowdown towards the increasing tightening of monetary policy and the austere financial situation." The pound bounced back from losses caused by efforts for a broadly funded tax cut in two weeks, but it took more than two months to reverse risks for a year to pre-budget levels. The slow recovery of this gauge, which tracks market sentiment broadly, shows that traders remain deeply pessimistic towards the long-term GBP and that the recovery in the spot market was more based on positioning than outright growth. The latest data from the Futures Trading Commission showed leveraged funds switching to short positions on the British pound in the week ending December 13, after being long positions previously, while asset managers held short positions. JPMorgan Chase & Co. analysts expect the pound to fall to $1.14 at the end of the first quarter, from around $1.21 now, citing their "particularly negative views" on the outlook for British economic growth. And the looming local elections in May could stir up more political uncertainty. Strategists polled by Bloomberg expect the pound to fall to $1.17 in the first quarter before recovering slightly to $1.21 by the end of 2023. Relevance up to 14:00 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/330788
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The GBP/JPY Pair Is Aiming To Re-Test A Six-Day High As A Continuation Of Loose Policy Is Impacting The Japanese Yen

TeleTrade Comments TeleTrade Comments 27.12.2022 08:54
GBP/JPY is approaching 161.00 as BOJ sees a continuation of easy monetary policy. BOJ Governor sees rising labor demand ahead and a shift in wage-setting behavior by the firms. The BOE needs to slowdown the interest rate hike pace as households are failing to segment monthly installments. The GBP/JPY pair has extended its gains to near 160.78 after rebounding from near the psychological resistance of 160.00 in the Asian session. The cross has gained sheer momentum as Bank of Japan (BOJ) Governor Haruhiko Kuroda is standing with the decade-long view of easy monetary policy. The asset is aiming to re-test a six-day high around 161.00 as a continuation of loose policy is impacting the Japanese yen. After the decision of widening the allowance band around BOJ’s yield target, BOJ’s Governor has cleared that the decision was not meant to be a step towards an exit from ultra-loose monetary policy. BOJ Governor sees rising labor demand ahead and a shift in wage-setting behavior by the firms. While Japan PM Fumio Kishida stated that it was premature to state now whether the government and the central bank could revise a decade-old joint statement that commits the Bank of Japan (BOJ) to achieve its 2% inflation target at the earliest date possible, as reported by Reuters. In the early Tokyo session, the Japan Statistics Bureau reported a decline in the Unemployment Rate to 2.5% vs. the expectations and the former release of 2.6%. The catalyst that has impacted the Japanese Yen is the weak Retail Sales data. The annual Retail Trade has dropped to 2.6% against the consensus of 2.8% while the monthly Retail Trade (Nov) has contracted by 1.1% while the street was expecting a contraction of 0.2%. On the UK front, think tank see a slowdown in the interest rate hike by the Bank of England (BOE) as households are failing to augment their monthly payments. Analysts at BBH think that the Bank of England tightening expectations may need to adjust lower after a separate consumer survey showed nearly two million UK households had failed to make at least one mortgage, rent, loan, credit card, or any other bill payment over the last month."  
Pound Sterling: Short-Term Repricing Complete, But Further Uncertainty Looms

The European Central Bank And The Bank Of England Face An Urgent Need To Continue To Tighten Policy Because Inflation Remains Strong

InstaForex Analysis InstaForex Analysis 30.12.2022 11:54
The foreign exchange market is expected to move quite sharply in 2023 as two mutually directed processes - fighting inflation and trying to slow or prevent the onset of recession in each of the currency zones - follow similar scenarios, but in different conditions. Let's look at the balance of short and long positions in speculative positioning in the long-term, based on CFTC reports. To clearly see how large speculators build their strategy, let's consider the ratio of long and short positions for each of the currencies against the U.S. dollar. We will convert the long and short volumes for each of the currencies using a simple formula: divide the difference between long and short positions by the sum of long and short positions and normalize them between -100 and +100. We will sum up the result in the table. The interpretation of the results is as follows. If the line is above zero, the positioning is bullish, if it is below then it's bearish. The direction of the line whether it's up or down shows the dynamics of the speculators' sentiment over time. As follows from the table, the euro shows the most stable and consistent growth in regards to sentiment. The bullish bias is evident, i.e. long-term expectations on the futures market are in favor of the euro, which suggests that EURUSD will continue to rise during the first weeks of the new year. The New Zealand dollar unexpectedly took second place. The positioning was bearish for a long period, but in the last week a sharp growth of longs and a decline in shorts became evident. This means that the market sees the prospect of the kiwi strengthening against the current levels, the long-term target might be in the resistance area at 0.6680/6720. All other currencies are still in the bearish area (below zero) and are quite close to each other. Nevertheless, the movement in favor of growth in longs and a decline in shorts (upward direction of the lines) is noticeable for all currencies, except for the Canadian dollar. This synchronism allows us to conclude that the foreign exchange market is focused on a scenario of a gradual transition of demand from the dollar to other currencies. Sentiment is determined by a number of factors, and the most important one is inflation expectations in each of the currency areas. As the chart below clearly shows, the spread between the Federal Reserve's discount rate and inflation has been growing most steadily for the dollar since August, which means that the US central bank has been the most consistent among all major central banks in stopping the inflation surge and achieving a noticeable result. And if so, then the market sees the Fed's policy as not only the end of the rate growth cycle, but also a reversal to its decline earlier than the other currencies, that is, long-term expectations for the yield spread suggest a fall in the dollar's position. But the European Central Bank and the Bank of England face an urgent need to continue to tighten policy because the actions they have taken by the end of 2022 did not produce a noticeable result. Inflation remains strong, and as the winter progresses, as sharply higher energy rates begin to factor in, inflation will remain high, real yields will be much lower than in other countries, and they will be forced to continue policy tightening longer than the Fed forecast. This means that in dynamics, long-term yield spread expectations will shift in favor of the euro and the pound. For the euro, we just see a steady bullish repositioning (see the first chart), the pound lags behind, but the projections for the BoE's actions are firmly bullish. Forecasts for the ECB and the BoE's further actions are hawkish, and unlike the Fed, the end of the tightening cycle and a pivot to monetary policy easing are seen much further into the future, meaning that over the long term, the yield spread will start to grow in their favor. Read next: Japan Is Trying To Maintain Cover For LNG Vessels In Russian Waters, How Digital Money Could Look Like According To The IMF| FXMAG.COM We expect both currency pairs, EURUSD and GBPUSD, to resume growth in the first weeks of the new year. Long-term targets for EURUSD are 1.0940 and 1.1270, for GBPUSD we can expect attempts to rise to the area of 1.2750/60. It is necessary to take note that the Bank of Canada is likely to strengthen its hawkish stance since its efforts haven't produced any noticeable result yet. And also the Bank of Japan, as the dynamics of yield on the yen remains negative, which puts the yen in a losing position in the long term due to the risk of increased capital outflow from the country. As for the Australian dollar, there is no clarity yet. The dynamics in the futures market is minimal, the Reserve Bank of Australia is behaving very cautiously and does not allow the aussie to deviate either to one or the other side of the market trends. The U.S. dollar, according to the CFTC reports, is close to exhausting its growth potential, the Fed's role as a flagship is nearing its end. The dollar stands a good chance of continuing to weaken across the currency market spectrum in the first weeks of 2023.     Relevance up to 07:00 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/331172
Asia Morning Bites: Inflation Data in Focus, FOMC, ECB, and BoJ Meetings Ahead

In Poland May Not See Inflation Peak Until February, Although 2023 Will Not Be A Stellar One For Most Asian Economies, They Will Still Mostly Grow Faster Than Anywhere else

ING Economics ING Economics 05.01.2023 11:01
The warm weather in Europe is helping the region to get through the energy crisis, though many central bankers across the globe are still not done with rate hikes Back from holidays Happy New Year. We are gradually returning from holiday and sharpening our minds and pens again for another year of economic excitement. The Christmas break is traditionally a period with very little economic news and data, which allows us to keep the first economic update of the year brief. Our main views for 2023 are still intact and nicely presented in our Global Macro Outlook 2023. Still, there have been some important developments since the release of our outlook in early December. China has made a full U-turn on its zero-Covid strategy and is now experiencing a surge in Covid cases. For Western economies, an end to zero-Covid in China has always been a double-edged sword. On the one hand, it means that after a wave of surging Covid cases, the Chinese economy could open earlier and faster than initially thought, lowering the risk of new supply chain frictions. On the other hand, this reopening will very likely push up demand and prices for energy. In Europe, warm temperatures and strong winds since mid-December have not only led to lower wholesale prices for gas but also lowered gas consumption and filled up national gas reserves again. Unless the continent gets caught out by a severe winter in the coming months, the risk of an energy supply crisis has become extremely low. As a result of lower energy prices and government intervention, headline inflation came down more significantly than initially expected in December. If energy prices stay at their current levels throughout the year, headline inflation could come down quickly. Just taking the energy base effects into consideration, eurozone headline inflation could temporarily even touch 2% towards the end of the year. However, let’s not forget that there are still many “pass-throughs” at play and that it is almost normal for headline inflation to drop significantly after energy price shocks, while core inflation could still increase further and stay stubbornly high. Before getting overly enthusiastic remember that energy prices are highly volatile and recent developments cannot be extrapolated to the entire year. We have revised down our energy price assumptions but still expect an increase in the second half of the year when China starts to accelerate and Europe prepares for next winter. The central bank meetings in December hinted at a possible central bank divergence in 2023. While the Bank of England turned more dovish and even the Federal Reserve lost some of its uber-hawkishness, the two most dovish central banks of the last decade – the European Central Bank and the Bank of Japan – became more hawkish. The ECB, in particular, seems determined to continue hiking rates whether or not the economy falls into recession, and headline inflation could retreat faster than expected. As much as many central banks got carried away with ultra-loose monetary policy when inflation was low, there is now the risk that they will get carried away with overly restrictive monetary policy. Maybe it is just human for central bankers to want to secure their place in history as the slayers of inflation. In any event, don’t expect recent positive inflation developments to change central bankers’ minds anytime soon. Many people start the new year expecting the best but preparing for the worst. We take a different stance. We still expect a difficult macroeconomic year but are clearly preparing for the best. At a glance: our house view Energy: mild weather eases natural gas concerns The European natural gas market has come under significant pressure recently with TTF falling by around 50% since early December. Milder weather has reduced heating demand and as a result, Europe is seeing an unusual build in gas storage in the middle of winter. Gas storage is around 84% full compared to a five-year average of around 70%. It appears as though Europe will enter the injection season with comfortable storage, although there are still plenty of risks around the remaining Russian supply and also the potential for increased competition for LNG from China, as the country drops its zero-Covid policy. A more comfortable European market has meant that prices are unlikely to be as strong as initially expected. However, prices will still need to remain elevated to ensure demand destruction keeps the market in balance through the 2023/24 winter. We expect TTF to average EUR125/MWh in 2023, but uncertainty and lingering supply risks mean the market will remain extremely volatile. The outlook for the oil market remains bullish. China’s Covid policy change should prove supportive for demand in the medium to long run, although admittedly rising Covid infections could weigh on demand in the immediate term. Russian oil supply is still expected to fall due to the EU ban on Russian seaborne crude and refined products. As a result, the oil market is expected to tighten from the second quarter onwards, which supports our view for Brent to average a little over US$100/bbl over 2023. Warren Patterson Eurozone: ECB moves into uber hawkish zone The fall in sentiment indicators was partially reversed in December on the back of lower energy prices, courtesy of the extremely mild winter weather. That said, the strong fall in industrial production in October still suggests negative GDP growth in the fourth quarter and falling orders, high inventories and weakening hiring activity point to a further contraction in the first quarter. We expect only a weak recovery thereafter, leading to, at best, stagnating GDP for the whole of 2023. The more subdued energy prices and resolving supply chain frictions will push inflation down further, though core inflation is likely to prove more stubborn. We therefore don’t expect headline inflation to fall below 3% before 2024. After a hawkish monetary policy meeting in December, members of the ECB’s Governing Council have continued to emphasise a very hawkish message, pencilling in 50bp rate hikes for “a period of time”. On the back of this, we expect a 50bp rate hike both in February and March, followed by another 25bp rate hike in May. Bond yields have less upward potential and might fall again in the first half of the year. Peter Vanden Houte US: Fed nears end of hiking cycle as recession draws closer Recession worries are mounting in the US as the Federal Reserve continues hiking interest rates despite the economy already bracing itself for a deep housing market downturn and American CEOs being as pessimistic as they were in the depth of the Global Financial Crisis. With more companies adopting a defensive posture we expect to see hiring and investment plans cut back aggressively. The combination of job worries, lingering inflation and falling asset prices are likely to lead to sizeable falls in consumer spending while residential construction will also drag output lower. We look for a further 50bp of rate hikes in the first quarter given that inflation remains the Federal Reserve’s focus. Nonetheless, we believe that the composition of the CPI basket (heavy weighting towards housing and vehicles) is helpful in bringing about sharp falls in inflation from the second quarter onwards. Remember, too, that the Fed has a dual mandate that places a strong emphasis on the job market as well as targeting 2% inflation. With more flexibility to respond to the recession than most other central banks, we see significant scope for interest rate cuts and falling Treasury yields later in the year. James Knightley UK: Bank of England turns more dovish but rate cuts still a while off The UK economy has most likely been contracting since the third quarter of last year, and we expect this trend to continue until the summer. Admittedly, a recession is likely to be mild by historical standards, not least because the job market remains uber-tight, plagued by increasingly persistent labour shortages. We expect a peak-to-trough fall in GDP of a little over 1.5%. Against that backdrop, it’s not surprising that the Bank of England is turning more dovish. December’s decision registered a noticeable shift in voting patterns among committee members, which much like the Fed, resulted in a ‘smaller’ 50bp rate hike. We expect 50bp worth of additional tightening, though the jury’s out on whether this will come in one burst or split into 25bp increments. Either way, the BoE is likely to be slower to turn to rate cuts than in the US. Stickier inflation, owing to Europe’s energy crisis, and the tight UK job market, suggests the first rate cut is unlikely before 2024. James Smith China: no smooth road to recovery China’s lifting of Covid measures domestically and for international travellers will, in time, help the economy to normalise. But we can expect the short term to be dominated by the very high level of Covid cases, which have come at a time when the economy is already very weak. Looking at other economies in the region which have suffered similar severe waves of Covid (India’s Delta wave springs to mind) we would expect this wave to last no more than three months at which time the economy could start to revert to a more normal footing. However, this could also coincide with the US and Europe entering recession, which will weigh on any manufacturing recovery and export growth even as China’s domestic issues abate. The People’s Bank of China has set the policy tone for 2023 as stable, strong, and precise, which suggests that policymakers do not envisage much adjustment to interest rates or reserve requirements. Instead, a re-lending programme could be the main tool to inject liquidity into specific industries or for a specific purpose. Fiscal stimulus will focus on supporting long-term economic growth and will likely be delivered in March. Iris Pang Asia: region slows as global recessionary fears build Asian growth is slowing as its major external trading partners slide towards recession while its major regional economic hub (China) battles a new Covid wave. Not helping, a global downturn in semiconductor demand is hitting hard at the major manufacturing sector of the region, and domestic demand is being undermined by higher policy rates and the erosion of purchasing power due to inflation. But it isn’t all bad. Inflation, which was never as bad as most of Europe or the US, and has required a more nuanced policy tightening response, already shows clear signs of peaking in many economies. Easier policy and a troughing of the downturn are likely over the middle of the year. Japan may be an outlier here as it is making tentative overtures towards a normalisation of central bank policy, though we think any steps the Bank of Japan makes this year will be extremely tentative. China, too, will emerge from the current Covid wave within a quarter or two and should begin to grow more strongly, lifting regional exports once more. Overall, although 2023 will not be a stellar one for most Asian economies, they will still mostly grow faster than anywhere else. Rob Carnell CEE: New Year's repricing is a reminder that the inflation story is not over Leading indicators suggest a rebound from the bottom in economic activity, but hard data will continue to underwhelm for a while yet. Still, more attention will be paid to inflation, which we think peaked in Hungary and Romania at the turn of the year. In the Czech Republic, the January repricing should bring inflation back within reach of the September peak. In Poland, on the other hand, we may not see inflation peak until February, and we also expect inflation here to be the most persistent in the CEE region. However, we do not expect much more action from central banks. In Romania, after the last surprisingly strong inflation number, it looks as though the National Bank of Romania (NBR) may deliver one more 25bp hike to 7.00%. But otherwise, we consider the hiking cycle in the region to be over. So the main question is when inflation in the region will fall enough that central banks will be willing to start normalising monetary conditions. We see the Czech National Bank and the National Bank of Hungary as the first in this race. Conversely, we forecast the NBR will cut rates only at the end of this year with the National Bank of Poland following next year at the earliest. Frantisek Taborsky FX markets: dollar to find support as central banks spark abrupt decline FX markets have shown a little more stability over the last month and the dollar has found some support after dropping around 8% through October and November. The hawkish December FOMC meeting has certainly helped here and provided a counterweight to a surprisingly hawkish ECB. The major outperformer has been the Japanese yen, which received a further boost in December after the Bank of Japan shifted its 10-year JGB yield target. Rarely can there be said to be a more successful case of FX intervention than Tokyo’s efforts to sell USD/JPY in the 145/150 area. Looking ahead, the seasonal trends are more dollar supportive in the January-February window and this may be the more likely period for EUR/USD to make a move lower. Markets price the turn in the Fed cycle and a weaker dollar from the third quarter onwards, though we suspect sustained gains in EUR/USD may be harder to come by as central bankers continue to hike into recessions. Chris Turner Rates: set to reverse higher before collapsing lower 2022 saw the biggest bear market for bonds in modern times. A peak in US inflation opened the door for a decent rump of investors to square up on bear market positions in the fourth quarter, requiring the buying of both duration and risk. However, this just stored up pressure for resumed higher market rates ahead. Despite the easing in inflation pressures, the first quarter will have a strong rate hiking theme. The Fed is still hiking and needs tighter financial conditions. That should force market rates back up. With the ECB on a hiking mission too, upward pressure on eurozone market rates will also feature. While we see resumed upward pressure on rates dominating the first quarter, the biggest narrative for 2023 as a whole will be one of significant falls in market rates. The Fed and the ECB will peak in the first quarter, and once there, market rates will have a carte blanche to anticipate future cuts. Larger falls for US market rates are projected later in 2023, reflecting likely subsequent Fed cuts. But with cuts less likely from the ECB, expect a relative steepening of the US curve versus the eurozone one. This is a classic box strategy where the US curve steepens out (dis-inversion), and the eurozone one re-steepens by less. By the end of 2023, the US 10yr Treasury yield should be back down at 3% and the eurozone 10yr swap rate at 2.5%. But we should not go below these levels for long. Padhraic Garvey Read this article on THINK TagsRates Monthly Update FX Energy 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
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

The Bank Of England Urgently Needs To Tame Stubbornly High Inflation

InstaForex Analysis InstaForex Analysis 04.01.2023 15:05
Before the end of the year, we asked InstaForex about UK economy, which is expected to decrease significantly, as we approach the end of the year. Let's have a look how do they see the near future of the UK economy and what would BoE consider as a gauge ahead of next interest rate decision. Although the UK GDP for the third quarter turned out to be noticeably worse than expected, the reading was still relatively positive. In annual terms, economic expansion contracted to 1.9% from 4.0%. However, a 2.0% economic growth is quite acceptable for Western countries. At first glance, it might seem that the British economy remains stable. However, in quarterly terms, it shrank by 0.3%. It indicates that the economy is gradually sliding into a recession. Notably, analysts have been predicting such a scenario for a long time. The energy crunch has considerably crippled the eurozone economy as well as the British one. The EU managed to fill its storage sites and avoid fuel shortages. However, it would hardly help it in the future. Even after some stabilization, energy prices soared by two or three times compared to last year. Such sharp price swings adversely affect the European economy. The manufacturing sector is bearing the brunt. Production costs have risen dramatically. Manufacturers are forced to reduce the profit margin to boost their market competitiveness. However, this move leads to a bigger extension of the payback period. However, in the EU,  the payback period is almost the longest one in the world. A few years ago, the payback period of individual industrial enterprises could stretch to 50 years. It made investments in the European economy less attractive.  Over such a long time, investors will only be able to return the invested funds, abandoning hopes for any profit. Recently, the situation has become even worse. It will inevitably lead to an increase in unemployment and a reduction in tax revenues.  Thus, many European manufacturers, including British ones, are now mulling over options for moving industrial production to other regions with lower energy costs and cheap labor. It will inevitably lead to an increase in unemployment and a reduction in tax revenues. In turn, governments will have to deal with worsening social policy, e.g. payments of pensions and benefits.  The situation is extremely challenging. However, those problems appeared a long time ago. The energy crisis and other economic woes have just exposed those cracks.  Things are getting worse due to the Bank of England’s monetary policy stance. It is adamant when it comes to rate increases. As a result, the borrowing costs are rising, which further extends the payback period. Such a problem is quite acute for those who are opening new enterprises or are going to modernize the existing ones.  Even if British companies decide to keep firms and staff, it will be difficult for them even to repair equipment. As for its upgrade, it would seem an attainable goal. Naturally, such companies will quickly lose market competitiveness and lower their production volumes. It will be a rather long and painful downturn.  Read next: Bitcoin: As for the price levels, one should pay attention to the level of $18,000 that has been recently hit. Probably, this level may well serve a starting point for buyers in case the price holds above it on a daily chart | FXMAG.COM The only thing the Bank of England can do is to reduce borrowing costs The Bank of England urgently needs to tame stubbornly high inflation. According to the latest data, inflation slowed to 10.7% from 11.1%. However, it is too early to talk about a steady decline in consumer prices. In June, inflation also dropped to 9.9% from 10.1%. Shortly after, it climbed again. Moreover, its rise was facilitated by supply chain disruptions and production cuts.That is, demand is constantly growing despite the shortage of goods. This is the main reason for an uptick in consumer prices. To some extent, the problem can be resolved at least partially by increasing the output volume. However, this option looks unlikely given the high cost of investment in the industrial sector.  The only thing the Bank of England can do is to reduce borrowing costs. Besides, the watchdog is not responsible for all other issues such as legislation and taxes. Judging by the results of the last meeting, the regulator may start lowering interest rates. Additionally, speculators were surprised that two of the nine board members voted for a rate cut. The Bank of England tries to act preemptively Once inflation starts to decline confidently, the Bank of England will stop the key interest rate hike. Then, after a small pause, it is likely to loosen its monetary policy. It is quite possible that the first key rate cut will take place as early as the first part of 2023. Notably, the BoE was among the first central banks that launched monetary policy tightening. In general, the economic situation in both the US and Europe is almost the same. On both sides of the Atlantic, most structural problems are identical. The Bank of England tries to act preemptively, whereas the European Central Bank and the Federal Reserve are closely monitoring the effect of these actions. If the result is not negative, they immediately take almost the same measures. At least in the last few years, the situation has been developing according to this scenario. There is no wonder. The fact is that the Bank of England is managing a large economy, but it cannot be compared with the economies of the US and the European Union. In other words, the Fed and the European Central Bank have weightier responsibilities. Any unwise decision may lead to alarming global consequences. Apart from inflation, central banks should also take into account the labor market condition. The Bank of England does not have difficulties with this issue. In the UK, the unemployment rate is 3.7%. In the last few months, it has been rising, thus approaching its usual level of 4.0%. This, in turn, provides the BoE with another reason to cut its benchmark rate, especially if the unemployment rate slightly exceeds 4.0%. This is likely to happen when the BoE sees a steady slowdown in inflation. It is highly likely that in early 2023, the Bank of England will raise the key interest rate once more. This time, analysts expect a 25-basis-point rise to 3.75% from 3.5% aimed at reinforcing progress in combat against inflation. At the second meeting of the year, the key rate will remain unchanged so that the regulator can analyze the effect of its previous decisions. At the following meeting, which is scheduled for May 11, the central bank may cut the benchmark rate to 3.5% from 3.75%. All the following cuts will be more moderate compared to the hikes in 2022. They are likely to be limited by rather high inflation and fears that it may resume surging amid a rapid drop in interest rates. It is highly possible that by the end of the year, the key interest rate will be lowered just to 3.0%. Could such measures support the UK economy? The UK is unlikely to avoid a recession. The fact is that the US is expected to slip into a recession, thus negatively affecting the European economy. However, the loosening of monetary policy may cushion the possible impact. Nevertheless, the Bank of England is unable to alter the situation considerably. It simply has no tools to affect structural economic problems. Thus, the regulator has only a minor influence on expenses in the industrial sector. It can settle just the financial component of the issue, which is of minor importance. The Bank of England can postpone the relocation of enterprises outside the United Kingdom, thus allowing the government to take effective steps if it decides to take this opportunity. 
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

The Issues That The UK Economy Is Facing Are Real: Interest Rate Expectations Peaking, Inflation Falling, And A Manageable Trading Downturn

Franklin Templeton Franklin Templeton 08.01.2023 12:48
Macroeconomic trends If 2023 is anything like 2022, then the UK may be in for a bumpy ride – inflation surged, interest rates soared, currencies swung, and the UK government clashed. But for us, one of the main challenges ahead for UK equities can be succinctly summarised: Will inflation begin to moderate as economic activity wanes? Indeed, macroeconomic headwinds remain. Investors remain hopeful that UK inflation has peaked, but continue to balance the prospect of surging prices with the rising cost of debt. Whilst the notion of transitory inflation has largely been disproven through 2022 as CPI data remained elevated, some factors are undoubtedly considered stickier than others. Frictional supply chain costs as the world emerges from the COVID-19 pandemic are already beginning to subside, but secular impacts on inflation such as globalisation and demographic change should not be overlooked. Thus, as the prospect of a technical recession is increasingly considered within the UK, the inflationary backdrop will be key to shaping its severity. Fortunately, an easing of global inflationary pressures is beginning to unfold. Data released in November showed that US consumer prices had risen by 7.7% over the past 12 months, falling short of the 8% estimates. In December, China announced a reversal of key zero-Covid policies after weeks of civil unrest. And indeed, global commodity prices have moderated since their extreme volatility earlier in the year. As inflation looks like it is peaking in the UK, the news of a cooling backdrop in the US has helped drive a rerating of equities and a pullback in government bond yields domestically. Inflation in the UK is expected to continue to fall back from highs over the next few months, although the impact from changes in consumer energy support policy will likely be a key determinant as to how this plays out. Assuming an easing in headline inflation figures, we expect the central bank to be nearing a peak in its monetary tightening programme. The Bank of England recently made steps to reduce its balance sheet, embarking on a programme of quantitative tightening in Q4 2022. Higher interest rates mean higher financing costs for corporations and consumers. Combined with the tighter flow of liquidity, this may present some short-term challenges for UK equities whilst the positive effect of moderating inflation takes its time to embed into supply/demand habits. Key economic concerns are the length and depth of this inevitable slowdown – investors remain closely focussed on the central bank response as the risk of a policy mistake is increased. As the short-lived “Trussonomics” regime unwinds, the central bank at least has some relative market stability in order to play its best hand. Market inferred peak base rates have moderated by over 100 basis points (bps) since the (not so) mini budget was announced earlier in 2022. The perception of a safe pair of economic hands with Prime Minister Rishi Sunak and Jeremy Hunt, chancellor of the Exchequer, has improved sentiment to the UK into 2023. With gilt yields stabilised, and an economic catastrophe seemingly circumnavigated, the expectation of relatively benign markets should be well received by the Bank of England as they execute monetary policy over the coming months. One must be reminded that not all consumers are proportionately impacted by the enduring cost-of-living crisis consuming the UK. The UK remains in a position of strength from the perspective of excess household savings – savings accumulated throughout the Covid-19 pandemic are now earning an attractive rate of interest income. Furthermore, the UK mortgage market has evolved since 2005 – the last meaningful period of central bank tightening – when 70% of mortgages were financed on variable terms. Today, only 14% of the UK mortgage market is financed with variable rates. The extent of fixed rate mortgage financing and indeed outright home ownership within the UK should continue to partially offset the cost-of-living burden instilled by soaring consumer energy bills. But we do expect a degree of consumer caution to remain until broader costs begin to moderate. The labour market has continued to demonstrate resilience throughout this period of volatility. Although latest data indicate that unemployment rose to 3.7% in Q3 2022 and that job vacancies dropped for the fifth consecutive quarter, one must be reminded that the labour market remains buoyant relative to historic levels. Signals such as a falling labour inactivity rate are indicative of employment re-engagement, particularly amid the over 50s, as soaring costs prompt ‘early retirees’ back into employment. Thus, we do not expect a surge in the unemployment rate, which should provide some protection against the risk of a prolonged, severe recession. Despite the relative strength of the UK equity market throughout a period of heightened volatility, investors remain mindful of the value that remains. The UK market is trading on a forward P/E ratio of around 10x – 20% beneath its 15-year median – and offers a dividend yield of 4%. Contrasting with the US, trading on a forward P/E ratio of around 18x – 12% above its 15-year median – and a dividend yield of 1.7%, UK equities look cheap to us. An economic slowdown is widely anticipated across global markets and as such, should investors continue to address the notion – is this bad news already priced in to UK assets? The UK market remains forward-looking, and in our mind is pricing in an excess of pessimism given where valuations are today. Thus, we believe the attractiveness of the region is enhanced to investors as evidenced by ongoing M&A activity, as indeed are the prospects for continued resilience through 2023 and beyond. Small- and mid-cap UK equities UK small-and-mid (SMid) cap has been an asset class that has been hugely out of favour over the last 12 months, leading to significant underperformance versus the wider UK equity market. Yet, we believe that the prospects for many companies in this area of the market remain much brighter than the investor value inferred in today’s constricted valuation multiples. Amongst the current barrage of UK negativity, short termism and ongoing selling pressure, we believe opportunities are emerging that set the stage for a recovery in 2023. The issues that the UK economy is facing are real. However, we believe that next year we are likely to see interest rate expectations peaking, inflation falling, and a manageable trading downturn. We are increasingly enthused by some of the compelling opportunities that we observe within the Smid cap market which lays the foundation for future returns. We do expect earnings to come under pressure in the short term, but the degree of valuation discount observed assumes a wide margin of safety. Currently, Smid cap companies are trading towards the lower end of their historical valuation range, along with what we believe to be attractive dividend and free cash flow yields. Many businesses are entering this well signalled downturn with significant balance sheet strength, and this enables them to continue to invest and take advantage of the opportunities which should inevitably arise. After exiting a disruptive pandemic period, not only in sound financial shape, but also operationally and competitively, we believe that many businesses and their prospects have actually been significantly strengthened. In our view, the flexibility, strength and resilience engrained in many Smid cap companies is being underestimated. Thus, we believe the prospects of the UK Smid cap market are enhanced, where the risk/reward opportunity is beginning to look compelling over the long term. Large-cap UK equities UK large-cap businesses kept the UK equity market afloat through 2022, as many other developed markets suffered at the hands of an inflationary resurgence. As humanitarian tragedy and geopolitical unrest reverberate across Europe, investors continue to shelter in recognised safe havens; this has led to an encouraging period of attractive relative returns for the FTSE 100 Index. Looking forward into 2023, the FTSE 100 looks well positioned to continue to demonstrate resiliency in the face of global headwinds. Of course, investors are presented with many unknowns… Will an enduring economic recession engulf the market? The FTSE 100 is comprised of some of the highest quality, cash generative businesses listed within the UK. These businesses are well capitalised and many raised equity where needed during the pandemic, and thus start from a position of strength relative to speculative/higher leveraged alternatives. Defensive havens remain prevalent – tobacco, pharmaceutical and utility businesses are demonstrably less sensitive to economic cyclicality. Will inflation persist? The FTSE 100 is constructed by many companies that exhibit innate inflationary resistance. Real asset businesses such as oil and gas majors and metal miners account for over 20% of the index. Whilst some may argue that their fate is in the hands of global commodity volatility, most would concur that these remain an effective hedge against soaring inflation. Furthermore, regulated businesses such as utility companies have a reliable mechanism for protecting their revenue streams from inflation. Will interest rates settle at 3-4%? Inherent interest rate protection is prevalent within the index. Multinational banks are now beginning to earn material interest income margins from their lending, after over a decade of frankly negligible rates. Furthermore, long-term liabilities for life assurance businesses are now discounted at a higher rate, reducing the value of their liabilities in today’s terms. The UK market has lagged the US market for some time due to the notable omission of high-growth, pre-profit stocks where the terminal value is discounted from many years into the future. These businesses were able to thrive in a zero-rate environment. But as rising interest rates inflate the discount rate used for equity valuations, these high-growth stocks are disproportionately sensitive to hawkish policy relative to the established, profitable, and mature businesses prominent within the FTSE 100 Index. Should investors not know what steps to take next. Then in our mind the notion of being “paid to wait” is an attractive concept amid the UK large-cap market. The mature nature of the UK large-cap landscape instils a degree of resilience in the propensity of businesses to return capital to shareholders. This may be derived from reliable dividend income – the FTSE 100 is a natural hunting ground for income, yielding over 4.5% - or indeed the opportunity to benefit from share buybacks which remain commonplace, particularly amongst businesses generating windfall profits. Source: Bloomberg as at 16/12/2022 unless otherwise stated. Read the full report
Soft PMIs Are Further Signs Of A Weak UK Economy

The U.K. Economy Is In Trouble, Fall Of GDP Is Expected!

Kamila Szypuła Kamila Szypuła 08.01.2023 19:48
A difficult year ahead for the global economy is set to hit some countries harder than others. Inflation was one of the biggest macroeconomic themes in 2022 and it is likely to remain so in 2023. Inflation also contributes to gross domestic product. In Great Britain, this indicator does not look optimistic, and its upcoming reading may turn out to be crucial for the economy this year. The Bank of England has said the country is on track for a prolonged recession, as households struggle to keep up with the soaring costs of food, energy and other basic essentials. Economists opinion Around four-fifths of economists say the UK will experience a much longer recession than its peers. They predict a difficult year 2023 and a potential return to normal by 2024. The UK will face one of the worst recessions and weakest recoveries in the G7 in the coming year, as households pay a heavy price for the government’s policy failings, some economists say. A large proportion of experts expect the UK to fall behind its peers, with gross domestic product already contracting and expected to continue to do so for most or all of 2023. The result is expected to be an increasingly steep decline in household income as higher credit costs add to the pain already caused by soaring food and energy prices. In its macro forecast for 2023, Goldman Sachs forecast a 1.2% decline in UK real GDP over the course of the year, well below all other major G-10 economies. ING pointed out that GDP figures have been somewhat discrepant recently, partly due to the Queen's funeral in September last year. But the economy is clearly weakening and ING expects a negative monthly result in November, after an artificial rebound in October after September's extra day off. Inflation Throughout the last year, the Bank of England has been raising interest rates in an attempt to cool down rampant inflation. This resulted in an increase in interest rates from 0.25% to 3.5%. The cost of borrowing in the UK has increased dramatically, affecting the ability of businesses to borrow money, but also the cost of mortgage payments for millions of Britons. As mortgage repayments increase, household disposable income decreases. Disposable income is also affected by inflation as the cost of goods and services increases. The Office for National Statistics reported last month that Britain's inflation rate was 10.7% in November, down from a 40-year high of 11.1%. GDP Economic activity has slowed sharply in recent months as consumers tighten their belts in response to soaring living costs, while business investment has slumped amid concerns over the strength of the UK and global economy. Last month, GDP showed that the UK economy contracted at a rate of -0.3% in the last quarter. This reinforces speculation that the UK is facing a long recession. When it comes to forecasts for quarterly or year-on-year results, there are no forecasts, but a contraction is to be expected given the prevailing economic conditions. The Pound (GBP) on FX market Based on the current outlook, investors can expect a difficult year ahead for the pound, with the value of sterling coming under significant pressure if the economies of its major counterparts continue to outperform the UK. During the last recession, the pound fell to 1.05 to the euro and 1.14 to the dollar. Cable (GBPUSD) was trading at 1.14 Source: investing.com
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

The Bank Of England's Committee Members C.L. Mann: "Restricting Energy Prices Is Forcing A Shift In Spending To The Rest Of The Consumer Basket"

Jakub Novak Jakub Novak 09.01.2023 11:25
More and more politicians have expressed their belief that UK inflation is slowing significantly this year. However, one of the Bank of England's committee members, Catherine L. Mann, said the recent introduction of a price ceiling could trigger inflation in other sectors by boosting consumer spending. Mann speach "By limiting energy prices, we have mechanically lowered the rate of inflation, which is irrelevant to future monetary policy decisions," Mann said during a panel discussion at the American Economic Association's annual conference. "Restricting energy prices is forcing a shift in spending to the rest of the consumer basket, thus causing potentially higher inflation," she added. Mann also spoke about global climate change, arguing that regulatory policies aimed at reducing emissions could change the economic environment over the coming decades. Bank of England  The Bank of England raised interest rates nine times since December 2021 in order to suppress inflation as quickly as possible. Although the bank now expects inflation to fall sharply this year, policymakers are divided on how long interest rates will rise further. Mann voted for a 75 basis point rate hike in December, while the rest of the group opted for a half-point increase. Two other officials opted to leave it at that. At the moment, investors are certain of another rate hike in February this year, but whether it will be by half a point or by a quarter is a big question. Minutes from the last meeting showed that most policymakers consider the labor market to be rather tight and inflationary pressures on domestic prices and wages remain stable. This would well justify further monetary policy tightening. Read next: After The Correction, Jacek Ma's Share In Shareholder Votes Will Fall To 6.2%| FXMAG.COM GBP/USD As far as the technical picture of GBP/USD is concerned, Friday's record rise of over 200 pips was quite impressive. Buyers need to break above 1.2160 to maintain their advantage, adn the breakdown of this range will strengthen the hope for further recovery towards 1.2220. After that, it will be possible to see a rise to 1.2260. But if pressure returns after the bears take control of 1.2100, the pair will rush down to 1.2040 and 1.1980. EUR/USD In EUR/USD, a break above 1.0700 will spur a rise to 1.0730 and 1.0770, while a dip below 1.0650 will increase the pressure on the pair and push it to 1.0610 and 1.0570. Relevance up to 08:00 2023-01-10 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/331722
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The EUR/GBP Pair Sticks To Its Modest Intraday Gains

TeleTrade Comments TeleTrade Comments 10.01.2023 09:57
EUR/GBP attracts fresh buying on Tuesday and recovers further from over a two-week low. Dovish BoE expectations weigh on the British Pound and remain supportive of the move. The recent hawkish ECB rhetoric underpins the Euro and supports prospects for further gains. The EUR/GBP cross regains positive traction following an early dip to sub-0.8800 levels and moves away from over a two-week low touched the previous day. The cross sticks to its modest intraday gains through the early European session and is currently placed near the top end of its daily range, around the 0.8825-0.8835 region. The British Pound's relative underperformance comes amid a bleak outlook for the UK economy, which has been fueling expectations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. Apart from this, a modest pickup in the US Dollar demand is seen weighing on the Sterling and lending some support to the EUR/GBP cross. The shared currency, on the other hand, benefits from hawkish European Central Bank (ECB) rhetoric. In fact, ECB Governing Council member Francois Villeroy de Galhau said last Thursday that it would be desirable to reach the right terminal rate by next summer. Furthermore, ECB expects wage growth to be very strong over the next few quarters. In the absence of any major market-moving economic releases, either from the UK or the Eurozone, the aforementioned bullish fundamental backdrop supports prospects for additional gains. That said, any subsequent move up might continue to confront stiff resistance and is more likely to remain capped near the 0.8865-0.8875 heavy supply zone.  
British Prime Minister Rishi Sunak Sees No Chance Of Reducing Inflation, Despite Promises To Halve It

British Prime Minister Rishi Sunak Sees No Chance Of Reducing Inflation, Despite Promises To Halve It

Jakub Novak Jakub Novak 10.01.2023 14:10
UK Prime Minister Rishi Sunak said UK inflation is not certain to slow down this year so there is a need to continue influencing wages in order to limit their rise despite ongoing negotiations with striking sectors, including the National Health Service and the railways. Sunak has come under criticism Sunak has come under criticism over promises to halve inflation this year. This is despite the forecasts of the Budget Authority that the rate of price increase will slow down significantly as it is without any additional intervention from the government. Rising energy prices in the UK led to inflation exceeding 11% last year, causing a cost-of-living crisis. The Prime Minister and many other politicians have also changed for this reason. The new Prime Minister, Rishi Sunak, has decided to take seriously the issue of containing price rises, which is his top priority and the reason why he is resisting calls to adopt high public sector wage demands as this is sure to spur yet another rise in inflation. A growing political problem for the prime minister However, unrest is now taking place all over the country as citizens are pushing for a 19% pay rise. Another issue is that Sunak refused to answer the question of whether he has private medical care, saying it was of little consequence. This has become a growing political problem for the prime minister, who is under pressure from both members of his own Conservative Party and the general public. GBP/USD Talking about the forex market, yesterday's rise in GBP/USD is gradually slowing down, so buyers need to stay above 1.2140 in order to maintain their advantage. The breakdown of 1.2200 will push the pair to 1.2260 and 1.2301, while a drop below 1.2140 will bring it to 1.2090 and 1.2040. EUR/USD In EUR/USD, there is a chance to update the December highs, but this is only if the pair breaks above 1.0760. Such a move will push euro to 1.0790 and 1.0850, while a fall below 1.0720 will bring it to 1.0680 and 1.0650.     Relevance up to 09:00 2023-01-11 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/331837
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The GBP/JPY Cross Is Likely To Display Volatile Moves

TeleTrade Comments TeleTrade Comments 11.01.2023 09:28
GBP/JPY is failing to surpass the immediate resistance of 161.00 as BOJ is discussing an exit from its ultra-loose policy. Japanese administration and the BOJ will review their decade-long loose policy under novel BOJ leadership. The Pound Sterling may display significant action after the release of UK’s economic activities data. The GBP/JPY pair has sensed selling pressure after multiple failed attempts of surpassing the critical resistance of 161.00 from the past two trading sessions. The cross is likely to display volatile moves amid chatters over the review of decade-long easy policy under the new Bank of Japan (BoJ) leadership ahead. Discussions over a review of prolonged ultra-loose monetary policy by the BoJ are getting heated now.  Earlier, Japanese Prime Minister Fumio Kishida said that the administration and the BoJ must discuss their relationship in guiding economic policy after he names a new Bank of Japan (BOJ) governor in April. He further added that the administration is looking to revise its long-decade blueprint of beating deflation and may look for an exit from ultra-loose monetary policy. And, now former BoJ board member Sayuri Shirai said on Wednesday “Review of last 10 years can be conducted under new BoJ leadership, but difficult to envisage a major change in the policy framework.” It seems that the Japanese economy has considered high inflation environment a better way to combat the Japanese yen's weakness as other economies are constantly shrinking the supply of their respective currencies. Read next: According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM On the United Kingdom front, investors are awaiting the release of the data belonging to economic activities comprising Gross Domestic Product (GDP) figures, Industrial Production, and Manufacturing Production data, which are scheduled for Friday. Meanwhile, the Bank of England (BOE) has cornered poor execution from Prudential Regulation Authority for their faulty risk-management systems as banks faced high exposure due to sheer market volatility in CY2022. Events like the collapse of Archegos Capital demonstrated firms’ large and concentrated exposure to single counterparties, as reported by Financial Times.  
Analysis Of The Euro To US Dollar Pair Situation - 30.01.2023

The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69

Kamila Szypuła Kamila Szypuła 11.01.2023 14:16
Fed Chairman Jerome Powell gave no policy guidance at Tuesday's panel discussion in Stockholm, and with other Fed officials saying their next moves will depend on the data, investors are very focused on the US CPI data. The dollar has weakened sharply in recent months on hopes that U.S. inflation is declining, which, along with some signs of pressure on the U.S. economy, is fueling expectations that the Fed is nearing the end of its rate hike program. In terms of energy, both the UK and the Eurozone have benefited from the fall in oil and gas prices, but with sanctions and price caps tightening on Russia, Russian retaliation could push energy costs up again. USD/JPY The USD/JPY pair is rising today and trading above 132.7500. What's more, the pair keeps its trade above 132.0000 for second day The current term of BoJ Governor Haruhiko Kuroda ends in April, and former Bank of Japan (BoJ) board member Sayuri Shirai has called for a review of the Bank's policies over the past 10 years in light of the changing inflation landscape. Moreover, the generally positive tone in the equity markets is weakening the safe haven of the Japanese yen and providing some support for the USD/JPY pair. In addition, broader risk sentiment will be taken into account for short-term trading opportunities around the USD/JPY pair. Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM AUD/USD The AUD/USD pair traded above the $0.69 level in the Asian and European sessions. Currently the Aussie pair is below 0.69, trading above 0.6880 at the time of writing The Australian dollar remains high, continuing to push towards the five-month high seen on Monday near 0.6950. Today's retail sales were 1.4% month-on-month in November, well above the forecast of 0.6% and -0.2% previously. The year-on-year figure to the end of November was 7.4%, not the expected 7.2% and 6.9% earlier. The data shows a downward correction in retail sales in early 2021, but an acceleration in November. Today, the monthly CPI for November was also released, with the headline CPI year-on-year printed at 7.4%, above estimates of 7.2% and 6.9% earlier. Markets are currently divided over whether the RBA will deliver another rate hike in February. China changed its Covid-19 policy in December and the reopening of the world's second largest economy could provide further opportunities for Australian exports. Frosty relations between Australia and China appear to be thawing, which could provide additional stimulus to the Australian economy. Source: investing.com EUR/USD The EUR/USD exchange rate maintains a steady upward trend after reaching a 20-year low of 0.9535 in September. EUR/USD regained traction and turned positive during the day near 1.0750. Currently, the pair is trading just below this level (1.0743) European Central Bank (ECB) Governing Council member Mario Centeno said late Tuesday that the current process of interest rate hikes may be coming to an end. As for the inflation outlook, Centeno noted that inflation may encounter some resistance in January and February before starting to decline in March. Nevertheless, these comments had no noticeable impact on the euro's valuation. The hawkish narrative was reinforced by one of the more aggressive officials in Isabel Schnabel, while ECB's Villeroy spoke in today's speech, stating the need for additional rate hikes in the coming months. Given this, higher relative rate hikes could support the strength of the euro over the next few months. Read next: According To Analysts, Russia May Collapse Within A Decade, Guaranty Trust Bank Has Fined| FXMAG.COM GBP/USD GBP/USD extended its downward correction towards 1.2100 during European trading hours on Wednesday. Improving market sentiment seems to be helping GBP/USD to contain losses for now. The Bank of England (BoE) is projected to move slightly slower than other central banks (e.g. ECB), given that the rate hike cycle started much earlier than the ECB. Source: finance.yahoo.com, investing.com, dailyfx.com
Hang Seng Index Plummets -2% Amid Weak China Data, Short-Term Trend Intact

The Bank Of England (BoE) Is Coming To The End Of The Current Cycle Of Interest Rate Increases And Support The EUR/GBP Rate

TeleTrade Comments TeleTrade Comments 13.01.2023 09:53
EUR/GBP struggles to gain any meaningful traction and oscillates in a narrow band on Friday. A bleak outlook for the UK economy undermines the Sterling and continues to lend support. The recent hawkish ECB rhetoric underpins the Euro and supports prospects for further gains. The EUR/GBP cross consolidates its recent gains to the highest level since September 29 touched earlier this Friday and seesaws between tepid gains/minor losses through the early European session. The cross remains below the 0.8900 round-figure mark following the release of the UK macro data, though seems poised to prolong the uptrend witnessed since the beginning of this week. The UK Office for National Statistics reported that the economy expanded a modest 0.1% in November as compared to estimates for a 0.2% contraction. This, however, marked a notable slowdown from the 0.5% growth recorded in October. Moreover, weaker-than-expected UK industrial and manufacturing production data adds to the bleak outlook for the UK economy, which has been fueling speculations that the Bank of England (BoE) is nearing the end of the current rate-hiking cycle. This, in turn, could undermine the British Pound and lend some support to the EUR/GBP cross. The shared currency, on the other hand, continues to draw support from more hawkish signals from the European Central Bank (ECB). In fact, several ECB officials spoke this week and confirmed that they will have to raise interest rates further in the coming months to tame inflation. That said, a modest US Dollar recovery keeps a lid on the Euro and holds back traders from placing aggressive bullish bets around the EUR/GBP cross. Nevertheless, the aforementioned fundamental backdrop suggests that the path of least resistance for spot prices is to the upside. Read next: The New Disney Drama: Disney Is Opposing Activist-Investor Nelson Peltz| FXMAG.COM Even from a technical perspective, the overnight convincing breakout through the 0.8865-0.8875 supply zone supports prospects for a further near-term appreciating move. Some follow-through buying beyond the 0.8900 round figure will reaffirm the positive outlook and allow the EUR/GBP cross to reclaim the 0.9000 psychological mark.
Britain's Rishi Sunak And EU's Ursula Von Der Leyen Will Meet Today To Finalize The Northern Ireland Drama

Sign Of Progress In The Long-Running Dispute Over Post-Brexit Trade Rules

Jakub Novak Jakub Novak 13.01.2023 12:00
Both the European Union and the UK are preparing to enter intensive phase of negotiations to overcome the long-standing dispute over post-Brexit trade relations. They want to resolve the problematic points that prevent the negotiated agreement between the parties from functioning properly. Both sides hope to reach an agreement Representatives of both sides announced that the EU had agreed to use the current UK database to track goods moving from the UK to Northern Ireland. This is a sufficient sign of progress in the long-running dispute over post-Brexit trade rules. Other unresolved issues include disagreement over who should hear the resulting disputes as the UK is demanding that the European Court of Justice be completely stripped of its role in resolving Brexit disputes in the region. However, that is something the EU is clearly not prepared to do under any circumstances. Nevertheless, both sides hope to reach an agreement by the end of next month, ahead of the April 1998 anniversary of the Belfast Peace Accord. Apart from technical issues, any agreement would have to be approved by stakeholders in the UK's Conservative Party, as well as in Northern Ireland, where the Democratic Party is strongly opposed to the protocol. If a new Northern Ireland executive is not formed by January 19, new elections must be scheduled for April 13. The original Brexit deal The dispute stems from the original Brexit deal, when both sides agreed to avoid a land border on the island of Ireland. This arrangement effectively established a border in the Irish Sea and allowed Northern Ireland to remain within the bloc's single market and customs agreements. The UK has so far failed to honor some of these agreements. This kind of news is unlikely to affect the short-term market direction in any way, especially after the release of the latest US inflation data. However, a positive and final decision on the Brexit deal will help pound rally in the medium term. GBP/USD So far, attempts to get out of the horizontal channel in GBP/USD have been unsuccessful, so buyers need to stay above 1.2160 to maintain their advantage. Only the breakdown of 1.2225 will push the pair to 1.2300 and then bring it to 1.2350. Meanwhile, sellers taking control of 1.2160 will lead to a decline to 1.2090. EUR/USD In EUR/USD, the chance of further growth remains, however, buyers need to stay above 1.0810 as that will spur a rise in the pair to 1.0863 and 1.0895. On the other hand, a return of pressure around 1.0810 will push the quote down to 1.0765 and 1.0725, or even towards 1.0685   Relevance up to 08:00 2023-01-14 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/332227
Polish Inflation Declines in July, Paving the Way for September Rate Cut

The UK Economy Is Sputtering, GDP For November Outperformed With a 0.1% Gain

Kenny Fisher Kenny Fisher 13.01.2023 12:54
The British pound is slightly higher on Friday. GBP/USD is trading at 1.2234, up 0.24%. The pound has enjoyed a solid week, with gains of 1.2%. US inflation drops again US inflation continues to decline and slowed for a sixth straight month in December. Headline CPI fell to 6.5%, down from 7.1% and matching the estimate. The drop was driven by lower prices for gasoline as well as new and used vehicles. Core CPI showed a similar trend, dropping from 6.0% to 5.7%, which matched the forecast. Inflation is coming down slowly and remains much higher than the Fed’s 2% target, as any Fed member will be quick to point out. Still, it’s clear that inflation is on the right path as the impact of the Fed’s aggressive tightening cycle is being felt in the economy. The inflation data came in as expected, but the markets were nonetheless delighted and the US dollar sustained losses across the board on Thursday. The Fed was also pleased that inflation continues to downtrend. After the inflation release, Fed member Harkins said he supports a 25-basis point hike at the February meeting and expects rates to rise “a few more times this year”, with a 25-bp pace being appropriate. This sounds like an acknowledgment that inflation has peaked, although we won’t be hearing the “P” word from any Fed official, for fear of the markets going overboard and loosening conditions, which would complicate the fight against inflation. Other Fed members have come out in support of a 25-bp hike in February and the CME’s FedWatch has pegged the odds of a 25-bp increase at 93%. Barring some unforeseen event, a 25-bp hike looks like a done deal. In the UK, GDP for November outperformed, with a 0.1%, gain, above the forecast of -0.2% but weaker than the October read of 0.5%. The broader picture is not pretty, with GDP falling by -0.3% in the three months to November. The UK economy is sputtering and the Bank of England has its work cut out as it must continue raising rates, despite the weak economy, in order to curb high inflation. The BoE meets next on February 2nd.   GBP/USD Technical GBP/USD tested support at 1.2192 earlier in the day. The next support level is 1.2017 There is resistance at 1.2290 and 1.2366 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.  
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The UK Economy Is Still Under Immense Strain, The Bank Of Korea May Be The First To End Raising Rates

Craig Erlam Craig Erlam 13.01.2023 14:48
It’s been another lively week in financial markets and one in which investors have become increasingly hopeful that 2023 won’t be as bad as feared. In a way, the week started with the jobs report the Friday before as it was this that enabled the enthusiasm to build. The labour market has been a major barrier to optimism as the Fed was never going to pivot quickly unless there were signs in the labour market that slack was building and wages cooling. We’re now starting to see that. That optimism has been compounded by the first monthly inflation decline in two and a half years and further sharp annual declines in both the headline and core readings. While the final hurdle to 2% may be the most challenging, there’s no doubt we’re heading in the right direction and the threat of entrenched inflation has greatly receded. Now it’s over to corporate America to potentially spoil the party as the enthusiasm on inflation is not yet matched to the economic outlook. We haven’t seen mass layoffs yet but a number of firms, starting in the tech space but spreading further, have warned of large redundancies in the coming months. The fourth quarter earnings season may bring investors back down to earth with a bang. The start of the year has been fantastic but the rest of it will still be very challenging. More bleak Chinese trade data That’s very evident in the Chinese trade data, as it has in the data of other major trading nations in recent months. Imports and exports both slumped again, albeit to a slightly lesser degree than expected. The drop in imports reflects the Covid adjustment which is likely weighing on demand and the local economy. Exports is a global issue, with those to the US and EU sliding the most, reflecting the challenging economic environment. That may not improve in the near term but there will be a hope that it could in the second half of the year. Can UK avoid recession? The optimists may put to some of the recent data as an indication of some resilience in the economy but I’m not convinced. Take the UK, for example. It may not be in a technical recession after all, with spending around the World Cup enabling a better performance in November, delivering growth of 0.1% after a 0.5% gain in October. Aside from the fact that December could be worse as a result, or some of those gains could be revised out, those numbers don’t change the reality of the cost-of-living crisis and if accurate, it more likely reflects shifted spending patterns as opposed to a more willing consumer. A recession may be delayed but the economy is still under immense strain. The end of the tightening cycle The Bank of Korea may be among the first central banks to bring its tightening cycle to an end, after raising the Base Rate by 25 basis points before removing reference to the need to hike further. This was replaced with a commitment to judge whether rates will need to raise rates depending on multiple factors including incoming data. I think most others won’t be far behind, with in most cases the end coming at some point in the first quarter. All we have to contend with then is the economic consequences of the tightening. BoJ under pressure to abandon YCC And then there’s the anomaly out there. I’m not talking about the CBRT which I just can’t take seriously and that’s saying something at the moment. The Bank of Japan shocked the markets in December by widening its yield curve control buffer around 0% and it’s been paying the price ever since. Another unscheduled bond buying overnight occurred on the back of the 10-year JGB breaching 0.5%, as investors bail on Japanese debt on the belief that the YCC tool is being phased out and will be abandoned altogether before long. This makes the meeting next week all the more interesting. Revival underway? The risk rally over the last week has even lifted bitcoin out of its pit of despair. It goes without saying that it’s been a tough few months for cryptos but the lack of recent contagion in the space, or new revelations, and the risk rebound in broader markets has lifted it off its lows to trade at its highest level since the FTX scandal erupted. It’s trading at $19,000 and traders may harbour some hope of a move back above $20,000, a level once deemed a disturbing low but now potentially representing a sign of a revival. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ 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.
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

The Last Dovish Central Bank (Bank Of Japan) Finally Caved To Market Pressure

Franklin Templeton Franklin Templeton 14.01.2023 09:47
Latest thoughts on global central bank policy (continued) Growing more cautious In a period of extreme market volatility due to the political turmoil originated by the mini-budget announcement in September, later scaled down by the new government, the BoE had to hike by 125 bps over the past two meetings, bringing the policy rate to 3.5% in December. Although the last 50-bp move was anticipated, the Monetary Policy Committee (MPC) vote was a dovish surprise with two members voting for no change. The policy calibration will be set on a meeting-by-meeting approach with a particular focus on wage developments and the persistence of domestic price pressures they are likely causing. The burden of proof is thus on data and a faster-than-expected weakening in the labor market, which could lead to a slowdown in tightening going forward. Internal divisions within the MPC will deepen as the United Kingdom is expected to enter a recession. We now expect a terminal rate of 4.5% with one more 50-bp increase in February, although the policy path will be more data dependent than before, and  two more 25-bp hikes in March and May. After the delayed start due to abrupt moves in long dated gilts (UK government bonds) in the wake of the mini-budget, active quantitative tightening began in November without further complications. Close to peak rate After having slowed down its pace of hiking to 25 bps in November, Norges further hiked its policy rate to 2.75% in December. Despite data coming in on the hawkish side, the deceleration of tightening stemmed from a more careful calibration as some signs of transmission to the real economy became visible. Although the labor market remains tight and wage growth resilient, vacancies and labor shortages are decreasing, and house prices are falling faster than anticipated. The expected policy path was revised downward in the long end and now anticipates some cuts from 2024 onwards. As Norges Bank was the first central bank to embark on its hiking cycle (in September 2021), it will likely be the first to end it, but the hawkish indications from the Fed and ECB on the length of the cycle might add some pressure down the line. We still expect a peak rate of 3.25% by May, acknowledging downside risks to the call. Attentive calibration going forward With fewer meetings scheduled compared to regional and global peers, the Riksbank hiked by 175 bps over the last two meetings to a 2.5% repurchase (repo) rate. Going forward, a quickly deteriorating housing market and hawkish pressures from other central banks will require a delicate balancing act. Sweden’s interest-rate sensitivity is enhanced by a leveraged household sector, which will be hit by increasing interest expenses, limiting the upside for rates as house prices are already plummeting.  On the other hand, the clear hawkish ECB message will challenge the historical interest-rate differential premium between the two. We expect another 50-bp hike in February, while a further 25 bps in March  will depend on the most recent inflation and housing developments. The rate path uncertainty remains particularly high also due to two new board members, including the Governor Erik Thedéen. As the Riksbank previously announced, it will cease quantitative easing (QE) reinvestments this year and it expects the balance sheet to shrink relatively fast compared to other central banks. Slows pace of hiking, signals more tightening in the pipeline   The SNB slowed the pace of tightening at its December meeting with a 50-bp increase. With this third hike, the Bank has lifted its policy rate by a cumulative 175 bps since the tightening process began in June 2022—the fastest increase since 2000. The bank has also signaled that additional hikes cannot be ruled out just yet. While the SNB’s decision to hike in March will likely be guided by its evaluation of  the Swiss franc’s value in the coming months, we also note that the SNB’s inflation forecasts remain broadly unchanged since its September meeting. This suggests that not only does the central bank not believe that the policy rate is high enough to slow down inflation, but it also does not yet consider its policy to be restrictive given that inflation is likely to re-accelerate in late-2024. Therefore, while our base case is for a 25-bp hike, if the franc continues to hold well until the March meeting, the SNB could opt  to stay on hold. The SNB has also vowed to remain active on the foreign exchange market, with Chairman Thomas Jordan even confirming the SNB had sold foreign currency in recent months. Surprise, surprise!  In a surprise move, the BoJ tweaked its Yield Curve Control (YCC) framework at its December policy meeting, widening the band for 10-year Japanese government bonds (JGB) yields to move from 25 bps to 50 bps around its 0.0% target. While making it amply clear that this change was neither tightening nor  an exit from its accommodative policy, it does signal that even the last dovish central bank finally caved to market pressure. If the move’s sole intent was to smooth market conditions, we cannot rule out further tweaks. However, for a sustained pivot to a tightening stance, the central bank will need to continue to keep an eye on the inflation-growth mix. While growth is holding up well as the economy opens and supply chain pressures ease, inflation is becoming more entrenched. The core Consumer Price Index (CPI) in November touched 3.7%, the highest in four decades and well above the 2% target. We will continue to monitor the evolution of price pressures in Japan to predict a clear tightening move, including wage pressures and services inflation. For now, we remain more bullish on inflationary pressures in 2023 and a likely pivot in 2023.   Source: cbw-0123-u.pdf (widen.net)
UK Budget: Short-term positives to be met with medium-term caution

The UK Economy Expects A Slightly Fall In Inflation, Expected To Fall By 0.1%

Kamila Szypuła Kamila Szypuła 15.01.2023 18:56
UK economic data will be released next week. Wednesday will be a particularly special day, as CPI results will be released. Previous data The UK inflation rate fell in November 2022 from its previous record high in October. The measure of price growth across the UK economy fell from a 41-year high of 11.1% to 10.7%. This is a key indicator to understand how severe the ongoing cost of living crisis has become. This seems to confirm the predictions of the Bank of England and other economists that the inflation crisis has reached its peak. There are many factors that contribute to high product prices. Soaring energy costs are a key factor. Demand for oil and gas was higher as life returned to normal after Covid. At the same time, the war in Ukraine meant that fewer raw materials were available from Russia, putting further pressure on prices. The war also reduced the amount of grain available, driving up food prices. Source: investing.com Predictions For now, the focus shifts to the UK in the coming week. UK CPI will be released on Wednesday. They are expected to fall slightly again to 10.6%. The base indicator is estimated at 6.2% y/y, which means maintaining the previous level. Bank of England The Bank of England has a target of keeping inflation at 2%, but the current rate is more than five times higher. Its traditional response to rising inflation is to raise interest rates.When people have less money to spend, they buy fewer things, reducing the demand for goods and slowing down price increases. In December, the Bank raised interest rates for the ninth time in a row, lowering the main interest rate to 3.5%. Inflation and wages Lower inflation does not mean prices will go down. It just means they stop growing so fast.The Office for Budget Responsibility (OBR), which assesses the government's economic plans, predicts that inflation will fall to 3.75% by the final quarter of 2023, well below half of current levels. Prime Minister Rishi Sunak said halving inflation by the end of 2023 is one of five key commitments. But it is unclear whether he will announce new policies to achieve this, or if he is simply relying on earlier interventions.Wage increases for many people have not kept up with rising prices. This is despite wage growth at the fastest pace in more than 20 years. According to official data, average wages - excluding bonuses - increased by 6.1% in the three months to October 2022 compared to the same period in 2021. But when inflation is taken into account, the average wage actually fell. Economic situation The economy grew by 0.1%, supported by demand for services in the technology sector and despite households being squeezed by rising prices. The Office for National Statistics (ONS) said pubs and restaurants also boosted growth as people went out to watch football. While November's gross domestic product reading was much better than expected, the overall picture still suggests the economy is stagnating as food and energy bills soar. The Bank of England predicts that the UK has already entered its longest recession in history. Economic growth has slowed sharply in the country since October, partly due to strikes. Economists generally expect the country's economic performance to be among the worst in the developed world over the next two years.   Source: investing.com
The USD/JPY Price Reversed From The Lower Limit

USD/JPY Pair Is Trading Above 128 Again, The Testimony Of Bank Of England Governor Andrew Bailey May Have Affect On The Pound (GBP/USD)

Kamila Szypuła Kamila Szypuła 16.01.2023 12:52
The dollar started the week on the back foot to a seven-month low against a basket of major competitors in Asian trading, with the yen in particular, as investors increased bets that the Bank of Japan would further improve its yield control policy. USD/JPY Year-on-year PPI by the end of December amounted to 10.2%, above the previous forecasts of 9.5% and 9.7%. The month-on-month figure for December was 0.5%, above 0.3% expected and 0.8% earlier. The data revealed upward revisions. From a macro perspective, the soaring PPI is problematic for corporate Japan, with companies facing a dilemma related to rising production costs. The upcoming central bank meeting, expectations of an upward revision of the bank's inflation forecast, and the imminent announcement of a new BOJ chairman are also likely to fuel expectations for a policy change. A generally positive tone around the equity markets undermines the safe-haven Japanese Yen and lends some support to the USD/JPY pair. Now the pair is above 128.20. Source: investing.com Source: finance.yahoo.com AUD/USD The AUD/USD pair started the new week on a positive note and climbed to its highest level since mid-August during the Asian session, surpassing the 0.70 level. Unfortunately, the Australian pair failed to hold above 0.70 and is now trading above 0.6970. Iron ore, Australia's main export, fell slightly on Monday but remains well above its low of last October. Tomorrow, China's GDP data will be watched closely for clues on the health of the world's second-largest economy. Higher commodity prices and China's quick re-opening from Covid restrictions have also supported the currency, with Australia's main trading partner partially lifting restrictions on Australian coal exports after an unofficial ban in 2020. Markets are currently divided over whether the RBA will make another rate hike in February. Read next: McDonald's Will Be Replaced In Kazakhstan By The Russian Vkusno & Tochka| FXMAG.COM EUR/USD EUR/USD showed a decent gain after breaking the critical resistance of 1.0840 in the Asian session. Although the EUR/USD pair failed to hold above 1.0840 and then dropped significantly, it has recovered and is trading above 1.0830. The publication of the expected decline in the US consumer price index (CPI) for December increased the chances of further slowing down the pace of policy tightening by the Fed. It is worth noting that in December the Fed announced a less hawkish monetary policy. The Fed raised interest rates by 75 basis points (bp), but after observing a significant decrease in inflation, it may change the scope of the increase. In the euro area, the European Central Bank (ECB) wants to reach the final interest rate faster. ECB Governing Council member and French central bank governor Francois Villeroy de Galhau, quoted last week, said the central bank should aim to reach its final interest rate by the summer. GBP/USD GBP/USD halted the correction, recovering to 1.2200 in the European session on Monday. The US dollar continues to rebound despite betting on smaller rate hikes by the Fed. Furthermore, a bank holiday in the US market could also keep volatility high around the GBP/USD pair with limited liquidity. Attention is now focused on the testimony of Bank of England (BoE) Governor Andrew Bailey before the Treasury Select Committee of the UK Parliament. Source: investing.com, finance.yahoo.com
The Results Of The March Meeting Of The Bank Of Japan Are Rather Symbolic

Japan Is Looking To Boost Its 2023 Defence Budget, Copper Fell As Signs Of Weak Demand Persist

Saxo Bank Saxo Bank 17.01.2023 08:19
Summary:  US equity and bond markets were closed on Monday for a holiday. Mainland China stocks surged 1.6% as northbound flows reached over RMB15 billion and were in net buying for the 9th day in a row. Ryan Cohen is building a stake in Alibaba. USD saw a rebound but will likely be driven by the Japanese yen in the next few days as the Bank of Japan meeting kicks off today. While China’s Q4 GDP scheduled to release today was expected to slip to 1.6% Y/Y, more than half of Chinese provinces are setting 2023 GDP growth targets at above 5.5%. The rally in industrial metals paused amid profit-taking ahead of the Lunar New Year.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) Closed for U.S. holiday US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) Closed for U.S. holiday China’s CSI300 (03188:xhkg) gained 1.6%; Northbound net buying for the 9th day CSI300 rose 1.6%, led by brokerage, household appliances, pharmaceuticals, and semiconductor names. Northbound net buying through Stock Connect was RMB15.8 billion on Monday, the 9th day in a row of net buying for a total of around RMB80 billion. Coal miners, autos, and media stocks retraced. Hong Kong’s Hang Seng Index had a choppy session, rising initially to make a new recent high but failing to hold and sliding to losses in the afternoon before closing nearly flat. The news that the Chinese regulators allowed Didi to resume registration of new users failed to boost the sentiment for internet stocks. On the other hand, Meituan (03690:xhkg) slipped 3.3% as investors feared that the company’s ride-hailing business might lose market share as Didi returns. Hardware names, AAC (02018:xhkg) up 11.4%, Techtronic (00669:xhkg) up 6.2%, and Sunny Optical (02382:xhkg) up 4.0%, stood out as top performers. The automaker, Brilliance (01114:xhkg) tumbled 8.2% after announcing a special dividend of HKD0.96 per share from the disposal of its stake in Brilliance BMW below the street estimate of HK$1.5 per share. FX: USDJPY seeing a barrier at 129 USDJPY was seen fluctuating around 128.50 in the Asian morning session as Bank of Japan meeting kicks off with speculations of a further policy tweak continuing to build. GBPUSD also failed at another attempt on 1.2300 while AUDUSD returned below 0.7000 ahead of the key China activity data due today, despite January consumer confidence coming in higher at 84.3 from 80.3 previously. A break above 0.7000 could bring the tough resistance of 0.7125 in focus. NZDUSD testing a break above 0.6400. Crude oil (CLG3 & LCOH3) prices soften Crude oil prices eased on Monday with WTI falling below $79/barrel and Brent back towards $84/barrel as profit-taking emerged after the 8% rally last week. The World Economic Forum’s annual meeting began with warnings of global recession. This was aided by signs of stronger Russian supply. Seaborne crude exports soared by 30% to 3.8mb/d last week, the highest level since April. India was the biggest buyer, snapping up 33 times more crude than a year earlier. There is a lot to digest in the oil markets, with demand concerns and sanctions on Russian supply and risks of OPEC production cuts. Meanwhile, volatility in gas prices also underpins, suggesting crude oil prices can continue to see two-way price action in this quarter. US natural gas higher but European gas prices fall US natural gas settled back above $3.50, higher about 7% on Monday with risks of cold weather at the end of the month. European gas however fell sharply on a strong supply outlook. Dutch front month futures were down more than 15% as full stockpiles in China eased concerns of supply tightness in the LNG market. Chinese importers are trying to divert February and March shipments to Europe amid weak prices at home and high inventories. This is despite a cold snap expected this week. Iron ore selling eases; and respective equities hold record highs shaking off China’s accusations The key steel making ingredient, iron ore (SCOA) has fallen 5.3% from its high, including Tuesday’s 0.4% slide, which takes the price to $118.90. Still the iron ore price holds six months highs and is up 56% from its low. The pullback was triggered by China’s top economic planner, the NDRC accusing market participants of hoarding and price gouging after the iron ore price strongly rallied from October’s low in anticipation of demand picking up from China easing restrictions. Iron ore inventory levels are still lower than they were a year ago, which fundamentally supports iron ore price. And the technical indicators indicate the longer term rally could continue. The 50 day moving average is approaching the 200 day moving average. Historically when the 50DMA cross the 200 DMA buying has picked up. Also consider iron ore majors shares, BHP, Rio Tinto Fortescue are holding in record high territory, as investors remember China has made such accusations in the past of price gouging, and the iron ore price previously recovered over the medium to longer term. Brakes on Copper rally; Aluminium continues to surge higher A slight recovery in the US dollar on Monday paused the strong rally that has been seen in industrial metals so far this year. Copper fell as signs of weak demand persist. The Yangshan copper cathode premium over LME has declined to USD31.50/t, compared with the 10y average of USD72/t. Stockpiles of copper in Shanghai Futures Exchange warehouses are also higher. HG copper dipped back to $4.14 from highs of over $4.20 last week. Aluminium bucked the trend to push higher as inventories continue to fall. Expectations of stronger demand as China reopens also boosted sentiment. Rio Tinto (RIO) reported 4Q iron ore shipments of 87.3mt, +3.8% YoY vs est 86.2mt and still sees 2023 shipments of 320-335mt while mined copper output guidance raised to 650-710kt from 500-575kt previously.   What to consider? China GDP and activity data While the reopening of China from Covid containment is a highly positive development for the Chinese economy, the initial shockwave of infections could be significantly disruptive to economic activities in the near term. The median forecast of economists surveyed by Bloomberg on China’s Q4 GDP growth is 1.6% Y/Y decelerated from 3.9% Y/Y in Q3. Disruption in production activities resulting from infection-induced absence from work is expected to drag the growth of industrial production to 0.1% Y/Y in December from 2.2% in November. Retail sales are expected to shrink 9% Y/Y in December, decelerating further from -5.9% Y/Y in November as dining, retailing, and deliveries were slowed by inflection. Full-year fixed asset investment is expected to come at 5%, down from 5.3% in the first 11 months of the year. More than half of provinces and municipalities in China are targeting above 5.5% GDP growth for 2023 According to China’s Securities Daily, the 28 provinces and municipalities that have released their 2023 GDP targets set them at 6% on average. Hainan is the most aggressive with a 9.5% target. According to data from the Shanghai Securities News, more than half of the 31 provinces and municipalities that have released 2023 work reports, are setting their GDP growth targets above 5.5% for 2023. Economically important provinces of Zhejiang, Jiangsu, Guangdong, and Shandong set their targets at above 5%. BOE’s Bailey comments hint at relief from energy and inflation but worries about labor market The rally in cable has cooled off recently even as the decline in USD has continued. The pair is looking for direction and there may be some key catalysts to watch this week. Bank of England Governor Andrew Bailey spoke on Monday at the Treasury Select Committee hearing, saying that the risk premium on UK assets after the Truss government’s policy shock in September has gone. Still, confidence remains fragile, and risks also remain from China’s chaotic exit from Zero Covid, the continued fallout from the war in Ukraine and the shrinking of Britain’s labor force. Focus will now turn to economic data, with labor market data due today, CPI on Wednesday and retail sales on Friday. Any signs that labor market is cooling or CPI has topped out could mean the BOE could start to consider a slower pace of rate hikes going forward, and that could see the 200DMA in GBPUSD at 1.2000 get threatened. Japan’s military focus supports our optimistic view on the Defence equity basket Japan is looking to overhaul its security policy as geopolitical threats in the region and globally grow. PM Kishida’s G7 tour last week saw multiple deals not just with the US, but focus was also seen on enhancing military ties with Germany, Canada and France, including mutual troop access with the UK and upgrading of defence ties with Italy. The plan to build more nuclear reactors is also a step in that direction. Japan and India also held their first joint air drills as they step up military exercises with other countries amid concerns about China's assertiveness. Japan is looking to boost its 2023 defence budget substantially to a record 6.8 trillion yen, an increase of 20%. This further supports our optimistic view on our Defence equity theme basket as further deglobalization continues to suggest defence spending will remain a key focus. Activist investor Ryan Cohen built a stake in Alibaba According to the Wall Street Journal, Ryan Cohen has built a stake in Alibaba. Cohen is a Canadian investor who is know for investing and attracting a large crowd of retail investors to invest in meme-stocks such as GameStop. His buying into Alibaba may attract retail investors from North America to follow. 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: - China A shares see large Northbound buying, Ryan Cohen building a stake in Alibaba - 17 January 2023 | Saxo Group (home.saxo)
Wage agreement may be game-changing in a way. First meeting of the new BoJ Governor Ueda takes place on April 28th

The Market Is Convinced That Further Tightening Of The Policy Will Take Place At The Latest With The Appearance Of The New President Of The Bank Of Japan

Saxo Bank Saxo Bank 17.01.2023 09:18
Summary:  The US equity market is back on-line today after trading into the pivotal 4,000 area for the S&P 500 Index, as traders wonder whether the recent rally can extend on hopes for a soft landing scenario or whether the bear market will return on downbeat news from the incoming earnings season. But the big event risk of the week is the Bank of Japan meeting up tomorrow, as markets brace for possible further policy tweaks from the Bank of Japan.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities are back on-line today after closing Friday into the key resistance/pivot area around 4,000 in the S&P 500 index (the cash index closed 1 point shy of 4,000 on Friday, the future has traded well above that level), which is also just above the 200-day moving average and near other technical levels. Through next week’s heavy calendar of megacap earnings reports, traders will watch whether the market can clear this key resistance area and make a bid to surpass the December pivot highs near 4,100 for the cash index. The Nasdaq 100 index has more work to do, still trading almost 600 points below its 200-day moving average and the December pivot highs above 12,100. Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) The Hang Seng Index pulled back 1.2% and the CSI300 Index retreated by 0.4% as of writing despite China’s Q4 GDP, industrial production, retail sales, and fixed asset investment coming in better than feared. Q4 GDP grew 2.9% Y/Y (consensus 1.9%; Q3: 3.9%). Separately, according to data from the Shanghai Securities News, more than half of the 31 provinces and municipalities that have released 2023 work reports, are setting their GDP growth targets above 5.5% for 2023. Economically important provinces of Zhejiang, Jiangsu, Guangdong, and Shandong set their targets at above 5%. The recent rallies are looking exhausted facing profit-taking pressure. FX: JPY takes centre stage this week as BoJ to meet Wednesday The FX market is bracing for the Bank of Japan meeting up in Asia’s Wednesday session (see preview below) with JPY crosses generally backing up, led by USDJPY pulling all the way above 129.00 at one point overnight after its Friday low just below 127.50. Worth remembering that a BoJ surprise that brings JPY volatility is more of a broad JPY story than a USDJPY story and aggravated volatility that triggers a generalized risk off could support both the yen and the US dollar. Action has generally been sluggish elsewhere, with AUDNZD rolling over a bit and the US dollar finding a some support as the US is back online today. Crude oil (CLG3 & LCOH3) take stock following last week's 8% rally Crude oil trades steady near the top of its current range, after data showed China growing by more than expected in the fourth quarter. Overall, the market has seen a bid this month on China’s reopening optimism. Exports of deeply discounted Russian crude oil soared last week as it continues to circumvent sanctions Later today OPEC will publish its monthly oil market report with the IEA to follow on Wednesday. For now, further upside seems limited with China and parts of Asias about to go dark next week as the Lunar New Year holiday begins. EU gas slumps to 16-month low as supply keeps coming Natural gas prices in Europe slumped on Monday to levels not seen since 2021 as already elevated stock levels look set to get a boost from the resale of LNG previously destined for China. Just like Europe, China has seen mild winter weather and together with increased consumption of coal stockpiles of gas are elevated forcing buyers to send LNG cargoes to Europe instead. The Dutch TTF benchmark future (TTFMc1) closed at €55.5 on Monday, down more than 60% during the past month. EU gas stocks are currently 81.5% compared with a long term average around 62%. Copper rally pauses while aluminum continues higher A slight recovery in the dollar on Monday was all it took to trigger an overdue correction in copper which has surged higher during the past couple of weeks on raised expectations for a pickup in demand as China reopens. However, as we have warned recently, the recovery in demand is unlikely to be felt until well after the Lunar New Year holiday, and following a recent surge in speculative buying, the contract has increasingly been left exposed to profit taking, potentially taking it lower to test key support in the $4 area. Aluminium meanwhile hit its highest since June, up 9% on the month, and with visible inventories being at their lowest since 2002 Goldman Sachs warns about further strong gains in the months ahead. Gold consolidating with the dollar finding a bid Gold trades softer ahead of Wednesday’s BoJ meeting which may trigger an outsizes reaction in the dollar. Following weeks of mostly short covering speculators have now moved to mostly long accumulation, and it's during the early stages of this phase the market remains most vulnerable to a setback as recently established longs are less sticky than long held ones. Given the length gold has travelled in recent weeks a correction all the way back down to $1852 would not alter the overall bullish technical picture. US Treasury yields rebounded slightly Friday (TLT:xnas, IEF:xnas, SHY:xnas) After trading near the cycle lows of late last year into 3.40% for the 10-year benchmark on benign inflation data last week and a series of very strong auctions for especially longer-dated US Treasuries, the 10-year yield rebounded toward 3.50% on Friday and traded slightly higher overnight after coming back from the long holiday weekend. The next US macro data point of note is perhaps tomorrow’s December Retail Sales release. What is going on? Nationwide strike in France on 19 January France is going into a nationwide strike on 19 January as trade unions are protesting the government’s plan to push back the minimum retirement age to 64 and to accelerate a previous reform, called the Touraine reform, which provides for the extension of the required contribution period to 43 years by 2035. Before Covid, the government also tried to implement a pension reform which caused a massive wave of demonstrations across the countries – there was basically almost no public transport in main cities for weeks. This is still uncertain how long the strike will last. But the trade unions are planning to keep fighting as long as needed. Expect a blockage in several sectors (refineries, metro, rail transport, education). At the moment, we don’t think the strike will have a noticeable negative impact on GDP growth this quarter. However, should the strike go beyond Thursday, this could reduce GDP growth by 0.1 or maximum 0.2 point in Q1, in our view. BOE’s Bailey comments hint at relief from energy and inflation but worries about labour market The rally in cable has cooled off recently even as the decline in USD has continued. The pair is looking for direction and there may be some key catalysts to watch this week. Bank of England Governor Andrew Bailey spoke on Monday at the Treasury Select Committee hearing, saying that the risk premium on UK assets after the Truss government’s policy shock in September has gone. Still, confidence remains fragile, and risks also remain from China’s chaotic exit from Zero Covid, the continued fallout from the war in Ukraine and the shrinking of Britain’s labour force. Focus will now turn to economic data, with labour market data due today, CPI on Wednesday and retail sales on Friday. Any signs that labour market is cooling or that CPI has topped out could mean the BOE could start to consider a slower pace of rate hikes going forward, and that could see the 200DMA in GBPUSD at 1.2000 get threatened. China’s population officially shrinking Official Chinese data released today showed an 850,000 drop in the Chinese population to 1.41 billion at the end of last year, the first official population drop since 1961. Births numbered 9.56 million in 2022, down just over a million from the prior year and at the lowest level since 1950, while deaths totalled 10.41 million. UK December claims data improves, November earnings data rises again The UK reported November Employment and earnings data today, with the Unemployment Rate steady for the month at 3.7%, while Employment Change rose 27k vs. 0k expected. Average Weekly Earnings rose more sharply than expected at 6.4% YoY ex Bonus vs. 6.3% expected and 6.1% in Oct. Alsot out this morning were December Jobless Claims data, which rose 19.7k vs. 16.1k in November (revised down from 30.5k, while the Payrolled Employees Monthly Change rose +28k vs. +60k expected and the November number was revised down to +70k from +107k. What are we watching next? Bank of Japan meeting tomorrow shaping up as major event risk The JPY has traded cautiously this week, ahead of the Bank of Japan meeting that has traders bracing for new policy tweaks after the Bank of Japan surprised in December with a widening of its trading “band” (de facto a “cap”) to 0.50% from 0.25%. The market has violated the band several times in recent days, requiring a heroic scale of intervention from the BoJ to enforce it. In question is whether the BoJ is willing to signal a further widening of the band and even an end to the last negative policy rate in the world of –0.10% before Governor Kuroda exits the scene in April after 10 years at the helm of the BoJ. Even if the BoJ fails to unveil new measures, the market may remain convinced that a further tightening shift is slowly under way and will arrive at latest with the arrival of a new BoJ Governor. The market is pricing a policy rate of more than +0.25% by the end of this year. Earnings to watch The Q4 earnings season continues this week, with a relatively light schedule before next week’s mother lode of mega-cap earnings reports. The key uncertainty is credit quality in 2023 as it is linked to the degree of a recession, or even whether there will be a recession at all in the US economy. Overall, the Q4 earnings season is likely going to see an extension of value and tangible companies performing better than intangible-driven companies. The two large US investment banks Morgan Stanley and Goldman Sachs are up today, not particularly good bellwethers for the US economy. On the other hand, Procter & Gamble, the consumer products giant, releases its earnings on Thursday and may offer interesting colour on the US consumer. The fast-growing French biotech lab equipment maker Sartorius Stedim reports today as well. Today: Sartorius Stedim, Morgan Stanley, Goldman Sachs, Interactive Brokers Wednesday: EQT, Charles Schwab, PNC Financial Services, Kinder Morgan Thursday: Procter & Gamble, Netflix Friday: Investor, Sandvik, Ericsson, Schlumberger Economic calendar highlights for today (times GMT) During the day: OPEC’s Monthly Oil Market Report 1000 – Germany Jan. ZEW Survey 1315 – Canada Dec. Housing Starts 1330 – US Jan. Empire Manufacturing 1330 – Canada Dec. CPI 2000 – New Zealand Dec. REINZ House Sales   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 17, 2023 | Saxo Group (home.saxo)
Saxo Bank Podcast: The Bank Of Japan Meeting And More

Rates Daily: The Bank Of Japan Is Increasingly Expected To Lift The 10Y Japanese Government Bond (JGB) Yield Target Once More

ING Economics ING Economics 17.01.2023 09:56
Bond markets face a number of bearish risks today, which have to be weighed against the underlying bullish tone. Look out for a strong ZEW, bond supply, and pre-BoJ positioning Source: Shutterstock Bearish risks for a strong bond market Germany’s ZEW survey is the first potential banana skin in the European morning. As a survey of investor confidence, calling its direction is relatively straightforward: it should improve. The warmer-than-usual winter weather, reductions in gas prices, and surprising resilience of hard economic data all point in that direction. This is particularly true when compared to the gloom prevailing in the last months of 2022. Bond supply so far this year has been well absorbed Bond supply so far this year has been well absorbed by investors betting on declining inflation, and despite record-breaking volumes in the first two weeks of January (see chart below). However, occasional sovereign and corporate deals, especially the unswapped types, have tended to lead to temporary bond market weakness. Usually, these seem to have been bought into, like the morning sell-off in yesterday’s session, but there is no guarantee that investors would do so today, especially given the event risks later in the week. High bond supply so far this year hasn't caused yields to rise Source: Bond Radar, ING Last chance to position for higher JGB yields This is particularly true due to the proximity of the January Bank of Japan meeting. Today is the last European and US trading session before a meeting where the Bank is increasingly expected to lift the 10Y Japanese Government Bond (JGB) yield target once more. Back in December, when that cap was lifted from 0.25% to 0.50%, 10Y Bund and Treasuries rose by roughly 50% of the sell-off in JGBs. Assuming a 25bp sell-off, one would expect European and US yields to jump by 13bp. Consensus is increasingly shifting to a higher yen With consensus increasingly shifting to higher yen rates - see for example 10Y swap rates hovering around 1% - this means the risk around the meeting is likely two-way, however. Shorting 10Y JGBs comes with a hefty carry and roll cost so a delay in shifting the cap higher may well result in short-covering. Note also that the steady selling of US and European bonds by Japanese investors in 2022 should reduce the foreign impact of higher JGB yields. Japanese investors have sold foreign bonds over the whole of 2022 Source: Japanese Ministry of Finance, ING Economic optimism isn't always good for bonds All this has to be weighed against the underlying strength in bond (and other) markets evident since the start of the year (in fact since late October if one excludes the late December sell-off). At its heart, the ‘everything rally’ is driven by an improvement in macro conditions, especially by the belief that inflation is getting under control. There is no obvious catalyst for a change of tone on today’s calendar but note that investors could at any point wake up to the potentially inflationary consequences of some of the drivers of their economic optimism, for instance better European growth, resilient job markets, or China reopening. Two of these risks were highlighted by Bank of England Governor Andrew Bailey yesterday. Today's events and market view Germany’s ZEW survey should be a good gauge of how much investor sentiment has improved. Based on the market reaction to lower gas prices and inflation, we would guess a lot. In the US session, the Empire Manufacturing Survey is the main release. Germany is scheduled to sell €5bn 5Y bonds. Greece has mandated banks for the sale of a new 10Y benchmark, John Williams, of the Fed, is the only central banker listed on today’s calendar but the World Economic Forum, known informally as Davos after the Swiss mountain resort, is sure to produce a flurry of quotes from economic leaders. 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
The UK Economy Looks Worse Than The Rest Of The G7 Countries

The UK Jobs Market Is Still Holding Up Fairly Well

ING Economics ING Economics 17.01.2023 10:10
While the jobs market is a lagging indicator of economic strength, the resilience of both vacancy and redundancy numbers suggest the impact of the forthcoming recession on the jobs market will be more modest than in some past recessions The UK jobs market is holding up despite the looming recession   Despite all the challenges facing the UK economy, the jobs market is still holding up fairly well. The unemployment rate is still flirting with all-time lows, while so far there are only moderate signs of deterioration in the more timely indicators. Unfilled vacancies are trending lower – and you’d expect that to continue based on another measure of online adverts – though neither measure is below pre-Covid norms. The official redundancy rate is edging higher but again is now essentially in line with past averages. The redundancy rate is edging higher, but so far is only back to pre-Covid norms Source: Macrobond   As with all jobs data, we need to remember they are lagging indicators, and indeed the redundancy rate took more than a year to go from trough to peak during the financial crisis. Nevertheless, the UK jobs market is entering the forthcoming recession from an unusually tight starting point. While Bank of England survey data shows the proportion of firms finding it ‘much harder’ to hire has begun to tumble, the root causes of worker shortages look like they will prove long-lasting. The number of people economically inactive – that are neither employed nor actively seeking a role – is no longer increasing, and the worrying upward trend in long-term sickness levels appears to have tentatively reversed. But to the extent that this vast increase in illness has been amplified by long waiting lists for treatments and delays in urgent care, the situation is, if anything, getting worse. Lower levels of inward migration from the EU also appear to have added to hiring struggles. Inactivity levels have stabilised over the past few readings Source: Macrobond, ING calculations   We therefore suspect firms will be more inclined than usual to ‘hoard’ labour, and avoid layoffs where possible to insure against potential rehiring problems when conditions improve. While we suspect the unemployment rate will rise, we think it will be more modest than during some past recessions. The clear risk here is that, with 70% of SME debt on floating interest rates and the effective rate on this lending already dramatically higher, firms are forced to make material cutbacks to their workforce regardless. A lot could hinge on whether energy prices begin to rise again later this year. For the time being though, the jobs market is the biggest argument in favour of another 50 basis-point rate hike by the Bank of England. Indeed, wage growth came in a touch higher than expected in the latest figures, and the bank's own survey data continues to point to more acute pay pressures come through. In reality, though, the February meeting rests on a knife edge, and there's a clear chance the Bank decides to mirror the Fed and slow the pace of rate hikes further now Bank Rate is well into restrictive territory. Tomorrow’s inflation data could be key. Read this article on THINK TagsUK jobs 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 Results Of The March Meeting Of The Bank Of Japan Are Rather Symbolic

The USD/JPY Pair Can Fall Sharply Ahead Of The Results Of The BOJ Meeting

InstaForex Analysis InstaForex Analysis 17.01.2023 10:59
USD/JPY traders are feeling nervous. The Bank of Japan will sum up the results of its 2-day monetary policy meeting on Wednesday. Now any surprise from the BOJ could have a significant effect. The culminating event of the week in the currency market should be the Japanese central bank's monetary policy meeting, which kicked off on Tuesday. With inflationary pressures intensifying in Japan and chaos reigning in the local bond market, many investors believe that the BOJ could announce a major policy shift this week, like it did last month. Recall that the BOJ tweaked its Yield Curve Control policy (YCC) in December, causing the yen to rise sharply against the dollar. Since then the pair has fallen over 6% and its future prospects are not bright at all. Investors clearly see that the BOJ is in a difficult predicament. Its decision to widen its tolerance range for 10-year bond yields was dictated by a desire to improve market functioning, as the bond market faced a liquidity problem. But the measure has made the situation even worse. By changing the YCC, the BOJ stoked the flames of market speculation about its possible surrender. This in turn provoked a massive sell-off in 10-year Japanese Government Bonds (JGB), which pushed their yields up. Since last week, the central bank has been trying its best to keep the index within the new limits by conducting daily emergency operations to buy JGBs. However the yield of 10-year JGBs is still growing above the set ceiling. That's what leads investors to think that the BOJ will be forced to further increase the permissible range of long-term bond yield fluctuations from its 0% target at the January meeting. If the BOJ makes such a decision again, it will serve as a great catalyst for the yen. In the short term, the USD/JPY risks falling below its 7-month low at 127.22. An even greater threat to the pair is the development of a radical scenario, which implies a complete abandonment of the BOJ's YCC policy. If the central bank decides to burn all bridges, USD/JPY will go into a prolonged free-fall. "The 10-year JGB yield could rise as high as 1% if the BOJ abandons yield curve control this week," according to estimates by Daiwa Securities strategist Eiichiro Tani. This negatively affects the movement of the pair. According to analysts at Goldman Sachs, the next YCC correction will help the yen strengthen against the dollar by more than 3%, to the level of 125, and an abandonment of the YCC will open a fast way to even higher levels for the Japanese currency. It's worth noting that US bank analysts don't even consider the latter scenario. Most of Goldman Sachs' analysts expect the BOJ to keep YCC in place with possible further tweaks to improve its sustainability. Financial analyst Barbara Rockefeller is of the same opinion. She believes that we should not expect the BOJ to take impulsive actions in the form of abandoning the YCC or a sharp change in the monetary course. "Allowing a giant move from 25 bp to 1% in under a month is too wild for any central bank, let alone the staid BoJ. So, abandonment is almost certainly out of the question, but that doesn't mean the market will not be expecting it and testing prices, forcing the bank to buy more bonds. We expect a whole lot of backroom arm twisting," Rockefeller said. According to ING economists, the USD/JPY pair can fall sharply ahead of the results of the BOJ meeting. They suspect USD/JPY can trade down to 126.50 before Wednesday. As for the dynamics of the dollar-yen asset after summing up the results of the BOJ meeting, everything depends on the market's reaction to the rhetoric of the Japanese officials. If it is considered hawkish, the quote will fall, as I mentioned before. If the central bank stays true to its dovish principles, in the short-term, the pair may show a steady recovery from the recent lows. By the way, this scenario is followed by all economists recently surveyed by Bloomberg. Experts expect the BOJ to refrain from any changes at its January meeting. But the probability they are wrong is quite high, because last month none of the 47 economists surveyed by Bloomberg was able to predict YCC changes   Relevance up to 08:00 2023-01-20 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. Read more: https://www.instaforex.eu/forex_analysis/332473
Bestway Might Have Larger Designs On The UK's Second Biggest Supermarket

In UK Employers Are Starting To Lay Off Workers, Wages Are Also Reported To Have Fallen

Jakub Novak Jakub Novak 17.01.2023 11:06
Pound rallied on Monday after news emerged that average wages in the UK continued to rise at an almost unprecedented rate. However, this puts further pressure on the Bank of England in terms of interest rates, forcing it to consider another increase at its meeting scheduled for next month. Reportedly, average household income excluding bonuses was 6.4% higher in the last three months to November 2022, which is the biggest increase since records began in 2001, not counting the peak of the coronavirus pandemic. This indicates that the labor market remains too challenging for the central bank, especially since inflation could hit double-digits if wages continue to rise at the current rate.  Labor shortages in the UK pushed unemployment to fall to a record low In a bid to prevent an inflationary spiral, the central bank raised rates from 0.1% to 3.5% late last year and is expected to announce a further 50 basis point increase as early as February. However, labor shortages in the UK pushed unemployment to fall to a record low below 4%, giving workers unprecedented market power. The pressure was most acute in the private sector, where wages rose by 7.2%. In the public sector, growth was only 3.3%, well below the current inflation rate of 10.7%. The decline in living standards has triggered a wave of strikes in recent months as workers insist on wage increases to offset inflation. Wages are also reported to have fallen by 2.6% compared to last year instead of rising at the end of December. The Bank of England's latest forecast says the unemployment rate will exceed 6% According to reports, the number of new vacancies fell by 75,000 to 1.16 million in December. This suggests that employers are starting to lay off workers as the economic situation worsens. The rate has jumped to 3.4% per thousand employees in the three months to November, up 1.1% from the previous three-month period. The Bank of England's latest forecast says the unemployment rate will exceed 6% over the next three years. GBP/USD Going back to GBP/USD, attempts to get out of the horizontal channel have been unsuccessful. Now, buyers need to stay above 1.2160 in order to maintain their advantage. A breakdown of 1.2225 will push the pair to 1.2300 and then towards 1.2350. Meanwhile, sellers taking control of 1.2160 will lead to a decline to 1.2090. EUR/USD As for EUR/USD, there is a chance of further growth, but buyers have to hold above 1.0810. That will spur the pair to rise to 1.0840 and 1.0885. Meanwhile, a decline to 1.0810 will put pressure on the pair, bringing it towards 1.0755 and 1.0720, or possibly to 1.0685   Relevance up to 08:00 2023-01-18 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/332485
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Today's UK Data Should Ensure The Bank Of England Continues Tightening

Craig Erlam Craig Erlam 17.01.2023 16:51
Equity markets are a little softer on Tuesday as investors await more earnings from the US and closely monitor events in Davos. Stocks have had a strong start to the year on the belief that interest rates may not go as high as feared and even move into reverse later in the year. While that is looking plausible in the US, it may not be the case in Europe where policymakers are seemingly still some way from considering the tightening cycle complete. The ECB, for example, was very late to the party and could be at least three 50 basis point hikes away from the terminal rate which we could see around the middle of the year. Inflation in the euro area declined last month but core inflation is still on the rise which is why we’re continuing to see pushback to the idea of slower hikes and cuts this year. That narrative may change once the data moves in a more positive direction. Pressure mounting on BoE In the UK, the data remains quite troubling. Labour market figures released today showed earnings growth accelerating to 6.4%, meaning while we’re still seeing negative changes in real terms, as far as the central bank will be concerned they’re still far too high to be consistent with inflation returning to target. And the longer it goes on, the more stubborn inflation will become. That should ensure the BoE continues tightening by 50 basis points next month, at which point we’ll get fresh economic projections. Encouraging figures from China The data from China overnight was broadly positive even if it confirmed one of the slowest annual growth rates in decades. The economy ended on a stronger note despite the surge in Covid infections as the leadership suddenly pivoted from a zero-tolerance approach to allowing it to run free. That was expected to take a heavy toll on the economy initially but the figures for December from retail sales to industrial production and fixed asset investment suggest a much more modest hit. That may offer hope that the opening months of the new year will not be as bad as initially feared. Bouncing back Bitcoin seems to have been one of the big winners from the new year risk rally, after struggling for much support in recent months as a result of the FTX collapse. Perhaps it’s making up for lost time as traders look to capitalize on such heavily discounted levels compared with the 2021 peak. That said, it will take a lot more than a risk revival to get traders fully back on board. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ 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
There Are No Obvious Reversal Of GBP/USD Pair Signs Yet

The British Pound (GBP) Is Still Increasing

Paolo Greco Paolo Greco 18.01.2023 08:34
Despite the lack of any compelling explanations, the GBP/USD currency pair once again displayed an upward trend on Tuesday. In the UK, data on unemployment and earnings were released early in the morning. These numbers cannot be characterized as "strong" or "failed," but it is very tough to call them either. Simply put, the unemployment rate remained at 3.7% in November, while earnings climbed by 6.4%, which was basically in line with expectations. Remember that the UK has been experiencing a severe cost of living problem for several months. The country's population's salaries are devalued by the fast-falling value of the pound in 2022 and a strong rise in inflation. Naturally, the least socially protected groups experience the most severe pound devaluation. Simply described as low-paid, everyday laborers. They can tell that the value of the pound has decreased by 10%. 10% inflation is a lot to them. Therefore, it is difficult to describe the 6.4% growth in earnings during a time of inflation that is higher than 10%. However, traders hurried to repurchase the pound after discovering a teaspoon of honey in a barrel of tar. They are completely correct from a technical standpoint because there isn't even one sell signal at the moment. The pair is still above the moving average line on the 4-hour TF, and both linear regression channels point upward. The price is above all of the Ichimoku indicator's lines on the 24-hour TF. Therefore, anything is possible based on fundamental research, but the pound will gain in value if the market buys more of it. Since many currently anticipate that the Bank of England will reduce the "monetary pressure" on the economy, the pound can, of course, halt this process at any point. Simply put, the BA may again pause the pace of tightening monetary policy in February to prevent a serious recession. If so, one of the strongest pillars of the pound's support may be lost. The Bank of England's governor is overjoyed with confidence. On Tuesday, Andrew Bailey testified before the House of Commons Treasury Committee. It had been a while since he had spoken in public because the head of BA rarely does so. He expressed his optimism for a significant drop in inflation in 2023 as a result of reducing energy prices in his address. He thinks that the military confrontation between Ukraine and Russia in 2022 caused the sharp rise in energy prices, but gas prices have dropped by almost four times since then, suggesting that inflation can be slowed down even without the regulator's help. Additionally, Mr. Bailey informed the Committee that the financial markets had calmed following the Liz Truss board issue, which saw a dramatic devaluation of the pound and an increase in government bond yields. The BA chairman added, "However, it will take some time to convince people that the worst is over." The markets continue to anticipate a further increase in rates in early February despite Mr. Bailey's silence on the subject. Since the anticipation of lower inflation naturally entails that the regulator may slow down the pace of tightening monetary policy more, we think Bailey's comments can be viewed as a "dovish" element. And give it a total break with the possibility of several months. The pound is still increasing, though. The result is the following image: The pound is growing regardless of how quickly or slowly rates are rising; rates may even cease rising altogether. Therefore, we continue to think that the more crucial element is the slowing of the US rate rise. Based on this reason, the British pound may continue to increase for some time, but its prospects may suffer if the rate is lowered to 0.25%. In any case, you shouldn't anticipate a significant decline in the value of the pound until the price is locked below the moving average. When that occurs, it will be possible to guess whether this is just a little reversal or the start of a new, lengthy decline in the value of the pound. Over the previous five trading days, the GBP/USD pair has averaged 117 points of volatility. This figure is "high" for the dollar/pound exchange rate. Therefore, on January 18, we anticipate movement that is contained inside the channel and is constrained by the levels of 1.2151 and 1.2385. A new bout of corrective action will begin when the Heiken Ashi indicator reverses direction and moves back down. Nearest levels of support S1 – 1.2207 S2 – 1.2146 S3 – 1.2085 Nearest levels of resistance R1 – 1.2268 R2 – 1.2329 Trading Suggestions: In the 4-hour timeframe, the GBP/USD pair is attempting to advance further. Therefore, until the Heiken Ashi indicator swings down, it is still possible to hold long positions with goals of 1.2329 and 1.2385. If the price is set below the moving average, short trades can be opened with goals of 1.2085 and 1.2024. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction. Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones   Relevance up to 05:00 2023-01-19 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/332574
Czech National Bank Prepares for Possible Rate Cut in November

The Latest UK CPI Figure Is Below October’s 11.1% Peak

ING Economics ING Economics 18.01.2023 09:46
Headline inflation has peaked but pressure from the service sector continues to build. That's likely to tip the balance for Bank of England hawks in favour of one final 50 basis point hike at the February meeting   The good news, at least, is that it seems like UK headline inflation is slowing. At 10.5% in December, the latest CPI figure is below October’s 11.1% peak. We expect this headline measure to stay roughly where it is for the next couple of months before showing more dramatic signs of easing as we approach Easter, which is when electricity/gas base effects begin to become more favourable. Last year’s near-50% increase in bills won’t be matched, and if anything it looks like the Treasury will either need to lower unit prices for consumers later this year, or scrap April’s planned increase altogether, given the recent fall in wholesale gas prices. On current policy, we expect headline inflation to fall back towards 6% by summer and to 3.5-4% by year-end. UK services inflation has risen further 'Core goods' excludes food, energy and tobacco. 'Core services' excludes air fares, package holidays and education Source: Macrobond, ING calculations   The bad news, at least as far as the Bank of England is concerned, is that its favoured ‘core services’ measure of inflation has jumped, even as goods inflation slows dramatically. At 6.8%, core services CPI (which excludes volatile components like airfares and package holidays) is materially higher than the Bank had been forecasting back in November, and reflects ongoing pressure from both wages and energy bills on service sector costs. While we suspect this is nearing a peak, it provides further ammunition for the BoE’s hawks to push for one final 50 basis point rate hike at the February meeting, putting the peak at 4% for Bank Rate (or perhaps 4.25% if the Bank adds one further 25bp hike in March). The UK's somewhat unique combination of structural worker shortages, and therefore potential for persistently higher wage growth, as well as its exposure to Europe's energy crisis, suggests the Bank of England will be less quick to cut rates than in the US, where we expect cuts later this year.  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  
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Yields On JGB's Fell Back Sharply, Markets May Expect To See Another 50bps Rate Hike From The Bank Of England

Michael Hewson Michael Hewson 18.01.2023 11:34
Yesterday saw another positive session for European markets, although the FTSE100 underperformed despite hitting a new 4 year high. US markets returned from their long weekend break with a choppy and somewhat mixed session, with the Dow and S&P500 struggling while the Nasdaq 100 finished slightly higher, as various earnings announcements painted a mixed picture of the US economy. Bond yields also chopped between negative and positive territory as yields ended the day little changed. BoJ tweaks bond program Asia markets have spent the day still digesting yesterday's economic numbers from China, as well as today's Bank of Japan rate decision. The Japanese yen has seen some decent gains over the past few weeks, with those gains accelerating after the Bank of Japan caught markets by surprise last month by widening the band of its yield curve control to between -0.5% and +0.5%, from +/-0.25%. It would appear that with current governor Kuroda set to leave in April that the BoJ wanted to start seeding the ground for a possible shift in the coming months, however as with everything related to monetary policy markets have already started to front run any possible change.. The 10-year JGB has consistently tested above the upper bound of the 0.5% in the past few days testing the central banks resolve in the process. The central bank has been consistent in maintaining that they aren't in any rush to make major adjustments to its yield curve control policy yet, however events appear to have overtaken them, as volatility has increased. The Bank of Japan's challenge today has been to try and reset market expectations, as well as try to avoid a further rapid appreciation in the yen, in the same way they wanted to manage the declines in their currency over the past few months. Suffice it to say they appear to have succeeded, pushing back on the recent moves that have pushed the yen higher. This morning the Bank of Japan kept monetary policy unchanged, which wasn't a surprise, but they also announced they would continue large scale bond buying and be more flexible about duration in order to keep policy settings loose. Yields on JGB's fell back sharply from the 0.5% upper bound in the wake of the announcement. Today's pushback or reset whatever you want to call it, shouldn't have been too much of a surprise given recent yen moves. Japanese central bank officials have always been particularly sensitive to sharp short term moves in either direction where the yen is concerned in the same way they were about recent yen weakness. The direction of the move is less of a concern rather than the speed of it, and in slowing the yen move lower the BoJ is merely resetting market expectations about future policy change, with the US dollar rising back above 130.00 UK inflation set to slip back in December After the peak of 11.1% in October, headline CPI fell back to 10.7% in November in a welcome sign that we could well be past the peak, when it comes to price rises.Recent falls in oil and gas prices are also likely to start to feed into the underlying numbers, while PPI inflation has also been falling in recent months, though given problems with the PPI calculations we haven't had clear visibility on that in the past couple of months, as the ONS continues to review how that is calculated. Today's December inflation numbers are expected to show that inflationary pressures continue to subside, but are only expected to fall modestly to 10.5%, with core prices also still high at 6.2%. We already know that food price inflation is trending in the mid-teens, which means that headline CPI is expected to remain above 10% for a while. It's also important to remember that RPI is even higher. With average wage growth trending at 6.4% and unemployment still low, the gap between wages and inflation is still quite wide, although it is narrowing from both directions. This probably means we can expect to see another 50bps rate hike from the Bank of England when it meets in just over 2 weeks' time, although any decision is unlikely to be unanimous, given the 3-way split last time. Headline CPI in the EU is also expected to be confirmed at 9.2% in December with core prices at 5.2%. EUR/USD – has struggled to overcome the 1.0870 area, prompting a fall to 1.0780. Could see a deeper fall towards 1.0720. The key resistance sits at 1.0950 which is a 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. GBP/USD – ran out of steam at 1.2300 yesterday, with the risk that the move above 1.2000 level is running out of steam, despite the decent rebound from the 1.1830/35 area. The next big resistance lies at the 1.2350 area. We need to hold above the 1.2000 area for further gains to unfold. EUR/GBP – the failure at the 3-month highs at 0.8895 this week has seen a drift back towards last week's low at 0.8770/80. Below 0.8770/80 retargets the 0.8720 area. USD/JPY – has recovered off 127.20 area this week, just shy of the 126.50 area which is the 50% retracement of the up move from 101.18 to the highs at 151.95. Has squeezed back above the 130.00 area and could extend back through 132.60 on towards 134.80 without undermining the downward momentum. FTSE100 is expected to open 10 points lower at 7,841 DAX is expected to open 32 points higher at 15,219 CAC40 is expected to open 11 points higher at 7,088 Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Rising U.S. Treasury Bond Yields Have Helped The USD/JPY Bulls

The Japanese Yen (JPY) Weakened, The Aussie Pair Is Trading Above 0.70$

Kamila Szypuła Kamila Szypuła 18.01.2023 13:33
Today the US releases data on retail sales and PMI indices, which are supposed to show support for inflation fading. USD/JPY At the two-day meeting, the BOJ unanimously maintained its YCC targets, set at -0.1% for short-term interest rates and around 0% for 10-year yields. The Japanese yen weakened by more than 2 percent in the wake of the Bank of Japan's monetary policy announcement in January. If the losses continue, this will be the best one-day performance for the USD/JPY pair. To understand why the yen weakened so quickly here, one has to go back to what happened in December. Last month, the central bank shocked the markets by widening the yield curve band around 0% to plus/minus 50 basis points. It was from +/- 25 bp. The central bank also increased asset purchases to 9 trillion yen each month from 7.3 trillion previously. The markets saw this as a move by the central bank towards normalizing policy. Therefore, investors were strongly focused on further corrections today. When this did not happen, these bets were voided. The USD/JPY pair strengthened and traded above 131. After this recovery, the pair began to fall to a level around 129.10. AUD/USD The Australian and New Zealand dollars gained on Wednesday on the retreating yen. The Australian jumped 2.0% to 91.36 yen. For now, the BJ's pledge to keep yields low has provided relief to global bond markets and the Australian 10-year yield fell 8 basis points to 3.57%. The main event of the week in the country will be data from the Australian labor market, which will be released on Thursday. The Austrailan pair (AUD/USD) has broken through the 0.70 level and is trading at 0.7020 at the time of writing Read next: Un Secretary General Antonio Guterres Encouraged The Transition To Green Energy At The World Economic Forum In Davos, The Chinese Economy May Surprise You Positively| FXMAG.COM GBP/USD The British pound received support this morning after mixed inflation data. UK headline inflation fell as expected to 10.5%. UK consumer price inflation fell to a three-month low of 10.5% in December but remains close to 40-year highs. The core CPI reading, which excludes food and energy from the calculations, underscores the tense labor market conditions seen in yesterday's UK employment data, while the recent fall in energy prices has contributed to the decline in the headline figures. The BoE has raised interest rates nine times since December 2021 to try to bring down inflation, with markets currently evaluating an 82% chance of a 50 bp rate hike at its next meeting, scheduled for February 2. GBP/USD holds its gains above 1.2300 again, undisturbed by mixed UK CPI data amid fresh US dollar weakness. Today's UK employment data becomes more important for GBP/USD traders given the recent comments from Bank of England (BoE) governor Andrew Bailey, as well as the worsening conditions of the UK labor strikes. EUR/USD The EUR is one of the weakest contenders against the US Dollar, with EUR/USD pulling back sharply after testing the 1.0870 level. The rest of this week is quite sunny on the economic calendar, which tends to support existing trends. The EUR/USD pair fell sharply mid-session in the US despite significant US dollar weakness. The euro fell after market talks suggesting that representatives of the European Central Bank (ECB) are considering slowing down the pace of monetary policy tightening. Rumors suggest that CEO Christine Lagarde and company will decide to raise interest rates by 50 basis points in February. The comments of the European Central Bank's chief economist Philip Lane also influenced the euro, who said that in order to bring interest rates back to their target levels and bring inflation back to the desired level, it will be necessary to stop the tightening of monetary policy by the central bank. At the World Economic Forum EU officials have announced their intention to accelerate the energy transition with a series of fiscal measures that support technological innovation in the green energy space. The support is expected to include a state aid mobilization as well as a sovereignty fund to stop companies relocating to the US. Source: finance.yahoo.com, investing.com, dailyfx.com
UK Budget: Short-term positives to be met with medium-term caution

Data Shows That The Bank of England Is Needing To Keep Raising Interest Rates

Craig Erlam Craig Erlam 18.01.2023 14:47
Equity markets are marginally higher in Europe, with the Nikkei outperforming in Asia on the back of a much weaker yen. BoJ stands firm The Bank of Japan has decided to stand its ground against market forces that have forced it to purchase huge amounts of JGBs in order to defend its yield curve control upper band. Despite mounting speculation that it could be prepared to further tweak the tool or abandon it altogether, the central bank has stubbornly dug in its heals and seemingly prepared itself for another onslaught in the bond markets. The surprise decision last month to widen the threshold in which it will allow the 10-year yield to trade has further fueled speculation that it’s planning to phase out YCC, so rather than ease the pressure on the central bank as it hoped, it has intensified. In standings its ground today, it’s effectively invited the backlash and the yen has been hammered as a result. Inflation eases but still far too high UK inflation eased slightly in December, the second month in which it has fallen, indicating that it has peaked and barring another surge in energy prices, it could now steadily decline. That will come as a relief to households and businesses suffering the cost-of-living squeeze although, with the headline CPI still above 10%, there’s still obviously a long way to go. The Bank of England now finds itself in the uncomfortable position of needing to keep raising interest rates as inflation is still more than five times its target. Even core inflation is above 6% and we haven’t really seen much progress on that front. Markets are pricing in another 1% of rate hikes in the coming months but if inflation remains stubbornly high, they may have to do more. Especially if the economy shows the kind of surprising resilience that it appeared to in the fourth quarter. Read next:The Japanese Yen (JPY) Weakened, The Aussie Pair Is Trading Above 0.70$| FXMAG.COM Steadies after huge surge It’s been a phenomenal week for bitcoin, up around 20% and looking in a far healthier position. The lack of further contagion in the aftermath of the FTX collapse and the surge in risk-appetite has seen a flurry of support for cryptos which have had a rough few months to put it lightly. Well, they’ve made up for lost time and bitcoin is now steadying above $21,000. Whether it can significantly build on this rebound is another thing but the fact that it’s trading back in the pre-FTX range will come as a huge relief to the industry that will have feared further plunges or negative headlines. For a look at all of today’s economic events, check out our economic calendar: www.marketpulse.com/economic-events/ 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.  
GBP/USD Options Market Anticipates 70 Pip Range on BoE Day

Slowdown In Inflation Is Likely To Produce A Rise In The British Pound (GBP)

Paolo Greco Paolo Greco 19.01.2023 08:23
On Wednesday, the GBP/USD currency pair resumed rising and managed to gain another 140–150 points. The UK inflation report, of course, served as the foundation for such a decision. The market reacted quite strongly and bought the pound virtually the entire day, although the actual value perfectly aligned with the prediction (10.5% in December). We have stated that a minor slowdown in inflation is likely to produce a rise in the British pound since it will force the Bank of England to hike interest rates more quickly than anticipated. The fact that it will be prepared for such a step is, however, far from certain. However, the market purchases the pound because it thinks there isn't and won't be any other option. In reality, given that all technical indicators point upward, what else can we anticipate from the British pound at this point? There isn't a single sell signal. The pound has already climbed "some" 2,100 points from its 2022 lows. However, if all technical indicators are pointing upward and we base our trading primarily on them, what difference does it make if we also consider that their growth is overly rapid and unreasonable? The first rule of trading is to always trade in the direction of the trend. Because there are no sell indications, we continue to trade for a raise while keeping in mind that the current growth is as irrational as possible. Additionally, the Bank of England's rate, which is currently 3.5%, should be mentioned. Let's assume it increases to 4% in two weeks. What will happen to inflation? It will fall by 0.5 percent. How can inflation respond to declining energy costs? Another negative 2–3%? In other words, for inflation to return to the target level within two to three years, the Bank of England needs to hike the rate to at least 5%, if not as high as 6%. They do not anticipate inflation to go below 3% this year, not even in the United States, where it has already decreased to 6.5%. What is there to say about the UK? It will take time for inflation to return to 2%. Morgan Stanley, an investment bank, has released a statement suggesting a potential future decline in inflation. The consumer price index may drop to 3% by the end of 2023, and 2% should be anticipated by the end of 2024, according to its analysts. As you can see, the inflation rise process is quick and simple, whereas the inflation fall process is difficult and drawn out. James Gorman, CEO of Morgan Stanley, thinks that a Fed rate cut this year is unlikely. Thus, the Fed's policy will continue to be "hawkish" for a very long time, something that market participants have forgotten lately. We think the dollar will bounce back, and just before the following sentence, let's not forget that we've been talking about a negative correction for nearly a month. In a report released by Standard Chartered, analysts predict that the euro and the pound will soon start to adjust. The report claims that after rapid expansion, there is no consolidation. The euro has already increased by 9%, and the pound has surged much more. A further increase is not impossible, but it is improbable without adjustment. The Fed is anticipated to boost the benchmark rate by at least 0.75%, according to Standard Chartered. And the American currency must be supported by this fact. The Fed rate's anticipated peak value may change as a result of China's strong economic recovery, which may cause a reduction in the rate of inflation's decline. As you can see, the biggest banks and research firms are similarly perplexed by the sudden and severe decline in the value of the US dollar, and the Fed hasn't even given up on tightening monetary policy yet. In the present situation, however, all we can do is wait for the market to "wake up," at which point the price will at the very least stabilize below the moving average. Remember that a fixation below the moving average is a signal for a potential trend change, but more evidence is required. Over the previous five trading days, the GBP/USD pair has averaged 138 points of volatility. This figure is "high" for the dollar/pound exchange rate. So, on January 19, we anticipate that movement that is constrained by the levels of 1.2205 and 1.2481 will occur inside the channel. A new phase of the corrective movement is indicated by the Heiken Ashi indicator turning downward. Nearest levels of support S1 – 1.2329 S2 – 1.2207 S3 – 1.2085 Nearest levels of resistance R1 – 1.2451 R2 – 1.2573 R3 – 1.2695 Trading Suggestions: In the 4-hour timeframe, the GBP/USD pair is still rising. Therefore, until the Heiken Ashi indicator turns down, it is still possible to hold long positions with objectives of 1.2451 and 1.2481. If the price is set below the moving average, you can start opening short bets with a 1.2085 objective. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction. Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones   Relevance up to 04:00 2023-01-20 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/332703
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The Rebound In The British Pound Contributes To A Strongly Bid Tone Around The GBP/JPY Cross

TeleTrade Comments TeleTrade Comments 19.01.2023 10:16
GBP/JPY witnessed heavy selling on Thursday and retreats further from a three-week high. Recession fears boost demand for the safe-haven JPY and exert some downward pressure. The prospects for more BoE rate hikes underpin the GBP and should limit deeper losses. The GBP/JPY cross extends the previous day's retracement slide from the 161.50 region, or a three-week high and remains under heavy selling pressure on Thursday. Spot prices snap a three-day winning streak and drop back closer to mid-157.00s, hitting a fresh daily low heading into the European session. As investors digest the Bank of Japan's (BoJ) dovish policy decision on Wednesday, looming recession risks boost demand for the safe-haven Japanese Yen and exert pressure on the GBP/JPY cross. Investors remain concerned about the potential headwinds stemming from the worst yet COVID-19 outbreak in China. Apart from this, the protracted Russia-Ukraine war has been fueling worries about a deeper global economic downturn. The fears were fueled by Wednesday's weaker US macro data, which showed that retail sales in December fell by the most in a year and manufacturing output recorded its biggest drop in nearly two years. This, in turn, forces investors to take refuge in traditional safe-haven assets and benefits the JPY. Apart from this, a modest pullback in the British Pound contributes to the heavily offered tone surrounding the GBP/JPY cross. Despite the downfall, spot prices remain well above the weekly low amid expectations that the Bank of England will continue raising interest rates to combat stubbornly high inflation. The bets were lifted by the stronger wage growth data released on Tuesday, which is expected to keep inflation elevated. Furthermore, the headline UK CPI - though fell to a three-month low in December - is still running at levels last seen in the early 1980s. Read next: Un Secretary General Antonio Guterres Encouraged The Transition To Green Energy At The World Economic Forum In Davos, The Chinese Economy May Surprise You Positively| FXMAG.COM In the absence of any relevant market-moving economic releases from the UK, the aforementioned mixed fundamental backdrop warrants some caution for aggressive bearish traders. Hence, it will be prudent to wait for strong follow-through selling before positioning for any further depreciating move for the  GBP/JPY cross
The EUR/USD Pair Has A Potential For Drop

EUR/USD Pair Holds Gains Above 1.0800, The Aussie Pair Falls To 0.6875

Kamila Szypuła Kamila Szypuła 19.01.2023 14:16
Concerns about US growth due to recent shortages in US PPI and retail sales cast a shadow over the dollar. The Fed's hawkish speakers are being largely shunned by the markets at this point. USD/JPY The Japanese yen, long favored as a safe haven and funding currency, has become so embroiled in market speculation over central bank policy in recent weeks that Wednesday's status quo decision triggered the yen's biggest fall in nearly three years. In a bond market where the central bank battled bond bears to defend its yield cap, the BoJ bought up so many of the issued 10-year Japanese government bonds that market liquidity virtually dried up. Speculators focused on the yen instead. Until late last year, BJ's dovish stance in the face of aggressive rate hikes by the Federal Reserve and other major central banks meant the yen was cheap and weak, making it an ideal currency to borrow for investment. Today USD/JPY started the day at 128.55 but then dropped below 128. USD/JPY is now trading back at the level from the start of the day, above 128.50 AUD/USD The Australian dollar falls after the unemployment rate in December was 3.5% from 3.4%. The figures show that the labor market remains robust, even as the Reserve Bank of Australia raised the cash rate by 3% from its pandemic low. The bank has rolled back large rate hikes and the futures market has a 50-50 chance of a 25 basis point hike priced at the February 7 monetary policy meeting. Ahead of this meeting, the key CPI data for the fourth quarter will be released on Wednesday next week, January 25. The RBA said it expects growth to 8% later this year The AUD/USD pair extended an overnight sharp pullback from the 0.7060-0.7065 area, its highest level since Aug. 16, and remains under strong selling pressure for a second consecutive day on Thursday. The downward trajectory remains uninterrupted throughout the European session. The Australian pair is currently trading below $0.70 but above $0.6850. Read next: Elon Musk Is Facing Trial In Fraud Trial Over 2018 Tweets| FXMAG.COM GBP/USD GBP/USD consolidates losses below 1.2350 during Thursday's European session. GBP/USD pair is currently above 1.2330. On the UK front, inflationary pressures have eased, according to the December Consumer Price Index (CPI) report published on Wednesday. Headline inflation was lowered to 10.5% on an annualized basis and the core CPI, which excludes oil and food prices, remained stable at 6.3%. The magnitude of the drop in the inflation rate is not enough to convince market participants that inflation in the UK is falling in a promising way. Therefore, investors should prepare for the continuation of the extremely hawkish monetary policy of the Bank of England (BoE). The UK data schedule is empty on Thursday, however, and traders will have to content themselves with looking ahead until Friday, when consumer confidence figures for January and retail sales figures for December are released. Consumers are expected to be a little less optimistic than they were. EUR/USD European Central Bank (ECB) President Christine Lagarde's speech on Thursday will point investors to the likely monetary policy actions in February. Falling energy prices in the euro area have moderated inflation, but the current rate of inflation is still far from the median. Therefore, investors should prepare for a hawkish comment by Lagarde from the European Central Bank. European Central Bank (ECB) policymaker Francois Villeroy de Galhau said on Wednesday it was "too early to speculate what we will do in March". However, he believes that Lagarde's earlier forecast of 50 bp is still valid. EUR/USD holds gains above 1.0800 in European trading. The pair is supported by falling US Treasury yields. Source: investing.com, finance.yahoo.com
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The Short-Term Trend Of The GBP/JPY Corss Is Bullish Now

TeleTrade Comments TeleTrade Comments 20.01.2023 09:11
GBP/JPY is approaching 160.00 as investors are still confused about forward Bank of Japan’s policy stance. Bank of England might discover a meaningful downtrend in inflation from the late spring amid tight monetary policy. Bank of Japan could look for an exit from the expansionary policy as inflation is stably rising. GBP/JPY might display a power-pack action after the release of the United Kingdom Retail Sales data. GBP/JPY has extended its recovery move above the critical resistance of 159.00 in the early European session. The cross is marching towards the round-level resistance of 160.00 ahead of the United Kingdom Retail Sales data. On Thursday, the asset rebounded from 157.70 after the Bank of Japan (BOJ) maintained the status quo by keeping the interest rates and yields target unchanged. Bank of Japan (BoJ) Governor Haruhiko Kuroda kept the interest rate at -0.10% and the 10-year Japanese Government Bonds (JGBs) around 0% steady, commented that there is “no need to further expand the bond target band.” He further added that Japan’s economy is still on the path towards recovery from the pandemic and the BoJ is aiming to achieve a 2% inflation target sustainably, stably in tandem with wage growth. BOE’s Bailey sees a sheer declining inflation trend in the late Spring Policymakers at the Bank of England (BOE) have put severe efforts for decelerating the pace of the Consumer Price Index (CPI) by accelerated interest rates. December’s CPI report has shown a consecutive decline in the inflation trend for the first time since the Covid-19 pandemic period, led by declining energy prices. The United Kingdom has been one of the laggards in slowing down the pace of inflation. On Thursday, Bank of England Governor Andrew Bailey cited “He expects that inflation will fall quite rapidly this year, probably starting in the late spring. While commenting on the terminal rate, the Bank of England Governor sees the interest rate peak near the market expectations at 4.5%. The Bank of England Governor is seeing a shallow recession than the historic ones. Earlier, Bank of England policymakers cited rising wages as responsible for escalating inflation. Bargaining power has been shifted in the favor of job-seekers due to a shortage of labor. Investors await United Kingdom Retail Sales for fresh cues For further guidance, investors will keep an eye on the United Kingdom Retail Sales data, which is scheduled for Friday. As per the projections, the annual Retail Sales (Dec) data could contract by 4.1% vs. a contraction of 5.9% reported in the prior same period. However, the monthly economic data is expected to expand by 0.5% against the contraction of 0.4%. A recovery in the retail demand on a monthly basis could be the outcome of rising employment bills due to employees’ bargaining power, which is leaving more funds in the palms of households for disposal. A better-than-projected retail demand could spurt the forward inflation expectations, which could accelerate hawkish Bank of England bets. Mixed Japan’s inflation fails to provide any boost to the Japanese Yen Bank of Japan’s unchanged monetary policy-inspired gains in GBP/JPY faded later as investors still believe that the central bank will look for an exit from its decade-long ultra-loose monetary policy. A rising trend in inflation and the administration’s effort to increase wages could end the expansionary monetary policy ahead. However, the release of the National CPI indicates that investors should wait further before reaching to a conclusion. Japan’s National headline CPI has landed at 4.0%, lower than the consensus of 4.4% but higher than the former release of 3.8%. While the core inflation that excludes oil and food prices has soared to 3.0% higher than the expectations of 2.9% and the prior release of 2.8%. National CPI that excludes fresh food has remained in line with the estimates at 4.0%. GBP/JPY technical outlook The recovery move from GBP/JPY around the upward-sloping trendline of the Ascending Triangle chart pattern plotted from January 13 low at 155.65 has pushed it above the 20-period Exponential Moving Average (EMA) at 159.22. There is no denying the fact that the short-term trend is bullish now.  The horizontal resistance of the volatility contraction chart pattern is placed from January 9 high at 160.92. Meanwhile, the Relative Strength Index (RSI) (14) has scaled above 60.00, which indicates that the upside momentum is active now. Broadly, the cross might find barricades after reaching the horizontal resistance mentioned above.
Soft PMIs Are Further Signs Of A Weak UK Economy

Recession Still Looks Like The Base Case For The UK Economy

ING Economics ING Economics 20.01.2023 09:58
Persistent falls in UK retail sales are another reminder that the UK is still entering a downturn. The good news is that lower gas prices mean the Treasury can afford to do away with April's planned increase in household energy bills, a move that would lower headline inflation by 1-1.5pp through the latter half of the year Retail sales have fallen - again British consumers spent almost 4% more on retail spending last year, but received almost 6% less for their money, accounting for the surge in UK inflation through 2022. That’s according to the latest year-on-year retail sales figures, which also showed that real-terms spending has fallen in 12 out of the last 14 months, and that December alone saw a 1% drop in expenditure. Coupled with another dip in consumer confidence released overnight, recession still looks like the base case for the UK economy. Admittedly, fourth quarter GDP is likely to come in flat, which is partly down to an artificial bounce-back in activity during October following the Queen’s funeral last September. But assuming ongoing weakness in consumer spending, coupled with some potential declines elsewhere (construction and manufacturing look vulnerable), we think first quarter GDP could see a fall in output in excess of 0.5% (Read more).  UK retail sales are down 6% year-on-year in real terms Source: Macrobond The fall in gas prices is welcome news for consumers The good news, at least, is that the squeeze on household incomes looks like it won’t be quite as bad as first feared. The recent fall in gas prices means the Chancellor can probably do away with his planned increase in energy bills in April, or failing that, can lower them again in July. Current plans would see a less generous household ‘price guarantee’ take the average annualised bill from £2500 currently (or £2100 accounting for an extra discount), to £3000 from April. When that change was envisaged last November, the average energy bill was projected to be well above that level until early 2024 in the absence of any government support. But recent falls in wholesale prices suggest that will only be the case during the second quarter. Our latest estimates, based on the regulator's pricing methodology, suggest the average annualised bill will have fallen back to roughly £2200 in the third quarter, without any government intervention at all. Energy bills should have fallen to £2200 in 3Q, without any government support The Energy Price Guarantee will currently see the average household energy bill increase from £2500 to £3000 from April Source: Macrobond, ING calculations, Ofgem   As well as improving the outlook for consumers, this is also good news for the Treasury. Suppose the government caps the average bill at £3000 in the second quarter and allows them to return to a level determined by market prices in the third. In that case, the cost in FY2023 will fall from almost £13bn to £1.5bn (excluding additional benefits/pensions payments the Treasury has committed to). If the Chancellor does away with the planned increase in unit prices altogether and keeps the average bill at £2500 in 2Q, the cost would be £4.5bn in FY2023, still well below November’s projections. Treasury looking at £11bn saving even if price guarantee is scrapped in 3Q The November figures, as well as the fixed welfare payment costings, are based on UK Treasury estimates. Our projections assume the average household energy bill increases to £3000 in April as planned, but falls back in Q3 to the standard Ofgem regulated price. Source: UK Treasury, ING calculatuons   Headline inflation should also be lower as a result. If household bills return to the default price level set by the regulator Ofgem, then we’d expect CPI to come in 1-1.5pp lower than currently forecast. For the Bank of England that’s a double-edged sword – lower headline inflation would undoubtedly please the hawks most worried about inflation expectations de-anchoring. But lower gas prices mean a less pronounced hit to economic activity, potentially justifying tighter policy. In reality, the Bank will probably lean more towards the former argument, and we still think we're close to the peak in terms of Bank Rate. That said, it looks like the combination of persistent wage pressures and higher core services inflation will unlock one more 50bp hike at the February meeting, potentially followed by a final 25bp move in March. UK inflation set to be 1-1.5pp lower if bills below £3000 government guarantee Source: Macrobond, ING calculations 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
Bestway Might Have Larger Designs On The UK's Second Biggest Supermarket

Weak Consumer Spending And Consumer Confidence Point To Economic Problems In The UK

Kenny Fisher Kenny Fisher 20.01.2023 12:21
The British pound has edged lower on Friday. In the European session, GBP/USD is trading at 1.2360, down 0.27%. Retail sales fall sharply UK retail sales were dismal in December. The headline figure fell -1.0% m/m, missing the forecast of 0.5% and below the November read of -0.5%. The core rate declined by 1.1%, shy of the forecast of 0.4% and below the November reading of -0.3%. On an annualized basis, the numbers were downright ugly – headline retail sales came in at -5.8% and the core rate at -6.1%, which was worse than November and below the estimates. Any hopes for a surge in spending due to Christmas were dashed, as consumers cut back due to the cost-of-living crisis. Inflation has eased a bit but remains in double digits, and consumers are expected to hold tight to the purse strings, as food and energy prices remain high and wages have been eroded by inflation. Consumer confidence remains in deep-freeze, with GfK Consumer Confidence falling to -45 in December, down from -42 in November and shy of the consensus of -40. Weak consumer spending and confidence points to a struggling economy, but the Bank of England has little choice but to continue raising rates in order to curb inflation. This will be a slow process, with the BoE projecting that inflation will fall to 5% late in the year. The Federal Reserve enters a 2-week blackout period after today, ahead of the rate meeting on February 1st. This means that public comments or interviews from Fed officials will be sharply curtailed. This made Fed member Brainard’s comments on Thursday all the more important. Brainard sounded hawkish, saying that rates needed to remain high even with signs that inflation was starting to ease. The Fed dot plot indicates that rates will peak at 5.1%, while the markets have priced a peak at around 4.75%. We’ll hear from Fed members Harker and Waller later today. Read next:A Serious Security Vulnerability In T-Mobile Caused Another Hacker Attack| FXMAG.COM GBP/USD Technical 1.2352 is a weak resistance line, followed by 1.2455 There is support at 1.2255 and 1.2179 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.  
Bank of England Faces Dilemma: Will They Raise Rates by 25bps or 50bps?

The Pound (GBP) Is Fast Increasing Once More

Paolo Greco Paolo Greco 23.01.2023 09:46
The GBP/USD currency pair started moving upward again on Friday and is currently approaching the regional high of December 14. Traders may be unable to break through the Murray level of "8/8" (1.2451), but so far, everything indicates that the British pound will continue to rise. One should only attempt to explain why the British pound has climbed by 600 points over the previous two weeks if one wants to comprehend what is going on in the market right now. The likelihood of a subsequent increase in the BA rate has not increased during this time, and the Fed has not changed its monetary policy. The US inflation report, which showed a new, significant deceleration, is the only thing that can be noted. The market quickly rejoiced and rushed to sell US dollars because it believed that the Fed's monetary policy would soon slow down again. Thus, the pound is fast increasing once more, but since it is a British currency, we can claim that this movement is at least somewhat predictable. Nevertheless, the pair corrected lower by 600 points in late December and early January. However, we are still baffled as to how the British pound can keep rising in value. The CCI indicator has entered the overbought region, which frequently heralds a reversal and movement in the other direction, even though all trend indicators are currently going upward. Although the meetings of the Bank of England and the Fed will take place in a week and a half, the market is already aware of both central banks' decisions. Of course, what the Central Bank leaders say matters as well, and there might be some surprises. However, the market can now determine those judgments that won't be made public until next week. Formally, the GDP report is the most significant report of the week. If the current week is boring for the European currency, it will be even more so for the pound. The producer price index will be released on Wednesday in the UK, and business activity indices for the manufacturing and service sectors will be released on Tuesday. Indicators of business activity are very likely to stay below the 50.0 thresholds, and the producer price index doesn't usually cause a market reaction. We are not anticipating any crucial communications from the UK. It remains only to consider the American events. Business activity indices will once more be released in the United States tomorrow, and they will also remain nearly 100% below the "waterline." A report on the fourth quarter's GDP and orders for long-term goods will be released on Thursday. Data on American citizens' spending and income, as well as the University of Michigan's consumer sentiment index, were released on Friday. The GDP report will undoubtedly garner the greatest interest. Currently, the official prediction indicates a quarterly rise of 2.6-2.7%. That is, although there is still a 50% chance that the American economy will experience a recession this year, it has not yet happened. The US economy expanded in the most recent quarter, and this development may have strengthened the dollar had the market not been generally inclined to buy the euro and the pound. As a result, we think that the dollar won't increase significantly even if the GDP report's predicted value is exceeded. Every other report is solely secondary information. Of course, in theory, the market might potentially react to them, but in practice, if it does, it will either be minimal or nonexistent. Furthermore, these data won't be able to change the market's sentiment enough to stop the dollar's upward trajectory. Additionally, there won't be any significant speeches this week because there is a "silent mode" 10 days before the next central bank meeting. We won't get any new information from the primary source because Fed officials aren't allowed to speak on monetary policy. But because nearly all of the monetary committee members spoke last week and we are aware of what to anticipate from the Federal Reserve next week, it is no longer necessary. Over the previous five trading days, the GBP/USD pair has averaged 117 points of volatility. This figure is "high" for the dollar/pound exchange rate. Thus, we anticipate movement inside the channel on Monday, January 23, with movement being constrained by levels of 1.2302 and 1.2535. A new phase of the corrective movement is indicated by the Heiken Ashi indicator turning downward. Nearest levels of support S1 – 1.2390 S2 – 1.2329 S3 – 1.2268 Nearest levels of resistance R1 – 1.2451 R2 – 1.2512 R3 – 1.2573 Trading Suggestions: On the 4-hour timeframe, the GBP/USD pair is still rising. Therefore, until the Heiken Ashi indicator swings down, it is still possible to hold long positions with goals of 1.2512 and 1.2535. If the price is locked below the moving average with targets of 1.2207 and 1.2146, short trades may be opened. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. Moving average line (settings 20.0, smoothed): This indicator identifies the current short-term trend and the trading direction. Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zones Relevance up to 07:00 2023-01-24 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/332953
Bank of England survey highlights easing price pressures

The Bank Of England Is Forced To Act Aggressively

Marek Petkovich Marek Petkovich 23.01.2023 10:02
The second consecutive decline in retail sales in December, this time by 1%, reminded investors of bad times. It seems too early to say that the UK economy will avoid recession. Sky-high energy bills and depleted household wallets indicate that retailers are in for a tough year. This threw the pound into the murky waters of last year, when Britain was named the worst G7 economy, never fully recovering from COVID-19. The optimists, however, have not lost faith. And the retreat of GBPUSD seems to them a temporary phenomenon. The economy looks more resilient Sterling fans cannot but rejoice that the Bank of England is among those for whom the glass is half full. According to Governor Andrew Bailey, the path for the BoE in 2023 will be easier than in 2022. Inflation is showing signs of slowing down, and the economy looks more resilient than previously thought. As a result, in a favorable scenario, the cycle of tightening monetary policy can be completed earlier. Derivatives are currently seeing a rise in the repo rate from 3.5% to 4.5% by the summer, and the central bank removed the phrase in its latest accompanying statement that it does not agree with the markets. In my opinion, Bailey is disingenuous. Unlike in the USA, where inflation expectations have fallen to 2%, UK's indicator, with a period of 1.2 and 5 years, hovers near the 4% mark, which forces the Bank of England to act aggressively. We are talking about raising the repo rate by 50 bps in February, which creates a comfortable advantage for the GBPUSD. And you can say anything you want. Softer rhetoric allows the economy to feel support from the central bank. Dynamics of inflation expectations in Britain Along with the decline in retail sales, consumer confidence from Gfk fell for the first time in four months. On the other hand, according to the Recruitment and Employment Confederation (REC), 184,000 new job postings were created in January, up a quarter from a year ago. According to REC, this is encouraging. At the beginning of the year, employees usually look for new positions, so an increase in job offers is good news for the economy. The vulnerability of Britain's GDP is perhaps the main problem of the pound. On the contrary, an increase in optimism about the outlook for the global economy, an improvement in global risk appetite, and a slowdown in the Fed's monetary restriction inspire investors with confidence in the continuation of the GBPUSD upward campaign. Indeed, the latest Consensus Economics surveys show that the eurozone will avoid a recession, and JP Morgan market models indicate that the U.S. will not fall into recession either. Add to that the opening of China, and the overall picture starts to play with bright colors. GBP/USD Technically, on the daily chart, the risks of winning back the double top with the GBPUSD pair look much less than the probability of restoring the upward trend. It makes sense to continue buying the pound against the U.S. dollar in the direction of the previously indicated target at 1.256.   Relevance up to 08:00 2023-01-28 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/332957
Services PMIs and Fed Minutes: Analyzing Market Focus and Central Bank Strategy

The Broader Risk Sentiment Will Influence The Safe-Haven Japanese Yen (JPY)

TeleTrade Comments TeleTrade Comments 24.01.2023 09:19
GBP/JPY retreats from a nearly four-week high touched on Monday, though lacks follow-through. A combination of factors revives demand for the safe-haven JPY and exerts pressure on the cross. Expectations that elevated UK CPI might force the BoE to continue raising rates helps limit losses. The GBP/JPY cross comes under some selling pressure on Tuesday and erodes a part of the overnight gains to a nearly four-week high. The cross remains depressed around the 161.25-161.30 area through the early European session and for now, seems to have snapped a six-day winning streak. A combination of factors assists the Japanese Yen to regain some positive traction and stall its recent corrective decline, which, in turn, is seen weighing on the GBP/JPY cross. Despite the Bank of Japan's decision last week to leave its policy settings unchanged, investors seem convinced that a shirt in stance is inevitable amid stubbornly high inflation. The bets were lifted after the latest CPI report from Japan showed that consumer inflation rose to a 41-year high level of 4% in December. Apart from this, worries about a deeper global economic downturn further underpin the JPY's relative safe-haven status against its British counterpart. Read next: The Japanese Yen Fell And USD/JPY Reached Level Of 130, The EUR/USD Pair Lost Its 1.09 Level And Agian Is Around 1.0880 | FXMAG.COM The downside for the GBP/JPY cross, meanwhile, seems limited amid speculations that elevated consumer inflation will maintain pressure on the Bank of England (BoE) to continue raising interest rates. In fact, the UK Office for National Statistics reported last week that the core CPI in the UK stayed at 6.3% in December or more than three times the BoE's 2% target. Furthermore, the emergence of fresh selling around the US Dollar benefits the British Pound, which might hold back traders from placing aggressive bearish bets. This, in turn, warrants some caution before positioning for an extension of the intraday depreciating move. Market participants now look forward to the release of the flash UK PMI prints for January for some impetus. Apart from this, the broader risk sentiment will influence the safe-haven JPY and contribute to producing short-term trading opportunities around the GBP/JPY cross. Bulls, meanwhile, are likely to wait for some follow-through buying beyond the 161.75-161.80 area, above which spot prices could aim to test the late December swing high, around the 162.30-162.35 region. The momentum could get extended further towards the 163.00 mark en route to the 100-day SMA, which coincides with the 164.00 horizontal support breakpoint near the 164.00 level.
The German Purchasing Managers' Index, ZEW Economic Sentiment  And More Ahead

European Markets Have Started To Lose Some Of Their Early Year Momentum

Michael Hewson Michael Hewson 24.01.2023 11:32
US markets started the week very much on the front foot yesterday, with the S&P500 closing above the 4,000 level and the Nasdaq 100 leading the way higher with its second successive 2% daily gain.   The outperformance in tech appears to point to a growing conviction on the part of investors that the Fed will soon have to look at cutting rates before the end of the year, although to look at bond markets yesterday, yields also moved higher, as money flowed out of treasury markets.   With a lot of tech companies starting to announce job cuts, as well as other measures to rein in costs, and inflationary pressures showing further signs of easing, it would appear that US investors are starting to think in terms of the next move higher, despite concerns over lower profits   Given the uncertain economic backdrop this comes across as a bit of a leap of faith, and its also notable that while US markets have started to gain momentum in the past few days, European markets have started to lose some of their early year momentum.   While US markets surged higher yesterday it is notable that today's European market open is likely to be a much more tepid affair, suggesting perhaps that investors in Europe don't share the same enthusiasm about the economic outlook, despite the reopening of the Chinese economy, which may help to provide a demand boost.   This increase in optimism is likely to be reflected in today's flash PMI numbers for January, which have already seen a pickup in economic activity in the past few months due to the sharp declines in energy prices from the peaks in August and September.   In Germany manufacturing PMI fell to 45.1 in October, but has recovered since then, albeit is still very much in contraction territory. Services have seen a similar pattern, dropping to two-year lows of 45, before showing small signs of a recovery. We expect to see a further improvement in today's January numbers to 48 for manufacturing and 49.5 in services.     In France, we've seen a similar pattern in manufacturing, although services have been more resilient due to the energy price subsidies provided by the French government to cushion French households from the worst effects of higher prices. France manufacturing is expected to improve to 49.5 from 49.2, and services to 49.8 from 49.5.   In the UK, manufacturing has struggled over the past 3 months and looks set to continue to do so, while services have been slightly more resilient. As we head into 2023 the challenges for business will be whether we see new investment, and a pick-up in economic activity, after the rising pessimism seen at the end of last year. Manufacturing is expected to remain subdued at 45.5, while services could slip back from 49.9 to 49.5.   Public sector borrowing in December is expected to remain high on the back of rising debt interest and energy price support with expectations of a small fall from November's £22bn to £18bn.   US manufacturing and services are expected to remain weak at 46 and 45 respectively.      EUR/USD – a marginal new high at 1.0927 yesterday, before slipping back again. The main resistance remains 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 – ran out of steam just below the 1.2450 area yesterday slipping back towards the 1.2320 area. Has managed to hold above the 1.2300 area for the last three days. Above 1.2450 could see a move towards 1.2600. A move below 1.2290 could see a move towards 1.2170.   EUR/GBP – slid back from the 0.8815 area but while above the 50- and 100-day SMA which acted as support last week the bias remains for a return to the recent highs at 0.8890. The next support below 0.8720 targets 0.8680.   USD/JPY – has squeezed back above the 130.20 area, with a move through 131.60 and last week's high potentially targeting 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 20 points higher at 7,804   DAX is expected to open 47 points higher at 15,150   CAC40 is expected to open 23 points higher at 7,055   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
Soft PMIs Are Further Signs Of A Weak UK Economy

Soft PMIs Are Further Signs Of A Weak UK Economy

Kenny Fisher Kenny Fisher 24.01.2023 14:15
The British pound has posted slight gains on Tuesday. In the European session, GBP/USD is trading at 1.2302, down 0.60%. UK debt hits record UK debt costs soared in December, sending the budget deficit to a record 27.4 billion pounds. This was sharply higher than the November reading of 18.8 billion pounds and the consensus of 17.3 billion pounds. The drivers behind the sharp upturn were rising interest payments and government subsidies for gas and electricity. The government’s bill for the subsidies in December was some 7 billion pounds. Despite the grim debt news, the pound remains steady, thanks to broad US dollar weakness. UK PMIs for December didn’t help matters, as both the Services and Manufacturing PMIs came in below the 50 level, which indicates contraction. Manufacturing rose slightly to 46.7, up from 45.3 in November and above the forecast of 45.0 points. The Services PMI fell to 48.0, down from the November read and the forecast, both of which were 49.9 points. The soaring debt and soft PMIs are further signs of a weak UK economy. These are clearly not ideal conditions for raising interest rates, but with inflation at 10.5%, the Bank of England doesn’t really have much choice, as entrenched inflation could cause more damage to the economy than high interest rates. The road back to low inflation promises to be a long one, with the BoE projecting that inflation won’t drop to 5% until late this year. The US will release Manufacturing and Services PMIs which are expected to remain in contraction territory. Manufacturing is expected to tick lower to 46.1 (46.2 prev.), while Services is forecast to dip to 44.5 (44.7 prev.). If the releases are softer than expected, the US dollar could lose ground as speculation will rise that the Fed may have to ease up on the pace of rates. Read next: South African Petrochemical Company Sasol Is Moving Away From Fossil Fuels, Germany Again Refused To Send Tanks To Ukraine| FXMAG.COM  GBP/USD Technical GBP/USD is testing support at 1.2335. Below, there is support at 1.2233 There is resistance at 1.2499 and 1.2601 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 GBP/USD Pair Started A New Round Of Downward Correction

The GBP/USD Pair Started A New Round Of Downward Correction

Paolo Greco Paolo Greco 25.01.2023 08:57
The GBP/USD currency pair started a new round of downward correction on Tuesday, and as a result, by the end of the day, it had fallen below the moving average line. Yesterday, we discussed the pair's inability to go over the level of 1.2451, where the latest rise in the value of the pound came to a stop, as well as the overbought CCI indicator, which frequently signals an impending negative reversal. These two technical elements were what made Tuesday successful. We want to point out right now that numerous reports have been released in the last day, all of which have been about commercial activity in the USA and the UK. However, it is impossible to categorically label these findings either positively or negatively. UK business activity increased in the manufacturing sector while marginally declining in the services sector. However, neither index rose above the "waterline" of 50.0, indicating that the trend is still downward. Based on this information, how could the pound have been declining all day? Let's take a look at it from the other angle: although the manufacturing and services business activity indices in the US increased, they both continued to be below the "waterline," and by the time they were released, the downward trend had already ended. Here, the numbers don't add up. It turns out that either the market calculated all of these statistics using its logic, or these reports have absolutely nothing to do with what occurred. Remember that we have been anticipating a significant decline in the value of both the pound and the euro for a very long time. It should not have been the only round of downward movement that we saw between December 14 and January 6. Therefore, we think it will make sense to start moving downward again after recovering to the level of 1.2450. We continue to have serious doubts that the Bank of England will hike the benchmark interest rate "to the bitter end." And if we are correct, there simply isn't any justification for the pound to increase. In just a few months, it has already gained more than 2,000 points, which is roughly half of what it lost during the most recent worldwide decline. The BA rate is expected to rise higher, according to experts. According to experts consulted by The Financial Times, the British regulator will probably keep raising the rate. There is no doubt in our minds, but how quickly will he complete it? Recall that there have been persistent reports about a further slowing in the UK's monetary policy tightening pace in recent weeks. Forecasts are more conservative due to worries over the British economy, although the UK's current inflation rate points to an increase of at least 2.0–2.5%. However, according to analysts, what matters most right now is BA's commitment to keeping the rate rising; they don't care how much higher it will go or how long it will take. They point out that the 0.1% increase in November's British GDP was a welcome surprise. Some even assert that because of this signal, we may infer that the British economy won't enter a recession in the fourth quarter, as practically predicted before by Rishi Sunak and Andrew Bailey. In addition, there have been 27,000 new jobs added, salaries are increasing at a record rate, and inflation is still at its highest point in 40 years. Everything would seem to be in favor of raising the rate by 0.5% further. And if the Bank of England does not disappoint next week, the pound may continue to rise. However, we want to remind you that the rise of the pound in recent weeks and months may have been influenced by high market expectations for interest rates. Most likely, the market has already resolved this issue. Despite the Fed's continued rate increases, the dollar has not increased since the US inflation rate first began to decline. Although only slightly, inflation in Britain has already started to slow down twice. However, if we apply the fairness principle, the pound should have already stopped gaining value if this support factor was the only one available to it. We also caution against drawing quick judgments about the UK recession, as it is highly unlikely that it can be stopped. And it won't be judged until the middle of this year, at the earliest. Over the previous five trading days, the GBP/USD pair has averaged 120 points of volatility. This figure is "high" for the dollar/pound exchange rate. Thus, we anticipate movement inside the channel on Wednesday, January 25, with movement being constrained by levels of 1.2209 and 1.2449. A potential continuation of the upward movement will be indicated by an upward turn of the Heiken Ashi indicator. Nearest levels of support S1 – 1.2268 S2 – 1.2207 S3 – 1.2146 Nearest levels of resistance R1 – 1.2329 R2 – 1.2390 R3 – 1.2451 Trading Suggestions: In the 4-hour timeframe, a significant correction in the GBP/USD pair began. Therefore, until the price is anchored above the moving average, it is possible to hold short positions with goals of 1.2268 and 1.2207. If the price is stable above the moving average line, you can start trading long with goals of 1.2390 and 1.2449. Explanations for the illustrations: Determine the present trend with the use of linear regression channels. The trend is now strong if they are both moving in the same direction. The short-term trend and the direction in which you should trade at this time are determined by the moving average line (settings 20.0, smoothed). Murray levels serve as the starting point for adjustments and movements. Based on current volatility indicators, volatility levels (red lines) represent the expected price channel in which the pair will trade the following day. A trend reversal in the opposite direction is imminent when the CCI indicator crosses into the overbought (above +250) or oversold (below -250) zone   Relevance up to 05:00 2023-01-26 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/333171
FX Daily: Upbeat China PMIs lift the mood

Chinese Have Enough Money To Temper Recession, Tesla’s Record Profit

Swissquote Bank Swissquote Bank 26.01.2023 10:56
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      
Rates Spark: Central banks vs economic data

Rates Spark: Central banks vs economic data

ING Economics ING Economics 27.01.2023 09:09
Next week sees the three major central banks' first policy meetings of 2023. Yet key data releases framing the meetings will mean an ongoing tug of war between the inflation and recession narratives in the market. Stretched valuations are at risk from more vocal central banks arguing that their jobs are not done Fed, ECB, BoE: High conviction on the hikes that will be delivered next week First policy meetings of the year for the Fed, European Central Bank and Bank of England are all squeezed into the next week. Each of these central banks will tell us that their job is not done yet, though some are clearly seen closer to being done than others. Central banks will tell us that their job is not done yet Markets have a pretty high conviction as to what will be delivered next week in terms of rate hikes. It is expected the Fed will slow to a 25bp hike, coming closer to its cycle end. A total of 60bp tightening is priced until summer. The BoE should still raise rates by 50bp next week, but is seen slowing thereafter with an overall 95bp of tightening by late summer. The ECB is also seen to deliver 50bp next week, but officials have signalled further sizeable hikes may be necessary and the market is pricing 140bp of tightening in total by summer. If we set this against our economists forecast the market is in line with our own view, at least for the upcoming meetings next week.   Markets are more concerned about what lies beyond But merely looking at the pricing of the next couple of hikes belies the fact that markets are more concerned with what lies beyond. The central banks signalling will be more important. It is still a tug of war between the need to rein in elevated inflation and the fear over a deepening downturn – it is central banks versus data. And next week is also packed with key data releases. Next week is also packed with key data releases The eurozone will see preliminary inflation data ahead of the ECB meeting, though the slight easing of the core inflation rate to 5.1% seen by the consensus is hardly going to change anyone’s mind on what the ECB’s next steps are. Fourth-quarter GDP is likely to see growth stalling, though avoiding outright shrinkage, which should also give the ECB more confidence to stay the course. More importantly, also for long end EUR rates is that the US the macro data could still feed recession angst with the ISM releases framing the Fed meeting. Crucially, the jobs data in the wake of the Fed could blunt any hawkish message from the meeting – the current consensus is looking for the labour market to lose further momentum. However, the weekly initial jobless claim data yesterday showed again that there is no one way narrative in the macro data. High allocation to indirect bidders in UST auctions shows strong demand Source: TreasuryDirect, ING We see the balance of risk from the meetings tilted towards higher rates That said, US Treasury auctions so far this year signal ongoing demand right along the curve – yesterday’s 7yr auction was no exception. The market appears primed for a Fed pivot and therein also lies the risk. If the Fed’s communication surprises on the hawkish side, we see the possibility that stretched valuations, especially the still deeply inverted curve, can imply a stronger pull higher of longer dated rates as well. Also keep in mind that ECB officials of late have pushed back hard against rate cut speculation that has crept into forward rates for late 2023 and 2024, spilling over from the recession angst in the US. President Lagarde may well attempt continue these efforts during the press conference. Real rates which define financial conditions have actually remained relatively stable in their positive range One consolation for the ECB is that despite market rates rallying back since the start of the year, real rates which define financial conditions have actually remained relatively stable in their positive range to which the ECB had elevated them with the December policy meeting. But the ECB has fought hard for this and will not want to risk diminishing these gains. And while tighter spreads in the periphery of the eurozone do signal easing conditions in some corners, that should give policymakers reassurance on their recent decision  to downsize the balance sheet. Real rates have remained higher despite markets rallying at the start of the year Source: Refinitiv, ING Today's events and market view We will get US data today covering personal income and spending as well as the Fed’s favoured inflation indicator, the PCE deflator, but it is doubtful that these will move the needle regarding next week’s decision. With 10Y yields having rallied back to the levels seen around mid-December, we see the risk that of profit taking as we approach the policy meetings. In particular the ECB should have an incentive to signal that the job is far from done and more tightening is still needed. Also keep in mind that long end supply in EUR has come with more concessions as opposed to the spectacular auction results in the US. Next week will see a busier acution schedule again including longer maturity bond sales out of France.   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
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

Four Bank of England scenarios for February’s meeting

ING Economics ING Economics 27.01.2023 12:35
Persistently high wage and service-sector price inflation points to another 50bp rate hike from the Bank of England next Thursday. If we're right, then we expect one final 25bp rate hike in March, marking the top of this tightening cycle Governor of the Bank of England, Andrew Bailey Four scenarios for the Bank of England meeting Market pricing based on spot values on 27 January Source: ING   The Bank of England looks more likely to follow the European Central Bank than the Federal Reserve next Thursday, and we expect a 50 basis point rate hike for the second consecutive meeting. While the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move in February – and this meeting looks like a closer call than markets are pricing – the reality is that the recent data has looked relatively hawkish. Wage growth is persistently high, looking both at the official numbers and the BoE’s own business surveys. Headline inflation came in a little lower than the Bank projected back in November, but services CPI – seen as a better gauge of domestically-driven inflation – has come in above expectations. Still, if we get a 50bp hike on Thursday then it’s likely to be the last. BoE officials have hinted previously that much of the impact of last year’s rate hikes is yet to hit, and cracks are forming in interest-rate-sensitive parts of the economy. Headline inflation should begin to come down more rapidly from March too, as the impact of last year's energy bill surges drop out, and core goods/food pressure begins to ease more noticeably.  We expect one final 25bp hike in March, taking the Bank Rate to a peak of 4.25%. The key question for Thursday is whether the Bank itself acknowledges its work is nearly complete. We suspect it’s more likely to keep its options open. Here's what we expect: 1 The vote split December’s meeting saw the number of policymakers voting for a 75bp hike drop from seven to one, and the committee’s two most dovish officials opted for no rate hike at all. The lesson then and throughout 2022 was that the committee tends to move by consensus, and that means that the vote split is unlikely to be particularly narrow, even if the meeting is a tough one to call. Either we’ll get a similar number of officials voting for 50bp again, or we’ll see the vast majority scale back their vote to 25bp, akin to the kind of shift we saw in December. Our base case is that we see six of the nine policymakers voting for a 50bp hike, one for 25bp and two for no change. How each official has voted on interest rate decisions since 2021 Dr Swati Dhingra joined the committee in August 2022 and began voting in September Source: Bank of England, ING 2 New forecasts Calmer markets and scaled-back rate hike expectations since the mini-Budget crisis last year mean we shouldn’t be surprised to see the Bank upgrade its growth forecasts. Lower gas prices should theoretically help too, though this is a little more awkward for the BoE given that the government hasn’t yet cancelled plans to increase household bills in April, even if such a move now looks unlikely. That also means we’ll have to take the new inflation forecasts with a slight pinch of salt, and our own view is that headline CPI will end the year 1pp lower if April's planned increase is scrapped and consumer bills return to levels consistent with market pricing from the third quarter.  Still, it's the medium-term story that matters more. Keep an eye on the so-called ‘constant rate’ inflation forecasts, where the Bank assumes the Bank rate will remain unchanged from now on. If these show inflation at, or very close to, 2% in a couple of years' time, then that would be a sure-fire sign that policymakers think we’re close to the peak for Bank Rate. 3 Guidance on future policy decisions Governor Andrew Bailey hinted recently that current market pricing, which sees a peak for Bank Rate at 4.4%, is in the right ballpark. That suggests little reason for the Bank to rock the boat too much on Thursday with new forward guidance, and we suspect it will want to keep options open. The Bank will likely repeat that it’s prepared to act ‘forcefully’ in future if required (though we learnt in December’s minutes that 50bp hikes classify as ‘forceful’). We also doubt Bailey will be willing to be drawn on whether the Bank could pivot back to a 25bp hike in March, nor indeed whether that would be the last move in the cycle. Where he may be tempted to push back is on policy easing, especially now markets are almost pricing in one 25bp rate cut by the end of this year. Chief Economist Huw Pill’s recent emphasis on the UK sharing the worst bits of the US and eurozone’s inflation problems – structural labour shortages with the former, the energy crisis with the latter – feels like a line we’ll hear a lot over the coming months as officials try to dampen expectations of policy easing. Sterling rates to tighten to euro, and a more inverted curve The sterling rates curve still trades with a remnant of the risk premium that appeared in the run-up to the September budget debacle, making it one of the few markets where we think rates are unjustifiably high. Things have changed since then, however. Markets have come around to our more benign view on the terminal rate in this cycle, now implying hikes will stop around 4.25%. Instead, the discrepancy is to be found in longer maturities where the curve implies the Bank rate will remain elevated longer than at other central banks. Read next: Ukraine Is Calling For More Sanctions Against Russia| FXMAG.COM What markets expect from the Bank of England over the coming months Source: Refinitiv, ING   That markets taking a more hawkish view of BoE policy than signalled, for instance in its forecast, is nothing new. What’s changed is the way participants look at inflation risk. This has prompted yield curves to take a much more benign view of Fed and ECB policy. Each country is different but we find the treatment of sterling rates increasingly at odds with that of the dollar and euro. As a result, we expect the differential between 5Y sterling and euro swap rates to shrink to 75bp. This convergence should also be helped by the worsening of UK economic surprise indices, just as their eurozone equivalent goes from strength to strength. The spread between euro and sterling swap rates is likely to narrow Source: Refinitiv, ING   We also think the GBP curve is due to flatten further. One likely driver is the market's growing confidence that the BoE, like the Fed, will soon be in a position to cut rates, although we wouldn’t expect this before 2024. Another less probable driver would be if the BoE feels the need to tighten policy more than expected in the coming meetings. We very much doubt that longer rates would follow the short end higher, pricing instead a growing risk of rate cuts down the line to cushion the economic hit. We think the GBP curve is due to flatten further Source: Refinitiv, ING GBP: Temporary strength The BoE’s broad trade-weighted measure of sterling has bounced around 6% since the dark days of September and will marginally ease the BoE’s fears of imported inflation. Given that a 50bp hike is not fully priced for Thursday, sterling could enjoy some limited and temporary strength should the BoE indeed hike 50bp. Depending on the post-FOMC state of the dollar, that could briefly send GBP/USD back into the 1.24/25 range and EUR/GBP back to the low 0.87s. However, the challenges facing sterling have not gone away. Large twin deficits, weak growth and what throughout the year should be building expectations that falling prices – especially from March/April onwards – will provide room for the BoE to cut rates around the turn of the year. In terms of a profile, we think a continued narrowing in GBP rates premium to the EUR can push EUR/GBP higher through the year towards the 0.90/91 area. GBP/USD should be supported by the better EUR/USD trend, but will probably struggle to hold any gains to the high 1.20s – potentially seen in the second quarter. Read this article on THINK TagsInterest rates Bank of England 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
Bank Of England Will Probably Be Unable To Avoid A Significant Easing Of Policy

The Bank Of England Is Likely To See One Or Two More Rate Hikes In The First Half Of The Year

Kenny Fisher Kenny Fisher 27.01.2023 14:32
The British pound is slightly lower on Friday. In the European session, GBP/USD is trading at 1.2366, down 0.37%. Will US Core PCE continue to drop? There are no UK releases today, so all eyes will be on the US Core PCE, which is considered the Federal Reserve’s preferred inflation indicator. The forecast stands at 4.3% y/y for December, following 4.7% in November. If the print is in line with the forecast, it will mark a fourth straight decline in inflation. The Core PCE release, even if it misses expectations, won’t change the outcome of the Fed meeting next Wednesday. The CME’s Fed Watch has pegged the likelihood of a 25-basis point hike at 98%. Still, the meeting could have a strong impact on the US dollar, depending on the tone of the rate statement and Fed Chair Powell’s follow-up remarks. The Fed has been very consistent in its hawkish stance, reiterating that rates will stay high and there are no plans to cuts rates, in contrast to the markets, which are expecting rate cuts late in the year. If the Fed repeats its hawkish stance at the meeting, it could give a lift to the US dollar. The Bank of England holds its meeting just a day after the Fed on Feb. 2. The central bank is widely expected to raise rates by 0.50%, which would bring the cash rate to 4.0% and would be a 10th straight rate increase. Despite the significant tightening, inflation is running at a sky-high 10.5%, meaning that the BoE can’t even think about a pause in its rate-tightening cycle. The terminal rate is likely to be reached at 4.25%-4.5%, so we’re likely to see one or two more rate hikes in the first half of the year. For the BoE, the first sign of success against inflation will be to bring it back to single digits, after four straight months above 10%.   GBP/USD Technical 1.2335 and 1.2233 are providing support There is resistance at 1.2446 and 1.2499 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.  
Long-Term Yields Soar Amidst Hawkish Fed: Will They Reach 5%?

Key events in developed markets next week - 28.01.2023

ING Economics ING Economics 28.01.2023 08:59
Next week is packed with central bank meetings. We see the Federal Reserve raising rates by 25 basis points, given inflation is moving in the right direction. For the European Central Bank, a rate hike of 50bp looks like a done deal, and we believe the Bank of England is likely to follow in the ECB's footsteps, given wage growth is persistently high In this article US: A slowdown in the pace of tightening UK: Bank of England to stick to 50bp hike following recent inflation data Eurozone: ECB to hike by 50bp; Lagarde to make hawkish statement   Shutterstock US: A slowdown in the pace of tightening Two major events in the US will shape market sentiment next week. First is the Federal Reserve policy meeting, where we expect it to raise the policy rate by 25bp. Having raised rates by 75bp on four consecutive occasions last year and then lifted the policy rate by 50bp in December, this marks a clear slowdown in the pace of tightening and appears justified given inflation is moving in the right direction and activity is slowing. However, the Fed remains wary and will again suggest that this is not the end for interest rate increases. The central bank will also be keen to dismiss the notion that it is preparing for potential rate cuts later this year. Financial conditions have loosened given movements in the dollar, Treasury yields and credit spreads and it may feel that any further loosening, fuelled by talk of potential policy easing in the second half of the year, could undermine its current actions in fighting inflation. We will then be looking at the January jobs report. Employment creation remains strong for now, but job lay-off announcements are coming in thick and fast. We are nervously watching what happens to the temporary help component, which has already experienced five consecutive monthly falls. Given the nature of the role, which is easier to be hired into and fired from, this tends to lead to broader shifts in employment. As such, we expect to see a softer non-farm payrolls increase than seen in recent months, but it is still likely to be well above 100k given the large number of job vacancies that remain. Read our full Fed preview here. UK: Bank of England to stick to 50bp hike following recent inflation data The Bank of England looks more likely to follow the European Central Bank than the Federal Reserve next Thursday, and we expect a 50bp rate hike for the second consecutive meeting. While the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move next month, the reality is that the recent data has looked relatively hawkish. Wage growth is still persistently high, both in the official numbers and the BoE’s own business surveys. Headline inflation came in a little lower than the Bank projected back in November, but services CPI – seen as a better gauge of domestically-driven inflation – has come in above expectations. Still, if we get a 50bp hike on Thursday then it’s likely to be the last. BoE officials have suggested that much of the impact of last year’s rate hikes is still to show through, and cracks are forming in interest-rate-sensitive parts of the economy. We expect one final 25bp hike in March, taking the Bank Rate to a peak of 4.25%. The key question for Thursday is whether the Bank itself acknowledges its work is nearly complete. We suspect it’s more likely to keep its options open. Read our full preview here. Read next: The Aussie Pair Is Holding Above 0.7100, The Major Currency Pairs Are Waiting For US PCE Report| FXMAG.COM Eurozone: ECB to hike by 50bp; Lagarde to make hawkish statement When the European Central Bank meets next week, all eyes and ears will once again be on communication. A rate hike of 50bp looks like a done deal, but how far and how fast the ECB will go from there is still unclear. We expect hawkish comments by ECB President Christine Lagarde in order to prevent another drop in market interest rates. Current market expectations about ECB rate cuts in 2024 are premature. Read our full ECB preview. Key events in developed markets next week Refinitiv, ING TagsUS UK Monetary policy Eurozone   Read the article on ING Economics   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  
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

Week Ahead: The Fed, The ECB And The Bank Of England Will Make The Rate Decision

Ed Moya Ed Moya 28.01.2023 09:30
US It doesn’t get any busier than this week. Traders will focus on the FOMC decision, but they should also closely watch mega-cap tech earnings, and the nonfarm payroll report. The Fed is expected to continue slowing their rate hiking pace with a small 25 basis point rate rise.  Disinflation trends are clearly here, but Core PCE suggest price pressures are coming and the labor market refuses to break and could prompt the Fed to remain vigilant with its inflation fight. The nonfarm payroll report is still expected to show job growth of 175K, even as we hear of multiple reports of layoffs announcements across tech, finance, and real estate. Most of the layoffs will happen throughout the next couple of quarters, so we still could see another better-than-expected jobs number. Earnings season gets chaotic as Wall Street will get results from Advanced Micro Devices, Alphabet, Amazon, Amgen, Apple, Canadian Pacific Railway, Cigna, ConocoPhillips, Deutsche Bank, Exxon Mobil, Ferrari, Ford Motor, General Motors, Gilead Sciences, GSK, Hershey, Honeywell International, Humana, McDonald’s, McKesson, Merck, Meta Platforms, Novartis, Qualcomm, Samsung SDI, Sanofi, Shell, SoftBank, Sony Group, Starbucks, T-Mobile, Thermo Fisher Scientific, and United Parcel Service EU Three events stand out next week, the most obvious being the ECB meeting on Thursday. While the rate decision is what everyone will be waiting for, the flash inflation data on Wednesday and GDP on Tuesday could have some influence on whether the central bank will seek to soften its hawkish message. A 50 basis point hike is mostly priced in but what comes next is less certain at this point. UK The Bank of England has a particularly tough decision over the coming months. On the one hand, inflation is above 10% and the economy likely didn’t fall into recession in the second half of last year, to the surprise of many. On the other, inflation has decelerated in the last two months and the November GDP data probably delayed the inevitable rather than making it less likely. The outlook remains bleak, how the BoE navigates is still highly uncertain. And next week brings the monetary policy report containing the latest forecasts from the central bank. The majority of analysts expect them to raise rates by 50bp to 4.00%, while a minority are eyeing a 25bp hike. Russia Unemployment on Monday and a couple of PMI reports are the only highlights next week. That aside, focus will remain on events in Ukraine. South Africa The whole economy’s PMI is the only highlight next week. Turkey Official inflation data is the main release next week but this has become more of a political focus in recent years than an economic one, as the central bank pays very little attention to it.  Inflation is expected to slow towards low-50s, potentially making it to the 30s by the end of the year. Switzerland A few notable pieces of economic data next week including the leading indicator, retail sales and PMI survey. China China markets reopen after the Lunar Year Holiday and traders await to see how much economic activity improved last month after they began rolling back some COVID restrictions. Traders will pay close attention to the official government manufacturing PMI reading which could come close to returning to expansion territory.  The services PMI is expected to post a strong rebound from 41.6 to 51.5. India The focus will fall on the Indian government’s budget which should focus on deficit reduction.  Economic data releases include India’s fiscal deficit, eight infrastructure industries and both manufacturing and services PMIs. Australia & New Zealand China’s COVID reopening has supported both Australian and New Zealand dollars significantly. Much attention will go towards China’s PMI data readings. For Australia, the economic calendar contains the December retail sales report that should show spending is cooling, building approvals are expected to rebound, and the NAB business confidence report. The New Zealand economic calendar contains the fourth quarter employment report, the December building permits, and ANZ consumer confidence. Japan The pressure of the sharp depreciation of the yen in the past has eased somewhat and the reopening of China should support the start of a recovery in the Japan economy in the first half of this year. The next BoJ meeting in March will be the last meeting of Governor Haruhiko Kuroda’s term of office. Bank of Japan governor candidate Takatoshi Ito recently said that if the BoJ abandons yield curve control, it will need to conduct a comprehensive review of its policy framework. Next week will focus on the jobless rate, retail sales, industrial production, housing starts data, and PMI readings. Singapore It will be a busy week of data for Singapore. Economic releases include money supply data, unemployment rate, PMI data, and retail sales. Markets Energy Crude prices are poised to finish the week on a strong note as global recession fears are countered by optimism that China’s reopening momentum will continue and over economic data that suggests large parts of the US economy remains strong.  The upcoming week has two massive events; the OPEC+ virtual meeting on output and the FOMC decision. The OPEC+ meeting might be easy with a decision to keep output steady as they await what happens with the short-term global demand outlook. Traders will also pay close attention to earnings from both Exxon and Shell. Gold Gold prices are consolidating leading up to the FOMC decision. Next week, the Fed is likely to shift from a 50bp hike pace to just a quarter point rate rise, but still will say that more could come.  Gold’s outlook for the rest of the year is turning rather bullish for some investors, but a lot of that hinges inflation steadily falling back below 3.0%. Cryptos Cryptos continue to benefit from the broad risk rebound across Wall Street.  The Fed is nearing the end of its rate hiking cycle and that has helped all interest rate sensitive assets to start the New Year.  The headlines across the crypto space have not all been doom gloom as Moody’s works on a scoring system for stablecoins, Amazon has a NFT initiative, and as some firms successfully raise money.  Bitcoin has major resistance at the $24,000 level, so momentum traders will closely watch to see how prices behave post-FOMC decision.  Given where inflation stands, the Fed will likely remain hesitant that a pause is imminent and lean more towards staying hawkish. If the Fed follows the lead from the BOC and signals they are almost done with rate rises, Bitcoin could tentatively break past $24,000. 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.
Oil Could Be Ready To Pop, The Bank Of England Market Pricing Is More Mixed

Oil Could Be Ready To Pop, The Bank Of England Market Pricing Is More Mixed

Saxo Bank Saxo Bank 30.01.2023 09:33
Summary:  Critical week for markets with the Fed, the ECB, and the BOE deciding on policy interest rates. The market has priced in a downshift by the Fed to a 25bp hike, bringing the Fed Fund target to 4.50%-4.75%, while the ECB sticking to its gun of a 50bp hike. The expectation for the BOE action is mixed with a slightly higher odd assigned to a 50bp increase. US ISM and job data will be pivotal for the direction of the next market movement, in conjunction with earnings announcements from the mega-caps Apple, Alphabet, Amazon, and Meta. Investors also have their eyes on China as it returns from a week-long holiday on the back of solid traffic and consumption data during the Lunar New Year. The Fed is expected to downshift again The expectations of a soft landing have picked up since the start of the year, relative to the rising recession bets seen in H2 of last year. Meanwhile, inflation has been on a steady downtrend in the last six months, which has allowed the Fed to downshift to a 50bps rate hike in December after a spate of rate hikes in 75bps increments before that. The consensus expects the FOMC will downshift again to lift its Federal Funds Rate target by 25bps to 4.50-4.75% on February 1, although some still expect the central bank to hike rates by a larger 50bps increment. Fed speakers have also broadly guided for a smaller hike at the next meeting. With economic data remaining volatile, there is some reason to believe that Powell and team may be aiming to lengthen the hiking cycle in order to buy more time to assess both the incoming data and the impact of their previous aggressive rate hikes. This warrants a smaller rate hike of 25bps at the February 1 decision. The key risk factor, favouring another 50bps rate hike, could be the financial conditions which are the easiest since April 2022 or the risks of another shoot higher in inflation due to China’s reopening and the resulting rise in commodity prices. US ISM surveys and the jobs report to provide further input for the soft landing vs. recession fight The ISM surveys are key to watch not just for activity data but also to understand if input and output price pressures are trending in the desired direction. For the manufacturing survey, the headline is expected to soften again and slip further below the 50-mark, while the ISM services survey is expected to return above 50. The jobs data can mean significant volatility for the markets as wage pressures likely soften further but the headline nonfarm payrolls still remain pretty robust and unemployment rate remains near record lows despite unending news of layoffs in tech and other sectors. All these data points will be keenly assessed by the markets which are now pricing in a soft landing. Stronger-than-expected data on growth with sustained slowing inflationary pressures will further boost the markets, while weaker-than-expected data can ignite some caution and profit taking. China returns from buoyant Lunar New Year holiday, expecting pickups in PMIs China returns from a week-long Lunar New Year holiday, during which, sales in consumption-related industries grew by 12.2% from the same lunar calendar period last year. Estimates of passenger traffic from various sources all pointed to a strong recovery of activities. The official NBS Manufacturing PMI and Non-manufacturing PMI, scheduled to release on Tuesday, are expected to bounce back strongly to the expansionary territory. The median forecasts from Bloomberg’s survey of economists call for the Manufacturing PMI to rise to 50.1 in January from 47.0 in December and the Non-manufacturing PMI to bounce sharply to 52.0 in January from 41.6 in December. Caixin China Manufacturing PMI, which has a bigger representation of SMEs in the eastern coastal regions, is however expected to improve only moderately to 49.8 in January from 49.0 in December. Caixin China Services PMI is forecasted to bounce to 51.6, back to expansion, from 48.0 in December. The in-person service sector, which had been hard hit during the pandemic, recovered strongly as the mobility and consumption data during the Lunar New Year holiday indicated. ECB and BOE meetings likely to be pivotal this week for EUR and GBP direction The European Central Bank (ECB) is expected to hike rates by 50bps to 2.50%, with the markets pricing in a 50bps rate hike at 86% with a 14% chance of a 75bps move. ECB speakers have been broadly hawkish, but even the most hawkish ones have hinted at multiple 50bps moves rather than another 75bps. Overall, about 140bps of rate hikes are priced in from the ECB until around mid-year, keeping ECB as the most hawkish G20 central bank. That reduces the scope of a potential hawkish surprise from this week’s meeting and means that EURUSD may have risks tilted to the downside. The Bank of England market pricing is more mixed, with a 70% probability for a 50bps rate hike and 30% for a 25bps, and the potential for a split vote is also high. Therefore the bar for a surprise is higher, and will likely come from a revision in inflation forecasts. A steeper than expected cut in inflation forecasts could mean a sooner-than-expected end to the BOE’s tightening cycle, likely weighing on the GBP which seems to be ignoring the economic headwinds facing the UK economy for now. Oil supply to shrink, will oil pop or see profit taking ahead of OPEC meeting, with oil equites to follow Oil could be ready to pop with Chinese demand expected to rise, while supply concerns pick up, with the EU embargo on Russian seaborne fuel exports kicking in on February 5. However, traders may book in profits and play it safe ahead of the OPEC+ committee meeting on February 1 and ahead of the FOMC outlook on interest rates in the US on Wednesday. It is expected that the OPEC+ countries won’t boost production which could underpin prices at a time when diesel demand is rising amid travel picking up in the Asian pacific region (with aircraft travel almost back at 2019 levels). Traders have also been watching energy names such as Chevron- its share are up 27% from the September low, Occidental Petrolum is up 15%, Marathon Oil is up 35% from its September low. For more on oil’s fundamental, and other commodities, click here. The China reopening drives the biggest monthly jump in Australian stocks since 2020 Australia’s share market, the ASX200(ASXSP200.I) is outperforming the S&P500 and Nasdaq, with a gain of 16% from its low - while also recording its biggest monthly gain since November 2020, (up 6.4%). Australia’s market - a dividend and commodity play, as well as being an investment proxy for China's reopening could also continue to outperform the US this year, given its heavy in materials such as iron ore, copper and aluminium, as well as financial companies - benefiting from higher interest rates. Mining giant BHP Group expects 17% dividend growth, Fortescue Metals sees higher sales in the first half of 2023 to China. Also consider, the iron ore price hit a new 2023 on the notion demand will rise. However, the iron ore (SCOA) price could be at risk of short-term correction, given it has rallied up almost 70%. So consider potentially taking profits given BHP shares are up 46% from their July low, Rio Tinto’s up 43%, Fortescue is up 53%. Although there is a risk of a short-term correction, as supply is lower than a year ago, the price over the longer term seems underpinned. Also consider sales to China have been increasing with Fortescue reporting greater buying of port side iron ore to 4.0mt (in the prior quarter), while guiding for H1 sales to rise to 9.3mt. Lastly, consider Australian insurers, banks and financials will likely benefit from the RBA’s rate hikes - QBE and WBC are expected to report profit jumps of over 30%. Read next: A Loss Of $48 Billion In Shares Of The Indian Group Adani As A Result Of The Hindenburg Research Report| FXMAG.COM Key U.S. corporate earnings As of 27 January, 143 or 29% of the S&P 500 companies have reported Q4 earnings. Overall, 41% of those who reported results beat street estimates and 41% were in line with estimates. The information technology, healthcare, and materials sectors had the highest percentage of companies reporting positive surprises. This week, Whirlpool (WHR) on Monday, General Motors (GM) and McDonald’s (MCD) on Tuesday, Amazon (AMZN), Ford Motor (F), and Starbucks (SBUX) on Wednesday will inform us of the latest state of U.S. consumers. Among them, the focus will be on Amazon, for which, the street consensus forecasts an 88% Y/Y decline in Q4 EPS to USD0.172. The business outlook from United Parcel Service (UPS), reporting on Tuesday, will be closely monitored for a glimpse of the health of global economic activities. Also reporting on Tuesday, Advanced Micro Devices (AMD) is expected to register a 27% Y/Y decline in EPS, reflecting the headwinds faced by the semiconductor industry as indicated in the poor results and downbeat guidance from Intel (INTC) reported last week. Investors will also watch Qualcomm’s results on Thursday closely for additional insight into the semiconductor and telecommunication equipment industries. The most-watched results this week will be mega-cap names Meta Platforms (META) on Wednesday, and Alphabet (GOOGL) and Apple (AAPL) on Thursday. The median forecasts from street analysts are expecting the latest quarterly EPS to decline by 40% to USD2.22 at Meta, by 22% to USD1.20 at Alphabet, and by 7% to USD1.95 at Apple. Monday: Whirlpool (WHR), GE Healthcare Technologies (GEHC) Tuesday: Electronic Arts (EA), General Motors (GM), McDonald’s (MCD), NVR Inc (NVR), PulteGroup (PHM), Exxon Mobil (XOM), Marathon Petroleum (MPC), Phillips 66 (PSX), Amgen (AMGN), Pfizer (PFE), Caterpillar (CAT), United Parcel Service (UPS), Advanced Micro Devices (AMD), Corning (GLW) Wednesday: Meta Platforms (META), T-Mobile (TMUS), Altria (MO), Metlife (MET), Boston Scientific (BSX), Thermo fisher scientific (TMO) Thursday: Apple (AAPL), Alphabet (GOOGL), Amazon (AMZN), Qualcomm (QCOM), Ford Motor (F), Starbucks (SBUX), ConocoPhillips (COP), Intercontinental Exchange (ICE), Bristol-Myers Squibb (BMY), Eli Lilly (LLY), Gilead sciences (GILD), Merck (MRK), Honeywell (HON), Friday: Cigna (CI) Key economic releases & central bank meetings this week Monday 30 January Eurozone         Economic, industrial & services confidence (Jan) Tuesday 31 January U.S.     Employment cost index (Q4) U.S.      Chicago PMI (Jan) Eurozone GDP (Q4) Germany GDP (Q4) France GDP (Q4) JapanIndustrial production (Dec) Japan  Retail sales (Dec) Wednesday 1 February U.S.     FOMC decision U.S.      ADP private employment (Jan) U.S.      ISM manufacturing (Jan) Eurozone EU harmonized CPI (Jan) Hong Kong GDP (Q4) Thursday 2 February U.S. Unit labor costs (Q4) Eurozone ECB meeting U.K.Bank of England rate decision Friday 3 February U.S.      Non-farm payroll, unemployment rate, average hourly earnings (Jan) Singapore Retail sales (Dec)     Source: Saxo Spotlight: What’s on investors' & traders' radars this week? Fed/ECB/BOE meetings, US ISM and jobs report, China back from holiday and reports PMI, Megacap earnings | Saxo Group (home.saxo)
Despite The Improvement In The Outlook Due To Falling Energy Prices, The Economic Environment In Britain Remains Difficult

China Steps Into Bull Market, How Much The Bank Of England Will Be Raising Its Rates?

Swissquote Bank Swissquote Bank 30.01.2023 10:44
The new week kicked off with Chinese equities jumping into a bull market as traders returned from their Lunar New Year holiday. S&P500 and Nasdaq The S&P500 and Nasdaq also freed themselves from the 2022 bearish trend, while global bond markets had their best January since 1990. And if the equity rally is still on a shaky ground – due to fear that the slowing economy could hit company earnings – the future in bonds looks brighter. Policy verdicts In the macro front, the Federal Reserve (Fed), the European Central Bank (ECB) and the Bank of England (BoE) will be announcing their latest policy verdicts, between Wednesday and Thursday. Fed For the Fed, there is extremely little doubt that this week’s rate hike won’t be anything more than a meagre 25bp hike. BoE The ECB is expected to hike by 50bp this month, while we don’t know by how much the BoE will be raising its rates. In one hand, the BoE should continue fighting against inflation – which remains in the double-digit zone in Britain. On the other hand, the economic outlook for Britain is so morose – with country-wide strikes adding salt and pepper to the gloomy picture that Bailey cannot throw a series of 50bp hikes in the middle like Madame Lagarde. Stocks market Elsewhere, the Indian markets are being shaken by the Adani scandal. OPEC will meet this week, and big US companies including Amazon, Apple, Google, Meta, Exxon, Starbucks and Ford are due to announce earnings throughout this week! Watch the full episode to find out more! 0:00 Intro 0:39 China steps into bull market 1:01 S&P500, Nasdaq extend rally into bullish zone 2:04 Bonds record best Jan since 1990 & more gains are in the store 3:18 What to expect from the Fed, US jobs data this week? 6:10 50bp from ECB, and what else? 7:16 Will the BoE dare a 50bp hike? 8:53 Also this week: India shaken by Adani scandal, OPEC to hold fire, Apple, Amazon, Google & Meta to post Q4 results 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 #ECB #BoE #OPEC #meeting #Apple #Amazon #Google #Meta #Exxon #earnings #US #inflation #NFP#data #Fed #expectations #USD #EUR #GBP #crude #oil #China #bull #market #Adani #scandal #Nifty #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
UK Budget: Short-term positives to be met with medium-term caution

The Bank Of England Is Anticipated To Hike Rates By 50 bp As A Result Of A Wealth Of Data

Jakub Novak Jakub Novak 30.01.2023 14:15
After the Bank of England meeting this week, the British pound is still optimistic about future growth since a sharp rise in salaries in the country is probably going to cause inflation to reach a new round and maintain its double-digit level. This decision will be extremely painful for families Investors and experts anticipate that the UK central bank will increase its benchmark interest rate on Thursday to 4%. This will be the fastest increase in three decades and the greatest rate since 2008. This decision will be extremely painful for families who are already trying to cope with the greatest cost of living increase in history. In a protest that their pay is not keeping up with inflation, which increased to a 41-year high last year, more than 1 million employees in the public sector are set to abandon their positions this week. Except for the time that followed the epidemic, politicians led by Governor Andrew Bailey are concerned that wages are rising at the quickest rate in history, raising the possibility of a spiral in which rising salaries lead to rising prices. The supply assessment Officials are currently putting the finishing touches on an annual report on pay fluctuations and an evaluation of the economy's potential for productivity. The supply assessment is likely to indicate a more competitive labor market than anticipated, while the report is likely to focus on future wage increases by businesses in 2023. These elements will cause price increases, which will make it even more necessary to boost rates even when the economy is contracting. At its meeting on Thursday, the Bank of England is anticipated to hike rates by 50 basis points as a result of a wealth of data demonstrating ongoing inflation. Although policymakers are expected to hold off on sending out overt signals that borrowing costs are about to reach their maximum, economists anticipate the action will put the central bank closer to the marginal rate in this cycle of hikes. The Bank of England will need to further cool the economy To avoid the development of a spiral in which wage growth + price growth, the Bank of England will need to further cool the economy by raising unemployment. This is true even though predictions called for a recession this year and a sharp decline in inflation compared to the level predicted in November. Many predicted a 4.8% pay gain in 2022, the highest percentage in the study's 15-year history. According to the most recent official data, average earnings, excluding incentives, rose 6.4% from a year earlier in the three months leading up to November. Since accounting began in 2001, this is the biggest rise. The regulator has few options, particularly if the government of Rishi Sunak continues to offer concessions and raise wages for the populace to ease the worst recent cost-of-living problem. GBP/USD Regarding the technical analysis of GBP/USD, the pound continues to be in demand. Purchasers must maintain their advantage above 1.2350. The only thing that will increase the likelihood of a further recovery to the area of 1.2440, after which it will be possible to discuss a more abrupt move of the pound up to the region of 1.2490 and 1.2550, is the failure of the resistance of 1.2400. After the bears seize control of 1.2350, it is possible to discuss the trading instrument's pressure returning. The GBP/USD will be pushed back to 1.2285 and 1.2170 as a result, hitting the bulls' positions. EUR/USD Regarding the technical analysis of EUR/USD, there is still demand for the single currency, and there is a potential that monthly and annual highs will continue to be updated. To do this, the trading instrument must maintain a price above 1.0850, which will cause it to surge to the area of 1.0900. Above this point, you can easily reach 1.0930 and update 1.0970 in the near future. Only the breakdown of support at 1.0850 will put more pressure on the pair and drive EUR/USD to 1.0805, with the possibility of falling to a minimum of 1.0770 if the trading instrument declines.   Relevance up to 08:00 2023-01-31 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/333588
There Are No Obvious Reversal Of GBP/USD Pair Signs Yet

The Market Does Not Now Show Any Willingness To Decrease Demand For The Pound

InstaForex Analysis InstaForex Analysis 31.01.2023 09:02
The wave analysis for the pound/dollar pair now appears rather complex, doesn't call for any clarifications, but starts to differ significantly from the analysis of the euro/dollar pair. Our five-wave upward trend section has the pattern a-b-c-d-e and is most likely already finished. Although the recent increase in the pair's quotes proved to be too powerful, wave b has developed into a form that is too long and is on the edge of cancellation. I assume that the downward section of the trend has started to form and will take at least a three-wave form. The current upward wave will cease to be regarded as wave b if the increase in quotes even somewhat persists, and the analysis for the entire wave will need to be adjusted. However, if the wave analysis is still accurate, I still anticipate the development of a falling wave, and the pair can decline by 500–600 basis points, up to a level of 1.1508, which corresponds to a 50.0% Fibonacci ratio. The validity of the current wave analysis is maintained because the peak of the proposed wave b does not yet surpass the peak of wave e. The British pound could begin a long decline. The pound/dollar exchange rate has been moving recently with horizontal dynamics. Since quotes remain close to the peaks of waves b and e, there is nothing to be said regarding changes in the exchange rate. Although wave b is about to be canceled, the market is still not in a rush to lower demand for the pair. It would be far more sensible and attractive to first develop three waves downward before beginning to develop a new upward trend section. Although the market does not now show any willingness to decrease demand for the pound or increase demand for the dollar, I do not completely rule out the start of the development of a downward wave c this week. It has no desire to participate in the preparation for the Fed or Bank of England meetings. The British economy has been the topic of much discussion recently, and most analysts concur that 2023 will be a very challenging year for the UK. Higher taxes, weaker-than-inflation wage growth, and excessive inflation that the regulator is unable to control just yet. All of this should have prompted Andrew Bailey or other Bank of England members to make new, aggressive statements, but in practice, things can go the other way. A severe recession might be avoided by the regulator's decision. He can anticipate that as energy prices decline over time, inflation will also gradually decline. The markets are uneasy because no one knows for sure what monetary policy the regulator will follow in the first part of the year. Although I believe that rates will continue to rise, I also believe that the tone will gradually shift in favor of "dovish." The pair needs this precisely to create the required downward wave. Conclusions in general The development of a new downward trend section is predicated on the wave pattern of the pound/dollar pair. Currently, sales with targets at the level of 1.1508, or 50.0% Fibonacci, might be taken into account. You can set a stop-loss order above the peaks of waves e and b. The upward section of the trend is probably over; however, it might yet take a longer form than it does right now. However, you must exercise caution while making sales because the pound tends to rise. The display is comparable to the euro/dollar pair at the higher wave scale, but differences still start to show. Currently, the upward correction portion of the trend is almost finished (or has already been completed). If this assumption is accurate, then we must wait for the development of a downward section to continue for at least three waves with the possibility of a decrease in the area of figure 15.   Relevance up to 06:00 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/333705
ECB's Tenth Consecutive Rate Hike: The Final Move in the Current Cycle

The Fed’s Likely Downshift To 25bps Rate Hikes Makes The Most Sense

Saxo Bank Saxo Bank 01.02.2023 09:32
  Summary:  A slew of key central bank meetings are on the horizon, with the Fed decision due today and the Bank of England (BOE) and European Central Bank (ECB) announcements due tomorrow. Fed Chair Powell has little reason to turn dovish at this point, with risks to inflation emanating from easing financial conditions and China reopening. But a hawkish Powell may only shift the focus back to data. ECB’s hawkishness has some more room to run, much as the BOE’s divide. Key central bank meetings are due over the next two days, presenting a host of event risks. Markets however remain rather upbeat and are showing no signs of nervousness, with VIX sitting below 20 and S&P500 staring at a key resistance of 4100. Although part of the market rally this week could be attributed to month-end flows, there is some reason to believe we are going into these central bank meetings with dovish-to-neutral assumptions. Let us consider what we can get. Fed: Powell to emphasize higher-for-longer With economic data in a Goldilocks situation in the US, the Fed’s likely downshift to 25bps rate hikes makes the most sense as it buys them more time to assess the growth and inflation trajectories. We wrote a preview for the Fed meeting here, but it is worth noting that it is becoming extremely necessary for Powell to push back on the 2023 equity rally and the easing financial conditions especially with the recent rise in commodity prices starting to lift inflation expectations. But will the market care? Despite Powell’s repeated messages on higher terminal rates, market pricing seems to continue to chart its own path. The key message at this meeting needs to move away from terminal rates to the push back against excessive easing that the market is pricing in, and an emphasis on higher-for-longer interest rates with risks to inflation skewed to the upside. There is little reason for Powell to be dovish, as he would certainly want to push back on excessive easing priced in by the markets. But a neutral-to-hawkish Powell is widely expected and may likely invoke only a knee-jerk reaction from the markets, offering some tactical opportunities. The US dollar may have some scope to make a recovery but the economic data trends are a bigger piece of the puzzle as of now, and will be a guiding the path for the USD more than the Fed itself. Only a firmer commitment from Powell in either direction, such as a 50bps rate hike or signaling a clear pause (like the BOC), would drive a market reaction that sticks. Read next: AUD/USD Pair Remains Under Strong Selling Pressure, The EUR/USD Pair Has Been Falling But Remains Above 1.08$| FXMAG.COM ECB: Still scope for upward repricing in the front-end curve The European Central Bank has surpassed its peers in the hawkishness quotient recently, and will likely repeat that this week. A 50bps rate hike is expected, along with the guidance for another 50bps in March which still has the scope to bump up front-end pricing with markets looking at 93bps of rate hikes over the next two meetings. Looking further out, about 160bps of rate hikes are priced in for the ECB until mid-year and that limits the scope to surprise on the hawkish side. If Fed proves to be more hawkish than the ECB this week, EURUSD can potentially move towards 1.07. But incoming data, including the Spanish CPI report this week, give the ECB enough ammunition to preserve its current hawkish stance this Thursday. But the 1.0920 resistance has proved tough for EURUSD, and without an upward repricing in the ECB path, that will remain difficult to overcome. EURGBP appears to be an easier pick for this week, with ECB and BOE policy and economic divergences much more evident. Bank of England: 50 and BOC? The Bank of England will likely be the trickiest given the indecisive market pricing as well as the scope for a split vote. Broader consensus hints at another 50bps rate hike this week, but a pause signal, potentially not as clear as the one from Bank of Canada (BOC), may also be on the cards. For this, investors will need to read through the Bank’s quarterly inflation forecasts which are also due to be reported this week. Downward revisions to inflation forecasts from November estimates of 1.8% for 2024-end and 0.4% for 2025-end will mean further pricing out of tightening. Growth risks for the UK economy are also more significant than the other major economies, as also highlighted by the latest IMF forecasts (see below). While the Bank’s own growth forecasts may be subject to an upward revision after a recession was highlighted previously, and data has been more hawkish since, it still seems that the market pricing of the BOE’s path from here remains prone to downside revisions. This leaves little scope of upside on the sterling.   Source: Macro Insights: Central banks on the agenda – Fed, ECB and Bank of England | Saxo Group (home.saxo)
Rates Spark: Balancing data and risk factors

Rates Spark: The end is near

ING Economics ING Economics 02.02.2023 08:36
US market rates fell after the Federal Reserve decision but this looks more like a market positioning effect than anything specific from the meeting. Expect some retracement. Both the European Central Bank and Bank of England are likely to hike by 50bp today, but the undertones could be quite different Net stand-alone outcome from the Fed meeting is an excuse for market rates to push higher The initial impact was upwards pressure on rates – mostly at the front end – and mostly in the real rates space. This fitted with the market's reading that the Fed is not impressed enough yet with the reduction in inflation risks. But that was quickly reversed, and we doubt that the reversal will be sustained. We probably need to see the payrolls report (Friday) before we get the next big move. In the meantime, the market now knows that a March hike is on. That keeps the rate hiking pressure in the mindset over the rest of the first quarter. Whether or not the Fed's view stands at the May meeting won't be known until then, which means the hawkish tilt should be sustained at least till then. A March hike is on. That keeps the rate hiking pressure in the mindset While “over-hiking” can be good for the long end, this is also a higher carry cost associated with higher front-end rates, and that’s a bond negative in a static market. In other words, if you are long bonds and yields don’t fall, you’re in a negative mark-to-market position. That’s a partial argument for further compensatory upward pressure on market rates. The other argument comes from the shape of the curve, which remains remarkably inverted. In fact, it’s unprecedented (at least in the past four decades) for long-tenor market rates to be this far below the Fed funds rate, specifically while the Fed is still hiking. The other key Fed rates have also been raised by the same amount, the full 25bp. That goes for the reverse repo facility (4.55%), the permanent repo facility (4.75%) and the rate on excess reserves (4.65%). This is all broadly as expected. And no special mention about the bond roll-off, which continues as was. There was no reference to outright bond selling either, but hard to believe this is not ever discussed; it’s just that it tends not to make the Fed minutes. US curve inversion means negative carry for holders of long-end bonds Source: Refinitiv, ING ECB meeting: a 50bp hike and guidance for more plus QT parameters While headline inflation coming down is encouraging, the ECB has expressed a focus on core inflation as a measure for underlying price pressures. That remains stubbornly high, implying the ECB is not done with its job yet. Obviously, markets are thinking beyond the next meeting(s) and have already started to price in rate cuts for 2024. ECB officials have pushed back against this notion ahead of today’s policy decision, but with modest success. By the end of 2024, the market still sees the ECB bringing down rates by 90bp from their prospective peak this year. What we will be watching today in brief (full preview here): 50bp rate hike: Markets are firmly priced for a hike of the depo rate to 2.5% today, which is also our expectation.  Rates guidance: The ECB decides on a meeting-by-meeting basis, but still provides a perspective for rates given prevailing conditions. This guidance should be the main focus today. In December the ECB signalled “rates will still have to rise significantly at a steady pace”, with President Christine Lagarde specifying in the press conference that one should expect rate increases “at a 50bp pace for a period of time”. The market largely agrees with our view of another 50bp in March, pricing in 94bp in total by then. Thereafter the pace slows, with a total of 153bp delivered by the July meeting, i.e. depo rate peaking at 3.5%.    Quantitative tightening parameters: President Lagarde promised “detailed parameters for reducing APP holdings”. We would expect the ECB to follow a proportionate reduction across the different asset portfolios, and – with regards to the public sector – sticking with the capital key split across jurisdictions. The ECB may think of shifting exposure towards supranational issuers in the context of “greening” the portfolio.   The ECB has no reason to dial down its hawkishness We think that the ECB has no reason to dial down its hawkishness. Market rates are correctly set for the next few meetings, but we think the notion of rate cuts starting in 2024 could receive more pushback given the ECB's awareness that financial conditions are not just dictated by setting their key rate, but by rates along the entire curve. The risk is that any signs of dissent – which have been notably absent from official communication, but surfaced in a “sources” story – could erode the impact of the ECB’s guidance on rates. That dissent may only show over the next couple of days, though.   Read next: USD/JPY Pair Drop Below 130.00, GBP/USD Is Trading Below 1.2330, The Australian Dollar Remains Generally Up| FXMAG.COM BoE meeting: 50bp hike with a dovish feel Our economists note that while the minutes of the December meeting appeared to open the door to a potential downshift to a 25bp move today, the reality is that the recent data has looked hawkish. Wage growth is still persistently high, and especially services inflation has come in above expectations. What we are watching in brief (for a full preview here): 50bp hike: We expect 50bp hike today, but we think the decision is a closer call than market pricing of 45bp suggests. Vote split: Our economist base case is that six of the nine policymakers will vote for a 50bp hike, one for 25bp and two for no change. New forecasts: The growth outlook looks likely to be upgraded given calmer markets and scaled-back rate hike expectations since the mini-Budget crisis. For the medium-term story, one should keep an eye on the so-called ‘constant rate’ inflation forecasts. If these show inflation at, or very close to, 2% in a couple of years' time it would signal that the Bank Rate is close to its peak. Guidance: The BoE is more likely to keep its options open. Our economist expects the Bank to reiterate being prepared to act ‘forcefully’ in future if required, but shy away from signalling a slowing of the pace in March. Markets still have a relatively hawkish take on the BoE Markets have come around to our more benign view on the terminal rate in this cycle, now implying hikes will stop around 4.25%. Though relative to what we see in other currencies, markets still have a relatively hawkish take on the BoE further out the curve, pricing more elevated rates for longer. Even if the BoE hikes 50bp today, that persistence could be challenged given the overall relatively dovish spin we expect surrounding the hike, for example in the voting split or new forecast, but also given the more general dissent voiced by some BoE officials thus far. We expect more convergence of sterling and euro swap rates after today's central bank meetings Source: Refinitiv, ING Today's events and market view The main highlights today are the ECB and BoE policy decisions. And while both central banks are expected to hike by 50bp, the undertones could be quite different. The ECB should continue to push a concerted hawkish line, while at the BoE we should see more signals of the peak in rates being close. We expect more convergence between EUR and Sterling rates, especially in the 5Y area pertaining more to the medium-term outlook. With regards to eurozone sovereign spreads we think the risks are still tilted towards wider spreads as the impact of quantitative tightening and potential shifts today are underappreciated. Among the data releases, we will see the US initial jobless claims, though they are outweighed by tomorrow's jobs data for January. In the supply space, we will get bond auctions in Spain and France.  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
Kiwi Faces Depreciation Pressure: RBNZ Expected to Hold Rates Amidst Downward Momentum

The MPC Is On The Horns Of A Dilemma But The ECB Will See Another 50bps Rate Hike

Michael Hewson Michael Hewson 02.02.2023 08:51
Having seen the Federal Reserve hike rates yesterday evening by 25bps and signal that they are far from done, equity markets reacted by rallying strongly with the Nasdaq 100 surging to its highest levels since early September.   For all of Fed chair Jay Powell's insistence that more rate hikes were coming, and that the Fed was not looking at cutting rates this year, his failure to push back emphatically on direct questions about market expectations of rate cuts this year, as well as the loosening of financial conditions has created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy is likely to evolve. To borrow a line from Cool Hand Luke, "what we've got here is a failure to communicate".    Long story short, the market thinks the inflation job is done, even if the Fed hasn't arrived at that conclusion yet. Consequently, this goes a long way to explaining why US markets closed strongly higher and yields and the US dollar plunged to 9-month lows, with the euro hitting 1.1000 for the first time since April last year. Last night's rally in the US looks set to translate into a higher European open as we now look towards the Bank of England and the European Central Bank to outline their messaging when it comes to the timeline of their own rate hiking cycle.   Starting with the Bank of England, the MPC is on the horns of a dilemma as the UK economy continues to struggle with double digit inflation, although the economy may well not be as bad as perhaps was thought at the end of last year, which could prompt a modest tweak to some of its economic forecasts.   The slide in energy prices in recent months has alleviated some of the pressure on wage packets, when it comes to petrol prices, however with food price inflation still at 16%, they will also be acutely aware that a weak pound will make headline inflation much sticker than it needs to be if they show any indication, they are going soft when it comes to hit its inflation target.   There will be the usual concerns about the impact on mortgage costs from another 50bps move but 5-year gilt yields have barely moved since the lows set back in November, although 2-year yields are higher.   Whatever we get today we are likely to see a split again, with the likes of Tenreyro and Dhingra likely to be the most averse to another hike given that they voted for no change in December.   The likes of Catherine Mann are likely to push for another 50bps, while the rest of the committee are expected to split between 25bps and 50bps, from the current 3.5%. If we do get 50bps will the Bank of England signal it is done, and signal a pause, or will they move by 25bps and signal there is more to come. With core prices looking sticky and wages rising at over 7% any procrastination on the MPC's part when it comes to forward guidance could well do more harm than good.   Whatever we get from the MPC today history has taught us it's unlikely to help the pound in the short term given the Bank of England's propensity to talk the pound lower whenever they meet. There is also the fact that the pound has been under pressure on the back of the belief that the Bank of England is much closer to the end of its rate hiking cycle than the ECB.     After the Bank of England, it is the turn of the European Central Bank and here there is little doubt that we will see another 50bps rate hike later today. It is what comes next that is likely to dominate the discourse today.   When the most recent ECB minutes were released, it became apparent that a raft of ECB governing council members wanted a much more aggressive approach, pushing for a 75bps move.   In the wake of the recent Davos Economic Forum ECB President Lagarde doubled down on her December messaging of multiple successive rate hikes, saying that inflation is still way too high, and markets are underestimating the ECB's resolve to drive prices back towards their 2% inflation target. This hawkish message is unlikely to be softened despite the recent fall in headline inflation to 8.5%, given core prices have remained steadfast at record highs of 5.2%.   When the ECB met in December, Lagarde more or less pre-committed the ECB to at least another 3 50bps rate hikes at the next 3 meetings, in a move that has seen the euro push higher and which has finally seen it break above the 1.1000 level, although that has mainly come about as a result of the market reaction to last night's Fed decision, rather than any intrinsic euro strength.   This would suggest that markets are still not convinced the ECB will be able to follow through on the number of hikes indicated given the risks it might pose to the borrowing costs of the more highly indebted members of the euro area.   EUR/USD – finally pushed through the 1.0930 area and the 1.0950 area which is 50% retracement of the move from the 2021 highs to last year's lows at 0.9536. Yesterday's move through 1.0950 now opens up a move towards 1.1110. Support now comes in at 1.0920.   GBP/USD – the recent lows at 1.2260 remain a key support after another failure last week at the 1.2450 resistance area. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – edging back towards the recent highs just below the 0.8900 area. A move through these highs could trigger a move towards 0.9000. Key support remains at the 50- and 100-day SMA which we saw earlier this month at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – slipped below trend line support at 129.00 from the recent lows at 127.20, raising the prospect of a retest of those lows, and potentially on towards 126.50. Resistance now at 129.30.   FTSE100 is expected to open 30 points higher at 7,791   DAX is expected to open 102 points higher at 15,282   CAC40 is expected to open 35 points higher at 7,112   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC
WTI Bulls Struggle To Cheer The Broadly Risk-On Mood

OPEC+ Recommended Keeping Crude Production Unchanged, The Fed Delivered A 25bp Rate Hike

Saxo Bank Saxo Bank 02.02.2023 09:41
Summary:  The Fed delivered a 25bp rate hike and a basically unchanged policy statement as widely expected. The remarks by Fed Chair Powell at the press conference saying that the disinflationary process had started saw stocks swing from losses to a 1.1% gain in the S&P 500 and a 2.2% advance in the Nasdaq 100. The interest rate futures market is pricing in 50 bps of rate cuts in the second half of 2023. The yield on the 10-year Treasury dropped to 3.42%.   What’s happening in markets? Positive reaction to Fed: Risk-on rally in Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) The Nasdaq 100 reversed its weakness after an ISM manufacturing index print a full point lower to 47.4 during early trading and advanced to finish the session 2.2% higher after the dovish remarks from Fed Chair Powel at the post-FOMC press conference. The S&P500 climbed 1.1% to close at its highest level since August 26, 2022. Powell’s comments raised the market’s hope for rate cuts in the 2nd half of 2023. 10 of the 11 sectors within the S&P 500 gained, led by information technology which advanced by 2.3%.  Energy, falling 1.9%, was the laggard. Advanced Micro Devices (AMD:xnas) jumped 12.7% on a revenue beat and upbeat sales forecasts. Electronic Art tumbled 9.3% on a disappointing business outlook. Meta Platforms (META:xnas) kicked off major tech earnings with a bang. Perhaps a good sign of what we can expect from Apple, Amazon and Google Meta shares surged more than 19% in extended hour trading, after announcing a $40 billion boost to its share buyback, as it’s guiding for stronger revenue for Q1 this year, seeing revenue hit $26 to $28.5 billion. Q4 revenue beat expectations, falling to $32.2 billion, vs $31.7 billion expected. The business sees outgoing expenses dropping more than expected to $89-95 billion and lower capital expenditure. Also on the positive, FB’s daily users improved more than the market expected. From a technical perspective Meta shares closed above their 200-day simple moving average. It also appears, a golden cross is forming which could trigger quant trader buying. That’s something to watch, which could trigger more upside. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) dropped as hopes for rate cuts in H2 heightened The Fed delivered a 25bp rate hike, bringing the Fed Fund target to 4.50%-4.75% as widely anticipated and a statement largely unchanged from the previous one, reiterating that “ongoing increases” in the policy Fed Fund target “ will be appropriate in order to attain a stance of monetary policy that is sufficiently restrictive,”  The strong market reactions came from the response to Powell’s dovish comments in the post-meeting press conference. Powell said the Fed “can now say, I think for the first time, that the disinflationary process has started” though he cautioned that “the job is not fully done.”  Powell’s remarks saw the June-Dec 2023 SOFR spread widen to 54.5 bps, fully pricing in 50bps of rate cuts in the 2nd half of 2023 after only one more 25bp hike in March. The yield on the 2-year and the 10-year tumbled 9bps each to 4.11% and 3.42% respectively. The weaker ISM manufacturing and ADP private payrolls but stronger JOLTS job openings data released during the day took a backseat to the FOMC drama. The Australian share market, the first to the react to the Fed, sees a strong risk on rally Risk on assets such as tech stock are charging today, with the sector up 2.8% while gold equities are being bid after the gold price rallied 1%. Long-term investors will be watching the tech index, given it’s down 30% from its high. Also consider the overall market, the ASX200 has a PE at 15.2 times. Cheaper than Nasdaq’s 57 times earnings. And S&P500’s earnings multiple of over 19 times.  Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) rallied around 1% The Hang Seng Index rallied 1.1% and the Hang Seng TECH Index surged 3.4%. Baidu (09888:xhkg) soared 9% on market chatters that the search engine platform was developing an AI-powered chatbot similar to ChatGPT. EV makers outperformed. The largest Chinese EV maker, BYD (01211:xhkg) surged 6.1%, extending gains after Tuesday’s preannouncement of the preliminary Q4 profit range. XPeng (09868:xhkg) surged 10.3% after its subsidiary received license approval for its flying cars. Geely (00175:xhkg) climbed 5.1% as the EV maker is launching its 3rd model and its Lotus unit went public via SPAC at a USD5.4 billion valuation. Macao casino stocks gained 2% to 5% on a much stronger-than-expected 82.5% growth in gambling revenues to MOP 11.6 billion (USD1.4 billion). In the mainland’s A-share market, ChatGPT concept stocks and EV names also rallied strongly. Non-ferrous metal, computing, and non-bank financials were other outperformers. CSI 300 finished the Wednesday session 0.9% higher. FX: USD bears back in action The USD was weaker across the board after the Fed Chair Powell stayed away from pushing back aggressively on the easing priced in by the markets for this year or the loosening of financial conditions. EURUSD broke above the 1.0930 resistance and was trading above 1.1000 in the Asian morning. If ECB maintains its hawkishness today, we could see these gains sustaining. USDJPY slumped back below 128.50 with focus turning to BOJ chief nominees. AUDUSD rose to 0.7150 but USDCAD was choppier as lower oil prices weighed on loonie. Crude oil (CLG3 & LCOH3) supported after the overnight slump Oil prices slid over 2% overnight with EIA inventories climbing 4.1 million barrels in the week ended Jan 27, its sixth consecutive weekly build. However, Fed’s dovish outcome came back in focus later, and expectations that demand will continue to run higher as Fed nears an end of its tightening cycle underpinned. OPEC+ recommended keeping crude production unchanged as expected, amid the volatility of Chinese demand and Russian sanctions. WTI futures were back above $77 after touching lows of $75 in the NY session. Gold (XAUUSD) broke above $1950 on dovish Fed Gold broke above the resistance at 1950, reaching fresh cycle highs, as the lack of a committal Powell at the FOMC press conference continued to allow market to price in rate cuts for this year. Next on watch will be $1963, the 76.4% retracement of the 2022 correction, following which there is no major level of resistance before the psychologically important $2000 level.  Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM What to consider? Fed hikes rates by 25bps, hints at a ‘couple more’ rate hikes to come The Fed hiked rates by 25bps to 4.5-4.75% as expected, with Chair Powell giving mixed and non-committal signals at the press conference. The statement continued to use the phrase "ongoing increases" in the Fed rate being appropriate to signal more rate hikes, and there was also a hint of a “couple” more rate hikes suggesting both March and May meetings could see 25bps rate hikes again. But Powell hinted at disinflationary pressures, and did not push back enough on the easing financial conditions. US ISM manufacturing shifting the narrative to low growth/high inflation ISM manufacturing declined for a fifth consecutive month to 47.7 from 48.4, short of the consensus of 48.0. While prices paid lifted to 44.5 (exp. 39.5, prev. 39.4), suggesting upside pressures in inflation sustaining, production a