ECB meaning

In the current situation, the ECB turns a blind eye to the risk of recession, but is very determined to bring down inflation and inflation expectations. To that end, it is hard to imagine how the ECB could not raise rates again. The economic outlook The economic situation is not looking very good in Europe and the euro area. Recent data showed a worsening picture of the situation. Many experts believe that the region may face a serious recession in the near future. Also the attempts by the ECB to raise the euro exchange rate through further tightening should continue to be ineffective in the near future. The economy is expected to stagnate in the first quarter of 2023. Very high energy prices reduce the purchasing power of the population's income. Moreover, Russia's unjustified aggression against Ukraine continues to undermine the confidence of entrepreneurs and consumers. The steady rise in prices in Europe is making households and businesses prepare for even greater pressure in the coming months. Previous date Economic difficulties have arisen since the start of the covid-19 pandemic. The persistent threats caused by the pandemic continue to pose a threat to the smooth transmission of monetary policy. Nevertheless, the European Central Bank did not manage to raise interest rates at that time and for a long time the rate was at 0.0%. The situation regarding interest rates changed after the second quarter of 2022. Inflation rose sharply, and other macroeconomic data were also not optimistic. For this reason, the ECB decided to raise rates by 50 bp. The first rate hike was expected to be milder, the forecast was at 0.25%. Another hike was also hawkish. And now the rate is 1.25%. It’s true that the ECB has consistently surprised on the hawkish side in the past few meetings, but the positive impact on the euro have been null. Source: investing.com What to expect? The economic background has hardly changed since September. Confidence indicators continue to decline, while data for the third quarter point to a very mild contraction in the eurozone economy. Needless to say, the outlook for the euro area economy is surrounded by an extremely high degree of uncertainty. Price pressures across the economy continued to strengthen and widen, and inflation may increase further in the near term. It is believed that the peak of inflation is close, but the economic situation will depend on the situation related to Russia's invasion of Ukraine. The Governing Council stands ready to adjust all instruments to ensure that inflation stabilizes at the 2% target. Finally, the ECB managed to lead the market expectations and next week's meeting may be the first without such a surprise. According to the minutes from the previous meeting, policy makers at the European Central Bank (ECB) were concerned that inflation might be stuck at a high level, so aggressive tightening was necessary. We can expect that this mood will also replicate at the next week's meeting. The September hike of the ECB by 75bp was expected by the markets, and now it expects that its next move in politics, planned for October 27, will be similar. Contrary to the preparations for the July and September meetings, there was no public controversy about the size of the rate hike. Source: investing.com, ecb.europa.eu

What doesn't kill makes us stronger. No matter what the Federal Reserve's rival central banks try to rein in the US dollar, it still blooms. It would seem that high inflation-induced rate hikes in other countries outside the US should have cooled the ardor of the bulls on the USD index. It wasn't there! One piece of information about the acceleration of consumer prices in New Zealand, Britain and Canada was enough for the greenback to launch a new attack. The same can be said about foreign exchange interventions. In conditions of low external demand and the highest inflation in decades, the interest in reverse currency wars, thereby strengthening rather than weakening the national currency, is understandable. As well as the dissatisfaction of governments with the fall of its exchange rate. Alas, intervention in the life of Forex does not help. Large-scale long positions on the yen managed to stop the USDJPY pair at 146 for just a few days, after which it rose to 151. At the same time, the experience of foreign exchange interventions with USDJPY in 1998 and 2011, with EURUSD in 2000, with GBPUSD in 1992 was also negative. A coordinated intervention is required, like the Plaza Accord in 1985. Dollar pairs react to coordinated intervention The problem is that the conditions then and now are significantly different. In those years, the Fed defeated high inflation and could afford the weakening of the US dollar. Today, the central bank still has a lot to do before consumer prices begin to move confidently towards the target. In addition, Finance Minister Janet Yellen notes that market-determined exchange rates are the best regime for the US dollar. Its strengthening is the result of differences in economic policies and the shocks that countries face. Without US support, currency interventions are doomed to failure. You don't need to go far for an example. Japan threw money to the wind, trying to support the yen diving into the abyss. Its interference in the life of Forex only made the situation worse. Gold and foreign exchange reserves were used to sell USDJPY. It was necessary to get rid of US Treasury bonds, which led to an increase in their yields and further strengthened the dollar. Dynamics of US Treasury Bond yields Rates on 10-year securities have reached the highest level since 2007. The situation resembles the events of those years, and investors are beginning to argue that only an increase in profitability to 5-5.25% will allow the indicator to reach a plateau. Until this happens, the US dollar will continue to sweep away everything in its path. No matter how hard its opponents try, raising rates or using currency interventions. Only the European Central Bank is able to suspend the fall of EURUSD. Its meeting is rightly regarded as a key event of the economic calendar in the last full week of October. Technically, the EURUSD peak continues on the daily chart. We hold the short positions formed from the 0.9845 and 0.9815 levels and increase them on the breakout of support at 0.97. The initial target is the 0.95 mark.     Relevance up to 15:00 2022-10-26 UTC+2 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/324997

The USD/JPY pair was storming the 151.00 mark (we wrote about this in our previous review), gold is falling in price, and the dollar continues to advance. When this article was written the DXY dollar index was near 113.34, remaining in the upper part of the range formed between the local support and resistance levels of 114.74 and 109.96. At the same time, the general upward dynamics of the dollar remains, pushing the DXY index towards more than 20-year highs near 120.00, 121.00. The breakdown of the local round resistance levels of 114.00, 115.00 will be a signal that the DXY index will return to growth. On Thursday, the dollar received support from statistics on the labor market: in its weekly report, the US Department of Labor reported a decrease in the number of initial applications for unemployment benefits (for the week of October 14) to 214,000 thousand (from 226,000 a week earlier ), which is better than economists' expectations of an increase to 230,000. The state of the labor market (together with data on GDP and inflation) is a key indicator for the Federal Reserve in determining the parameters of its monetary policy. The drop in the indicator (the number of initial and secondary claims for unemployment benefits) and its low value is a sign of a recovery in the labor market and has a short-term positive impact on the USD. There were no important macro statistics for the US on Friday. It will appear next week (for more details, see Key economic events of the week 10/24/2022 – 10/30/2022). Also next week, meetings of the three largest world central banks will be held at once: Japan, Canada, the eurozone. As for the latter, its leaders are, in general, set up for another interest rate hike. As expected, at a meeting on Thursday, European Central Bank leaders will again raise the level of key interest rates, by 0.50% or even 0.75%. According to the final estimate, annual inflation in the eurozone in September amounted to 9.9% (below the first estimate of 10.0%). Core annual CPI rose by +4.8%, which is in line with the forecast and the previous 4.8%. According to Eurostat, annual inflation fell in six of the bloc's member states, remained stable in one and rose in twenty. A recent media poll of economists showed that they expect the ECB to raise its deposit and refinancing rates by 75 bps (deposits to 1.50% and the refinancing rate to 2.00%) at the October 27 meeting to contain inflation exceeding the target level by five times. By the end of the year, deposit and refinancing rates are forecast to be 2.00% and 2.50%, respectively. At the same time, the ECB is in a difficult situation as the eurozone economy is facing a recession, with the probability of its onset within a year, and the nature of the recession can be deep and long, given the military conflict in Ukraine and confusion in the European energy market. Despite information from the previous EU leaders' summit, which "managed to reach a common agreement on energy security" with the prospect of creating a cartel of European gas buyers that would deal with the purchase and subsequent distribution, the shortage of gas and oil in Europe will continue to drive inflation. Whether the ECB, which is moving so far with cautious steps, will be able to cope with it is a question that remains open. As for the EUR/USD pair, at the time when this article was written on Friday morning, it was trading near the 0.9740 mark, in the area of a stable bear market. From a fundamental point of view, we should expect at least a strong bearish momentum in the EUR/USD pair, and at a high, a further fall of the pair towards 20-year lows, when it was trading near 0.8700, 0.8600. In general, the downward dynamics of EUR/USD remains.   Relevance up to 13:00 2022-10-26 UTC+2 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/324985

Long-term perspective. The EUR/USD currency pair gained 140 points during the current week. We can say that this is one of the best weeks for the euro in recent times, although this growth is very difficult to consider on a 24-hour TF. But on this TF, a global downward trend immediately catches the eye, within which strong corrections are still rare. However, it would be correct to say there are none. As we have already said, over the past 1.5–2 years, the euro currency has shown corrections of a maximum of 400–450 points. And the whole downward trend already exceeds 2500 points. And, of course, it is worth noting that it has been three weeks since the price last updated its 20-year lows, and the pair is still close to these lows. The beginning of an upward trend does not even "smell." Thus, the technical picture does not change. Therefore, it can be assumed that the fundamental and geopolitical backgrounds do not change either. And this is not just an assumption. It is an objective reality since the "foundation" now remains the same as it was a month ago, two months ago, and three months ago. The Fed is also raising interest rates aggressively and is prepared to do so "to the bitter end." The ECB is also simply raising the rate and is already thinking about reducing it because many EU countries may be unable to cope with tight monetary policy. The Fed rate has long been higher than the ECB rate, and the gap between their values may only increase in the coming months. When the Fed ends the rate hike cycle, a "high rate period" will begin, during which monetary policy will not change. Thus, the Fed's monetary policy may remain much tougher than the ECB for another year or two or three. Naturally, this state of affairs will support the dollar. It may not grow all this time, but it will be extremely difficult for the European currency to show tangible growth. COT analysis. COT reports on the euro currency in 2022 can be entered into the textbook as a vivid example. For half the year, they showed a frank "bullish" mood of professional players, but at the same time, the European currency was steadily falling. Then they showed a "bearish" mood for several months, and the euro currency also steadily fell. The net position of non-profit traders is bullish again, and the euro continues to fall. This is happening, as we have already said, because the demand for the US dollar remains very high against the backdrop of a difficult geopolitical situation. Therefore, even if the demand for the euro currency is growing, the high demand for the dollar does not allow the euro currency itself to grow. During the reporting week, the number of buy-contracts from the non-commercial group increased by 6.5 thousand, and the number of shorts decreased by 4 thousand. Accordingly, the net position increased by about 10.5 thousand contracts. This fact does not matter much since the euro remains "at the bottom" anyway. Professional traders still prefer the dollar to the euro currency at this time. The number of buy contracts is higher than sell contracts for non-commercial traders by 48 thousand, but the European currency cannot extract any dividends from this. Thus, the net position of the "non-commercial" group can continue to grow, but it does not change anything. If we look at the general indicators of open longs and shorts for all categories of traders, then sales are 22 thousand more (586k vs. 564k). Thus, according to this indicator, everything is logical. Analysis of fundamental events. There is nothing to note in the European Union this week except for the banal inflation report, which was released in the second assessment for September. Traders expected an increase of 10.0%, but in reality, prices rose only by 9.9% y/y. However, the epithet "only" hardly applies to an ever-growing index. We cannot say that traders were upset about this or, on the contrary, happy. This indicator does not change anything because it cannot affect the ECB's plans in a cardinal way. The European regulator cannot look at the current inflation and decide to raise the rate at each next meeting by 1% to deal with high price growth and not just pretend. There was practically no geopolitical news this week either. Perhaps that is why the euro currency has avoided a new fall. But again, there is no difference since it continues to be near its 20-year lows. Trading plan for the week of October 24–28: 1) In the 24-hour timeframe, the pair resumed their movement to the south. Almost all factors still support the long-term growth of the US dollar. The price is below the Ichimoku cloud and the critical line, so purchases are irrelevant now. It would be best if you waited at least for consolidation above the Senkou Span B line and only considered long positions. 2) The euro/dollar pair sales are still more relevant now. The price formally went above the critical line, but it did not go higher, but the line itself declined, so we expect the fall to continue with a target below the 0.9582 level (161.8% Fibonacci). In the future, if the fundamental background for the euro currency does not improve and geopolitics continues to deteriorate, the euro currency may fall even lower. Explanations of the illustrations: Price levels of support and resistance (resistance/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). Indicator 1 on the COT charts is the net position size of each category of traders. Indicator 2 on the COT charts is the net position size for the "Non-commercial" group.   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/325028

Long-term perspective. The GBP/USD currency pair has increased by 40 points during the current week and remained above the critical line on the 24-hour TF. Thus, certain chances of a new upward trend are also preserved. We have already said earlier that the pound has more reasons for growth - technical. At least because it overcame the Kijun-sen line sharply and strongly moved away from its absolute lows. However, this is a double-edged sword. The last fall in the pound sterling might not have happened if not for the tax initiatives of former British Prime Minister Liz Truss. In general, her resignation turned out to be very unexpected since, at the beginning of the week, in an interview with Bloomberg, she said she was going to fight and did not intend to leave her post. We did not believe that she would leave voluntarily, and even so quickly, and we still could not announce a vote of no confidence in her in the near future. Thus, most likely, political pressure was exerted on her. However, all this is history and generally not interesting. Now I wonder who will become the new prime minister. And good old Boris Johnson can become one, as he is currently leading in the amount of support from the Conservatives, according to opinion polls. From the same conservatives who dismissed him a few months ago. The political pun in the Kingdom continues. We need to wait for new elections, but the situation will not change dramatically for the pound sterling. Politics is, of course, interesting and important. As we have seen, the Prime Minister's short-sighted decision can collapse the financial markets. However, Johnson is unlikely to make the same mistake as Truss. And even more so, Rishi Sunak, who served as finance minister under Johnson, will not allow it. But in any case, the pound still has big problems with the grounds for growth. Technically, it can show an upward movement, but will one "technique" be enough for market participants? COT analysis. The latest COT report on the British pound showed a new strengthening of the "bearish" mood. During the week, the non-commercial group closed 8,600 buy contracts and opened 3,400 sell contracts. Thus, the net position of non-commercial traders fell by 12.9 thousand, which is quite a lot for the pound. The net position indicator has been growing slightly in recent weeks, but this is not the first time it has been growing. Still, the mood of major players remains "pronounced bearish," and the pound sterling maintains a downward trend in the medium term. And, if we recall the situation with the euro currency, there are big doubts that, based on COT reports, we can expect strong pair growth. How can you count on it if the market buys the dollar more than the pound? The non-commercial group has now opened a total of 91 thousand contracts for sale and 40 thousand for purchase. The difference, as we can see, is still very big. The euro cannot show growth in the "bullish" mood of major players, and the pound will suddenly be able to grow in a "bearish" mood. As for the total number of open buy and sell orders, the bulls have an advantage of over 25 thousand. But, as we can see, this indicator also does not help the pound much. We remain skeptical about the long-term growth of the British currency, although there are certain technical reasons for this. Analysis of fundamental events. During the current week, only one really important report was published in the UK - on inflation. The consumer price index rose by 10.1% y/y and, as we can see, continues to grow, despite the seven increases in the key rate. Many experts suggest that the rate in the UK should be raised to at least 5% to count on a significant reduction in inflation. But is there an opportunity for BA to raise the rate so high with the current financial and economic problems? From our point of view, no, and the ECB, together with BA, will stop tightening monetary policy in the near future. Or they will greatly slow down its pace. Both can create additional pressure on the pound, as the Fed will continue to accelerate its pace at the same time. In general, the prospects for the pound are bad as usual, and rising inflation does not mean that the British regulator will increase the aggressiveness of the monetary approach. Trading plan for the week of October 24–28: 1) The pound/dollar pair as a whole maintains a long-term downward trend but is located above the critical line. Therefore, small purchases can now be considered as long as they are located above the Kijun-sen. The target is the Senkou Span B line, which runs at 1.1843. There are some reasons for the pair's growth, but there are still many reasons for a new fall. Be careful with your purchases. 2) The pound has made a significant step forward but remains in a position where it is difficult to wait for strong growth. If the price fixes below the Kijun-sen line, the pair's fall can quickly and cheerfully resume with targets of 1.0632–1.0357. Explanations of the illustrations: Price levels of support and resistance (resistance /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). Indicator 1 on the COT charts is the net position size of each category of traders. Indicator 2 on the COT charts is the net position size for the "Non-commercial" group.     Relevance up to 10:00 UTC+2 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/325030

  The US dollar index showed contradictory dynamics this week. Initially, at the start of the five-day trading period, it dropped sharply, returning to the area of the 111th figure. The market unexpectedly increased interest in risk, amid quarterly reports of the largest US banks (in particular, Bank of America and Bank of New York Mellon), which exceeded the expectations of most analysts. After that, the main Wall Street indexes went up, while the safe greenback came under pressure. In addition, on Monday it became known that British Prime Minister Liz Truss canceled the key points of her odious anti-crisis plan, which included large-scale tax cuts. And although this step subsequently did not help her stay in the chair of the head of government, directly "in the moment" it increased interest in risky assets. Against this background, the EUR/USD pair reached 0.9875 (one and a half week price high). However, bulls on the pair were unable to develop an upward trend. On Tuesday, the US dollar index turned around and headed upward again. Throughout the week, including on Friday, the pair had been trading within a wide price range, actually circling in the area of 97-98 figures. Traders reacted reflexively and are reacting to contradictory macroeconomic statistics, mainly from the United States. For example, the greenback reacted positively to the published report in the real estate sector: the volume of construction permits issued in America increased by 1.4% in September after a serious decline in August (-8.5%). At the same time, the volume of housing sales in the secondary market (the release was published the next day) unexpectedly decreased, and immediately by 1.5% (with a forecast decline of 0.8%). The Federal Reserve-Philadelphia Manufacturing Index also turned out to be disappointing, which came out at -8.7 in October. While the growth rate of initial applications for unemployment benefits was at the level of 214,000 (a three-week low). The above-mentioned macroeconomic reports (generally of a secondary nature) could not help – neither the EUR/USD bears nor the bulls. Of course, traders reacted to these reports accordingly, but only formally – literally after a few hours, the downward/upward momentum faded away. Obviously, traders need a more powerful informational occasion that will allow them to either approach the parity level or break through the defense at the base of the 96th figure. For the development of the upward corrective movement, EUR/USD bulls need to settle above the 1.0000 mark, and for the continuation of the downward trend, bears need to go below the 0.9600 target. Current macroeconomic statistics are not able to cope with such tasks. In my opinion, EUR/USD traders can only pin their hopes on larger-scale information campaigns. The vector of price movement will be determined primarily by the level of anti-risk sentiment. By the way, Friday's dynamics of the dollar index eloquently illustrated the current situation. So, during the day, the greenback steadily strengthened its positions throughout the market, but at the start of the US session it weakened sharply: it became known that Russian Defense Minister Sergei Shoigu held telephone talks with US Defense Minister Lloyd Austin. According to Russian media, the parties discussed "topical issues of international security, including the Ukrainian issue." These are the second talks between the heads of defense departments this year (the first were in May). Amid general geopolitical tensions, this news was received by the market "with a bang". However, the growth of the EUR/USD pair was limited. Almost immediately, the press secretary of the president of Russia Dmitry Peskov said that following the conversation of the ministers, "there are no plans for a telephone conversation between Vladimir Putin and Joe Biden." However, this moment highlighted the main idea: traders react sharply to news of a geopolitical nature. A decline in anti-risk sentiment can put significant pressure on a safe greenback - and vice versa, an increase in panic will allow dollar bulls to open a second wind. Also, the tone of trading can be set by representatives of the Fed. But, to the disappointment of the EUR/USD bears, the members of the Fed have not yet decided to voice "ultra-hawkish" comments. In particular, many representatives of the central bank spoke this week – Philip Jefferson, Lisa Cook, Michelle Bowman, Patrick Harker, James Bullard, Charles Evans. In one form or another, they made it clear that the Fed is ready to continue taking steps to curb inflation in the United States. In one form or another, they hinted that they are ready to support a 75-point rate hike in November. But the thing is that even before their speeches, the probability of a 75-point rate hike at the November meeting was estimated at 95%! That is, the market has already largely played this fundamental factor. While the members of the Fed are not yet ready to "increase the degree of heat", allowing, for example, a 100-point increase. They are also not ready to talk about more distant prospects (regarding the November meeting) – according to them, further decisions will be made taking into account incoming data, primarily in the field of inflation and the labor market. Thus, traders of the EUR/USD pair in the medium term will continue to trade in the 100-point price range of 0.9750-0.9850. In my opinion, the downward dynamics will resume over time, but at the moment it is impossible to talk about prioritizing short or long positions. Given the current uncertainty, it is advisable to take a wait-and-see attitude for the EUR/USD pair.     search   g_translate       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/325008

On Friday, the head of the San Francisco Federal Reserve, Mary Daly, said that the high pace of rate hikes is slowing down the economy, this pace needs to be slowed down. As a result, yields on government bonds fell, stock indices rose, and the euro closed the day up 75 points. The quote of the single currency again reached the resistance of 0.9864 and the MACD indicator line. The European Central Bank raises rates on the 27th, but we still doubt the market's willingness to switch so quickly from the Fed's leading role in pricing the euro to the ECB's leading position. Eurozone business activity indicators for October will be released today, and a recession is predicted for them. On the technical side, in order to consolidate the euro in the green, the price needs to go above the descending price channel, marked in green on the daily chart, that is, above the level of 0.9950. Price development above 0.9864 (September 6 low) before breaking 0.9950 in this situation is considered as a false exit above the MACD indicator line. Consolidation below this line may bring the price back to support 0.9724. The Marlin Oscillator is already turning down and does not share the optimism of the price. The price is already forming a divergence with Marlin on the H4 chart. As long as it's weak. A decline below the MACD line (0.9797) will set the bearish mood for the euro.       Relevance up to 04:00 2022-10-25 UTC+2 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/325066

USD/CAD has accelerated to near 1.3680 amid a stellar recovery in the DXY. The 10-year US Treasury yields have extended their losses to near 4.17% amid soaring market mood. The BOC may trim the extent of the rate hike to 50 bps this week. The USD/CAD pair sensed buying interest after dropping to near the round-level support of 1.3600 in early Tokyo. The loonie bulls have retreated after the US dollar index (DXY) defended the intervention rumors of the Bank of Japan (BOJ) recovered its entire intraday losses. The asset has extended its gains to near 1.3680. The DXY has recaptured its intraday high at 112.26 and is expected to behave critically ahead as the returns on US government bonds have dropped sharply. The 10-year US Treasury yields have extended their losses by 4.17% after displaying jaw-dropping gains to near 4.34% on Friday. Market sentiment is extremely cheerful and S&P500 futures are holding their gains. On Monday, the US S&P PMI data will be keenly watched. The Manufacturing PMI is expected to decline to 51.2 vs. the prior release of 52.0 while the Services PMI may drop to 49.2 from 49.3 reported earlier. This week, the interest rate decision from the Bank of Canada (BOC) will determine the further direction of the asset. A Reuters poll on projections for BOC’s interest rate claims that BOC Governor Tiff Macklem will announce a rate hike of 50 basis points (bps). The extent of the rate hike seems lower than their current pace of hiking interest rates. It is worth noting that the headline inflation rate in Canada was recorded at 6.9% for September. On the oil front, oil prices have dropped below the crucial support of $85.00 amid mounting global recession fears. In addition to the BOC, the BOJ and the European Central Bank (ECB) will announce their monetary policies. The BOJ may continue its ultra-loose stance while the ECB could tighten its monetary policy. An expectation of a fresh rate hike spell is weighing pressure on oil prices.

Gold price prints mild losses while reversing from one-week high. DXY pares the first weekly loss in three amid geopolitical, market meddling concerns. Fed speakers’ absence, likely hawkish outcome from ECB could test XAU/USD bears. Preliminary readings of US PMI for October, Q3 GDP are also important for near-term directions. Gold price (XAU/USD) remains pressured around the intraday low of $1,652, keeping the week-start pullback from a fortnight top, during early Monday morning in Europe. In doing so, the yellow metal justifies the firmer US dollar, as well as the market’s cautious mood. US Dollar Index (DXY) rises 0.30% intraday to 112.25 by the press time amid chatters surrounding Japan’s meddling in the market to defend the yen, as well as challenges to the risk appetite. That said, the news that both North and South Korea have exchanged warning shots near their disputed western sea boundary, published on Monday, also seemed to have favored the US dollar buyers of late. On the same line could be the fears that China President Xi Jinping won’t hesitate to escalate geopolitical matters with the US when it comes to Taiwan. The reason could be linked to Jinping’s dominating performance at the annual Communist Party Congress after winning the third term in a row. Additionally, ABC News quoted Ukrainian General Oleksandr Syrskiy citing fears of Nuclear war, which in turn might have recalled the US dollar buyers. Recently, news that China announced covid lockdown in the factory hub Guangzhou weigh on the market sentiment and the XAU/USD prices. The latest jump in the market’s bets over the Fed’s 75 bps move in November, from 88% to 95%, also seemed to have drowned the gold prices. Amid these plays, S&P 500 Futures print 0.50% intraday gains while the US 10-year Treasury yields remain offered around 4.17%, extending Friday’s losses from the 14-year high. That said, the US equities posted the largest weekly gains in four months in the latest amid previously receding fears of the Fed’s aggressive rate hike. On Friday, the gold price rose heavily while portraying the first weekly gain in three as the hawkish Fed bets retreat after a mixed Fedspeak. That said, St. Louis Fed President James Bullard said, “I want rates that put significant downward pressure on inflation.” On the same line, Chicago Fed President Charles Evans stated that they will need to raise rates further and hold them for a while. However, Nick Timiraos, Chief Economics Correspondent at The Wall Street Journal (WSJ) wrote that the Federal Reserve officials are barreling toward another interest-rate rise of 75 bps at their meeting in November and are likely to debate then whether and how to signal plans to approve a smaller increase in December. Looking ahead, gold traders should expect further weakness amid dicey markets and challenges to sentiment. However, the absence of the Fed speakers and a likely hawkish outcome from the European Central Bank (ECB) could challenge the XAU/USD downside. Technical analysis Gold price retreats from the 21-DMA hurdle amid bearish MACD signals and sluggish RSI, which in turn suggests the metal’s further declines towards the resistance-turned-support line from October 06, around $1,630 by the press time. However, monthly horizontal support near $1,620, quickly followed by the yearly bottom of $1,614, could challenge the gold bears afterward. In a case where the metal prices drop below $1,614, the $1,600 threshold and the 61.8% Fibonacci Expansion (FE) of June-October moves, near $1,565, lure the XAU/USD bears. Alternatively, the 21-DMA and the 50-DMA, around $1,665 and $1,694 in that order, guard the short-term recovery of gold price. Following that, the $1,700 round figure and the monthly high near $1,730 might be interesting to watch for further upside. Gold: Daily chart Trend: Limited downside expected

The third-term leadership of China’s XI Jinping has messed up Chinese and Hang Seng indices. S&P500 futures have extended their gains after an upbeat Friday. Oil prices have dropped amid escalating recession fears. Markets in the Asian domain are not tracking positive cues from S&P500 futures and are displaying terrible price movements. The risk-on sentiment has extremely firmed as 10-US Treasury yields have trimmed further to near 4.15%. Meanwhile, the US dollar index (DXY) is attempting to establish above 112.00 after a roller-coaster move. At the press time, Japan’s Nikkei225 gained 0.57%, ChinaA50 nosedived 2.93%, and Hang Seng witnessed a bloodbath. The index has erased 5.53%. Indian markets are closed on account of Diwali-Balipratipada. Chinese markets have witnessed an intense sell-off after the announcement of China’s XI Jinping's third leadership term.  Investors have dumped equities significantly amid soaring fears of economic slowdown as the Chinese leader could prefer ideology-driven policies even at the cost of economic growth. Apart from that, upbeat Gross Domestic Product (GDP) and Trade Balance data have failed to fetch optimism for investors. Blood has spilled over the roads as indices in Hang Seng have witnessed a bloodbath. The continuation of China’s XI Jinping leadership has strengthened fears of an economic downturn. In Japan, gains in Nikkei225 are weak against the run-up recorded in S&P500. Potential intervention chatters from the Bank of Japan (BOJ) in the currency markets against disorderly yen moves have restricted the upside in Japanese equities. On the oil front, oil prices have dropped below the crucial support of $85.00 amid mounting global recession fears. In addition to the BOC, the BOJ and the European Central Bank (ECB) will announce their monetary policies. The BOJ may continue its ultra-loose stance while the ECB could tighten its monetary policy. An expectation of a fresh rate hike spell is weighing pressure on oil prices.

Last week ended on a strong positive footage, on hints that some Federal Reserve (Fed) officials have started talking about pausing the interest rate rises to avoid going too far. BoC, ECB & BoJ to decide Softer Fed expectations pulled US yields lower and sent equities higher.On the earnings front, 70% of the S&P500 companies that reported earnings so far did better than earnings expectations, and big US tech companies and oil giants will be reporting earnings this week. In politics, Boris Johnson announced yesterday evening that he will not be running for the PM role this week. That makes the British ex-Chancellor of Exchequer Rishi Sunak the front runner in the contest. Sterling kicked off the week on a positive note, but bumped into 50-DMA resistance. In central banks, the Bank of Canada (BoC) is expected to raise interest rates by another 50bp when it meets this week, the European Central Bank (ECB) will certainly raise its rates by 75bp, while the Bank of Japan (BoJ) is expected to stay pat. The BoJ intervened again in the currency markets on Friday to pull the USDJPY lower, after the pair flirted with the 152 level last week. The pair eased to 145.50 following the intervention and is back to almost 149 at the time of video. Commodities In commodities, US crude trades around $85per barrel level, and gold is better bid. Softer US yields could play in favour of gold if we really start seeing material easing in Fed expectations. But the latter is data dependent. Due this week, investors will closely watch the US latest GDP update, and the PCE index. Watch the full episode to find out more! 0:00 Intro 1:02 Are Fed officials softening tone? 3:23 China GDP better-than-expected, but well below target 4:44 US Big Tech & Oil Giants due to announce earnings 7:54 UK to choose its new PM 8:57 BoC, ECB & BoJ to decide 11:05 Update on crude oil & gold 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. #Apple #Amazon #Microsoft #Meta #ExxonMobil #Chevron #earnings #UK #PM #Rishi #Sunak #GBP #USD #JPY #BoJ #ECB #BoC #China #US #GDP #XiJinPing #crudeoil #XAU #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

“Core inflation in the eurozone continues to rise, reaching 6% year-on-year in August 2022. Its acceleration is inevitable. The European Central Bank (ECB) will therefore have to decide whether to tolerate core inflation remaining high into 2024 or switch to a far more restrictive monetary policy than is currently expected, analysts at Natixis report. Core inflation lingers “The ECB can no longer claim that core inflation will rapidly subside, because of its inertia. If core inflation is higher than 6% in early 2023, the inertia of this inflation forces will lead it to at least around 6% at least in early 2024.”  “Econometric analysis shows that core inflation is perfectly inert (core inflation has an eigenvalue of 0.98). The ECB will therefore have to accept: Either core inflation of around 6% at least in 2024; Or a more restrictive monetary policy than is currently expected.”

EUR/USD 5M The euro/dollar pair alternated between an absolute flat and a strong trend on Tuesday. Recall that at this time the pair's movements are confusing so any development of events should be expected. However, yesterday everything went more or less logically, as the pair was again virtually in the same place during the European trading session, and again traded in a very volatile manner during the US session. There were no reports or events in the European Union and the United States that could provoke a fall in the dollar by 100 points in just an hour. Thus, we are inclined to believe that the nature of this movement was technical. The euro in the long term continues to move away from its 20-year lows, but it is still somehow hesitant. Yesterday's growth could be associated with the future European Central Bank meeting, the results of which will be known on Thursday, but at the same time, the British pound was also growing, which, in theory, should not be reacting to such a factor. But it's good that the euro is at least trying to show growth. There was a difficult situation in regards to Tuesday's trading signals, since the very first one formed in the middle of the US session, when most of the upward movement had already been completed. Thus, after the pair grew by 100 points, it was hardly worth trying to work out a buy signal. The same applies to the second signal to buy near the level of 0.9945, it also formed too late in time. Unfortunately, a pretty good move was missed, but out of 8-10 hours of the daytime, the pair was only following a trend movement for an hour, and it was impossible to predict this breakthrough. COT report: The euro Commitment of Traders (COT) reports for 2022 could be used as good examples. In the first part of the year, the reports were pointing to the bullish sentiment among professional traders. However, the euro was confidently losing value. Then, for several months, reports were reflecting bearish sentiment and the euro was also falling. Now, the net position of non-commercial traders is bullish again and the euro is still dropping. This could be explained by the high demand for the US dollar amid the difficult geopolitical situation in the world. Even if demand for the euro is rising, high demand for the greenback prevents the euro from growing. In the given period, the number of long non-commercial positions increased by 6,500, while the number of shorts decreased by 4,000. Accordingly, the net position increased by about 10,500. This fact is not of particular importance, since the euro still remains "at the bottom". At this time, commercial traders still prefer the euro to the dollar. The number of longs is higher than the number of shorts for non-commercial traders by 48,000, but the euro cannot derive any dividends from this. Thus, the net position of the non-commercial group can continue to grow further, this does not change anything. If you look at the total open longs and shorts for all categories of traders, then shorts are 22,000 more (586,000 vs 564,000). Thus, according to this indicator, everything is logical. We recommend to familiarize yourself with: Overview of the EUR/USD pair. October 26. Four more explosions occurred in the area of the Nord Stream pipelines. Overview of the GBP/USD pair. October 26. The British prime ministerial election ended dull and prosaic. Forecast and trading signals for GBP/USD on October 26. Detailed analysis of the movement of the pair and trading transactions. EUR/USD 1H You can see on the hourly timeframe that the pair continues to form a new upward trend and, if not for yesterday's strong growth that lasted for about an hour, we would say that the pair is preparing for a new fall. But no, it came close to price parity, breaking 400 points off its 20-year lows for the second time in recent weeks. There are still no obvious reasons to buy the euro. They can be highly technical and expressed by the bears' lack of desire to continue selling the euro. On Wednesday, trading could be performed at the following levels: 0.9553, 0.9635, 0.9747, 0.9844, 0.9945, 1.0019, 1.0072, 1.0124, as well as Senkou Span B (0.9754) and Kijun-sen lines (0.9838). Ichimoku indicator lines can move during the day, which should be taken into account when determining trading signals. There are also additional support and resistance levels, but trading signals are not formed near them. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. Today there will be no important events or reports scheduled again in the European Union and America. Thus, once again there is a possibility that we might witness a flat or "swing". What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group.       Relevance up to 02:00 2022-10-27 UTC+2 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/325311

The US curve is looking to the end fo the Fed cycle, and bank funding cost is ratcheting higher. The European Central Bank is about to change the targeted longer-term refinancing operations (TLTRO) rules after the game has started. It can save €31bn in interest but early repayments should remain modest In this article The US story continues to hum in a nuanced fashion A change of TLTRO rates is now widely expected Saving the ECB money but repayments to remain more elusive Today’s events and market view The US story continues to hum in a nuanced fashion Two things have happened in the past couple of days. First the structure of the curve has flipped toward a more bullish leaning as the 5yr has resumed an outperformance on the curve as market rates have fallen. This is typical as the market starts to converge on a likely completion of the rate hiking process. Second, the market discount for the terminal rate itself has eased off from the highs. A few days back the fed funds strip was peppering the 5% area. Its now back down to 4.85%. That pulls down the need for the 10yr to ratchet higher. The 10yr had been at 4.25%, and looking up. It’s now closer to 4%, pulled there in part by a slew of weak macro data, and talk that the Fed may be about to ease off on the size of hikes once they deliver the 75bp discounted for November. But there is something else going on too. Sneaky item three. Bank funding costs are now creeping higher. The 3mth commercial paper rate is up to 25bp over the risk free rate, and double that for European names. That’s the beginning of signs of creaking in the system. If the Fed is going to pull back in the face of persistent inflation it is more likely to reflect this than the macro weakness that, after all, they are actively engineering. No panic yet. Just something to monitor. Probably enough there to keep the 10yr above 4% for now, and for it to continue to be re-pressured higher in the weeks ahead. But we are also looking at 4.25% as being quite peakish (with an outside risk to 4.5%). Can’t quite conclude that the 4.25% seen was in fact the high, but these are the things we are looking at. 5Y coming in on the curve indicates a peak in 10Y yield is getting more likely Source: Refinitiv, ING A change of TLTRO rates is now widely expected Heading into tomorrow’s ECB meeting, various press reports have put changing the terms of TLTRO loans to banks as the ECB’s favourite option. The goal is to nudge them to repay, and to reduce a perceived subsidy paid to banks that can currently place these funds back at the ECB at a higher interest rate than they borrowed. As we’ve outlined in earlier publications, all options on the table are potentially disruptive but the central bank seems intent on acting before TLTRO loans fall due, the majority of them as soon as June next year. The question now is what change the ECB will implement. The central bank seems intent on acting before TLTRO loans fall due Changing the borrowing rate from “average interest rate on the deposit facility calculated over the life of the respective TLTRO III during the rest of the life of the same operation” to “average interest rate on the deposit facility calculated over the rest of the life of the respective TLTRO III during the rest of the life of the same operation” would make the borrowing rate identical to the rate at which the proceeds are placed back at the ECB, and eliminate the carry trade opportunity. A change to TLTRO terms would only result in partial repayments Source: Refinitiv, ING Saving the ECB money but repayments to remain more elusive This wouldn’t guarantee immediate repayment of TLTRO loans, however. Likely, these funds have been earmarked by banks for other uses already, and it is probable that some banks don’t have the liquidity available to repay the ECB at the next opportunity in December 2022. Given funding difficulties over year-end some may choose to wait for March 2023 for their early repayments. Finally, we expect other banks would hold on to their TLTRO loans until their maturity given challenging funding environment currently. In the chart below, we illustrate the difference between this early repayment scenario and the original maturities of TLTRO loans. This wouldn’t guarantee immediate repayment of TLTRO loans Of course, the ECB could be more aggressive and add a spread on top of the average interest rate on TLTRO loans to incentivise earlier repayments. This is an option it might pursue if a sharp reduction in excess liquidity is its goal but we think it is far from guaranteed to work, and would end up punishing banks with the most difficulties in accessing funding markets. The other, apparently more important, objective of getting rid of the perceived subsidy to banks, can be achieved without causing such disruptions as desribed above. By this simple change, up to €31bn of interest cost to the ECB disappear. Euro syndicated supply has been above recent years' despite difficult markets Source: Refinitiv, ING Today’s events and market view The economic release calendar is relatively thin today, with only eurozone M3 growth to watch out of Europe, followed by mortgage application, inventories, and new home sales in the US. Instead, the action will be on the supply front. Italy will auction 2Y bonds as well as inflation-linked debt. The US treasury will auction 2Y floating rate notes, as well as 5Y T-notes. The UK will sell 7Y bonds. This will come on top of syndicated supply which has overshot previous years’ average on most weeks since the summer (see chart above for euro syndications). Despite this headwind, short-covering into tomorrow’s ECB could tip price action in favour of lower rates today. 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

Yesterday wasn’t not a good day for the US Big Tech. Google dived almost 10% after reporting disappointing results, while Microsoft sank almost 8%. Nasdaq bounced 2% lower after having tested the major 38.2% Fibonacci retracement, a touch below the 11700. Meta And don’t expect the things to look better today. Meta dived another 20% in the afterhours trading, after announcing disappointed results. Softer-than-expected  On the macro front, however, the Bank of Canada (BoC) surprised with a softer-than-expected rate hike, and US home sales fell almost 11% in September.   EUR/USD The US dollar index dived below its 50-DMA yesterday. The EURUSD rallied above parity, as Cable advanced past 1.16. Focun On Focus shifts to US GDP dat, the European Central Bank (ECB) decision, Apple & Amazon earnings today. Watch the full episode to find out more! 0:00 Intro 0:33 US Big Tech selloff intensifies. Meta down 20% post-market 1:55 What to expect from Apple & Amazon?7 4:05 Policy pivot? 5:20 US GDP to rebound despite sluggish economy 6:52 US dollar softer, EURUSD rallies above parity, Cable past 1.16 7:52 ECB to hike by 75bp, discuss QT 9:19 Gold, oil up on soft dollar 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. #Apple #Amazon #Meta #Google #Microsoft #earnings #USD #GDP #ECB #rate #decision #EUR #XAU #crudeoil #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      

Markets expect a 75 bps hike from the European Central Bank (ECB) today but the focus will be on communication. Nevertheless, the euro requires concerns about growth to ease in order to strengthen, Kit Juckes, Chief Global FX Strategist at Société Générale, reports. 75 bps is priced in, forward guidance is everything “A 75 bps hike is priced in, followed by at least 50 bps more in December. Warmer weather is helping, the market doesn’t expect QT to start until rates are significantly higher, but does expect to see the TLTRO being run down.”  “As important as anything else will be the tone of Christine Lagarde’s comments, and there, a clear focus on fighting inflation probably keeps the hawkish message intact. That suggests we won’t get anything negative for the euro from the meeting, a least. A stronger currency though probably requires pessimism about growth to wane.” “The Bloomberg consensus for Eurozone 2023 GDP growth has fallen from 2.5% to -0.1% since the start of March, during which time the consensus for US GDP has fallen from 2.5% to 0.4%.”  See – ECB Preview: Forecasts from 15 major banks, no obstacles to a 75 bps hike

Summary:  The ECB rose its key rate to 1.5% from 0.75% and signaled it is making progress in the fight against inflation. The US economy grew 2.6% on an annualized basis last quarter after two declines in a row, beating consensus as personal consumption rose more than forecast. The Nasdaq 100 & S&P 500 ended 1.6% and 0.6% lower, with Amazon falling 13% after hours, while the Dow Jones lifts, boosted by McDonald’s and Boeing. Crude oil climbs above $89, while iron ore falls to its lowest level since 2020. Asian equity futures mostly trade lower. Australia’s ASX200 opens 0.6% lower today, but tracks 2% higher this week, supported by commodity stocks and Macquarie beating forecasts. What’s happening in markets?     Need to know  The ECB rose its key rate to 1.5% from 0.75% and signaled it is making progress in the fight against inflation. Officials dropped a reference to hikes continuing for "several meetings," while saying they expect further action. Christine Lagarde emphasized that more increases were on the way: "We still have ground to cover." Money markets pared tightening wagers by as much as 20 bps, and European stocks erased losses. The US economy grew 2.6% on an annualized basis last quarter after two declines in a row, beating consensus as personal consumption rose more than forecast. The GDP report showed foreboding signs, as growth was almost entirely driven by trade, and residential housing investment plunged. As such, treasuries yields extended their fall, with 10-year yield pushing below 4%. The dollar was mostly higher, though the yen was barely up ahead of the BOJ meeting. Oil advanced and gold retreated. Asia-Pacific's equity futures are mostly in the red. The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) ended 1.6% and 0.6% lower, while the Dow Jones lifts, boosted by McDonald’s The US major indices fell on Thursday from continued weaker than expected earnings carnage with Facebook (META) falling 25%. In mega caps, Amazon (AMZN) was leading the losses, falling 4.1% on projecting slower growth and cutting its spending in the face of economic uncertainty, falling 13% after hours. Apple (AAPL) shares fell 3% on reporting weaker than expected iPhone and services sales in its latest quarter, however it gave an otherwise somewhat upbeat report, noting record sales spurred its active base of devices to hit an all-time high. Post market, Apple shares trade 0.4% higher. Meanwhile, the Dow Jones 30 blue-chip index ended 0.6% up on Thursday, supported by recession-stalwart McDonald’s (MCD) shares rising 3.3% on reporting sales that well surpassed analysts’ estimates, despite inflationary pressures. McDonald’s results were boosted by McRib sales, with the CEO saying they are “the GOAT of sandwiches on our menu,” using the acronym for greatest of all time. The fast-food chain will offer McRib nationwide in the US from the end of this month. Oct. 31. Boeing (BA) shares moved up 4.5% with the company releasing a bullish 20-year forecast for China’s commercial jet market, saying China will need to double its fleet in two decades and that China will be a major driver of Boeing sales. Boeing expects China to need 8,485 new passenger and freighter planes valued at $1.5 trillion through 2041.   Crude oil (CLX2 & LCOZ2) climbs above $89, while iron ore (SOCA) falls to its lowest level since 2020 Oil is trading higher for the third day, on tightness and heavy worry about the price of fuel products over the coming months as the northern hemisphere heads to winter. WTI climbed above $89 with US data showing an economic rebound last quarter. US natural gas futures steadied after the EIA reported stockpiles rose last week. European gas prices advanced. It’s also really important to note, tight diesel markets are taking the main stage at the moment, which you can read more on from our head of commodity strategy, just click here. As for other commodities, copper fell 0.7%, while iron ore (SCOA, SCOX2) fell 0.2% to $81.55, which is its lowest level since May 2020 on concerns that the iron ore market could be oversupplied. Yesterday Fortescue Metals (FMG) affirmed extra production will come to the market before March, (instead of June), with investors worried there is not enough demand from China. Most other commodities were lower, including Wheat and Corn while Cocoa rose 1.6%  Australia’s ASX200 (ASXSP200.1) falls 0.6% on Friday, but tracks 2% higher this week, supported by commodity stocks. Macquarie beats forecasts  After the Aussie share market rose for four straight sessions putting on 2.5% Monday to Thursday supported by commodity stocks, including lithium, gold stocks and agricultural stocks, today’s focus is on tech stock carnage, following the Wall Street sell off. Brainchip (BRN) is down 15%. While iron ore shares are lower, with Fortescue (FMG) trading 7% lower after noting that its increasing its spending, while its margins are tightening. Plus Fortescue is ramping up production, at a time when iron ore demand is limited. On the upside, Macquarie Group (MGQ) shares trade up 3.5% after reporting profit that beat forecasts with market volatility buoying its commodities and global markets business. Macquarie’s net income for the six months to Sept. 30 rose to A$2.31 billion ($1.49 billion), up from A$2.04 billion in the prior year. That exceeded the A$2.15 billion average estimate of four analysts surveyed by Bloomberg. Elsewhere, oil stocks are higher with the WTI price cleared $89, with Viva Energy (VEA) up the most in energy, up 1.6%. What to consider 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 his policy on stronger state control over the economy and markets, which look set to continue unchallenged for years. The confirmation was made on Sunday and across the week, Hong Kong’s Heng Seng fell 7.5%, and the iron ore (SCOA, SCOX2) price fell to 15% $79.60 its lowest level since 2020 on concerns that the biggest iron ore consumer, China 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 almost 12% this week, as a result. Plus Fortescue company affirmed it is increasing its spending, while its margins are tightening. Fortescue plans to ramp up iron ore production at its expanded facility in March, instead of June, which will likely further push the iron ore market into greater oversupply. Australian exports trade prices stumble, imports prices rise   Australian exports prices fell last quarter, but less than expected, falling 3.6% vs the 7% fall consensus forecast. That said, export prices are still up 25.9% YoY. The quarterly drop in prices was driven by the fall in iron ore demand from China, and the drop in coal prices, as global steel demand weakens. That said, Australian gas and crude export prices rose amid surging global demand particularly from Europe. And lithium prices rose markedly, boosted by global electric vehicle sales. Inversely, Australian import prices rose more than expected, up 3%, vs the 0.9% consensus forecast. What contributed to this was price of imports of sodium hydroxide (used in bauxite refining) rose, while the price of importing plastics rose, coinciding with higher energy prices. All in all, import prices to Australia are up 19.3% YoY.    For a global look at markets – tune into our Podcast.     Source: https://www.home.saxo/content/articles/equities/market-insights-today-28-oct-28102022

European Central Bank (ECB) policymaker Gediminas Simkus hints at a potential 75 bps rate hike at the next policy meeting. Additional quotes “We're moving closer towards the neutral-rate territory.” “It is not the case that 75 basis points is the new norm.” “Expect inflation forecasts to be revised up.” “I expect ECB inflation projections to be raised in December.” “QT discussion in December should be about the start date and amounts.” Market reaction EUR/USD remains unfazed by the above comments, trading around 0.9970, up 0.06% on the day.

Summary:  A rocky session for equity markets once again yesterday, which tried to find cheer on falling bond yields, only for a thorough thrashing after the close yesterday on Amazon issuing its weakest ever holiday sales outlook, which saw its shares knocked some 13% in the aftermarket. Elsewhere, Apple shares managed to stabilize after its earnings report in, as revenue and earnings topped estimates. What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The recent string of US earnings have not done much to keep the recent momentum in US equities alive. Neutral earnings from Apple last night was topped with awful outlook from Amazon, the second largest stock in the US equity market, that saw its shares decline 13% in extended trading. S&P 500 futures are retreating this morning trading around the 3,790 level despite a sizeable readjustment lower in the US 10-year yield to 3.93%. Euro STOXX 50 (EU50.I) European equities saw more diverging price action yesterday but closed above the 3,600 level again, but this morning STOXX 50 futures are coming down 1% trading around the 3,570 level with 100-day moving average at 3,528 being the next support level to watch. There are no economic releases in Europe of importance today so it will be interest rate direction and sentiment on earnings that will drive price action into the weekend. FX: USD pulled in two different directions as falling yields negative, weak sentiment positive The further drop in US treasury yields fail to extend the US dollar sell-off yesterday, as a far less hawkish than expected ECB took EURUSD back below parity and the Bank of Japan sent no new signals on its terminally stuck policy mix of ongoing QE and yield-curve-control.  Weak risk sentiment seems to provide offsetting support from the greenback, but the dollar will find stronger support if US data remains resilient and the Fed is faced to stay on message with further tightening, especially now that the market has significantly downshifted expectations for peak Fed Funds rate beyond the 75 basis point move expected at next Wednesday’s FOMC meeting, with less than 100 basis points of further tightening now priced and a peak rate near 4.78% by next March. Gold (XAUUSD) Gold remains on track for a second week of gains although some caution has emerged ahead of next week's FOMC meeting. Yesterday, the positive sentiment received a knock as the dollar regained some ground, especially against the euro after the ECB stayed far less hawkish than expected. Countering this potential gold negative development, US bond yields continued lower with the US 10-year treasury yield benchmark falling below the important 4% level to record a +25-basis point drop on the week. While the FOMC is expected to deliver another bumper 75 basis points hike they may tilt towards slowing the pace at future meetings while assessing the impact of their rate and quantitative tightening actions. As a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called. Crude oil (CLZ2 & LCOZ2) Crude oil remains on track for a second week of gains but for now without challenging resistance indicating a market still struggling for direction with no overriding theme being strong enough to set the agenda. Strength this week has been driven by a developing tightness in the fuel product market, US exports of crude and fuels setting a weekly record and the weaker dollar, as well as strong buying from China as refineries there plan to boost fuel exports through the end of the year. Diesel markets in Europe and the US continues to signal tightness ahead of winter with elevated refinery margins and prompt spreads signalling tight market conditions. Focus next week on the Nov 2 FOMC meeting and major OPEC producers beginning to cut their production. Additional technical upside in WTI above $89.25 while Brent’s next level of resistance is the October high at $98.75. US treasuries (TLT, IEF) The US 10-year treasury yield benchmark fell through the important 4.00% level yesterday, with the yield trading as low as 3.90% before treasuries found resistance. The 3.85% area is arguably a pivotal level if treasuries continue to rally. The entire yield curve dropped yesterday, in part on a less hawkish ECB continuing the trend recently of central banks delivering less than expected on guidance, as German 10-year Bunds dropped below 2.00% for the first time in weeks on the ECB meeting yesterday (more below). It looks like we’ll be heading into next week’s FOMC meeting with a fairly hard market lean for a significant downshift in the Fed’s hawkish message. What is going on? ECB the latest central bank to surprise dovish The ECB hiked its key rate 75 basis points to 1.5% from 0.75%. Officials dropped a reference to hikes continuing for "several meetings," in the statement, while saying they expect further action. Christine Lagarde said in the press conference that more rate hikes were on the way: "We still have ground to cover." The bank will continue to reinvest all maturing assets in its asset purchase program (QE) and QT won’t be discussed until the December meeting. The market read the meeting as a strong dovish surprise, as another 20 basis points of tightening were removed from forward expectations for 2023 (down some 50 basis points now from peak expectations just over a week ago.) Apple is a fortress FY22 Q4 revenue came out at $90.2bn vs est. 88.6bn up 8% y/y keeping up with inflation and EPS at $1.29 vs est. $1.26 driven by a new all-time high of active devices. The number of paid subscriptions, which Apple has recently announced will see price hikes, have doubled in three years to 900mn. Shares were unchanged in extended trading. Amazon shares plunged 13% on Q3 results Revenue in Q3 hit $127.1bn vs est. $127.6bn up 15% y/y but operating income hit $2.5bn vs est. $3.1bn. The weaker than estimated operating income was driven by a negative revenue surprise in their cloud business AWS with revenue of $20.5bn vs est. $21bn. The free cash flow in Q3 was still negative at $5bn with the combined negative free cash flow over the past year at $26bn. The change in cash generation for Amazon indicates that the pandemic turned out to be bad for the business as it spent too much on expanding capacity that could not be maintained. The outlook for Q4 was what terrified investors with the retailer guidance operating income in the range $0-4bn vs est. $4.7bn and revenue of $140-148bn vs est. $155.5bn. Japan announces massive fiscal stimulus Japan’s Prime Minister Fumio Kushida announced a ¥71.6 trillion (nearly $500 billion) stimulus package overnight, in a purported bid to “ease inflation” and shore up his government’s popularity. The new spending in the package is set at ¥39 trillion and will focus on incentivizing companies to raise wages, national security/defense and subsidies to reduce the impact of energy costs, especially electricity bills. With the Bank of Japan not allowing government bond yields to adjust, this risks adding to the yen’s weakness as long as other major central banks are not in easing mode. Caterpillar, McDonalds, and Boeing positive stories in the negative backdrop A few positive stories to highlight amidst the massive drop in marquee megacap names include Caterpillar, which soared a massive 7.7% on impressive results. Elsewhere McDonald’s (MCD) shares rose 3.3% on reporting sales that handily beat analysts’ estimates, despite inflationary pressures. McDonald’s results were boosted by McRib sales, and the fast-food chain will offer McRib nationwide in the US from the end of this month. Meanwhile, Boeing (BA) shares jumped a day after an ugly drop on its earnings report. Yesterday, shares rose 4.5% with the company releasing a bullish 20-year forecast for China’s commercial jet market, saying China will need to double its fleet in two decades and that China will be a major driver of Boeing sales. Boeing expects China to need 8,485 new passenger and freighter planes valued at $1.5 trillion through 2041. A tough week for coffee, cotton and sugar The Bloomberg Commodity Softs index trades down 5% on the week led by a 6% drop in Arabica coffee (KCH3) $1.79/lb, a 14-month low as money managers continue to exit long-held bullish bets, now turning increasingly sour amid concerns a global recession will hurt demand at a time where the outlook for the 2023/24 crop in Brazil is showing signs of improving. However, a combination of exchange monitored stocks lingering at a 23-year low and oversold condition may soon drive a technical bounce ahead of support at $1.73/lb. Sugar (SBH3) meanwhile has been hurt by a weaker Brazilian Real boosting incentives to export. Cotton (CTZ2), down 52% from its May peak has plunged to near a two-year low on weak demand for supplies as consumers around the world cut back on spending. Weekly export sales from top shipper, the US, plunged from a year earlier with overall sales for the current season being well behind last year and the long-term average. What are we watching next? Market leaning very hard now for a dovish downshift at next Wednesday’s FOMC After the Bank of Canada surprised with a smaller than expected hike this week and the ECB surprised with more dovish forward guidance, the market is now. But will the US data cooperate and is the maximum conceivable downshift from the Fed next week already in the price – given that the Fed itself has said that it will continue to hike even as the economy – including the labor market - weakens? After all, the market has removed nearly 25 basis points of tightening through the March FOMC of next year from the peak of just above 5.0% a bit more than a week ago to just under 4.8% now, and is more aggressively pricing the Fed to begin cutting rates by late next year (December ‘23 FOMC yield down almost 50 bps from peak).  Earnings to watch Today’s US earnings focus is on the two oil and gas majors Exxon Mobil and Chevron expected to report strong earnings in Q3. Exxon Mobil is expected to grow revenue 44% y/y with the operating margin expanding further. NextEra Energy is also worth watching given the recently passed US bill on renewable energy because it may lift the outlook for the industry. Today: Macquarie Group, OMV, ICBC, China Merchants Bank, LONGi Green Energy Technology, Midea Group, Imperial Oil, Danske Bank, Sanofi, Airbus, Volkswagen, China Construction Bank, Agricultural Bank of China, Bank of China, BYD, China Shenhua Energy, Eni, Keyence, Hitachi, Denso, Equinor, CaixaBank, Wilmar International, Swiss Re, Exxon Mobil, Chevron, AbbVie, NextEra Energy, Colgate-Palmolive, Royal Caribbean Cruises Earnings releases next week: Monday: Daiichi Sankyo, Stryker Tuesday: Toyota Motor, Sony Group, Mondelez, AMD, Airbnb, Eli Lilly, Pfizer, BP Wednesday: KDDI, Novo Nordisk, GSK, Booking, Qualcomm, CVS Health, Estee Lauder, Humana Thursday: Cigna, Amgen, PayPal, Starbucks, EOG Resources, ConocoPhillips, Regeneron Pharmaceuticals, Zoetis, Canadian Natural Resources, DBS Group Friday: Duke Energy, Enbridge Economic calendar highlights for today (times GMT) 0800 – Germany Q3 GDP0900 – Eurozone Oct. Confidence Surveys1200 – Germany Oct. Flash CPI1230 – Canada Aug. GDP1230 – US Sep. Personal Income/Spending1230 – US Sep. PCE Inflation1400 – US Oct. Final University of Michigan Sentiment   Source: https://www.home.saxo/content/articles/macro/market-quick-take-oct-28-2022-28102022

An ugly week of Big Tech earnings is coming to an end, having wipe out hopes of seeing earnings boost gains across the stock markets. Yesterday, Meta plunged more than 24%; Nasdaq 100 lost almost 2%. And today won’t be any better, as Apple and Amazon also lost in the afterhours trading. Amazon lost up to 20%! US Big Tech US Big Tech rather killed joy this week, so all eyes are on Big Oil to reverse mood. Exxon Mobil and Chevron will be reporting earnings this Friday and are expected to announce stunning earnings. US GDP data On the data front, investors didn’t know what to do with the mixed US GDP data yesterday. The latest GDP update showed that the US economy grew 2.6% in the Q3, exports boosted the headline figure, while imports fell - meaning that the domestic demand from the US weakened despite a significant appreciation of the US dollar. The central banks On the central banks front, the European Central Bank (ECB) hiked the interest rates by 75bp at yesterday’s meeting, as the stubborn Bank of Japan (BoJ) maintained its interest rate unchanged at -0.10% at today’s meeting, while revising the 2022 inflation forecast significantly higher from 2.3% to 2.9%. What ahead Today, investors will be watching one last thing on the macro front before the weekly closing bell – and that’s the September PCE index, along with the personal income and spending data. Any weakness could further weigh on the dollar before we close the week, and before next week’s FOMC meeting. Watch the full episode to find out more! 0:00 Intro 0:41 Big Tech selloff continues as Amazon & Apple fail to convince 2:23 Watch Big Oil earnings: Exxon & Chevron are due to report today. 4:17 US GDP data was mixed! 6:16 ECB hiked 75bp, but euro slipped 7:46 BoJ stood pat, while revising inflation forecast! 8:35 Watch US PCE index, personal income & spending 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. #Apple #Amazon #Meta #Google #Microsoft #ExxonMobil #Chevron #earnings #USD #GDP #ECB #BoJ #rate #decision #EUR #JPY #crudeoil #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

Today the BLS (Bureau of Labor Statistics) will publish the latest inflation report in relation to the PCE index for September 2022. This will be the most recent inflation data the Federal Reserve will receive and will therefore be a key component in deciding the size of the next rate hike at the Federal Open Market Committee meeting next week. According to the CME FedWatch tool, there is an 88% chance that the Fed will raise rates by 75 basis points, down from yesterday's forecast of 92.5%. This will raise the Fed's base rate between 375 and 400 basis points at the FOMC meeting next week. According to Bloomberg News, economists polled predict that, compared with last year, the PCE index will rise by 6.3% in September. "Excluding food and energy, the figure is expected to rise by 0.5% compared to August and by 5.2% from September 2021. The higher forecasts follow government data released earlier this month, which show that a key indicator of core consumer prices accelerated to a 40-year high in September. In an article written by Jessica Menton of Bloomberg News, the biggest question facing investors and traders is: "Is multi-year inflation nearing a peak, or will prices continue to rise... Traders are keeping a close eye on the Federal Reserve's preferred inflation rate. The PPI will help determine if there will be another 75 basis point interest rate hike by the central bank at its meeting next week." Although her article focused on Wall Street and stock investors, her statements give a clear picture of other asset classes, including gold and silver. Thomas Martin, senior portfolio manager at Globalt Investments, said: "The Fed is laying the groundwork to end excessive rate hikes if inflation data supports it. But if this does not happen, they will be ready to continue their big campaigns after November. Unlike previous trading days, yesterday's dollar strength was negatively correlated with gold prices. The dollar rose 0.79%, with the dollar index currently at 110.87. This means that the partial decline in the price of gold would have been much larger had the dollar not added about 8/10 percent of its value. Market participants are also considering how the Fed will take into account yesterday's government report, which showed third-quarter GDP rose 2.6% from an estimate of 2.3%, expanding faster than expected. It is also clear from the report that this year the US economy experienced a period of positive growth for the first time. This led to a decline in gold prices after the release of yesterday's GDP report. The third-quarter GDP report included the most recent data on annual federal interest payments, indicating they had increased to $736.5 billion. This set a new record for annual interest payments on US government debt. According to US Debt Clock.org, the US national debt is currently over $31 trillion and is unsustainable. The higher interest rates set by the Fed only exacerbate this problem. However, the current level of government debt and the high cost of servicing only interest rates are creating extremely optimistic market sentiment for gold.   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/325634

German inflation increased once again in October. We are still a few months away from the peak  The German inflation shocker has entered the next round as headline inflation just came in at 10.4% year-on-year in October, from 10.0% YoY in September. The HICP measure increased to 11.6% YoY, from 10.9% YoY in September. The fact that monthly inflation (0.9% month-on-month) is still far above the historical average for October illustrates how inflation is spreading across the German economy. Peak not reached, yet The available regional data suggest that the increase in headline inflation was not only driven by higher food, energy and commodity prices. Inflationary pressure is actually spreading across the entire economy with prices for clothing and other apparel, and leisure and packaged holidays further increasing. Looking ahead, the peak of German inflation will probably come at the turn of the year but it will take until next spring before inflation drops into single-digit territory again. The recent drop in wholesale gas prices will hardly affect the short-term inflation outlook and may only bring relief later in 2023. Today’s German inflation data once again underlines that no central bank in the world can bring down actual inflation. This is why the ECB’s own narrative will increasingly shift toward inflation expectations and longer-term inflation outlooks. With this in mind, after yesterday’s jumbo rate hike, the December meeting could indeed deliver a dovish pivot. ECB president Christine Lagarde was more vocal than ever regarding a looming recession yesterday and the ECB’s staff projections in December will very likely show inflation structurally coming down to 2% during 2024 and 2025. Enough to stop the rate hiking cycle at the latest in February and shift from rate hikes to gradual quantitative tightening at the start of the second quarter of 2023. TagsMonetary policy Inflation Germany Eurozone ECB   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

US Will the fourth 75 basis-point rate hike be the last major rise before the Fed downshifts in December?  Next week’s FOMC decision is widely expecting a unanimous vote for one last major rate increase. With the Fed’s preferred price measure still showing inflation is running hot, that might make it harder for them to set up a possible downshift in its rate-hike pace for the December meeting. Despite an acceleration with inflation, strong consumer spending data, and a robust labor market, much of Wall Street is growing confident that the Fed will pause tightening once they take the funds rate to 4.50-4.75% next quarter. In addition to the FOMC decision, traders will also closely monitor the nonfarm payroll report.  The strong labor market is still expected to show job growth with 200,000 jobs created in October, down from the 263,000 created in the prior month. The unemployment rate is expected to tick higher and wage gains are expected to slow. It will be another busy week filled with earnings that will likely confirm the slowdown being seen across the economy.  Healthcare, consumer discretionary, energy, and car manufacturer stocks will report next week. EU Inflation has hit double-digits and remains the ECB’s number one priority. The Eurozone releases its inflation report on Monday. Inflation rose to 10.0% in September, and it is expected to surge to 10.3% in October. Some analysts are expecting a possible surge to 11.0%.  Core inflation is projected to tick higher to 4.9%. The Eurozone will release the October Final PMIs, which are projected to indicate contraction, with readings below the 50.0 level. Manufacturing will be released on Wednesday and Services on Friday. Manufacturing is expected at 46.6 and Services at 48.2, confirming the initial estimates. UK The UK releases Final PMIs for October, with Manufacturing on Tuesday, Services on Thursday and Construction on Friday. The 50.0 line separates contraction from expansion. The initial readings were 45.8 for manufacturing and 47.5 for services, indicative of weak economic activity in the UK. Construction may provide a silver lining, with an initial reading of 52.3, pointing to slight expansion. The highlight of the week will be the Bank of England’s rate decision on Thursday. The BoE raised rates by 0.50% in September and is expected to go all in with a jumbo 0.75% hike, which would bring the cash rate to 3.0%. The vote could have two dissenters, which is why markets are expecting a downshift to a half-point pace in December.  The UK may already be in a recession and higher rates will hurt households and businesses, but the BoE has little choice but to continue tightening if it hopes to curb red-hot inflation, which is at 10.1%. Russia The war in Ukraine and the severe Western sanctions have taken a steep toll on consumer spending. In August, real retail sales plunged by 8.8% and September is supposed to be just as bad with an 8.6% decline. South Africa South Africa’s recovery from Covid-19 has been slow and a weak global economy is not helping matters. The October PMI will be released on Thursday. The PMI is expected to rise slightly to 49.7, following a 49.2 read in September. A reading below 50.0 indicates contraction. Turkey Turkey will release the October inflation report on Wednesday. The Turkish central bank continues to slash interest rates, with a 150 basis point cut earlier in October. This policy has seen inflation soar to staggering levels that is more than 17 times the CBRT’s target rate.  CPI rose to a 24-year high of 83.4% in September, and the consensus for October stands at 85.6%. Switzerland Switzerland releases the October inflation report on Thursday. Inflation has been rising in Switzerland, which forced the central bank to raise interest rates by a massive 0.75% in September. Still, inflation is much lower than in the Eurozone or the UK. Headline CPI is expected to tick lower to 3.2%, down from 3.3% in September. China Strict anti-COVID measures are about to send China’s factory activity back  into contraction territory. The global growth outlook will struggle as China’s economy shows their recovery is struggling. Both services and manufacturing data are expected to weaken in October. Currency traders will pay close attention to the PBOC as they have set the yuan reference rate at the weakest levels since 2008. Authorities want a strong yuan, but defending it could prove costly.  They might need to consider narrowing the band. India India’s economy is losing momentum and the latest PMI readings might confirm that trend.  The growth outlook continues to get slashed and the current rate hiking cycle is starting to weigh much more on the economy. The RBI will have an an out-of-cycle meeting next week as the government urges them to get inflation back under 6%.  Traders should not be surprised if some RBI action occurs before the December 5-7th policy decision. Australia & New Zealand The focus is on the RBA policy decision. This meeting could have some added volatility as the general consensus leans towards a 25bp rate rise, but a half-point increase should not be ruled out.  Inflation remains hot and with the cash rate nowhere near inflation, the bank might feel more pressure to act aggressively. New Zealand’s third quarter Employment Change and Unemployment Rate data, due out next Wednesday (2 November), as an increase in employment and a decrease in unemployment will be beneficial to New Zealand’s economic growth. As the overall inflation level in New Zealand remains high, the money markets are pricing in either a half-point rise or 75- basis point rate hike at the RBNZ’s next interest rate meeting on November 23rd. Japan The Bank of Japan did not deliver any surprises. Both rates and the 10-year yield target did not have any changes. The yen remains a volatile trade and now the ball is in the Ministry of Finance hands. With momentum growing for the Fed to shift to a slower pace of tightening in December, Japan may try to be aggressive in defending the dollar-yen 150 level. Traders will also pay close attention to the minutes of the last BOJ decision. Singapore Singapore’s economy is weakening and the October PMI reading should show that the weakening trend continues. Traders will also pay close attention to the retail sales report for the month of September. Markets Energy Oil markets remain volatile as China ramps up COVID restrictions, some US oil giants signal modest commitments to boost production, and the global economic outlook continues to dim.  Next week, energy traders will get a better sense of how China’s economy is performing despite the COVID lockdowns that happened in October. OPEC will also announce their World Oil Outlook on Monday. Commodities broadly will also have a reaction to the FOMC policy decision and nonfarm payroll report. A dovish rate rise could allow for dollar weakness which could keep oil prices supported here.  If risk appetite remains healthy, WTI crude could continue to consolidate above the mid-$80s. Gold The bullish case for gold is improving as financial markets begin to grow optimistic that the Fed will begin the deliberation of a slower pace of tightening.  Gold could be on the verge of a major breakout if the FOMC decision is supported by the nonfarm payroll report at the end of the week.  Gold has initial support at $1640, with the line in the sand being $1,620.  The $1680 provides major resistance for gold, followed by the $1700 level. Cryptos Bitcoin is forming a trading around the $20,000 level as many investors await to see what happens with next week’s market reaction to the FOMC decision. What will also draw extra attention is the Hong Kong Fintech Week, that includes appearances from FTX’s Sam Bankman-Fried, but could contain more insight on how Hong Kong will provide guidelines on how retail crypto trading could be allowed. Binance CEO Zhao and Ark’s Cathy Wood will speak at the Web Summit in Lisbon. Economic Calendar Sunday, Oct. 30 Economic Data/Events: Brazilians vote in a presidential runoff election between Luiz Inacio Lula da Silva and incumbent Jair Bolsonaro. Daylight savings time ends in the UK EU trade ministers informal meeting in Prague Monday, Oct. 31 Economic Data/Events: Eurozone CPI, GDP Poland CPI Mexico GDP Australia retail sales China manufacturing and non-manufacturing PMI Japan industrial production, retail sales, housing starts South Africa trade balance Thailand trade UK mortgage approvals Danmarks Nationalbank conference, speakers include ECB Chief Economist Lane, Riksbank Governor Ingves, and Norges Bank Governor Wolden Bache Bank of Italy Governor Visco and Italian Finance Minister Giorgetti speak at a World Savings Day event. Nordic prime ministers meet in Helsinki for a Nordic Council meeting. Hong Kong Fintech Week: Speakers include FTX’s Sam Bankman-Fried, China Banking and Insurance Regulatory Commission’s Yuanqi and the Securities and Futures Commission’s Leung as speakers. OPEC launches its 2022 World Oil Outlook at the Abu Dhabi International Petroleum Exhibition and Conference. Russian President Putin meets the leaders of Armenia and Azerbaijan in the southern Russian city of Sochi. Tuesday, Nov. 1 Economic Data/Events: US construction spending, ISM manufacturing index, light vehicle sales RBA rate decision: Expected to raise rates by 15bp to 2.85% China Caixin Manufacturing PMI Canada Manufacturing PMI Czech Republic Manufacturing PMI India Manufacturing PMI Japan Manufacturing PMI, Vehicle Sales Mexico Manufacturing PMI Norway Manufacturing PMI Russia Manufacturing PMI South Africa Manufacturing PMI UK Manufacturing PMI Czech Republic GDP Macau casino revenue Mexico international reserves New Zealand building permits Denmark’s general election Riksbank Governor Ingves gives a speech on the economy and monetary policy, in Helsingborg. Web Summit conference; Speakers include Binance CEO Zhao and ARK Investment Management’s Wood Wednesday, Nov. 2 Economic Data/Events: FOMC Decision: Expected to raise rates by 75bps US MBA mortgage applications, ADP employment European Manufacturing PMI: Eurozone, France, Germany, Italy, Poland, Spain Australia building approvals Germany unemployment Japan BOJ minutes of Sept. meeting New Zealand unemployment, central bank Financial Stability Report Russia unemployment, retail sales EIA Crude Oil Inventory Report Bank of Ireland’s Financial System Conference: Speakers include Irish Central Bank Governor Makhlouf, Finance Minister Donohoe and Bank of France Governor Villeroy In Dublin. Thursday, Nov. 3 Economic Data/Events: US factory orders, durable goods, trade, initial jobless claims, ISM services index Bank of England Rate Decision: Expected to raise rates by 75bps to 3.00% UK services PMI Australia trade balance China Caixin services PMI Eurozone unemployment India S&P Global services PMI Italy unemployment Norway rate decision: Expected to raise rates by 25bps to 2.50% Russia services PMI Spain unemployment G-7 foreign ministers to meet in Munster, Germany German Chancellor Olaf Scholz visits China RBA’s Kearns speaks at the ASIC Annual Forum in Sydney. ECB’s President Lagarde and Elderson speak at Latvijas Banka Economic Conference 2022. ECB’s Panetta gives a keynote speech at ECB money market conference. BOE’s Mann speaks on a panel about inflation at an American Enterprise Institute web event. Friday, Nov. 4 Economic Data/Events: US October Change in nonfarm payrolls: 200Ke v 263K prior, unemployment Rate to tick higher to 3.6%, Average Hourly Wages European Services PMI: Eurozone, France, Germany, Italy, Spain Japan Services PMI Canada unemployment Eurozone PPI France industrial production Germany factory orders Singapore retail sales Spain industrial production Thailand CPI The UN’s Food and Agricultural Organization releases its monthly index of world food prices. ECB’s VP de Guindos gives a keynote speech at the Energy Prospectives session ECB President Lagarde gives a lecture on monetary policy in the euro area organized by Estonia’s central bank. Fed’s Collins speaks on macroeconomic conditions at a Brookings Institution virtual event. Sovereign Rating Updates: France (Fitch) Ireland (Moody’s) Norway (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.

The downside risks of the European economy are growing, but with inflation rising to almost 10% in September, the European Central Bank continued to raise interest rates. After raising interest rates by 75 basis points across the board, ECB President Christine Lagarde said the committee had tightened financial conditions and more work needed to be done. "There is still a field to cover," she said. "In the current state of uncertainty, with the possibility of a recession rising, everyone has to do their job," Lagarde said. "Our job is price stability. This is our main task." Interest rates are expected to rise by early 2023. But Lagarde didn't say how high the stakes would be. Reiterating that future policy rate decisions will continue to be data-driven and meeting-by-meeting. The increase in interest rates is due to the fact that the ECB continues to see further risks to economic activity until the end of the year. "Eurozone economic activity is likely to slow significantly in the third quarter of the year, and we expect further weakening for the remainder of this year and early next year. High inflation continues to hold back spending and production. Serious disruptions to gas supplies have further worsened the situation, and both consumer and business confidence has fallen rapidly, which is also putting pressure on the economy," Lagarde said in her opening remarks. However, price stability and bringing inflation down to the ECB's medium-term target of 2% is the central bank's priority. While soaring energy and food prices are the two biggest drivers of inflation, the ECB is forecasting a general rise in consumer prices. "Inflation remains too high and will remain above our target for an extended period," Lagarde said. "Incoming data confirms that the risks to the economic growth outlook are clearly abating, especially in the near term," she added. However, price stability and bringing inflation down to the ECB's medium-term target of 2% is the central bank's priority. Although the sharp rise in energy and food prices is the most significant driver of inflation, the ECB predicts a widespread increase in consumer prices. "Inflation remains too high and will remain above our target for an extended period," Lagarde said. - The risks for the inflation forecast are primarily positive. The main risk for the nearest period of time is a further increase in retail prices and energy prices. In the medium term, if energy and food prices rise, inflation may be higher than expected."     Relevance up to 12:00 UTC+2 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/325638

At the beginning of the week, the European Union will share the most important indicators. Europe faces a difficult and uncertain geopolitical and economic outlook. Inflation remains too high for a long time. Actions in the field of montage policy do not bring the expected results. However, the fight against inflation is expected to be painful. High interest rates can reduce demand, investment and employment, causing the economy to slow. The ECB seems determined to overcome these fears and fulfill the bank's main mandate of price stabilization, a goal that has turned into a difficult struggle in the Ukrainian war and the energy crisis. Core CPI The change in the price of goods and services purchased by consumers, excluding food, energy, alcohol, and tobacco is expected to reach level of 4.8%. The fight against inflation continues. And the situation of the eurozone does not seem to be getting better. The geopolitical situation, which is the war in Ukraine, which directly affects the member states, still threatens the economic situation. The base CPI indicator also shows this significantly as it has been growing significantly since May. The expected level of 4.8% is the result of the previous reading, so we can believe that the actions of the European central bank may have eased the situation. CPI Although the core CPI remains below 5%, the Eurozone Consumer Price Index is expected to rise to 10.2%. The Baltic countries continue to be the hardest hit; Estonia in particular is experiencing the highest levels of inflation in the eurozone. Such a high level is significantly influenced by the situation of energy prices. It is obvious that as a result of the war in Ukraine difficulties have arisen in Euroland with energy. There is no sign of an improvement in the energy crisis, as Russia said in September that it would not fully resume gas supplies to Europe until the West lifts sanctions imposed on Moscow over its invasion of Ukraine.The central banks of the member states are doing what they can to fight inflation. The ECB has the greatest impact on the fight against inflation. The ECB tries to bring the inflation level back to stabilization. Following in the footsteps of its counterparts elsewhere in the world, in July, the European Central Bank raised interest rates by more than expected amounts for the first time in 11 years as it pursues persistently high inflation. Everything is going up: electricity, diesel, vegetables, the Internet, hotels, flights, and now interest rates as well. The only question is whether such a state of affairs leads to a recession in the euro area. Source: investing.com GDP The surprisingly positive forecast is for gross domestic product, which is expected to reach 1.0%. Despite the positive data, it should be expected that the worst is still to come. Some economists are of the opinion that a recession is already in Europe. Recession in the eurozone now appears likely as a result of the deepening gas crisis. Economic activity in the euro area declined even more in October, and Germany, the EU's largest economy, appears to be headed towards a recession. Higher interest rates tend to mean a decline in economic activity as credit becomes more expensive and consumer spending decreases. Source: investing.com

The coming week will be unusually rich in economic statistics and various events that will have a significant impact on the markets. A number of important economic data will be released this week, where the values of production indicators both in Europe, China and the USA will play a significant role. The numbers of indexes of business activity in the manufacturing sectors will have to indicate what impact the processes of raising interest rates have on national economies, of course, here we mean the countries of the so-called West. The decline in indicators will demonstrate a steady trend towards recession in the Western countries with the expected result - continued increase in interest rates by central banks and, as a result, continued pressure on demand in the stock markets and the dollar. Also, new data on consumer inflation in the euro area will be published today, which, as predicted, will again show its increase in annual terms from 9.9% to 10.2%. If the reports do not disappoint, then the growth of inflation in the euro area will again bring to life the topic of further continuation of the aggressive increase in European Central Bank interest rates, however, which we strongly doubt, since there are noticeable discrepancies between the words of the central bank's representatives and real actions. This allows us to believe that the euro is unlikely to receive significant support in the near future. Monetary policy meetings of the Reserve Bank of Australia and the Bank of England will be held this week. Interest rates are expected to rise by 0.25% in Australia and by 0.75% in Britain, which, in our opinion, is unlikely to noticeably change the positioning of the Australian dollar and sterling against the US currency if the Federal Reserve, following the meeting on Tuesday, makes it clear that the growth rate rates at 0.75% can be maintained until the start of the new year. Only a softening of the US central bank's position regarding the prospective aggressive continuation of raising rates can significantly change the situation on the markets and lead to a global reversal in the stock markets and a weakening of the dollar. And the icing on the cake will be the release on Wednesday and Friday of new data from the US labor market. If they show the preservation of a high rate of creation of new jobs, this may allow the Fed to continue actively raising rates, which will become a new basis for the dollar's growth. What can we expect in the markets today? We believe that trading in Europe, according to the dynamics of futures for stock indices, will start in the red, but a lot will depend on the positioning of American investors. If trading in the United States starts positive, this may put pressure on the dollar and support its local weakening, as the markets still hope that the Fed at the November meeting may consider reducing the rate growth rate in the near future. Forecast of the day: EURUSD The pair is trading in a very tight range of 0.9925-0.9970. If the eurozone inflation report turns out to be lower than expected or in line with the forecast, the pair may break out of this range and fall to 0.9820, at the same time, if inflation shows more growth, this will cause an expectation of a continuation of the ECB's aggressive rate hike and may cause the pair to rise to 1.0080. EURJPY The pair is moving in the range of 14550-147.65. A strong increase in inflation in the euro area may trigger the likelihood of continued aggressive rate hikes by the ECB, which will support the euro against the yen. In this case, a rise above 147.65 could lead to a rise of the pair to 148.65.       Relevance up to 08:00 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/325759

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

We start the beginning of the new week with data on inflation in the European Union. Apart from important data from Strego Kontunet, the market does not expect important data from America. Japan Industrial Production In Japan, despite the positive results in August, Industrial Production fell below zero to -1.6%. The decline was expected but not that low. The result was forecast at -1.0%. Such a situation means weakening demand in this sector. For investors, this means a significant slowdown and is not beneficial for the image of the Japanese currency or its entire economy. Japan Retail Sales Another important report for the Japanese economy is the report on retail sales. The result turned out to be positive. The 4.1% level was expected to hold this time as well, but the reading was higher. The current level of retail sales in Japan is 4.5%. Since the fall in July, sales in Japan started a new pattern trend, which, as we can observe, continues. Retail sales are seen as a stand-in for consumer spending and its growth can be considered positive for the development of the Japanese economy. Source: investing.com Austrailan Retail Sales Australia also shared the results on retail sales. The result was neither positive nor negative. The positive fact is that it has met expectations and has not fallen. This is the third reading in a row when the retail sales level is 0.6%. According to this indicator, the Australian economy is stagnating. China Manufacturing PMI The China Manufacturing Purchasing Managers Index fell below 50 again. The current reading shows that the index reached the level of 49.2 against the previous one (50.1), it is a negative reading. Also, this reading did not meet the forecast level (50.0) The China Non-Manufacturing Purchasing Managers Index (PMI) also fell. The spatula trend continues. The gauge has dropped from level 50.6 to level 48.7. The current value and movements of the PMI and its components can provide useful information for business decision makers, market analysts and investors .We can expect that poor performance in both sectors will have negative effects on market decisions. Important economic data from Europe The core CPI reached the level of 5.0% against the forecasted 4.8%. On the other hand, the overall CPI reached the level of 10.7% and was higher by 0.5% than forecasted. As we can see, the situation in the euro zone has not changed despite the actions of the ECB. Read more: Forecasts Of The Situation In The Eurozone Are Not Very Good| FXMAG.COM ECB’s member is set to speak After today's important economic data from the Eurozone, a speech by Philip R. Lane, member of the Executive Board of the European Central Bank will take place at 16:00 CET. The speech that will take place after important reports will be helpful for investors in taking further decisions and thus contain indications on the future possible direction of monetary policy. Summary Despite the fact that only the European Union released data important for the markets, during the week there will be more reports that will have a significant impact on the market situation. This week we should focus on next decisions of central banks regarding interest rates (Fed, RBA, Bank Of England). 0:50 CET Japan Industrial Production (MoM) (Sep) 0:50 CET Japan Retail Sales (YoY) (Sep) 1:30 CET Austrailan Retail Sales (MoM) (Sep) 2:30 CET China Manufacturing PMI (Oct) 11:00 CET EU CPI 11:00 CET EU GDP 11:00 CET EU Core CPI 12:25 CET BCB Focus Market Readout 16:00 CET ECB's Lane Speaks Source: https://www.investing.com/economic-calendar/

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

October 2022 seems to have brought respite to many asset classes. During this time, the stock, bond or cryptocurrency markets tried to pick up, while the US dollar seemed to lose value at the same time, along with the falling VIX "fear index" contract. Performance of key indices and companies In October,one of the popular futures contracts, the contract for the U.S. Dow Jones Industrial Average index saw the biggest gains. It rose by almost 13 percent during this period. Although the month is not yet over, for the moment, only Verizon ranks in the entire index since the beginning of October with a negative result. On a monthly basis, the decline is 0.92 percent. In contrast, the biggest increase in the index was achieved by Caterpillar (up more than 30 percent). The company reported that sales and revenues in the third quarter of 2022 recorded an annual increase of 21 percent, reaching $15 billion. The company's profit was $2.04 billion, an increase of 43.13 percent compared to the same quarter of the previous year, BBN reported. Operating profit rose 45.73 percent year-on-year to $2.42 billion. Caterpillar is the world's leading manufacturer of construction and mining equipment, diesel engines, industrial gas turbines and diesel-electric locomotives. Source: Conotoxia MT5, Caterpillar, Monthly DAX also with growth in October The second popular instrument, which seemed to rebound from earlier declines, was the contract for the German DAX index. Although emerging macroeconomic forecasts for the German economy appear to be worsening, and the European Central Bank raised interest rates, the DAX rose nearly 10 percent. The company that may have gained the most was Deutsche Bank, as the month's performance was up more than 30 percent by now. The German bank reported its best results since 2016 in October. Net income for the third quarter of 2022 was €6.9 billion, up 15 percent year-on-year and the highest third-quarter income since 2016. The dollar exchange rate fell nearly 1 percent. Market hopes that the U.S. Fed will slow down interest rate hikes at the end of the year and in the first quarter of 2023 may have led the U.S. dollar to fall in October. At the moment, the USD index is trading 0.9 percent lower than at the beginning of the month at 111 points. The EUR/USD exchange rate is near parity at 1.0000, all likely in anticipation of the Fed's November 2 interest rate decision. The market seems to be expecting a 75bp hike to 3.75-4.00 percent, while the end of the hike cycle could be priced in at 4.75-5.00 percent in early 2023. October's biggest declines? It seems that among the popular contracts, the biggest drop in October may be the VIX, which fell 15 percent to 26.86 points this morning. Looking at the chart of the contract showing expected volatility on the S&P500 index, someone could  see that this month's trading may have turned around at a potential resistance level. Source: Conotoxia MT5, VIX, Weekly Will volatility continue at lower levels in November? Here, a lot may depend on the US central bank and events in Eastern Europe. Daniel Kostecki, Director of the Polish branch of Conotoxia Ltd. (Conotoxia investment service) Read more reviews and open a demo account at invest.conotoxia.com 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.

Summary:  A return to hawkish expectations for the FOMC and risk-off from weak China data as well as possible issues in Russia-Ukraine grain deal saw markets tumble on Monday and US 10-year yields reversed back to 4.10%. Dollar strength returned as well, with gains most pronounced against the sterling and yuan. However, demand concerns returned, while oil also retreated with President Biden’s hopes of a windfall tax on profits of US energy companies weighing as well. Gold extended its downtrend with the surge in yields. Reserve Bank of Australia on watch in the day ahead, with some key Japanese names like Toyota and Sony also reporting earnings. What is happening in markets? The Nasdaq 100 (USNAS100.I) & S&P 500 (US500.I) fall on Monday ahead of Fed, but hold onto monthly gains US stocks fell into the red on their last trading day of the month with end of month rebalancing coming into play, while stocks were also on the back foot as bond yield climbed ahead of Wednesday's Fed decision. Still the S&P500 held onto a monthly gain of 8%, but on Monday the index dropped 0.75%. The Nasdaq fell 1%, but held a 4% October gain. Most Treasury yields rose, with 10-year notes up to around 4.05%, while the dollar climbed against every G-10 partner, save the kiwi. Oil and gold both retreated. Energy shares whipsawed on news that President Joe Biden will call on Congress to consider tax penalties for oil producers accruing record profits. JPMorgan Chase Marko Kolanovic is joining strategists who believe the aggressive Fed hiking is nearing an end. He thinks the Fed will raise rates by 50 basis points in December and pause after one more 25-basis-point hike in the first quarter. Apple (AAPL) shares fell 1.5% with iPhone’s Foxconn plant in central China grappling with virus outbreak.  Fertilizer giant, Archer Daniels (ADM) rose 2.2% with traders expecting higher agricultural prices amid supply concerns from added geopolitical tension. Australia’s ASX200 (ASXSP200.1) futures suggest a 0.15% rise on Tuesday, ahead of the RBA rising rates today The Reserve Bank of Australia is expected to deliver its 2nd straight month of 0.25% hikes at today’s meeting, according to Bloomberg consensus, which will take the cash rate from 2.6% to 2.85%. However it will be a tough decision, with stronger-than-expected third-quarter inflation data from last week, and hot retail and credit data yesterday giving room for a potential 50-bp (0.5%) hike. This could trigger a knee jerk jump in the Aussie dollar vs the US (AUDUSD), however we maintain our bearish view of the AUDUSD given the Fed has more ammo to aggressively rise. Also note, Governor Philip Lowe has regularly wrong-footed forecasts. Still, swaps imply only a 20% chance of an outsized move, and Australian 10-year yields are a full 25 bps below similar-dated Treasuries, meaning there are expectations that RBA will take a softer line than the Fed. The RBA will last month previously noting loan arrears and insolvencies have picked up in Australia, while housing loan commitments declined -  ‘demonstrating the effect of high interest rates on housing’. This demonstrates, the RBA has a tough task of rising rates to slow inflation, without compromising the health of the economy. FX: Dollar returns to gains ahead of FOMC Dollar started the week on a firmer note as WSJ Timiraos comments turned more hawkish over the weekend after dovish Fed expectations possibly went a bit far. The worst performer was GBP, and we had raised concerns yesterday that it was pricing in all the good news so there was scope for disappointment. GBPUSD broke below 1.1500 with EURGBP also reversing back higher to 0.8620 despite EURUSD weakness to sub-0.99. USDJPY rose back above 148.50, with US 10-year Treasury yields touching 4.1% at one point. Japan’s Finance Ministry data showed a record USD 42.8bln was spent on multiple interventions in the FX market last month to attempt to cushion the Yen’s fall. The Chinese yuan continued to slide, USDCNH rose to 7.34 and the onshore spot USDCNY seen close to 15-year highs of 7.30+ at Monday’s close. Crude oil (CLX2 & LCOZ2) worried about oil demand Crude oil prices were lower on Monday as concerns of weaker demand weighed on sentiment with the Fed commentary from whisperer Nick Timiraos shifting towards a hawkish stance again. Meanwhile, China’s PMIs fell below the 50 mark which separates expansion and contraction. On the other hand, OPEC’s World Oil Outlook estimates demand will climb 13% to reach 109.5mb/d in 2035, then hold around that level for another decade and secretary-general Haitham al Ghais said that the oil supply surplus was the main reason for the decision to cut output. There were also some reports suggesting that President Biden is considering a potential windfall tax on US energy companies. WTI futures slid towards $86/barrel. Gold (XAUUSD) in a downtrend Gold (XAUUSD) fell for a third consecutive day approaching the recent support area $1,625 as US dollar broadly strengthened with 10 year treasury yield touching 4.10% at one point on Monday. With the Fed poised for another 75bps rate hike this week, pressure on gold could increase, but we continue to see fundamental strength in gold especially given the higher-for-longer inflation expectation. But as a minimum gold needs to break above $1730 before an end to the month-long downtrend can be called.   What to consider? What next for the RBA after peak hawkishness? The Reserve Bank of Australia meets today and is expected to continue with a smaller pace of rate hikes with 25bps priced in despite a hotter than expected Q3 CPI. Q3 CPI rose by 7.3% YoY from previous print of 6.1%, coming in higher than expectations. RBA’s preferred Trimmed Mean CPI was seen at 6.1% vs. expected 5.6% (prev. 4.9%), while PPI also accelerated in Q3 to 6.4% from 5.6% previously. There are, therefore, some calls for an outsized 50bps rate hike as well as inflation continues to inch above the central bank’s 2-3% target range. An update on the latest growth and inflation projections will also be seen along with today’s rate decision. AUDUSD will need a clearly larger than expected rate hike of 50bps, or a very hawkish commentary with a 25bps rate hike to make any substantial gains. If RBA tows the line, focus shifts to USD and the Fed meeting on Wednesday. AUDNZD is also key to watch, with the 1.1000 handle on test. Eurozone GDP and inflation prints continue to make the ECB’s job tougher Eurozone inflation data for October YoY printed another record as it soared to 10.7% (prev. 9.9%), and well above the median Bloomberg expectation of 10.3%. Meanwhile, Q3 GDP growth slowed to 0.2% QoQ or 2.1% YoY (prev. 0.8% QoQ, 4.1% YoY). While mild whether and full storage hasn’t unleashed the full effects of energy shortages this year, the threat continues to loom and this could mean the macro story could deteriorate further. China PMIs and Hong Kong GDP growth send red flags China’s manufacturing and non-manufacturing PMI both plunged into contractionary territory in October with Covid curbs likely continuing to weigh on demand and manufacturing ahead of the CCP meeting. China's official manufacturing PMI declined to 49.2 in October after a brief rebound to 50.1 in September following a two-month decline. Meanwhile, services activity fell to 48.7 in October from 50.6 last month. Also, Hong Kong recorded its worst quarter in over two years, with Q3 GDP growth coming in at -4.5% YoY vs. expectations of -0.8%. The QoQ growth was also in negative territory at -2.6%, signalling recession concerns if such a performance continues despite the economy’s reopening. Key Japanese earnings on watch Big Japanese names Toyota (7203) and Sony (6758) report earnings today. While high inflation and interest rates remain a key consideration to watch for consumer spending trends, the effect of a weak yen will also be key to consider. Sony will be key to watch after the US tech tumble last week, and consensus is looking for a 10% drop in its operating profit from a year ago. Toyoto will likely continue to highlight the supply chain pressures, but possible buyback announcements could support.   For a global look at markets – tune into our Podcast.   Source: https://www.home.saxo/content/articles/equities/market-insights-today-1-nov-01112022

Summary:  Risk sentiment remains near the local highs heading into tomorrow’s FOMC meeting, where the market is hoping for guidance that suggests a downshift in the pace of tightening. Another micro-hike of 25 basis points from the RBA increases the sense that more central banks are set to slow their fight on inflation via rate hikes. Elsewhere, unconfirmed stories swirling overnight in China that that Covid restrictions are set to be lifted saw a potent rally in Chinese equities.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Momentum is trying to come back into US equities after yesterday’s retreat with S&P 500 futures trading around the 3,902 level. A higher close today could set in motion an extended rally into tomorrow’s FOMC rate decision lifting expectations for the Fed to signal a slowdown in rate increases. Given the latest macro figures we have gotten this might still be too early for the market to expect this, but if the Fed confirms the ‘peak hawkishness’ narrative then the 4,000 level in the S&P 500 futures is not outrageous. Euro STOXX 50 (EU50.I) Strong earnings from BP lifting sentiment in early trading in addition to positive spillover effects from the Chinese equity session seeing Hang Seng futures 6.1% higher on unconfirmed news that Chinese policymakers are considering phasing out its strict Covid policy. STOXX 50 futures are pushing higher this morning trading around the 3,649 level, which is the highest level since 13 September. The market is increasingly adjusting to the ‘peak hawkishness’ theme and if momentum extends here the 200-day moving average at the 3,675 level is the big area to watch out for. FX: USD on its back foot as market hopes for dovish downshift at FOMC meeting The market’s hope for a dovish downshift in the Fed’s guidance is a bit nuanced, as the expectations for the coming handful of meetings are back near the cycle highs, with the Fed funds priced to reach nearly 5.00% at the March or May FOMC meeting next year, while expectations farther out into next year and in 2024 are 25 or more basis points from the cycle highs. But with the USD on its back-foot and risk sentiment clearly unafraid of the Fed at the moment, the surprise side this Wednesday would be a stern message from the Fed that checks sentiment. Watching parity in EURUSD as an important psychological barometer, 1.1500 in GBPUSD, which was briefly broken yesterday, and eventually 145.00 in USDJPY and 7.25 area in USDCNH if the sudden USD drop overnight on hopes that China Covid policy is set for relaxation sticks and follows through. HG Copper (HGZ2) recovered all of Monday’s losses during Asian trading ...partly driven by a report that a “Reopening Committee” has been formed led by a Politburo Standing Member. The committee is reviewing data to assess various opening scenarios, targeting a March 2023 reopening. In addition to a weakening dollar and demand towards renewable energy, the copper market is being supported by persistent supply challenges highlighted by top supplier Codelco lowering its annual guidance for the second time in three months. The futures price remains stuck within a narrowing trading around $3.45 and looks poised for a breakout soon. Given the latest developments the risk of an upside break has risen. Gold (XAUUSD) trades higher … after falling for a third consecutive day on Monday, thereby extending its monthly losing streak to seven, the longest since the late 1960’s. The market bounced with support from lower bond yields and a softer dollar but as a minimum the yellow metal needs to break above $1730 before an end to the month-long downtrend can be called. The WGC reported that central banks bought a record 400 tons during the third quarter, more than quadruple the amount of a year earlier, thereby more than offsetting the 227 tons reduction in holdings across bullion-backed ETFs Crude oil (CLZ2 & LCOZ2) Crude oil trades higher within the established range after advancing with the broader market overnight as OPEC+ begins to cut production by around 1.2 million barrels per day, a decision that has been driven by excess supply according to its secretary-general. OPEC also released its World Oil Outlook in which they estimate demand will climb 13% to reach 109.5mb/d in 2035, then hold around that level for another decade. A weaker global economic growth hurting demand, OPEC+ production cuts and EU sanctions on Russian crude from December have all clouded the outlook, thereby supporting the current rangebound price action. Focus on Wednesday’s FOMC meeting and its potential impact on the dollar. Brent has since the September low several times been bouncing off trendline support, currently at $92 with resistance at $97.25 and $98.75. US treasuries (TLT, IEF) US 10-year treasury yields have eased back toward 4.00% after briefly touching above 4.1% yesterday. The focus on continued strength in bond markets will be the 3.90% pivot low yield posted last week, which could open up for a run to the 3.50% area, but would such a move represent a flight to safety (weak risk sentiment) or be celebrated as a sign of easing pressure on asset valuations. The key two event risks are the FOMC meeting Wednesday and how the yield curve reacts as well as the US jobs report on Friday, with the ISM Services Thursday also an interesting data point. What is going on? RBA hikes 25 bps, ups inflation forecasts, downgrades GDP and remains dovish Will the RBA stop hikes early? The RBA hiked the cash rate by 25bps (0.25%) as most expected to 2.85%, maintaining its dovish stance and bordering on restrictive, as it again acknowledged tighter financial conditions are yet to be felt in mortgage payments, but higher rates and inflation have put pressure on household budgets, causing a small amount of loan arrears and insolvencies. This rate hike cycle since May, has been the second fastest in history. We note the RBA was the first major central bank to under-deliver on rate hike expectations last month. The RBA raised its year-end 2022 CPI forecast from 7.8% to around 8%. The RBA revised its GDP forecast down, with growth of around 3% expected this year and 1.5% in 2023 and 2024. AUD knee-jerked lower on the decision, but recovered most of the lost ground against a stumbling US dollar in Asia, while sticking near local lows against the NZD. BP had exceptional Q3 in gas marketing and trading The European oil and gas major is lifting sentiment in Europe with strong net income beating expectations while cash flow generation is coming in below estimates. The energy company is increasing its buyback programme further by $2.5bn. Toyota down 2% on big operating income miss Japan’s largest carmaker is lowering its fiscal year production target as Volkswagen also recently did while posting a Q2 operating income of JPY 563bn vs JPY 765bn due to soaring materials costs and one-off items. The lower production target comes as the industry is still facing a chips shortage. UK Treasury says all Britons will have to pay more tax Chancellor Hunt said that “those with the broadest shoulders should be asked to bear the greatest burden” as the clear message from the new Sunak government, after the previous Truss-Kwarteng team triggered chaos in UK Gilts and sterling, is that financial stability is priority number one. The particulars of the new budget and policy will be laid out in a statement on November 17. US President Biden rails against oil companies not reinvesting profits, promising to raise taxes on profits that are “windfall of war”... ... saying that “The oil industry has not met its commitment to invest in America.” Such a move would require a bill to pass through Congress, however, which would likely prove difficult after the mid-term elections next week, if projections of a strong GOP showing flip the House and possibly the Senate into their hands, making for a largely lame-duck presidency for the next two years. Eurozone GDP and inflation prints continue to make the ECB’s job tougher Eurozone inflation data for October YoY printed another record as it soared to 10.7% (prev. 9.9%), and well above the median Bloomberg expectation of 10.3%. Meanwhile, Q3 GDP growth slowed to 0.2% QoQ or 2.1% YoY (prev. 0.8% QoQ, 4.1% YoY). While mild weather and full storage has not unleashed the full effects of energy shortages this year, the threat continues to loom, and this could mean the macro story could deteriorate further. Japan spent a record $42 billion to defend JPY in October The Finance Ministry is said to have another 10 trillion yen, or about $68 billion in ready cash left to throw after defending the JPY if pressure mounts again, although Japan’s central bank reserves are many, many multiples of these amounts, currently at $1.24 trillion. What are we watching next? Another small hike from a central bank (the RBA) encourages speculation of dovish shift at the FOMC meeting on Wednesday A number of recent central bank meetings of late, including the latest RBA meeting overnight, which saw Australia’s central bank only hiking rates 25 basis points for the second consecutive time, encourage the notion that the Fed is set for a dovish shift at this Wednesday’s FOMC meeting. Working against that narrative have been a number of possible “leaks” by journalists at key publications thought to have strong Fed sources, including the WSJ’s Nick Timiraos and a NY Times reporter, whose latest musings suggest that the Fed is not set to indicate any backing down from its hawkish message. An overtly defensive and hawkish FOMC meeting tomorrow could badly shock the market, which coming into this morning, at least, seems hopeful that the Fed is set to downshift its tightening guidance this week. Or at least, given that Fed expectations for the next six months or so are within a few basis points of the cycle highs, isn’t obviously afraid of the message the Fed is set to deliver: equities are up near the local highs after a ripping rally off October lows. Earnings to watch Today’s US earnings focus is AMD, Airbnb, and Uber with analysts expecting revenue growth of 31% y/y for AMD but EPS down 5% y/y as input pressures are eating up growth coming from strong product introductions. Airbnb is still riding the reopening tailwind with revenue expected to increase 26% y/y in Q3 and EBITDA expanding significantly to $1.39bn up from $888mn a year ago. Uber has a goal of becoming self-funded by 2024 and could achieve this based on the current trajectory. The company is expected to deliver revenue growth of 67% y/y and EPS of $-0.06 up from $-0.42 a year ago. Today: Toyota Motor, Sony, BP, Eli Lilly, Pfizer, AMD, Mondelez, Airbnb, Uber Wednesday: Suncor Energy, Nutrien, Novo Nordisk, Maersk, Vestas Wind Systems, GSK, Electronic Arts, Qualcomm, CVS Health, Estee Lauder, Booking, Fortinet, Ferrari, Albemarle Thursday: Verbund, Barrick Gold, Orsted, Novozymes, BNP Paribas, BMW, Enel, ING Groep, DBS Group, ConocoPhillips, Amgen, PayPal, Starbucks, Regeneron Pharmaceuticals, EOG Resources, Moderna, MercadoLibre, Block, Cloudflare, Coinbase Friday: Enbridge, Societe Generale, Intesa Sanpaolo, SoftBank, Amadeus IT Group, Duke Energy, Economic calendar highlights for today (times GMT) 0820 – Australia RBA Governor Lowe to speak 1400 – US Sep. JOLTS Job Openings 1400 – US Oct. ISM Manufacturing 2000 – New Zealand RBNZ publishes Financial Stability Report 2030 – API Weekly Report on US Oil Inventories 2145 – New Zealand Q3 Average Hourly Earnings 2145 – New Zealand Q3 Employment Change/Unemployment Rate 2230 – Canada Bank of Canada Governor Macklem to speak 0030 – Australia Sep. Building Approvals Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-1-2022-01112022

Equities fell and bond yields rose, as the hawkish Federal Reserve (Fed) fears resurfaced before Wednesday’s FOMC decision. Fed The Fed starts its two-day meeting, and could call the end of the aggressive rate tightening and signal slower rate hikes to enter the final phase of policy tightening, before pausing. But the Fed will not want to throw the foundation of a market rally, which could play against its fight against inflation. Eurozone In the Eurozone, inflation hit a record high of 10.7% in October, versus 10.2% expected by analysts, and the European Central Bank (ECB) Chief Christine Lagarde said that inflation came from nowhere, ignoring a decade-and-a-half of aggressive bond buying that threw the foundations of the present spike in inflation, boosted by the pandemic, the war and a global energy crisis The Eurozone yields spiked on expectation that higher inflation would mean higher ECB rate hikes in the future. But the euro didn’t gain, as currency traders priced in the rising recession fears that come along with the higher interest rates. Rate Hike In Australia, the Reserve Bank of Australia (RBA) raised the interest rates by 25bp as expected and said there will be more rate hikes. The Losses In Switzerland, the Swiss National Bank announced a 142 billion franc loss in the first nine months of the year; melting currency valuations, especially the melting euro, was to blame. Gold In precious metals, gold remains under pressure. The $1615 is the next important support. If the US dollar strengthens as a result of a sufficiently hawkish Fed statement this week, gold bears could pull out the $1615 support and tip a toe into the $1500s for the first time since April 2020. Watch the full episode to find out more! 0:00 Intro 0:28 EZ inflation hits record, EZ yields rise, but euro falls 2:24 Two-day FOMC meeting starts today. What to expect? 5:28 Quick update: Apple, Exxon 6:56 How could oil respond to Fed decision? 7:55 RBA hikes by 25bp 8:18 SNB loses 142 billion francs 8:46 Gold to test important support 9:08 Bitcoin could rebound if risk appetite improves 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 #RBA #rate #decision #Eurozone #inflation #crudeoil #ExxonMobil #Apple #Foxconn #China #covidzero #USD #AUD #EUR #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

European Central Bank (ECB) executive board member Fabio Panetta said on Thursday, “we need to bring inflation back to our 2% target as soon as possible, but not sooner”. Additional quotes   Medium-term inflation outlook presents clear upside risks. Further policy adjustment is warranted. We must calibrate our monetary policy carefully to ensure inflation durably returns to target, while also guiding market expectations and limiting excess volatility. He of our stance should not rely on a one-sided view of risks. We must avoid excessive focus on short-run developments and fully taking into account the risks. The neutral interest rate provides limited guidance here. We also need to stand ready to address collateral issues. I  prefer the concept of the target-consistent rate to that of the neutral rate. Maintaining ample liquidity in the system will help ensure smooth money market functioning. Ready to intervene in a timely manner to counter unwarranted market dysfunctions, should they arise. We should ensure that TLTRO repayments have been absorbed before we stop fully reinvesting the principal payments. A controlled reduction – whereby only redemptions above a cap are not rolled over – is preferable to active sales. A bigger-than-expected rate increase may heighten volatility and have a stronger impact in the current highly leveraged environment. We need to pay close attention to ensuring that we do not amplify the risk of a protracted recession. Our policy rate remains a suitable marginal instrument of normalization. If these bigger-than-expected increases are interpreted as signalling a higher terminal rate, we could have a stronger impact on financing conditions. We have a comparatively limited understanding of the effects of reducing the size of our balance sheet.   Market reaction The EUR/USD pair was last seen trading at 0.9786, down 0.31% on the day.

The US stock market continues to fall sharply. Stock index futures continued their decline as Jerome Powell warned that the Federal Reserve would raise interest rates further, if necessary. This undermined risk appetite. The US dollar eventually won. S&P 500 futures declined by 0.7% after falling by 2.5% on Wednesday. The industrial Dow Jones lost about 0.4% and the high-tech NASDAQ index sank by nearly 1.0%. Two-year Treasuries rose to 4.72% and remained below the 5.06% yield peak. The sell-off spread to Europe and Asia. China intends to continue its Covid-Zero policy and this dashed investor hopes. Meanwhile, the market is focused on another central bank. The Fed made a 75 bps hike and the Bank of England is likely to follow suit. Although the interest rate in the UK is much worse than in the US, the regulator is not expected to give up its fight against inflation, even amid an expected severe recession in the economy. Yesterday, Fed Chairman Jerome Powell disappointed traders who had bet on a reversal, saying that the US economy remains resilient, which will continue to spur inflation. A similar situation occurred at the end of the summer of this year, when investors, encouraged by a bullish rally suffered huge losses. History repeats. Every time the market participants hope for a bit of dovish rhetoric, they watch the market crash and burn. While investors are concerned about the impact of the central bank's tightening policies on economic growth, Powell said there was no doubt that the committee was ready to raise rates as high as necessary at any time to calm inflation. ECB President Christine Lagarde also spoke today and warned that a moderate recession in the eurozone may be coming soon but it was not enough to stop price hikes. Meanwhile, the US dollar rose against risky assets. The British pound fell by more than 1%, as fears that the Bank of England's interest rate hike could worsen the situation in the economy increased. The rally in Chinese stocks also came to an end before it could begin amid rumors of Covid Zero cancellation. However, this rumor remained a rumor. Economists see a further sell-off in emerging markets in Asia as the US dollar is rising. Wheat prices fell after Russia agreed to renew a deal allowing the safe passage of Ukrainian crop exports. Oil fell after Powell's comments on interest rates overshadowed supply cuts. As for the technical picture of the S&P 500 index, after yesterday's decline, the demand for the index remains rather sluggish. Bulls need to protect the support of $3,735. As long as the trading instrument is trading above this level, we can expect the demand for the risky assets to come back if the US data occurs to be weak. This may strengthen the index and bring it back to the level of $3,773 under control, opening the way to the level of $3,808. If the price breaks through this level, it may start an upward correction and reach the resistance of $3,835. The next target is located at $3,861. If the index declines, bulls will have to show some activity at $3,735. If this level is pierced, the trading instrument may be pushed down to $3,699 and to a new support of $3,661.     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/326184

The eurozone economy expanded in the third quarter, but most recent data suggests that the recession has already started. Double-digit inflation is keeping the ECB in tightening mode, though substantial progress has been made in withdrawing stimulus. That means we're unlikely to see any more rate hikes after February next year In this article Growth surprises positively in the third quarter Consumption is likely to cave in Horror inflation Substantial progress in withdrawing stimulus Growth surprises positively in the third quarter The eurozone registered an unexpected 0.2% Quarter-on-Quarter expansion in the third quarter. Not surprisingly Spain, Italy and France did see growth on the back of a good tourism season, but Germany also performed much better than expected with 0.3% QoQ growth. However, it is striking to see that economic data has started to deteriorate strongly after the summer holidays. The eurozone composite PMI flash estimate fell to a lower-than-expected 47.1 in October. This is just a near 2-year low but also the fourth consecutive month that the PMI is hovering below the 50 boom-or-bust levels, clearly suggesting negative GDP growth. We get the same story from the European Commission’s economic sentiment indicator: it fell in October for the eighth month in a row to the lowest level since November 2020. The forward-looking components of the business surveys such as hiring intentions and new orders are heading south, a signal that the downturn is likely to intensify in the coming months. Consumption is softening Source: Refinitiv Datastream Consumption is likely to cave in Admittedly, consumer confidence improved slightly in October, but it remains close to the historical low reached in September. As households are expecting higher unemployment in the next 12 months, their intentions to make major purchases, renovate their homes or purchase a house, are all at very low levels. This strong cooling of consumption is also seen in high-frequency data such as hotel bookings, which are showing a post-summer dip. To be sure, in most countries there is budgetary support to alleviate the energy bills, but we don’t expect this to be sufficient to generate positive consumption growth in the coming quarters. With the significant rise in interest rates, accompanied by tighter credit standards, the real estate market is starting to cool rapidly in several countries, putting downward pressure on house prices. This is likely to impact construction activity negatively over the coming year. We're reiterating our forecast of a GDP contraction in the fourth quarter of this year and in the first of 2023. But there's more. The ECB's current tightening policies and the still difficult energy transition away from Russian gas will restrain the recovery thereafter. On the back of the better third-quarter numbers, we've revised our 2022 eurozone growth forecast up to 3.1%. For 2023 we are now pencilling in -0.7% growth and for 2024 1.3%. Horror inflation The October inflation data, published on Halloween, was another shocker: 10.7% headline inflation and 5.0% core inflation. The good news is that upstream in the supply chain there finally seems to be some moderation in price pressures. Supply chain delays eased to the lowest level for over two years, with shipping and material prices now clearly coming down. With inventories of finished products rising rapidly, pricing power is also likely to wane. On the back of the mild October weather, natural gas prices have also softened significantly, though we expect prices to rise again over the coming months when more normal winter temperatures set in. But even then, the contribution of energy to headline inflation is likely to diminish gradually. For 2022 we are now looking at 8.4% inflation and for next year, 5.6%. High inventories are likely to depress pricing power Source: Refinitiv Datastream Substantial progress in withdrawing stimulus The European Central Bank no longer dismisses the possibility of a recession, though we will have to wait for the December staff forecasts to know whether it will become the base case. For the time being the bank is still in tightening mode. But at the same time, it acknowledges that substantial progress has been made in withdrawing monetary stimulus. While the Bank's president, Christine Lagarde, didn’t want to put a figure on the neutral or the terminal interest rate during the press conference after the last rate hike, Banque de France President, Villeroy de Galhau, stated on several occasions that the neutral nominal interest rate is believed to be close to 2%. We, therefore, maintain our forecast of a deposit rate of 2% in December and a final rate hike of 25bp in February. The ECB is also likely to announce the conditions that will trigger the start of Quantitative Tightening. We believe that it will begin in the second quarter of 2023 at the earliest, basically through no longer fully reinvesting the Asset Purchase Programme portfolio. This will only have a minor impact on excess liquidity and bond yields next year. TagsMonetary policy Inflation GDP Eurozone ECB   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

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

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/

EUR/USD The euro is seem to be trading in the 0.9750-1.0050 range. Expectations that the ECB may raise the interest rate by 0.75% at the next meeting provide support for the euro although the currency is now hovering around its all-time lows against the dollar. At the same time, the instrument has strong resistance on its way. Indeed, the US Federal Reserve is likely to remain aggressive. The regulator is anticipated to lift interest rates by 0.75% or at least 0.5% in December. Therefore, we may observe such a price range on the chart. Final thoughts: Consider selling EUR at 1.0050, the upper limit of the range, and above. Likewise, it will be possible to go short after a breakout through today's low.   Relevance up to 11:00 2022-11-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/326517

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

Analysis of transactions in the EUR / USD pair The test of 0.9986 happened when the MACD line moved down quite a lot from zero, which limited the further downside potential of the pair. Some time later, another test took place, but this time the MACD line was in the oversold area, so the pair rose by about 35 pips. As for short positions at 1.0079, they led to losses. Although retail sales in the Euro area coincided with forecasts, the market was not affected in the morning. But by afternoon, euro shot up as the start of the US midterm elections weakened dollar's position due to the majority in Congress being taken by the Republicans Today, ECB member Frank Elderson is scheduled to speak, but it will be of little interest. There are also no important fundamental statistics, so the market will return to balance ahead of tomorrow's inflation data in the US. Statements by FOMC members John Williams and Thomas Barkin, along with US wholesale inventory changes, will also be of little interest. Only the next election results will lead to a surge in volatility. For long positions: Buy euro when the quote reaches 1.0088 (green line on the chart) and take profit at the price of 1.0141. But growth is unlikely to occur today, so be careful with buying at the highs. Nevertheless, remember that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0044, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.0088 and 1.0141. For short positions: Sell euro when the quote reaches 1.0044 (red line on the chart) and take profit at the price of 1.0004. Pressure will return after hawkish statements from Fed representatives and news on the midterm elections in the US. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0088, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.0044 and 1.0004. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Relevance up to 07:00 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/326608

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.

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

On Wednesday, the EUR/USD currency pair began a new round of corrective movement while failing to update its previous local maximum. We've said before why this is important. If the previous highs are not updated, then there is no upward trend. Thus, a price reversal near the level of 1.0010 followed by a fall to the moving average line is very bad for the euro currency. However, we have already talked about the illogical growth of the pair in the last few days. We believe that the events of last week should have provoked a new powerful strengthening of the US currency, but not the growth of the European one. From our point of view, non-farms were strong enough, and the unemployment rate did not rise critically to sound the alarm and shout about a recession. Moreover, the recession itself may still be avoided. Some forecasts say the probability of its occurrence in the coming year is no more than 35%. And a year later, the Fed may already start lowering the key rate, which will slowly accelerate the economy again. Based on this, we believe the most logical development would be a new fall in the euro. Recall that Alan Greenspan, the former head of the Fed, believes that the US dollar will strengthen next year. Goldman Sachs lowered its 3-month forecast for the euro/dollar pair from 0.9700 to 0.9400. Thus, many significant experts do not believe that now the European currency will move to the formation of a long-term uptrend. We fully agree with this assessment because we also do not see how the euro can increase over a long distance. The Fed is not even thinking about stopping raising the rate yet, the ECB is unlikely to catch up with the Fed in terms of the rate level, and even these two factors alone suggest that the pair, at least, will not grow much and for a long time. Therefore, we believe that the decline will resume. Maybe it will no longer be large-scale and collapse, but the euro will not grow to 1.1000. Goldman Sachs forecast the Fed rate at 5%, but this may not be the limit. As mentioned above, almost all experts believe the Fed rate will continue to rise. The only question is to what level it will eventually grow. Recall that at the beginning of the year, the most "hawkish" member of the Fed monetary committee, James Bullard, spoke about raising the rate to 3.5%. Now no one doubts that the rate will rise to 4.75%, and some experts predict stronger growth. For example, Goldman Sachs economists believe the rate will rise to 5%. We believe that everything will depend on inflation. If it shows the same rate of slowdown as in the last two months, the Fed will receive the necessary grounds for further tightening monetary policy. Naturally, the higher the rate, the longer it will grow, and the more reason the dollar will continue to enjoy increased demand and strengthen against its competitors with lower rates. ECB head Christine Lagarde said last week that her department also intends to continue to fight high inflation. Still, in the case of the European regulator, it is unclear how far it can go in tightening monetary policy. We have already written earlier that not all EU countries can withstand the burden on the economy in the form of a 5% key rate. Most likely, the ECB will not bring the situation to a "critical mass." We believe that the ECB will stop somewhere in the middle to slow down inflation as much as possible, but at the same time, not bring the state of weak economies to a catastrophic state. This will mean that the rate will rise to a maximum of 4%, which is unlikely enough to return inflation to 2%. Therefore, the cost of borrowing will be more expensive in the United States, and bank deposits are also more profitable in the United States. You can make elementary money by taking a European loan and placing it on a deposit in the USA. This is a joke, but cash flows can continue to flow from Europe overseas. The average volatility of the euro/dollar currency pair over the last five trading days as of November 10 is 134 points and is characterized as "high." Thus, we expect the pair to move between 0.9897 and 1.0165 on Thursday. The upward reversal of the Heiken Ashi indicator signals the resumption of the upward movement. Nearest support levels: S1 – 1.0010 S2 – 0.9888 S3 – 0.9766 Nearest resistance levels: R1 – 1.0132 R2 – 1.0254 R3 – 1.0376 Trading Recommendations: The EUR/USD pair continues to be located above the moving average. Thus, now we should consider new long positions with targets of 1.0132 and 1.0165 in the case of a reversal of the Heiken Ashi indicator upwards. Sales will become relevant again no earlier than fixing the price below the moving average line with targets of 0.9888 and 0.9766. 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/326707

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.

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/

US CPI readings have had a habit of disappointing, and markets' stronger footing into the release and an ongoing preoccupation with a 'pivot'-narrative make it look more susceptible to such an outcome. In any case, Fed officials may see little reason yet to signal less tightening on aggregate given inflation is still wide of the mark In this article One slower inflation print may not yet mean the Fed will want to signal less tightening in sum ECB sticks with hawkish tones Today's events and market view One slower inflation print may not yet mean the Fed will want to signal less tightening in sum The US October CPI will be today’s main flashpoint. The consensus is for headline inflation to slow to 7.9% and the core rate to ease to 6.5%. The main focus should be on the month-on-month core rate, which is seen ticking down to 0.5% from 0.6%. Mind you, readings closer to 0.2% is what would be needed to bring the rate closer to the Fed’s 2% target, so anything we will see today will still signal central bankers that they are wide off the mark. Today will still signal to central bankers that they are wide of the mark     But coming in the wake of the Fed signalling the possibility of decelerating its tightening pace from December onwards, there is a good chance that markets will extrapolate this from today’s data. A reading in line with consensus should further strengthen expectations for a 50bp hike in December, which is what the market is currently leaning towards, with a 57bp increase discounted in the OIS forwards. The cautionary tale is that inflation data has had a habit of surprising with higher readings. Markets have been trading stronger going into today’s reading with 10Y Treasury yields dipping towards 4.05% yesterday, which could increase the impact of a disappointing inflation reading. However, we have the feeling that the market may still be too absorbed with the notion of a potential pivot. There are good reasons to slow the pace of tightening not least given policy lags involved after a phase of catching up. That does not mean that the Fed will want to signal that it is doing less tightening in sum. This should not be the case unless there is more compelling evidence of inflation being on a trajectory to return to target.       US yields off their highs means a high CPI would be most impactful for markets Source:Refinitiv, ING ECB sticks with hawkish tones The European Central Bank has shown its willingness to keep its hawkish stance even in light of growth risks. At the hawkish end, Belgium’s Pierre Wunsch stated the ECB may need to hike more than markets expect if the economic downturn remained mild. Such hawkish signalling might be motivated by real rates having failed to rebound from their late October slump. The ECB’s consumer expectations survey contained little to cheer about for the ECB To be sure, the ECB’s consumer expectations survey contained little to cheer about for the ECB and its efforts to tackle inflation. Near-term price expectations over the 12-month horizon increased a little to 5.1%, while longer run inflation expectations over the 3-year horizon remained unchanged at 3%. Uncertainty over the outlook remained elevated. At the same time expectations of economic growth deteriorated markedly. The fall in real rate is a concern with inflation expectations rising Source: Refinitiv, ING Today's events and market view Rates markets appear to be trading on the front foot going into today's US CPI report. But the backdrop is still one where the appetite to take on duration risk appears to be limited. At least this is what the disappointing metrics of yesterday's 10Y US Treasuty auction suggest and we think the risks are skewed towards a larger move on the back of a disappointing inflation reading. Note that today the US Treasury will also follow up with a 30Y auction, and such long duration supply could well extend a push towards higher yields. A number of Fed officials are scheduled to speak after the CPI release, including the Fed's Daly, Mester and George. Other US data to watch are the initial jobless claims that should still point to a relatively robust labour market. In the eurozone the focus should be on ECB comments with Isabel Schnabel scheduled to speak in the afternoon. TagsRates Daily

Primed for pivot, the market has rallied on the US CPI surprise. Fed officials have started to push back against the premature easing of financial conditions, but timing is especially inconvenient for the European Central Bank, which is still seeing greater risk of deanchoring inflation expectations  In this article Market runs with the CPI and is tailed by the Fed's hawks Spill-over of easing financial conditions comes at an inconvenient time for the ECB More signs that collateral scarcity is also on the ECB's mind Today’s events and market views We have published our Rates Outlook 2023: Belt up, we are going down: After a horrific 2022, bond markets can look forward to improving returns helped by a higher starting running yield, and subsequent falls in market rates. Brace for a reduction in central bank liquidity, more bonds supply and lingering systemic concerns as key themes, too.   Market runs with the CPI and is tailed by the Fed's hawks For once the US CPI release broke with the bad habit of surprising to the upside. And the market was quick to jump on the ‘pivot’-bandwagon, with a larger Fed hike of 75bp for December now seen off the table, and if anything it now seems that the market is shifting to discussing whether it could be 25bp rather than 50bp next month. The terminal rate that the Fed is seen reaching has slipped to 4.87%. Just after the last Fed meeting this had stood as high as 5.15%. Risk assets rallied on the prospect of slowing inflation and the Fed turning less aggressive.  At first Fed officials were quick to push back against the markets optimism The first Fed officials were quick to push back against the markets optimism. The data was better than expected, yet it is but one reading and the month-on-month core rate of 0.3% is still signaling inflation running well above the Fed’s desired level. While encouraged by the data the Fed’s Mester still saw greater risk in tightening too little than too much, Logan and George reiterated  that the Fed had more work to do. While the Fed may well move on to a slower pace of tightening also to better assess the impact of previous rapid rate increases, it may not want to signal that it is doing less overall. In fact, rallying equity markets and lower market yields easing financial conditions is probably not what it wants to see at this stage already without having more clarity where inflation is actually headed. The lower CPI print was greeted by lower nominal and real yields Source: Refinitiv, ING Spill-over of easing financial conditions comes at an inconvenient time for the ECB The read across from US markets saw the 10Y Bund yield falling to 2%, coincidentally the lowest level since just after the October ECB meeting. Terminal rate pricing for the ECB also slipped to 2.87% from above 3% previously. The ECB, however, does not even have the comfort of having at least one set of encouraging data with regards to inflation that could justify easing financial conditions, which may explain why we have had the ECB hawks becoming more vocal yesterday. We had highlighted the ECB’s consumer survey pointing to elevated if not slightly higher inflation expectations. The ECB’s Schnabel picked up on the higher persistence of inflation in her talk yesterday, while pointing out that the risk of inflation expectations deanchoring remains. There is no time for complacency and rates will likely have to move into restrictive territory to rein in inflation. Neutral won't cut it, even as the probability of a recession in the euro area increases. More signs that collateral scarcity is also on the ECB's mind On a more technical matter concerning collateral scarcity, the ECB announced yesterday that it was raising its limit of lending against cash collateral from €150bn to €250bn. Schnabel commented in a tweet that this was a precautionary measure ahead of year-end. Indeed when looking at the daily data through September, daily lending against cash never exceeded €100bn, which should be testament to the rather expensive conditions of this facility. But markets are also going into the upcoming year-end from an already much more strained starting point, so this increased backstop should be taken as a positive signal and further acknowledgement that the ECB is heeding market concerns. Daily ECB securities lending has not run into its cap Source: ECB, ING Today’s events and market views The post CPI gains in bond markets may persist for a while despite some pushback from Fed officials. The US holidays might induce some calm into overall markets allowing also risk assets to bask in the sentiment lift from improving inflation for a little while. Alongside positive news out of China that could limite the further downside in rates. This is not without risks, though. Today will still see the University of Michigan consumer confidence including its measure of surveyed inflation expectations. Longer run expectations are seen stable, while shorter run 1Y inflation expectations are seen ticking up a tad. In the eurozone we will see another busy slate of ECB speakers, though this time around with representatives from both ends of the dove-hawk spectrum. Among others look out for Holzmann, Lane, Panetta and de Guindos. Also keep an eye on the release of the European Commission economic forecasts. In primary markets Italy will be active auctioning a new 7Y bonds and tapping a 3Y bond as well as a 12Y green bond, in total for up to €8.75bn.      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

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 euro zone has been battling against surging inflation for about a year, with Russia’s invasion of Ukraine accentuating those inflationary pressures. The European Central Bank has meanwhile raised interest rates three times this year to tackle the rising prices. Expectations According to the autumn economic forecast of the European Commission, in the last quarter of 2022, the euro area and most EU countries will be in economic recession. Prices are expected to fall in 2023, but inflation is projected to remain at 7% in the EU and 6.1% in the euro area before falling to 3% in the EU and 2.6% in the euro area in 2024 r. The EU forecast was based on the assumption that geopolitical tensions, such as the war in Ukraine, would not normalize or escalate and sanctions against Russia would remain in place. EU labour markets are expected to react to the slowing economy. Unemployment rates in the EU were projected to be at 6.2% in 2022, 6.5% in 2023, and 6.4% in 2024. GDP growth will be around just 0.3% in the EU and euro area in 2023, the European Commission predicted. Inflation The new percentages were revised up from the European Commission's last economic outlook, which predicted that inflation would reach an average of 7.6% in the eurozone this year and 8.3% in the EU. Inflation in the eurozone reached a record high. Eurozone inflation is expected to hit a new record high of 10.7% in October. Eurostat's October estimates predict that the prices of food, alcohol and tobacco, non-energy industrial goods and services will rise from August and September, when annual euro area inflation was expected to be 9.1 percent and 9.9 percent respectively. Official figures will be released on Thursday, November 17 Energy prices were again the main driver of inflation with a 41.9% increase year-on-year, compared with 40.7% in September and 38.6% in August. Euro area #inflation up to 10.7% in October 2022: energy +41.9%, food, alcohol & tobacco +13.1%, other goods +6.0%, services +4.4% - flash estimate https://t.co/b9t9sOMDLM pic.twitter.com/NbsakF4eVe — EU_Eurostat (@EU_Eurostat) October 31, 2022 Every corner of the continent is facing rising prices and the expected economic recovery in Europe after the coronavirus pandemic is hampered by a number of factors. The Baltic countries remain the hardest hit, with annual inflation above 20%. Estonia leads in comparison with estimates of 22.4%. This is mainly because they are particularly vulnerable to fluctuations in the energy markets. According to Eurostat, the price of natural gas for households increased by 154% and 110% respectively in Estonia and Lithuania between the first half of 2021 and the first half of this year. Meanwhile, France maintained its position as the country least affected by the crisis, although annual inflation in October was 7.1%. The European Central Bank (ECB) raised interest rates Central banks use their interest rates to make money more expensive or cheaper to increase or reduce spending as they directly affect the interest rates offered to households and businesses by commercial banks. Following in the footsteps of its counterparts elsewhere in the world, in July the European Central Bank (ECB) raised interest rates for the first time in 11 years by more than expected as it pursues persistently high inflation. This was followed by another record rate hike in September, raising new questions about whether the rush to increase credit costs and keep inflation in check will plunge major economies into recession. On October 27, the ECB raised interest rates again, increasing the deposit rate by another 75 basis points to 1.5 percent. – the highest level in over a decade. Further such increases are expected in the coming months as "inflation remains far too high and will remain above the [2%] target in the extended version." Source: ec.europa.eu/eurostat/en

Recession will weigh on EUR rates in 2023 but Bund yields dipping below 2% is not a normal state of play. Balance sheet reduction at the European Central Bank will bring a new round of tightening even after hikes stop In this article The inflation peak is not certain, and rates are already low Chipping away at the reasons for structurally low rates Curve inversion is still ahead of us The inflation peak is not certain, and rates are already low 2022 has brought the end of negative interest rate policy (NIRP) and of expanding ECB balance sheet. In 2023, the challenge for markets will be how to deal with contradictory inflation and growth signals. Our economists sit at the more pessimistic end of the growth spectrum in their 2023 forecasts, and there are signs that the ECB is moving in the same direction, albeit slowly. The first order of business in 2023 should be to see tangible signs that inflation is actually on a declining path. Markets have been disappointed in the past. 2% in 10y Bund yields is already low when compared to our (below consensus) call for a 2.25% terminal deposit rate We think this should eventually push EUR rates down further, but one has to be realistic. 2% in 10yr Bund yields is already low when compared to our (below consensus) call for a 2.25% terminal deposit rate. This is all the more true given that financial conditions will tighten further due to a shrinking ECB balance sheet even after the ECB stops its hiking cycle. A dip below 2% should be a temporary one for 10yr Bunds and one we can only justify with significant assistance from declining dollar rates in 2023. The ECB has reduced the amount of German debt in circulation to record lows Source: ECB, Refinitiv, ING Chipping away at the reasons for structurally low rates The low EUR rates story has been a structural one since the global financial crisis of 2008. The low growth and perma-crisis environment resulted in ever-lower interest rates, enforced by the ECB’s NIRP and ever-growing balance sheet. Another feature of the post-GFC world was a single-minded commitment to fiscal austerity, which contributed greatly to the scarcity of German government bonds. Some, but not all, of these drivers are now going into reverse. Take austerity, the energy crisis and growing pressure to shield consumers from its effects have tipped the scales in favour of greater issuance. The ECB is also cautiously dipping its toe into the quantitative tightening shark tank. Both processes will be gradual indeed, and fraught with risks, but they are chipping away at the main technical driver for structurally low rates in the eurozone. We could see 10yr EUR swap rates (vs Euribor) dip towards 2.5% 10yr swap rates, which at times this year have been more than 100bp above Bund yields, are less sensitive to these factors but are not entirely insulated from them. Worse still, a new round of upward pressure on rates will come from shrinking excess liquidity and rising Euribor (and eventually Estr) fixings relative to the ECB deposit rate. At a push, we could see 10yr EUR swap rates (vs Euribor) dip towards 2.5% in the course of 2023 but we expect a jump back towards 3% by the end of 2024. The EUR curve should invert mildly in 2023 Source: Refinitiv, ING Curve inversion is still ahead of us Persistent inflation, and so uncertainty about the path of policy rates, should prevent front-end rates from dipping much below their 2022 levels in 2023. This should be mostly true in the first half of 2023. A corollary to our below-consensus call for a 2.25% peak in the ECB deposit rate is that the end of this hiking cycle shouldn’t be followed by much easing, unlike what our US colleagues expect. This means that the case for much lower front-end rates is flimsy in our view, and we’re expecting 2yr swaps to remain within their late 2022 range in 2023. After a shallow inversion of EUR swap 2s10s towards -15bp, we expect the re-steepening process to begin by 2024 Where the read across from US to European rates is relevant is at the back end. A meaningful drop in Treasury yields will bring 10yr Bund yields through 2% and 10yr EUR swap rates potentially as low as 2.5%. This dynamic will come at a time of worsening recession in Europe but, as the economy recovers, so will the term premia on the curve. After a shallow inversion of EUR swap 2s10s towards -15bp, we expect the re-steepening process to begin by 2024.   This article is part of Rates Outlook 2023: Belt up, we’re going down   View 8 articles TagsOutlook Interest Rates ECB   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 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

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  

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

Analysis of transactions in the EUR / USD pair The test of 1.0244 happened when the MACD line went up quite a lot from zero, which limited the upward potential of the pair. In the afternoon, sell-offs surged around 1.0317, prompting a price decrease of about 30 pips. No other signals appeared for the rest of the day. CPI in Germany, as well as forecasts for the EU economy, did not affect the market. But today, the upcoming report on industrial output and speeches of ECB representatives may prompt growth in euro, albeit not as rapid as last week's. By afternoon, the situation could even put as there are no statistics scheduled to be released. For long positions: Buy euro when the quote reaches 1.0325 (green line on the chart) and take profit at the price of 1.0383. Growth is likely to occur, especially if the statements by ECB representatives remain hawkish. But remember that when buying, the MACD line should be above zero or is starting to rise from it. Euro can also be bought at 1.0283,, however, the MACD line should be in the oversold area as only by that will the market reverse to 1.0325 and 1.0383. For short positions: Sell euro when the quote reaches 1.0283 (red line on the chart) and take profit at the price of 1.0231. Pressure will return after unsuccessful consolidation above monthly highs and weak reports on the eurozone. Take note that when selling, the MACD line should be below zero or is starting to move down from it. Euro can also be sold at 1.0325, however, the MACD line should be in the overbought area, as only by that will the market reverse to 1.0283 and 1.0231. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Relevance up to 07:00 2022-11-15 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/327006

The previous week ended with a noticeable increase in risk appetite and weaker demand for dollar. The main reason was the growing purchases of government bonds in the US, accompanied by a strong drop in yields. The scenario happened because of the latest inflation data in the US, which showed a sharp decrease in the year-on-year ratio and growth in the month-over-month one. Markets have been hoping for this kind of positive news for a long time, believing that the measures taken earlier by the Fed put further pressure on the economy. Now that the figures improved, the US central bank may start easing the pace of rate increases, then take a break. Much will depend on the values of inflation indicators for November, which will be presented in December. If they show, if not a continuation of a strong decline, but at least a stabilization or a slight decrease, then a strong rally may occur in all markets without exception. It could be accompanied by the depreciation of dollar and decrease in Treasury yields. Be that as it may, positive sentiment will continue today. Although stock indices in Europe and the US remain in negative territory this morning, everything may change by the start of the US trading session. In this case, dollar will continue to weaken, then decline further towards the end of the week, especially if the published data on retail sales and their volumes show better values than expected. Data on consumer inflation in the euro area is also important as its figure will affect risk appetite. US statistics will also play an important role since the very position of the ECB on the issue of further aggressive rate hikes remains unclear. Forecasts for today: EUR/USD The pair is trading above 1.0300. If market sentiment worsens, there will be a decline to 1.0235. GBP/USD The pair is trading above 1.1735. If buying pressure remains, it will rise further to 1.1900. But if market sentiment worsens, there will be a decline to 1.1635.   Relevance up to 08:00 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/327022

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.

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

The dollar index lost 4% last week, the most significant drop since March 2020. Such powerful moves against the trend often signal a further trend reversal. However, it will probably be a slower pace of decline and not a one-way street as we see it over the previous ten days. Speculation about Fed decision The pressure on the dollar has intensified over the past two weeks on speculation that the Fed will slow down the pace of policy tightening and that the maximum interest rate in this monetary cycle could be lower than previously feared. Signals from Fed members and slower-than-forecast inflation supported this view, triggering a wave of demand for risky assets. At the same time, monetary regulators in other countries were in no hurry to soften their rhetoric, returning markets to a familiar situation where the Fed acts first and more aggressively than its peers in lowering and raising rates. But overall, it does not stand out for any rigidity. Eurozone The monetary watchdogs in the Eurozone have continued to signal in recent weeks that they are prepared to maintain the high speed of rate hikes, which fed their purchases in the Euro. That pressure could be fuelled by sales of dollar assets from the reserves of the SNB and the BoJ. USD/CHF and USD/JPY USDCHF and USDJPY returned under the emotionally significant levels of 1.0 and 150, attracting market-oriented and trend-following participants' interest. Dollar Index The nearest target for the Dollar Index correction is 105, actively operating as a resistance and support between May and August. This is also where the 61.8% Fibonacci retracement level of 2021-2022 comes in. A decisive failure below would confirm that we see the Dollar moving into a decline and not just a correction in a long-term uptrend. In this scenario, the Dollar Index heads into the 90-100 area, where it has been comfortable since 2015, with a potential pullback to the upper bound of this range in the first quarter of 2023. History History has other examples. In late 2008, two weeks of a significant sell-off in the dollar were followed by three months of gains, and the DXY rewrote local highs, finally reversing only in March 2009. However, it is essential to remember that in both March 2020 and March 2009, the EUR reversal was sustained when supported by the equity market surge we also witnessed last week.

The EUR/USD currency pair moved very calmly on Monday. We admit that we expected a noticeable correction on the first trading day of the week and throughout the week, but so far, our calculations have yet to be justified. So far, there is a clear upward trend for the euro/dollar pair, and, from a technical point of view, everything now speaks in favor of further growth of the euro currency. Recall that on the 24-hour TF, the price managed to overcome all the important lines of the Ichimoku indicator, so finally, we can witness a reversal of the long-term downward trend. At the same time, the "foundation" and geopolitics can break the entire "raspberry" of the European currency at any moment. After all, it is not the euro that is growing but the dollar that is falling. Let's read more: the dollar has been growing for almost two years, and traders have been busy buying American currency. And now they are reducing purchases, reducing the demand for the dollar, so the pair is growing, but this does not mean that the demand for the euro currency is growing. COT reports If we talk about the demand for a particular currency, it is best to turn to COT reports. However, they do not give a clear answer to what is happening in the minds of traders and investors. The net position on the euro among professional traders has long been "bullish," and the euro currency began to grow only in the last couple of weeks. Moreover, according to the logic of things, this "bullish" position should increase for the European currency to continue growing. Or it should decline against the US dollar. As we can see, there are certain reasons for the pair's growth in the future, but they still need to look more convincing as the factors for the growth of the US dollar at the beginning or middle of this year. We rely on technical analysis when we make forecasts and recommendations, so now we need to look more toward purchases. But at the same time, we must keep in mind that the current growth of the euro is quite doubtful from a fundamental background point of view. The EU inflation report will be quite formal. Industrial production The current week began with the publication of a report on industrial production in the EU. It turned out to be slightly better than predicted, which could support the euro on Monday. However, this is different from the scale of inflation or central bank meetings, so count on a long and strong market reaction. Let's go through the other events of the week in Europe. GDP The second estimate of the GDP report for the third quarter will be published today. The market is waiting for a slowdown in the growth rate of the European economy to 0.2% q/q. Still, in principle, all indicator estimates do not have much significance for the market. Some reactions may follow this report, but it is too "stretched" in time to "see" a reaction to it. Recall that three estimates are always published for GDP, which rarely differs much from each other. And in any case, the market is more interested in the ECB's monetary policy, which directly impacts GDP. The speech of ECB President  Thus, a much more important event will be the speech of ECB President Christine Lagarde on Wednesday. The ECB seems to have decided to raise the rate "to the bitter end" or at least "significantly" to lower inflation in the Eurozone as much as possible. This is good news for the euro, but the market needs to understand to what level the regulator will be ready to raise the key rate. We have already said earlier that not all member countries of the alliance can bear the high cost of borrowing relatively smoothly for their economies. The ECB should consider the interests of all EU members, so the rate will not rise to 5%, as, for example, in the USA. EUR/USD Christine Lagarde can refute this assumption or confirm it. She may want to do this, but her comments may dissuade traders from continuing to buy the euro currency (if they even have a place to be). So far, the euro is growing more on the fact that the Fed will stop raising its rate in a few months, and since traders had plenty of time to work out all the tightening of monetary policy, now the actions of the ECB, which is behind schedule from the Fed, are more important. The average volatility of the euro/dollar currency pair over the last five trading days as of November 15 is 168 points and is characterized as "high." Thus, we expect the pair to move between 1.0177 and 1.0513 on Tuesday. The reversal of the Heiken Ashi indicator downwards signals a new round of downward correction. Nearest support levels: S1 – 1.0254 S2 – 1.0132 S3 – 1.0010 Nearest resistance levels: R1 – 1.0376 R2 – 1.0498 R3 – 1.0620 Trading Recommendations: The EUR/USD pair continues to move north. Thus, we should stay in long positions with targets of 1.0498 and 1.0513 until the Heiken Ashi indicator turns down. Sales will become relevant again by fixing the price below the moving average line with targets of 1.0010 and 0.9888. 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/327095

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.

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/

Signs of optimism abound in global markets but caution remains. A Treasury short base explain the strength of the rally, but curve moves show the Fed’s cautious message has landed. Easing collateral scarcity in Europe means swap spreads could tighten alongside riskier bonds In this article A Treasury short base explain the post-CPI rally but markets remain cautious Less collateral stress means swap spreads can join the risk party Today’s events and market views A Treasury short base explain the post-CPI rally but markets remain cautious Even with Thursday’s post US CPI rally partially reversed, we find government bonds are at risk of a near-term retracement if US data continue to show pockets of strength. The most obvious risk is a disappointment in today’s PPI release. Consensus is for a colling down of both the monthly and annual core (ex-food and energy) measures. CFTC data suggested that non-commercial future positions heading into last week’s CPI were net short, and in the case of the 2Y, at a record level. This may account for the strength of the rally but data isn’t timely enough to assess what percentage of these shorts were closed since. Non-commercial future positions heading into last week’s CPI were net short Assuming a short base still exists, the potential for a rally on a soft inflation print remains, although we think most near-term short-covering needs have happened since last week. Another development that is harder to explain with this positioning data alone is the failure of the US curve to re-steepen after the CPI release. Common sense would dictate that the 2Y would rally the most if data points to an early end to the Fed’s cycle but it is the 5Y point that benefitted. This may suggest that the Fed’s cautious message has been heard, and that markets believe it won’t rush into cutting rates, which in turns means the 2Y could prove relatively sticky near-term. 5Y Treasuries dropped on the curve but 2s10s failed to steepen Source:  Refinitiv, ING Less collateral stress means swap spreads can join the risk party So far the strength of risk sentiment has failed to weigh on government bonds, in particular in Europe. The re-tightening of credit and sovereign spreads has failed to add to core yield upside which is characteristic of an environment where inflation remains the principal concern. In theory, this should weigh both on rates and riskier assets but the former is more directly impacted, so it is no surprise to see government bond yields stay range-bound even as stocks rally and spreads tighten. It is no surprise to see government bond yields stay range-bound even as stocks rally and spreads tighten Even the effect on swap spreads, an historical barometer of risk aversion, has been delayed. We’ve written repeatedly about steps taken by both the German federal treasury and the European Central Bank to ease the collateral shortage that has driven a wedge between the yield of German government bonds and swap rates. Large targeted longer-term refinancing operation (TLTRO) early repayments to be announced on Friday would add to this already well established dynamic. What lower collateral shortage would achieve is to make swap spreads more sensitive to other factors, including improving risk appetite, and so add to tightening pressure. This is assuming the reasons for the improvement in risk sentiment holds up, however. Easing collateral scarcity is allowing swap spreads to tighten alongside credit spreads Source: Refinitiv, ING Today’s events and market views Spanish and French CPI, as well as 3Q eurozone GDP will all be final readings. For more forward-looking indicators, look to Germany’s ZEW sentiment index, also released this morning. Frank Elderson, of the ECB, is due to speak today. Euro bond supply will come from Germany (7Y), Finland (5Y/25Y), and from the EU which mandated banks for a dual tranche 10Y green and 30Y deal. The UK will carry out sales in the 10Y and 22Y sectors. Given the magnitude of the post-CPI rally in bonds, today’s PPI will be scrutinised for confirmatory signs that inflation is on the descent. For the same reason, the Fed speakers scheduled for the day will be of particular importance in dictating US rates direction. They include Patrick Harker, Lisa Cook, and Michael Barr. Empire Manufacturing completes the list of US releases. We think the Treasury short base hasn’t entirely disappeared but has shrank enough to reduce the risk of a rally. Meanwhile, supply should weigh on bonds until at least mid-week. 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

Dashing trouble began. After Jerome Powell's fiery speech about a higher peak federal funds rate, who would have thought that gold would not just bounce back but return to 3-month highs? In fact, the slowdown in the rate of tightening of the Fed's monetary policy is a bullish driver for XAUUSD. If inflation remains at elevated levels for a long time, and the Central Bank slows monetary restrictions and eventually pauses, real yields on Treasury bonds will fall, allowing the precious metal to rise above $1,800 an ounce. The main catalysts of the 9.5% November gold rally were the releases of data on consumer prices and producer prices. Both indicators slowed down more than Bloomberg experts predicted, which gave rise to talk that the Fed is doing its job well and can afford less aggression. In the end, the tightening of monetary policy affects the economy with a time lag, rates are already at restrictive levels, so you can not go as fast as before. However, in order to defeat inflation, you need to understand its causes well. The Fed and the White House have gone too far with stimulus in response to the pandemic. As a result, domestic demand grew by 21.4% in the three years to the end of the second quarter of 2022, which is equivalent to an annual GDP growth of 6.7%. No wonder inflation is so high and the job market is strong as a bull. Americans sitting on a mountain of dollars are in no hurry to return to work. Dynamics of domestic demand in the US, Britain and the Eurozone Sooner or later, the money runs out, which will lead to a slowdown in consumer prices in the US by itself. The Fed's aggressive monetary restriction can strengthen their decline. There will be a risk of deflation on the horizon, as in Japan. Ark Invest agrees with this scenario. The company sets the example of the beginning of the 20th century, which was overshadowed by the First World War and the Spanish flu epidemic. Inflation in 1920 in the United States exceeded 20%, but thanks to an aggressive increase in the federal funds rate from 4.6% to 7%, it fell to -15% in 2021. Current conditions have much in common with the period of a hundred years ago. The same scenario of the development of events is not excluded, but in my opinion, it is unlikely. Its implementation would be disastrous for gold, returning its quotes to $1,610 per ounce. On the contrary, a scenario where the Fed slows down and eventually pauses while inflation remains at elevated levels creates a tailwind for the precious metal. Simultaneously with the fall in real yields of Treasury bonds, the US dollar is also weakening. Technically, on the daily chart of gold, due to the implementation of the triple bottom pattern the long-term bearish trend was broken. Quotes have gone beyond the descending trading channel and are moving away from the moving averages. I recommend holding the longs formed on the decline to the support at $1,702 and periodically increasing on pullbacks. The targets are $1,790 and $1,815 per ounce.   Relevance up to 08:00 2022-11-21 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/327262

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

The dollar is tumbling from multi-decade highs. Calling the FX market in 2023 requires taking a view on the Federal Reserve, the war in Ukraine, China, and the overall investment environment. We suspect that the dollar can stay stronger for a little longer. But the main message in our 2023 FX Outlook is to expect fewer FX trends and more volatility Source: Shutterstock The dollar's highwire act Having risen around 25% since the summer of 2021, the dollar has recently taken quite the tumble. For 2023, the question is whether this is the start of a new bear trend or whether the factors that drove the dollar to those highs still have a say.  Given that the most liquid FX pair, EUR/USD, was such a large driver of global FX trends in 2022, we use a scenario approach to look at a range of 2023 EUR/USD outcomes – derived from the expected volatility priced into the FX options market. The range of scenarios and end-year FX levels extend from ‘Permacrisis’, where EUR/USD could be trading at 0.80, to ‘Safe and Sound’, where EUR/USD could be closer to 1.20. Key inputs to that scenario approach are factors like: i) how aggressive the Fed will be, ii) Ukraine, Europe, and energy, iii) China, and iv) the overall risk environment. Given ING’s house view of the Fed taking rates to 5.00% in early 2023, four quarters of recession in Germany amid higher energy prices, relatively weak Chinese growth, and a still difficult equity environment, our baseline view favours softer EUR/USD levels. 2023 will see fewer FX trends and more volatility But perhaps the strongest message to get across in our outlook is that FX markets in 2023 will see fewer trends and more volatility. We say this because conditions do not look to be in place for a clean dollar trend – no ‘risk-on’ dollar decline nor ‘risk-off’ dollar rally. And central banks tightening liquidity conditions through higher policy rates and shrinking balance sheets will only exacerbate the liquidity problems already present in financial markets. Volatility will stay high. Softening global activity and trade volume growth at less than 2% will likely limit the gains of pro-cyclical currencies in 2023. EUR/USD could be ending the year near 1.00. If the positive correlation between bonds and equity markets does break down next year, it will likely come through a bond market rally. Our forecast for US 10-year Treasury yields at 2.75% year-end will argue for USD/JPY to be trading at 130 or lower. EUR/USD will set the tone for European currencies in general. We favour the Swiss franc to outperform and sterling to underperform. Scandinavian currencies may continue to struggle with the high volatility environment. Further east, we see scope for the Hungarian forint to be re-assessed positively, while the overvalued Czech koruna and Romania leu look more vulnerable as FX intervention slows. In the commodity bloc, the uncertain outcome for China continues to place a question mark on the Australian and New Zealand dollars. We again prefer the Canadian dollar – although how the housing market correction plays out will be a risk. USD/CNY itself may struggle to sustain a move sub-7.00. And in a more mixed FX environment, expect local stories to win out – one of which may be Korean debt being included in world government bond benchmarks – helping the won. EUR/USD: Four scenarios for 2023 Source: ING, Refinitiv 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

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/

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

Euro hovered at monthly highs after some ECB members hinted at a lesser rate hike next month. Of course, inflation will play a key role, but although prices have not slowed down lately, at least there is no significant upward spurt. With no momentum for another 75 basis point move, the European Central Bank could hold off on further aggressive policies, which will pull euro down as there are no other reasons to buy it. The Board of Governors and its meetings are closed, but the leaked information gives a certain reason to think about whether it is worth buying the currency now. Obviously, unless there is another unexpected spike in inflation, the ECB may well opt for a less aggressive move. Decision of the ECB The reasons why the central bank may look towards a softer policy include growing risks of a recession, the likelihood that pressure on consumer prices will ease in the near future, and the prospect that a half-point increase in the deposit rate will move closer to the neutral a level that will no longer stimulate the economy and thereby limit inflationary pressures. With four weeks before the final decision of the ECB, there is still enough time for officials to think carefully. Amid market expectations for a half-point increase, hawkish ECB politicians have made little effort to refute this view, only calmly insisting on a third consecutive 75 basis point increase. Austrian central bank governor Robert Holzmann said that now is not the time to change course, although he also kept silent about the size of the next increase. Joachim Nagel, president of the Bundesbank, took a similar approach to the situation. Their Estonian and Latvian counterparts, suffering from the most runaway inflation in the eurozone, called 50 and 75 basis points possible, but did not express a preference for which side they would take. Meanwhile, the head of the Bank of France, Francois Villeroy de Gallo, said the ECB is likely to take a less aggressive path, which could also point to 50 basis points. Inflation in the eurozone However, inflation in the eurozone remains at 10.7%, and even if the rate falls today, it will remain a record in the history. The next meeting of the Board of Governors will coincide with the publication of inflation data for November. A week later, politicians begin a period of calm before their December decision. EUR/USD With regards to the forex market, risk appetite decreased significantly, but sellers are yet to be active. For further growth in EUR/USD, it is necessary to break above 1.0440 as only that will prompt a rise to 1.0480, 1.0525 and 1.0570. If pressure persists, the pair will fall to 1.0350, then to 1.0280 and 1.0220. GBP/USD GBP/USD has halted, so buyers are focused on protecting the support level of 1.1850. They want to breaking through the resistance level of 1.1920 because that will prompt a further rise to 1.2020 and 1.2080. But if pressure returns and sellers take control of 1.1850, the pair will fall to 1.1790 and 1.1740.   Relevance up to 10:00 2022-11-18 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/327395

A regional wage agreement in Baden-Wuerttemberg yesterday will pave the way for broader wage developments and shows the European Central Bank that second-round effects will kick in next year but should be dampened Last night, employers and unions in the metal and electronics industry in Baden-Wuerttemberg reached a new wage agreement. Wages will be increased by 5.2% in June 2023 and by 3.3% in May 2024. There will also be a one-off payment of €3,000, exactly the amount the German government had offered to exempt from tax and social security contributions. While this is "only" a regional wage agreement, it will have knock-on effects on other regional and sectoral wage negotiations. Almost four million people in Germany work in the metal and electronics industry. Traditionally, there has been a lot of attention on German wage settlements across the eurozone. The takeaway for German wage developments and the risk of second-round effects is that last night's deal shows what a compromise can look like. It won’t be enough to fully offset the drop in purchasing power caused by higher inflation, but it softens the damage. For the ECB, it signals that second-round effects remain dampened and that a lower, subdued inflationary pressure can last for longer than markets currently think. TagsInflation Germany Eurozone ECB   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

EU response to Russian invasion of Ukraine: In response to the Russian invasion of Ukraine, the EU has introduced economic sanctions on Russia, including a full coal embargo (since August), an oil embargo (with exceptions) and a two-thirds reduction in gas imports by the end of the year. Substitution of Russian gas in the EU: EU measures (more LNG and network gas from other locations, fuel substitution, and energy efficiency) leave a gap of around 20bcm. The EC has proposed voluntary (and forced if necessary) consumption cuts of 15% in EU countries. This is roughly equivalent to the additional gas consumption that occurs during a cold winter in Europe. Re-Power EU: EU policy, in particular the May 2022 Re-Power EU program, has remained consistent with the long-term goal of climate neutrality and the Green Deal strategy. In addition to diversifying gas supplies, it envisions accelerating the low-carbon transition, mainly through support for RES and energy efficiency. EU shields package from high energy prices: On 14 September, EC President Ursula von der Leyen announced the following: •A target to reduce gas and electricity consumption by 10% and by 5% during the peak winter season to a 5-year average •A tax on excess profits of energy producers •A €180/MWh price cap on low-cost technologies (mainly nuclear, lignite and RES) for the wholesale market in all segments and bilateral contracts •A €3 million investment in hydrogen The gas shock has already caused a significant reduction in natural gas consumption in EU countries, although market prices have not been passed on to the end user. In January-July 2022, gas consumption in the EU was 10% and in Poland 15% YoY lower than in 2021. Natural gas consumption in JanuaryJuly 2022 (%YoY) In the context of deep declines in gas consumption this year, the mechanism proposed by the EC in July to reduce consumption by 15% by member countries does not seem to be a major challenge for Poland. Twelve EU countries, including Poland, have already re duced gas consumption by 15% YoY in January-July 2022. High storage fills, the launch of the Baltic Pipe pipeline from late September and new interconnectors with Lithuania and Slovakia reduce the risk of a gas shortage in Poland in the upcoming heating season. High prices are being boosted by negative events related to the war in Ukraine, including sabotage at Nord Stream. Record high prices encourage gas substitution and directly affect the decline in demand and production in gasintensive sectors. Househ olds and the service sector are generally protected; hence price increases are most severe for producers of the chemical (including fertilisers), mineral and metal smelting industries. 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

Energy price shock for producers in 2022 Translation of wholesale market prices into Producer Price Index (PPI) and Consumer Price Index (CPI) prices: Producer prices typically respond quickly to changes in wholesale energy market prices, which are driven by global developments. In Europe, they are largely impacted by the EU’s energy and climate policy and the EU’s energy market design. However, for individual companies, price changes are often indexed to market prices and occur with some delay. While stock market transactions are transparent, we have limited insights into bilateral contracts between energy utilities and individual manufacturers. Finally , the transmission of shifts in wholesale and 4 producer prices on consumer prices in Poland is constrained by the Energy Regulatory Office, which is responsible for electricity and gas tariffs to households, as well as government decisions on taxes and bene fits. Energy prices what and what does it depend on? Postrecession rebound 2021 and rising oil prices: The upward pressure on industrial output in 2021 was a rebound from the 2020 pandemic recession steadily. In January 2021, PPI growth was 1% built up quickly and YoY, and by December was already at 14.4%, largely driven by price increases in the coke a nd refined petroleum products While January 2021 saw a 6.9% . YoY decline in this category, while December 2021 price growth was 64.3% YoY. This category accounts for 5.2% of the PPI index basket in 2022. Producer price index (PPI) and its energy categories (%ch YoY) A rapid buildup of cost pressures in 2022 and increases in gas and electricity prices: Throughout 2022, water incre prices in the generation and supply of electricity, gas, steam, and hot ased systematically . Price increases in this category reached 30% January 2022 and accelerated to nearly 80% YoY in YoY in August. This category accounts for .8% 7.5% of the PPI basket in 2022. Increases in energy and other categories moved the PPI index from 14 YoY in January to 25.5% in August At the starting point ( before the energy shock ) , 2022 . energy prices for companies in Poland were generally close to the EU average: for companies (including taxes) average in Poland in the second half of 2021. They the past According to Eurostat data, electricity prices were about a quarter lower than the EU27 have increased by a total of about 25% over four years (between the second half of 2021 and of 2018). The price of natural gas for companies saw a total increase of 30% in four years, close to the EU average . Electricity prices for companies in the EU in second half of 2021 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

External assistance and government's anti-inflation shield The vast majority of respondents say the anti-inflation shield is helpful. The shield comprised temporary cuts in indirect taxes, addressed mainly to households. However, most companies (63%) find the anti-inflation shield helps only slightly, and only 15% feel that it does not help at all. Does the anti-inflation shield help your company? External assistance and EU policy to combat the energy crisis Most companies are quite sceptical about the effectiveness of EU policies in dealing with the energy crisis. 44% of companies do not believe that EU policies can contain the crisis but do note the potential for good solutions within them. One in ten companies are strongly critical and see EU policies as a pause button rather than a firm solution for dealing with the crisis. Slightly rarer are the companies that view EU policies more positively and with more hope (a total of 36%, of which 6% believe in EU policies without reservations. The remaining 30%, however, would make changes). Could EU policies help in the 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

Long-term outlook. The EUR/USD currency pair moved slowly during the current week, resulting in no significant price changes. We predicted a significant downward correction at the start of this week, but it has yet to materialize. Traders have been trying to decide whether to continue making speculative purchases of the euro currency or to return to a more stable dollar. The market was uninterested in the fundamental events that occurred. For example, the European Union's October inflation report was only the second assessment with which everyone was already familiar. As a result, the market did not react to the 10.6% y/y increase in inflation. The US elections were incredibly fascinating, but it's fair to say that the outcomes were predictable. Republicans narrowly won the House of Representatives, while the Democrats kept control of the Senate with a majority. Given that they previously held control of both chambers of Congress, the Democrats' situation has worsened. In contrast, many American journalists and experts refer to this loss as "the defeat of the Republicans" because of the Republicans' confidence in the prospect of a decisive defeat. Many believed that Donald Trump, the party's leader, was laying the groundwork for the elections of 2024. He congratulated the Republicans on their victory and asserted that it was his merit before the vote count was finished. Trump then began his favorite record about "numerous violations at polling stations" after it became apparent that there would be no victory in the Senate and a slight advantage in the House of Representatives. In the end, he did submit a formal application to run in the 2024 presidential election. Recall that the Democrats receive the most criticism from Americans regarding high inflation and the current economic downturn. Inflation can safely return to 2% over the following two years, and the recession can end without actually beginning. Therefore, we predict that Biden will win a second term in office rather than Trump winning another term as US president in 2024. COT evaluation. The predictions from the COT report for the euro in 2022 are paradoxical. They displayed the openly "bullish" attitude of professional traders for the first half of the year, but the value of the euro was steadily declining at the same time. Then they displayed a "bearish" attitude for a while, and the value of the euro also steadily declined. The euro has barely budged from its 20-year lows, and the net position of non-profit traders has turned bullish again and is strengthening. As we've already mentioned, this is taking place due to the continued high demand for the US dollar against a challenging geopolitical backdrop. As a result, although demand for the euro currency is rising, the strong demand for the dollar prevents the euro currency from experiencing significant growth. The number of buy-contracts from the "non-commercial" group increased by 7,000 during the reporting week, while the number of shorts decreased by 2,000. The net position consequently increased by roughly 5,000 contracts. Recent weeks have shown a gradual increase in the value of the euro, which already accords with the COT report's indications. However, the geopolitics are likely to remain the same, or there may not be enough reasons for the euro to continue to grow. The upward trend may end as the green and red lines of the first indicator are very far apart from one another. For non-commercial traders, there are 113 thousand more buy than sell contracts. As a result, although the net position of the "Non-commercial" group may continue to increase, the euro may not experience a similar increase. Sales are 39 thousand more if you look at the overall open long and short position indicators for all trading categories (635k vs. 596k). Fundamental event analysis This week, there were no significant macroeconomic reports. Last week, when the US inflation report had the effect of a bomb detonating in the market, traders were very active in buying the pair. However, we stated that while the reaction in the form of a fall in the dollar is quite logical, the strength of its fall raises concerns. The inflation report wasn't so significant or shocking that traders started selling off US currency in large quantities. Many people are still determining the best course of action when buying the euro currency, which appears to be in the early stages of developing a new upward trend. In contrast to the ECB, the Fed will keep raising interest rates. Furthermore, neither the timing nor the identity of the party whose final bid will be higher is known. Technical factors favor the euro, and the fundamental environment offers limited support for this currency. Trading strategy for the week of November 21–25 : 1) The pair crossed all of the Ichimoku indicator's lines in the 24-hour time frame, giving it a real chance of long-term growth for the first time in a long time. Of course, if geopolitics deteriorates again, these opportunities could vanish quickly. However, we can confidently anticipate an upward movement with a target of 1.0636 (100.0% Fibonacci) and cautiously buy the pair. 2) The sales of the euro/dollar pair are no longer significant. You should now wait for the price to return below the important Ichimoku indicator lines before thinking about short positions. 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/327564

Summary:  Markets remain on edge amid lack of economic data but heavy focus on Fed commentaries which were mixed at best with Collins remaining hawkish but Bostic again signaling a slowdown in the pace of rate hikes. Meanwhile, covid outbreaks in China continue to get worse, keeping expectations of a Xi pivot also restrained. Commodities including oil and gold gave up recent gains on higher USD and China concerns. Weekend elections in Malaysia saw its first ever hung parliament, although not a complete surprise. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) traded sideways US equity markets had a lackluster session with modest gains on Friday. Nasdaq 100 was unchanged and the S&P 500 edged up 0.5%. Nine out of the 11 sectors within the S&P 500 gained, with utilities, up 2% being the top performer. Energy was the largest laggard, down 0.9% as WTI crude oil fell to as low as USD77.24 at one point before settling at USD80.08, down 1.9% on Friday and 10% for the week on the concerns of weakening demand. Retailers Foot Locker (FL:xnys), Rose Stores (ROST:xnas), and Gap (GPS:xnys) surged by 7% to 10% on earnings and guidance beating street estimates. US  treasury (TLT:xnas, IEF:xnas, SHY:xnas) yield rose as Fed member Collins keeping 75bps on the table Investors sold the front end of the treasury curve, seeing 2-year yield up 8bps to finish at 4.53% on Friday, following Boston Fed President Susan Collins kept the option of a 75bps hike in December open. Nonetheless, the money market curve continue to assign a higher than 80% chance of a 50bp hike in the next FOMC meeting. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) consolidated on Friday but ended the week higher The risk-on sentiment in Hong Kong and mainland China faded towards the end of last week as investors became cautious about the surge of Covid cases in mainland China that might be testing the resolve of the Chinese authorities, in particular, that of the local governments to implement the 20-item guidelines of relaxing pandemic control measure. Hong Kong stock markets traded higher initially in the morning, led by China Internet stocks, following Alibaba (09988:xhkg) reporting earnings beating expectations and adding to its share repurchase programme and The Chinese authorities’ grant of a new round of 70 online game licences to firms including Tencent (00700:xhkg) and NetEase (0999:xhkg). China property developers declined and dragged the benchmark indices lower, after Moody’s warned that the recent government policy support to the mainland real estate sector was no game changer. Hang Seng Index dropped by 0.3% on Friday and gained 3.9% for the week. In mainland bourses, healthcare shares gained as new Covid cases surged to above 25,000, a new high since April. CSI 300 declined 0.5% on Friday and edged up by 0.3% for the week. Crude oil (CLZ2 & LCOF3) suffering from worsening Covid outbreak in China WTI futures took a look below the key $80/barrel mark on Friday amid the return of demand concerns as the Covid outbreak in China continued to get worse. Further developments over the weekend (read below) suggest further caution on Xi pivot expectations will likely remain. Meanwhile, the winter demand has so far remained restrained but the week ahead may bring further volatility as the deadline for European sanctions on Russia crude looms. NatGas prices were also lower after Freeport LNG announced initial operations are set to resume from their export facility in mid-December, one month later than prior guidance. Gold (XAUUSD) still eying the hawkish Fed Gold stayed short of making an attempt at the key $1800 level last week and was down over 1% as the USD gains returned amid the generally hawkish rhetoric from Fed speakers confirming more rate hikes remain in the pipeline. It is now testing the resistance-turned-support at 1750, and a move higher needs support from further declines in yields and the US dollar or some other catalyst that sees a run to safety. FX: NZD in gains ahead of RBNZ rate decision this week The Reserve Bank of New Zeeland is likely to deliver its sixth consecutive 50bps rate hike this week, or more with consensus tilting towards a larger 75bps move. The calls for a hike come amid hot inflation at 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target – which comes in conjunction with a tight labour market. Most members of the RBNZ shadow board also supported a 75bps rate hike. NZDUSD started the week on a stronger footing, after having touched 0.62 on Friday. AUDNZD remains in a downtrend with China’s Covid outbreak as well as a relatively dovish RBA limiting the prospects for AUD.   What to consider? Fed’s Collins says 75bps still on the table for December, Bostic dovish Fed’s Boston Governor Collins appeared on a CNBC interview on Friday, and said she hasn’t decided on the magnitude of next month’s interest rate hike, but that a 75bps rate hike still remains on the table. She also emphasised that there is no clear and significant evidence that the overall inflation is coming down at this point, and there is also no clear consistent evidence of softening in labor markets. In fact, her comments raised terminal rate expectations as she said that data since September have kind of increased the top of where the Fed may need to go with interest rates. On the economy, she is concerned there could be a self-fulfilling dynamic that could make a more severe downturn more likely. However, Collins is reasonably optimistic a recession can be avoided. On the other hand, we also heard from Atlanta Fed Governor Raphael Bostic who said he favours slowing down the pace of rate hikes and also hinted that terminal rates will be about 1% pt higher from here. Worth noting however that Collins is only a voter this year (and not in 2023) while Bostic is not a voter this year or next. China’s Covid outbreak is getting worse China reported its first Covid-related death in nearly 6 months in Beijing as the outbreak continues to get worse and cast doubts on a Xi pivot. The capital added 516 cases on Sunday, and called the situation "grim." There are some retail and school closures, and the request to stay home was made over the weekend and has been extended. Meanwhile, a district in Guangzhou has imposed a 5-day lockdown to conduct mass coronavirus testing in some areas. ECB balance sheet reduction kicks off Euro zone banks are set to repay 296 billion euros in multi-year loans from the European Central Bank next week, less than the roughly 500 billion euros expected, in its latest step to fight runaway inflation in the Eurozone. The ECB has given banks an incentive to get rid of those loans by taking away a rate subsidy last month. It was its first move to mop up cash from the banking system and the first step towards unwinding its massive bond purchases. While the odds of a 50bos are still in favor for the December 15 meeting, key focus will also be on how fast this move can reverse the ECB's 3.3-trillion-euro Asset Purchase Programme. Christine Lagarde continued to sound the alarm on inflation, saying that even an economic downturn wont be enough to tame soaring prices. However, Knot hinted at slower pace of rate hikes, expecting rates to reach neutral next month. He still reaffirmed that policy needs to be restrictive and QT should be used alongside. UK retail sales signals a temporary recovery in consumer spending A rebound in UK’s retail sales for October signalled that Q4 may see concerns on consumer spending ease slightly. Retail sales grew 0.6% MoM in October after a decline of 1.5% in September. However the outlook remains bleak given the squeeze on incomes amid high inflation and the rise in interest rates. Political gridlock in Malaysia After Saturday’s election, Malaysia saw its first ever hung parliament as none of the three major coalitions won enough seats to form a majority, extending the political crisis in an economy on a fragile rebound. It is unlikely to be a big shock to the markets, as the results were generally as expected. The king has asked the parties to name their PM candidates by Monday afternoon, and while a coalition will likely be formed it is hardly enough to ensure a smooth functioning government. Ex-PM Mahathir lost the election while the ruling coalition was reduced to 30 seats, signalling a complete lack of trust in the political framework.   For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-21-nov-2022-21112022

Summary:  Markets are off to a sluggish start this week after a choppy session on Friday, with China reporting its first official Covid deaths in months, one in Beijing, and driving new headwinds for reopening hopes. The Hang Seng Index was down over 5% at one point overnight. The week ahead is a short one in the US, with markets closed there on Thursday for the Thanksgiving holiday. Wednesday sees the release of many preliminary manufacturing and services PMI.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are trading slightly lower in early European trading hours driven by lower sentiment as China’s zero Covid policy is already under pressure with rising case numbers and the central bank, PBoC, urging stabilisation of financing to the real estate sector indicating how fragile this part of the economy is. The key level on the downside to watch in the S&P 500 futures is the 3,955 level and after that the 100-day moving average at around the 3,919 level. Euro STOXX 50 (EU50.I) European stocks are still up more than 20% from the lows in early October following better than expected macro news and mild weather on the continent. But it seems the good fortune might change now with the weather turning much colder in Northern Europe and if China is not opening up as fast and wide as expected that is a negative for European companies as China is the largest trading partner to Europe. STOXX 50 futures are trading around the 3,910 level with the 3,892 level being the first support level to watch on the downside and then the 3,873 level. FX: USD grinds higher on wobbly risk sentiment The US dollar traded firmer in the Asian session overnight after choppy action late last week as there has been no major follow up move in US yields after the huge reaction to the October CPI data release the week before. Risk sentiment seems to be the local driver here and major reversal levels for USD pairs are still quite distant, meaning the USD can continue to consolidate without major technical implications just yet. Examples of levels are the 1.0100 area in EURUSD, the 1.1600-50 area in GBPUSD and 0.6500-25 in AUDUSD. Little in the way of US macro data this week, although on Wednesday we do get the FOMC minutes, together with a dump of data points including Oct. Durable Goods Orders, weekly jobless claims, preliminary Nov. Manufacturing and Services PMI, and Oct. New Home Sales ahead of the Thanksgiving holiday, with markets close in the US on Thursday and only partially open on Friday. Crude oil (CLZ2 & LCOF3) Crude oil dropped further to fresh multi-week lows in early Monday trading with January Brent touching 86.40 and December WTI below 80. The short-term outlook has been hurt by renewed dollar strength, the most inverted US yield curve in four decades signaling high risk of an economic recession, and not least China’s continued struggle with Covid (see below). Ahead of EU sanctions on Russian oil, which will reduce supply from early next year, the seasonal softness in demand has been exaggerated by the above-mentioned developments. Crude oil trades within a wide range, and it will take a break below the September low at $83.65 in Brent and $76.25 in WTI for that to change. Gold (XAUUSD) Gold trades lower for a fourth day with the market potentially targeting $1735 support. While a stronger dollar driven by FOMC hawks (see below) is weighing on prices, gold’s biggest short-term threat remains long liquidation from funds who in the runup to last week’s failed attempt to break resistance around $1800 had bought gold futures at the fastest pace since June 2019. During a two-week period to November 15 money managers bought 80k lots thereby flipping a short position to a 49k lots net long. During the same period holdings in bullion-backed ETFs continued to drop, signaling no appetite from longer-term focused investors to get involved. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US treasury yields rose slightly on Friday, but have fallen back to start the weak amidst soft risk sentiment in Asia. Friday saw the yield curve inversion reaching a new extreme for the cycle at –72 bps for the 2-10 slope. For the 10-year yield, the cycle low is 3.67%, with considerable focus on the 3.50% level (the major high from June just after the FOMC meeting), while an upside reversal would require a jump well through 4.00%. What is going on? China’s Covid outbreak is getting worse China reported its first official Covid-related death in nearly 6 months in Beijing as the outbreak continues to get worse and cast doubts on a Xi pivot. The capital added 516 cases on Sunday and called the situation "grim." There are some retail and school closures, and the request to stay home was made over the weekend and has been extended. Meanwhile, a district in Guangzhou has imposed a 5-day lockdown to conduct mass coronavirus testing in some areas. China focused commodities have taken a haircut on the recent deterioration on concerns tighter restrictions could be enforced, while China implements its new 20-point tweaking covid restriction plan, aimed at minimising disruptions to people’s daily lives and the economy. The iron ore (SCOc1) price fell almost 4% on Monday in Asia while copper has lost 8% during the last week. Hopes regarding China’s property sector remain after the nation introduced a property rescue package last week. Netherlands trade minister says US cannot impose trade restrictions on Netherlands Referencing the US’ ban against exports of key advanced semiconductor production technology, the Netherland’s trade minister said Friday. This was among signs that Europe is seeking a “middle path” on its policy toward China after US President Biden’s administration asked key allies to comply with its ban as well. French President Macron Friday also pushed back against the idea of dividing the world into rival blocs, while German Chancellor Scholz visited China two weeks ago looking for economic reconciliation between the two countries. Sweden house prices down 3% m/m in October This takes the decline in house prices down 14% from the peak sounding off the alarms at the Riksbank and commercial banks as the house price declines will drive impairments on loans related to the sector. This could in turn lead to lower credit extension from banks into the private sector and thus slow down the economy further. ECB Christine Lagarde reaffirms high inflation remains the number one issue In a speech on Friday, ECB president Christine Lagarde confirmed once again that the central bank will mostly focus on fighting inflation in the short- and medium-term. According to her, the risk of a recession in the eurozone has significantly increased but even if this happens, it is unlikely to quell inflation significantly. This means that hiking interest rates is still on the cards. She also advises the eurozone government to embrace targeted and temporary fiscal stimulus. Too much fiscal stimulus is likely to stimulate demand, thus increasing inflationary pressures. Based on the detailed eurozone HIPC report for October which was released a few days ago, there is so far no sign whatsoever of a peak in underlying inflation pressure. In our view, we should not take for granted that the ECB will slow the pace of hikes to 50 basis points in December. COT report shows major rotation between commodity sectors The weekly Commitment of Traders report covering the week to November 15 saw speculators make some major position adjustments as the dollar and yields dropped, a further inversion of the US yield curve raising the risk of an incoming recession as well as temporary hopes China would ease its Covid restrictions. Developments that saw funds reduce exposure in energy and grains while adding length to metals and softs. The biggest changes being a sharp reduction in speculative bets in crude oil, soybeans, corn and cattle while buying was concentrated in gold, copper, sugar and cocoa. What are we watching next? NZD gains ahead of RBNZ rate decision this week The Reserve Bank of New Zeeland is likely to deliver its sixth consecutive 50bps rate hike this week, or more with consensus tilting towards a larger 75bps move. The calls for a hike come amid hot inflation at 7.2% YoY in Q3 – well above the RBNZ’s 1-3% target – which comes in conjunction with a tight labour market. Most members of the RBNZ shadow board also supported a 75bps rate hike. NZDUSD started the week on a stronger footing, after having touched 0.62 on Friday. AUDNZD remains in a downtrend with China’s Covid outbreak as well as a relatively dovish RBA limiting the prospects for AUD. Fed’s Collins says 75bps still on the table for December, Bostic dovish Fed’s Boston Governor Collins appeared on a CNBC interview on Friday and said she hasn’t decided on the magnitude of next month’s interest rate hike, but that a 75bps rate hike remains on the table. She also emphasised that there is no clear and significant evidence that the overall inflation is coming down at this point, and there is also no clear consistent evidence of softening in labor markets. In fact, her comments raised terminal rate expectations as she said that data since September have kind of increased the top of where the Fed may need to go with interest rates. On the economy, she is concerned there could be a self-fulfilling dynamic that could make a more severe downturn more likely. However, Collins is reasonably optimistic a recession can be avoided. On the other hand, we also heard from Atlanta Fed Governor Raphael Bostic who said he favours slowing down the pace of rate hikes and hinted that terminal rates will be about 1% pt higher from here. Worth noting however that Collins is only a voter this year (and not in 2023) while Bostic is not a voter this year or next. Earnings to watch Today’s US earnings focus is Zoom Video and Dell Technologies. After being a darling through the pandemic Zoom Video has experienced revenue growth coming down to 4.4% y/y expected in the FY23 Q3 (ending 31 October) release down from 35% y/y a year ago. The company is well run but is facing intense competition in the video conferencing business. Dell Technologies will likely highlight the trends we already know of slowing PC sales and lower spending on enterprise technology driven by a slowing economy and falling share price in the technology sector. Today: 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 Economic calendar highlights for today (times GMT) 1330 – US Oct. Chicago Fed National Activity Index 1800 – US Fed’s Daly (Voter 2024) to speak 2145 – New Zealand Oct. Trade Balance  Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-21-2022-21112022

The beginning of the week is quite calm when it comes to reports. Today, attention may be drawn to the events from the second half of the day, ie reports from New Zealand. German PPI In Germany, there was a report on inflation from the manufacturer. For Europe's largest economy, it turns out that the reading was positive/negative. The current reading has reached the level of -4.2% , which is what was expected. In September, the PPI m/m peaked at 7.9% for the year and then dropped dramatically to 2.3%. Today's reading may suggest a negative trend. PPI YoY has been on an upward trend since the beginning of the year. The current reading is at 34.5% and it is a drop from level of 45.8%. Hong Kong CPI The Hong Kong Consumer Price Index has reached 1.8% and thus increased/decreased. Since the beginning of the current year, it has remained at low levels to a maximum of 2.5%. A sharp increase in inflation took place in September and reached the level of 4.4%. Source: investing.com Speeches Today, the market awaits three speeches from the European continent, including one from Great Britain. The first speech was at 10:00 CET, The European Central Bank Supervisory Board Member Edouard Fernandez-Bollo. This speech can clarify certain aspects of the financial regulation in the eurozone. The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures Bank of England (BOE) Monetary Policy Committee (MPC) Member Sir Jon Cunliffe will speak at 11:05 CET. His speeches often contain indications on the future possible direction of monetary policy. Deutsche Bundesbank President and voting member of the ECB Governing Council Joachim Nagel is set to speak at 19:30 CET. He may drop subtle clues regarding future monetary policy. BCB Focus Market Readout The Central Bank of Brazil will publish a report on market expectations regarding the economic performance of the country's economy, i.e. Focus Market Readout. Expectations are important because they will determine what mood prevails in the economy, whether the country is developing and what the further economic situation in Brazil may look like. US 2-Y and 5-Y Note-Auction Yield fluctuations should be monitored closely as an indicator of the government debt situation. Investors compare the average rate at auction to the rate at previous auctions of the same security. US Treasuries have maturities of two to ten years. Governments issue government bonds to borrow money to cover the gap between the amount they receive in taxes and the amount they spend refinancing existing debt and/or raising capital. The interest rate on government bonds reflects the return an investor will receive by holding the bond for its life. When it comes to 2Y and 5Y bonds, yields are increasing, which means that investors rate the risk associated with US debt high. And they want the highest possible rate of return to decide to buy US bonds. The last reading for 2Y was 4.460% and if the trend continues you can expect a drop of 4.5%. The situation for 5-Y bonds is better as the ongoing uptrend has not gone that high and the last reading was down. The decrease took place from the level of 4.228% to the level of 4.192% New Zealand Trade Balance At the end of the day, reports on imports and exports, and thus on the trade balance, will come from New Zealand. This country is expected to import more than it exports and its trade balance will remain negative. The trade balance is forecast at -1.715M, this is the expected decline from the previous reading which was at -1.615M. It can mean that a country with a large trade deficit borrows money to pay for its goods and services. Even though the beginning of the week was calm, watch out for the next days. There may be important reports for the markets. Summary: 3:15 CET China New Loans 9:00 CET German PPI (Oct) 10:00 CET ECB Supervisory Board Member Fernandez-Bollo Speaks 10:30 CET Hong Kong CPI (YoY) (Oct) 11:05 CET BoE MPC Member Cunliffe Speaks 13:25 CET BCB Focus Market Readout 18:30 CET US 2-Year Note Auction 19:30 CET German Buba President Nagel Speaks 20:00 CET US 5-Year Note Auction 23:45 CET New Zealand Trade Balance Source: https://www.investing.com/economic-calendar/

For now, higher-than-expected inflation data trumps the mounting concerns about the housing market for the Riksbank. A 75bp rate hike looks likely on Thursday, and we expect one final 50bp increase in February In this article The Riksbank is likely to hike faster than signalled in September Riksbank is keen to stay ahead of the ECB, but housing is a risk A stronger SEK still unlikely in the near term The Riksbank is likely to hike faster than signalled in September When the Riksbank hiked its policy rate by a full percentage point back in September, it was coupled with a message that this was unlikely to happen a second time. The bank’s forecasts pointed to a peak policy rate of 2.5% in April, effectively setting the stage for a 50bp hike this week. But in what has become a familiar tale for central banks, core inflation has since come in higher than the Riksbank had anticipated, and a more aggressive move now looks likely. The Riksbank's September rate hike projection Source: Riksbank, ING   At 7.9%, core CPIF is half a percentage point above the central bank’s September forecast. The jobs market still looks strong, too, even if we saw an unexpected rise in the unemployment rate in the latest set of data (these numbers are fairly volatile). Together with the weak krona, it looks like policymakers will opt for a 75bp rate rise on Thursday. We’re forecasting that rates peak at 3% in February. Core inflation rose from 7.4% to 7.9% in October Source: Riksbank, ING Riksbank is keen to stay ahead of the ECB, but housing is a risk All of this is reinforced by the recent messaging we’ve had from Swedish policymakers. Among the Riksbank’s hawks, Governor Stefan Ingves has stressed the importance of staying a “comfortable distance” ahead of the European Central Bank. Don’t forget that Thursday’s meeting is the last before February, and the ECB will meet – and presumably hike rates – twice before then. Ingves said in the last set of meeting minutes that the Riksbank would need to “follow along upwards at the same pace” at the very least. However, there are good reasons to think the Riksbank is not very far away from the end of its tightening cycle, and the most obvious of these is the housing market. It’s no secret that Sweden’s economy is among the more interest-rate sensitive, and there are already signs that tighter policy is weighing on the housing market. Transaction volumes have fallen sharply, and by some measures, property prices have already started to fall. The headline Valueguard HOX housing index fell a further 3% in October alone, and the Riksbank has projected more declines to come. Much of Sweden’s mortgage market is either fixed for short periods or not at all. Housing market is declining at a faster pace than expected Source: Macrobond, ING   In short, there’s a growing trade-off for the Riksbank between taming inflation and exposing debt fragilities – a challenge that’s far from unique to Sweden. We expect the Riksbank’s new rate projections to factor in a further 25-50bp of tightening next year, and much will depend on the outcome of wage negotiations in the spring. A stronger SEK still unlikely in the near term The SEK OIS curve is embedding around 60bp of tightening this week, so a 75bp move would likely come as a hawkish surprise. However, we believe a greater focus will be on the new rate projections, which are (unlike in Norway) hardly ever followed to the letter by investors, but will provide an indication of how much appetite there is for further tightening. Implicitly, the projections will also show how much the focus is shifting from the mere inflation-fighting exercise to domestic concerns – in particular on housing. This is important because it will shape how SEK rates react to future data releases. On the FX side, despite the Riksbank’s constant protests against a weak krona, the implications of monetary policy remain rather limited for the near term, where we see EUR/SEK trading around 11.00 and facing upside risks. The RB’s hawkishness has been ineffective at lifting SEK in an unstable risk environment, especially in Europe, and we doubt this will change any time soon. The actual implications may emerge in the longer run. If the RB ends up hiking substantially more than the ECB by the time both central banks’ tightening cycles come to an end, then EUR/SEK may face some downward pressure next year, but only under the condition that risk sentiment stabilises. As discussed in our 2023 FX Outlook, we expect SEK to remain vulnerable on the back of European and global risk factors, and only expect limited downside risks for EUR/SEK into end-2023 despite a widening in the Riksbank-ECB rate differential. We currently forecast 10.40/50 for the pair in 2H23. TagsSwedish krona Sweden 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 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

EUR/USD There is a slow but smooth reversal in euro, which has been going on for almost two weeks. The new talks of another 0.75% Fed rate hike as early as mid-December are obviously pushing the currency down. But even though inflation in the Euro area is at 10% y/y, which forces the ECB to raise the rate or make formidable statements about their willingness to increase it, there is an important factor that distinguishes it from the situation in the US. That is the energy crisis. In the US, fuel and electricity prices have changed little over the year, while in Europe, both have gone up very much, which is fatalistic. This means that euro will be under pressure, with highs of recent weeks becoming the upper limit of the range. Be careful when selling, especially from rebounds.       Relevance up to 07:00 2022-11-24 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/327754

Euro sustainable bond issuance in 2023 is not likely to repeat the growth rates seen in the last few years. While governments and agencies could slightly accelerate ESG issuance in 2023, financial institutions' ESG bond supply will lose some steam. Corporates are expected to remain active with sustainable bonds representing 40% of their total issuance In this article Government and agencies' sustainable bond issuance to report moderate growth in 2023 Financial institutions' ESG bond issuance to lose some steam Corporate issuers will remain very active on the sustainable bond markets   2022 sustainable bonds issued in the € currency will exceed 2021 but will end up short of our initial higher expectations. We forecast 2023 total Environmental, Social, and Governance (ESG) bond issuance to be stable compared with 2022 at €355m. A strained geopolitical environment and tougher credit market conditions make bond issuance more pricey. €355bn total sustainable bond supply in 2023 in € credit markets   Government and agencies' sustainable bond issuance to report moderate growth in 2023 After an issuance volume nearing €180bn this year we expect only very moderate growth next year towards €195bn. Sovereign issuers have seen all of the main issuers enter the market, and it is now smaller issuers such as Greece that are contemplating inaugural green bonds in 2023. That also means that an additional growth push out of that direction looks unlikely. For SSAs (Sub-sovereign organisations and agencies), the EU will continue to play a dominant role as the plans remain in place to raise 30% of the Next Generation EU fund via green bonds. The Next Generation EU fund, also called the Recovery Fund, may contribute up to €30bn to EUR SSA green bond issuance. €195bn expected sustainable € bonds by governments and agencies in 2023     SSA social issuance, which has made up around a quarter of the overall SSA ESG supply, is currently dominated by the two French agencies CADES and UNEDIC followed by the Dutch BNG and NEDWBK. The EU only issued slightly more than €2bn in social bonds under the SURE programme in 2022. We would expect that situation to persist in 2023, but would not exclude the off chance that the EU’s social issuance could see a revival amid a prolonged energy crisis and recessionary environment.  Sustainability linked issuance (SLB) continues to play a very niche role among sovereigns, seeing only dollar-denominated issues from two South American countries. In EUR the Dutch state treasury has indicated that such issuance could become part of the funding mix, yet not in the short term as they would have to be part of a political process.    Financial institutions' ESG bond issuance to lose some steam The integration of environmental and social sustainability aspects into the business operations of banks has strongly accelerated in recent years. This has not only been driven by regulation but also by the wider societal sense of urgency to combat climate change and protect the environment. ESG is a top priority for banks, including in their capital markets presence   Banks have become more vocal and transparent about their environmental and social strategies and targets. These not only comprise actions taken to reduce their own climate footprint, but also involve actively engaging with clients to support them in improving their environmental footprint, or distancing themselves from sectors deemed highly polluting, such as fossil fuels. They develop dedicated lending products at attractive terms, such as green mortgage loans, for the financing of environmentally sustainable projects or assets. Green and/or social bonds have become increasingly popular as a source of funding for banks in recent years. In 2021, banks issued a record €64bn in euro sustainable bonds through different types of instruments, ranging from covered bonds to subordinated bonds. This was more than double the supply seen in previous years. Banks are well on their way to breaking this record in 2022. Sustainable bank bond supply (in €bn) Source: Refinitiv, ING   During the first ten months of this year, banks issued €58bn in sustainable bonds, of which €17bn were in covered bonds, €19bn in preferred senior, €20bn in bail-in senior and €2bn in subordinated paper. This is up from €54bn over the same period last year. While green issuance is more than €10bn higher than last year, social and sustainability supply falls €7bn short of the first ten months of 2021. This largely reflects the lower refinancing of Covid-19-related small and medium-sized enterprises (SME) and/or healthcare loans through social bonds. €60bn New sustainable supply in € by banks in 2023     For 2023, we expect less issuance in sustainable bank bonds (€60bn) despite the high refinancing need of banks due to the targeted longer-term refinancing operation (TLTRO)-III expirations. The major reason is the anticipated slower lending growth. This will mitigate the ability of banks to naturally expand their green and social loan books. Meanwhile, the growth potential for supply via new sustainable bond issuers will at some point reach its limit. That said, demand for sustainable investment alternatives will remain disproportionally high. This will incentivise banks to continue to look for possibilities to grow their green and social loan portfolios, including through the identification of new types of sustainable assets. Regulatory disclosure requirements, including those related to the EU Taxonomy, will support banks in the further identification of environmentally and/or socially sustainable assets on their balance sheet. Sustainability-linked bonds (SLBs) are still shunned by banks   The issuance of sustainability-linked bonds is still not really taking off in the banking segment. Thus far only one bank printed a EUR sustainability-linked preferred senior unsecured note, with a reduction of the carbon intensity of the bank’s loan portfolio as a sustainability performance target. This contrasts sharply with the corporates segment, where nowadays about a third of the sustainable bond supply is in the SLB format. The proceeds of sustainability-linked bonds are used by issuers for general purposes, but the characteristics of the bond (such as the coupon) can vary depending on whether the issuer meets its predefined ESG performance targets. However, coupon step-up features may be seen as an incentive to redeem the bond early. This makes it difficult to issue senior unsecured or subordinated bonds in SLB format eligible for a bank’s minimum requirement for own funds and eligible liabilities (MREL). Corporate issuers will remain very active on the sustainable bond markets Corporate issuers and investors alike are embracing ESG as core financing or investment philosophies. As the pressure from societies, governments, activists and regulations accelerate, there is a bigger push for ESG issuance – particularly now with the European Central Bank favouring ESG debt for their reinvestments. This expected shift will only make ESG bonds more interesting to issue in the future.   €100bn corporate ESG bonds in € currency in 2023     We forecast a total corporate € bond issuance around €270bn in 2023, up from c.€230bn in 2022. The percentage of ESG bond supply relative to overall € corporate supply is growing year on year. We expect this to jump up to 40% in 2023, up from 35% in 2022. We expect the industrial sector to lead issuance with c.€45bn of ESG bonds next year. Utilities could print up to €40bn of SDG bonds, representing between 75% and 80% of the sector’s total supply in 2023. Total corporate ESG bonds (in €bn) and share in total issuance (%) Source: Refinitiv, ING For corporates, green bonds will remain the dominant format   We believe that green bonds will remain the preferred format representing more than half of ESG corporate issuance, but we assume sustainability-linked bonds will continue their ascension with about €32bn issued out of the €100bn we forcast for next year. Social bonds have been absent from corporate issuance, except for one social bond issued by the French utility EDF in 2021. Sustainability bond issuance by type (in €bn) Source: Refinitiv, ING TagsSustainability Green Bonds   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Market sentiment bounced yesterday on little news, with sentiment steady in Asia overnight. Long US treasury yields dipped, and short yields were steady ahead of today's FOMC minutes release from the November 2 meeting, taking the US yield curve inversion to a multi-decade low of -75 basis points. The focus in Europe today will be on preliminary November PMI for a sense of how badly the EU is tilting into recession.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures rallied 1.3% yesterday closing at the 4,010 level, the highest close since 9 September, suggesting bulls are in control as bears are already sitting on strong profits for the year and therefore has little incentive to take bigger positions before yearend. The next big level on the upside is the 200-day moving average at around the 4,060 level. Today’s key events are preliminary US PMI figures for November and later this evening the FOMC Minutes which could provide more clues into the thinking of policymakers. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) According to Reuters, the Chinese regulators may be close to a decision to impose a fine of over $1 billion on Jack Ma’s Ant Group. Since its IPO was halted by the Chinese authorities in 2020, the group has been under regulatory overhaul. While the amount of the fine is substantial, initial reactions from the investment community to the news were positive as the fine could set the stage for the conclusion of the regulatory overhaul. Alibaba (09988:xhkg) jumped more than 4% on the news. China internet stocks gained, led by Kuaishou Technology (01024:xhkg) as the social media platform company surged 6.2% on better-than-expected Q3 results. After rising 25.5% yesterday, China Aluminum (02068:xhkg) continued its advance, rising 18% on Wednesday. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Hang Seng Index gained 1.2% and CSI 300 climbed 0.5%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. FX: Dollar drops as risk sentiment rebounds Softer long US treasury yields also pushed the US dollar lower as the US yield curve inverted to a new cycle low. Still, the big dollar has done very little after the huge, but brief sell-off move on the October CPI release nearly two full weeks ago, with today’s large data dump and FOMC minutes the last hope this week for providing a spark of volatility in either direction ahead of the long holiday weekend (tomorrow, US markets are closed, with most workers also out Friday). The FOMC minutes late today are not highly anticipated, but could surprise if there is more consensus on a hawkish stance than anticipated. EURUSD has carved out a 1.0222-1.0479 range now. Crude oil (CLF3 & LCOF3) Crude oil closed higher on Tuesday supported by a general recovery in risk appetite as the dollar softened and recent short sales in response to false production hike rumor were paired back. Crude oil prices have traded lower this month in response to a drop in demand from China as Covid cases surge to near a record with restrictions of movements currently impacting 48 cities. Ahead of today’s weekly EIA report, the API reported a 4.8 million barrel drop in US crude stocks. The data also showed that gasoline inventories declined by about 0.4m barrels last week, and distillate stocks increased by 1.1M barrels. EU diplomats will discuss and potentially approve a price cap on Russian seaborne oil sales today (see below), and if implemented Russia may retaliate by refusing to sell its crude to nations that adopt the cap. WTI resistance at $82.25 followed by $84.50 Gold (XAUUSD) Gold trades nervously around the $1735 support level for a second day as the market awaits the release of FOMC minutes. The yellow metal managed a small bounce on Tuesday as the dollar softened after Fed officials indicated they were open to implementing less aggressive hikes going forward. In the short-term the direction will be determined by fund activity and whether they need to make further reductions in recently established, and now under water, long positions. An extension of the recent rally likely requires further declines in yields and the US dollar driving fresh demand for ETFs or some other catalyst that sees a run to safety. US treasuries (TLT, IEF) US treasury yields were steady at the short end and dipped at the long end yesterday, driving a new extreme in the 2-10 yield curve inversion of –75 basis points. Traders are awaiting incoming US data today and the FOMC minutes for next steps, although more heavy hitting data awaits next week with Wednesday’s November PCE inflation data and next Friday’s November US jobs report. The key upside swing area for the 10-year treasury yield is near 4.00%, while the major downside focus beyond the 3.67% pivot low is the 3.50% cycle high from June. What is going on? New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Fed’s Mester and George keep the focus on inflation As investors continue to try and gauge the path of Federal Reserve rate hikes, Cleveland Fed President Loretta Mester reiterated on Tuesday that lowering inflation remains critical for the central bank, a day after supporting a smaller rate hike in December. Kansas City President Esther George said the central bank may need to boost interest rates to a higher level and hold them there for longer in order to temper consumer demand and cool inflation. Russian oil price cap in the works The Wall Street Journal is reporting that Western countries are set to agree on Russian oil price cap around $60 per barrel. However, it could be as high as $70 per barrel on oil loaded after the December 5 start date. The sanctions that the G7, EU and Australia will set, will ban the provisions of maritime services for shipments of Russian oil unless the oil sells below the cap price. The aim is to reduce petroleum revenues for Russia's war machine while maintaining flows of its oil to global markets and preventing price spikes. Russian Urals crude oil already trades at around a 25-dollar discount to Brent, so the impact on Russia’s revenues at current international prices would be limited. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The OECD revised downward its 2023 growth forecasts Yesterday, the OECD published its latest Economic Outlook. There is not much surprise. Global growth is expected to slow down significantly in 2023 to 2.2 % and to rebound modestly in 2024 at 2.7 %. This will be a long and painful economic crisis. Asia will remain the main engine of growth in the short-term. But the zero Covid policy in China will likely limit the country’s contribution to global GDP growth. Before Covid, China represented about 30 % of global growth impulse. It is now down to roughly 10 %. The OECD warns that the fight against inflation will take time. But several countries are successful. For example, in Brazil, the central bank moved swiftly, and inflation has started to come down in recent months. In the United States, the latest data also seem to suggest some progress in the fight against inflation. Nevertheless, a pause in monetary policy is unlikely in most countries in the short-term. Read the full report here. The increase in the ECB’s TLTRO funding costs for European banks came into effect Until today, European banks’ outstanding borrowings from the ECB’s Targeted Long-term Refinancing Operations III (TLTRO III). LTRO III has been funded at as low as 50bps below the average of the ECB’s Depository Facility Rate (DFR) over the entire life of those borrowings. The DFR, which is currently 1.5%, has been kept at minus 50bps from Sept 2019 to July 2022. It has been a large subsidy from the ECB in the form of below-market funding costs to European banks. Some banks are depositing these monies back into the ECB and arbitraging the interest rate differential. Last month, the ECB announced to change the calculation of the applicable DFR index with effect from Nov 23 to over the current period as opposed to the whole life of the borrowings. The move will reduce European banks’ net interest income and withdraw liquidity from the banking system. Currently, the TLTRO III balance is EUR 2.1 trillion.     JD.COM cut senior management pays while increasing benefits for all employees JD.Com announced that the company is slashing the pay for about 2,000 managers by 10-20% and using some of the savings from the move to fund planned increases in staff benefits, including health and housing benefits, for all employees including hundreds of thousands of delivery staff. Founder Richard Liu will also donate 100 million yuan of his own money towards staff benefits. Under the quest for “common prosperity” of the top government leadership, Chinese tycoons are mindful of doing their share in redistributing income. What are we watching next? 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. Copper demand growth shifting from China to Europe and the US At the FT Commodities Asia Summit in Singapore, Jeremy Weir, the CEO of Trafigura said demand for copper is shifting away from cooling building activities in China to energy transition demand, especially in Europe and the US. Weir said demand for copper has remained strong despite recent global headwinds. “We’re seeing for example very strong copper demand in Europe through electrification and even through the pandemic,” he said. “Even the current crisis and conflict in Ukraine is not reducing the demand for copper.” Following a recent rally, that got rejected ahead of key resistance at $4 per pound, HG copper has dropped back and currently trades near the middle of its established range around $3.55 FOMC minutes 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 hawkish message 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. Earnings to watch Today’s US earnings focus is Deere, the US manufacturer of agricultural and forestry equipment, with analysts expecting FY22 Q4 (ending 31 October) revenue growth of 18% y/y and EPS of $7.09 up 72% as momentum and pricing power remain strong due to high commodity prices on agricultural products. Today: Xiaomi, Prosus, Deere Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Nov. Preliminary Manufacturing and Services PMI 0930 – UK Nov. Preliminary Manufacturing and Services PMI 1330 – US Oct. Preliminary Durable Goods Orders 1330 – US Weekly Initial Jobless Claims 1445 – US Nov. Preliminary Manufacturing and Services PMI 1500 – US Nov. Final University of Michigan Sentiment 1500 – US Oct. New Home Sales 1530 – EIA's Weekly Crude and Fuel Stocks Report 1700 – US Weekly Natural Gas Storage change 1905 – US FOMC Meeting Minutes 1905 – New Zealand RBNZ Governor at Parliament committee 2130 – Canada Bank of Canada Governor Macklem to testify to parliament committee Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-23-2022-23112022

The OECD said the global economy will avoid a recession this year, and next year, and that unemployment rates won’t skyrocket. That was the good news. But growth will be low and slow, and inflation will remain high, keeping central bank policies tight. That was the bad news. Stocks The S&P500 gained, as strong earnings from retailers improved sentiment before Thanksgiving. Energy stocks performed well on the back of a sustained recovery in crude oil. Shell rallied 5% on announcement that the company will be reviewing its investment in the UK to avoid paying windfall taxes to the British government. BP rallied 6.52%. Central Banks In central bank news, the Reserve Bank of New Zealand (RBNZ) raised its rates by 75bp as expected today. The US dollar softened, and the EURUSD rebounded past 1.0320 in the middle of mixed comments about what the European Central Bank (ECB) should do at its next meeting. Gold In precious metals, gold slid yesterday despite a softer US dollar, and softer yields. China In China, stocks were not looking good as Beijing and Shanghai put stricter rules to slow the Covid contagion, again! But Alibaba rebounded almost 4% in HK today, on news that Ant Group would pay a fine over a billion USD. Crypto In cryptocurrencies, traders remain on the edge, on news that a ‘substantial amount’ of FTX assets have either been stolen or are missing. Bitcoin however resists. The price of a coin recovered above $16K yesterday, but risks remain tilted to the downside. Watch the full episode to find out more! 0:00 Intro 0:30 OECD says no recession, slow growth but not for UK! 1:45 Market update 2:52 Oil, natural gas up 4:41 Goodbye Shell! 6:15 EUR traders expect softer Dec rate hike 8:00 Gold under pressure 8:22 Alibaba jumps on $1 billion fine 9:08 Bitcoin resists 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. #OECD #growth #forecast #Gazprom #natgas #crudeoil #recovery #EU #Russia #price #cap #EUR #USD #ECB #Fed #FTX #contagion #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

Today is full of important statistics from the USA. The first will be a report on durable goods orders, which will reflect the state of the industrial sector and consumer demand. In addition, there will be PMI reports from the European Union and the UK. RBNZ Interest Rate Decision Undoubtedly, Wednesday is a very busy day. The first important information came from Noerj Zealand. As expected, Reserved Bank Of New Zealand raised rates by 75bp. Thus, interest rates are the highest since 2008. RBNZ Interest Rate reached 4.25%. CPI data Singapore At the beginning of the day, information about the level of inflation in Singapore also appeared. CPI and Core CPI reached lower than expected levels. CPI for October will amount to 6.7% against the last reading of 7.5%. Core CPI decreased by 0.2% and reached 5.1%. This may mean that inflation is heading to decline and reach a stable 2% level. South Africa The opposite movement of inflation took place in South Africa. CPI Y/Y increased to 7.6% and Core CPI Y/Y reached 5.0% PMI data French Manufacturing PMI (Nov) rose from 47.2 to 49.1. Services PMI (Nov) fell to 49.4. German A similar situation took place in Germany. The Manufacturing PMI (Nov) rose to 46.7 and the Services PMI (Nov) fell 0.1 to 46.4. Both readings were greater than expected. EU PMI In the European Union, PMIs were higher than expected. The Services PMI (Nov) held its previous level of 48.6 against expectations of a decline to 48.0, and the Manufacturing PMI rose from 47.3. In Europe, the manufacturing PMI improved while services declined or remained flat. UK PMI In the UK, declines were expected, but the Manufacturing PMI And Services PMI remained at its previous level. The Manufacturing PMI remained at 46.2 and the Services PMI at 48.8. US PMI In the US, PMI reports will appear at 16:45 CET. The manufacturing PMI is expected to decline while the services PMI is expected to increase slightly. US Reports Ahead of Thanksgiving, the US will release a broad package of reports. Weekly reports as well as reports from the real estate sector may have an impact on the situation in this and other economies. Read more: Important US Reports Ahead, The Services And Manufacturing Projected Under 50| FXMAG.COM Speeches There will also be a lot of speeches today, especially from the Bank of England. At 11:45 CET, David Ramsden, Deputy Governor of the Bank of England took the floor. His public engagements are often used to drop subtle clues regarding future monetary policy. At 12:30 the Bank of England Monetary Policy Committee (MPC) Member Pill took the floor. Dr Catherine L Mann serves as a member of the Monetary Policy Committee (MPC) of the Bank of England to speak at 15:45 CET. The last speeches from the islands will be at 5:30 pm CET and Huw Pill will speak again. Representatives of the German bank will also take the floor. Two speeches are scheduled for 14:30 CET, Prof. Dr. Johannes Beermann and Professor Joachim Wuermeling are set to speak. At 16:00 CET Prof. Dr. Johannes Beermann will be speak again. FOMC Meeting Minutes The minutes are arrived today. The minutes offer detailed insights regarding the FOMC's stance on monetary policy, so currency traders carefully examine them for clues regarding the outcome of future interest rate decisions. Summary: 3:00 CET RBNZ Interest Rate Decision 7:00 CET Singapore CPI (YoY) 10:00 CET South Africa CPI (MoM) (Oct) 10:15 CET French PMI (Nov) 10:30 CET German PMI 11:00 CET EU PMI 11:30 CET UK PMI 11:45 CET MPC Member Ramsden Speaks 12:30 CET BoE MPC Member Pill Speaks 14:30 CET German Buba Beermann Speaks 14:30 CET German Buba Wuermeling Speaks 15:00 CET US Building Permits 15:30 CET US Core Durable Goods Orders 15:30 CET US Initial Jobless Claims 15:45 CET BoE MPC Member Mann 16:00 CET German Buba Beermann Speaks 16:45 CET US PMI 17:00 CET US New Home Sales 17:00 CET US Crude Oil Inventories 21:00 CET BoE MPC Member Pill Speaks 21:00 CET FOMC Meeting Minutes Source: https://www.investing.com/economic-calendar/

The eurozone composite PMI came in at 47.8 in November, slightly better than in October but nonetheless confirms a contraction in the business economy. The good news is that inflation pressures are fading on the back of easing supply problems and the imminent recession The slight increase in the November PMI was mainly driven by the manufacturing PMI     American economist Robert Solow famously said that the computer age was everywhere but in the productivity statistics. At the moment, we can say that the recession is everywhere except for in the GDP statistics. While the eurozone economy still eked out positive growth in the third quarter, it seems inevitable that a recession has started in the current quarter and today’s PMI figures confirm that. The slight increase in the PMI was mainly driven by the manufacturing PMI, which saw an uptick from 43.8 to 45.7. This is still showing a sharp contraction, but slightly less than last month. New orders continue to decline, meaning that current production is coming from a lot of previously built-up backlogs. The pace of decline in services was similar to October and fierce by historical standards. New orders continue to decline here too, and businesses are becoming increasingly reluctant to hire on the back of sluggish economic activity. The upside to the clearly recessionary environment is that inflationary pressures are fading. Weaker demand, lower energy prices than in August, and easing supply-side problems are all contributing to a softening of price pressures. While energy prices remain volatile and businesses are likely to still price through some of the higher costs incurred, these factors do point to a turning point in the inflation rate around the turn of the year. TagsInflation GDP 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

Preliminary eurozone PMI estimates are better than expected, although they point to an economic contraction. Germany's manufacturing PMI rose from 45.1 to 46.7 in November, contrary to forecasts of a decline to 44.9. Values below 50 indicate an activity decrease, while higher-than-expected figures indicate its lesser intensity. The service sector PMI declined from 46.5 to 46.4, but above the expected 46.1. The composite PMI rose from 45.1 to 46.4 thanks to manufacturing. Earlier, a positive reversal, albeit from low levels, was also marked by the ZEW indices. Tomorrow will be the turn of the Ifo to confirm or deny this trend. Most likely, the Eurozone and the German economies will shrink in the current quarter and could also lose some money at the start of next year. However, so far, we only see signs of a relatively modest slowdown, and the labour market is displaying the highest employment rate in the history of the Euro-region. The ECB is expected to raise its rate by at least 50 points in December but might take a more drastic step with relatively strong economic data, as we saw in New Zealand earlier today. Until 2009, the eurozone economy grew strongly, even at higher rates than in the US, contributing to the euro's strength against the dollar. The economy and inflation in the Eurozone have been less rate-sensitive than expected and more so than in the USA. The euro, however, has been relatively well worked out the difference between the ECB and Fed rates. If so, the ECB could take rates above US levels, which would gradually restore the position of the single currency lost since the start of 2021.

The Fed minutes have allowed rates markets to rally further, ahead of the US holiday. The focus now shifts to the European Central Bank minutes, which could also deliver dovish headlines   In this article Dovish Fed minutes extend market rally, likely to the dismay of officials More dovish headline risks from the ECB minutes Today's events and market views We think EUR rates hold the most upside in the near term Dovish Fed minutes extend market rally, likely to the dismay of officials Markets got the dovish headlines out of the Federal Open Market Committee minutes they needed to rally further –  a “substantial majority” judged that slowing the pace of hikes “would soon be appropriate”. Together with the dismal PMI readings earlier in the session this has helped put a brake to the curve flattening, though, as the front to intermediate maturities caught up. The overall takeaway looks more nuanced, and not too different than what could be gleaned from recent official statements about the general rate trajectory – “various” Fed officials did see rates peaking at a higher level than previously thought. In their discussion officials also noted that the full effect of tightening financial conditions would take longer to feed through to inflation, though there was great uncertainty about the lags. That itself could well be seen as justifying a slowing pace of further policy tightening after what has been delivered already.  Financial conditions have already started to loosen again However to the degree that markets are running ahead of themselves and financial conditions have already started to loosen again, it is unlikely this is the broader message the Fed wants to send just yet. While the meeting pre-dates the latest positive surprise in the inflation data, officials since then were quick to note that one CPI reading alone is not yet a trend. Yes the PMIs were bad, but other data is showing more resilience with a clear focus near term on next week's job market data. Fed hike discount for 2022 and 2023 has remained stable but more 2024 cuts are now anticipated Refinitiv, ING More dovish headline risks from the ECB minutes The ECB minutes of the October meeting follow hot on the heels of last night's Fed minutes. Here as well the market's main focus is on the pace of rate hikes going forward. The ECB still hiked rates by 75bp last month, but subtle tweaks to the wording of the press statement were already interpreted as a dovish sign. Later background reporting confirmed that the Council was not unanimous on the size of its last hike with three members calling for a smaller hike.  While it was also reported that the Council did not intend to send any specific signal for the size of future rate hikes back then, we could still see some dovish headlines out of the minutes with regards to differing views on the appropriate size of the rate hike. There should also be a more thorough discussion of recessionary risks, even if they should also be balanced by inflationary risks “clearly” on the upside, as Lagarde put it in October’s press briefing. The lack of QT discussion at the October ECB meeting helped to set off a fixed income rally Refinitiv, ING   Market OIS forwards are pricing c.60bp higher rates for December. This suggests expectations leaning towards a smaller 50bp hike, but the signal is less clear than only a couple of days ago, helped also by less gloomy PMIs just yesterday. Some ECB officials have since suggested there was scope for less aggressive action, such as Italy’s Visco, who is known to lean more dovish. Even some of the better known ECB’s hawks have been less clear on their preference, and their choice between a 50bp or 75bp hike is apparently dependent on the upcoming inflation data, at least Austria’s Holzmann has suggested as much. Only Slovenia’s Vasle was still explicit in saying that the current pace was adequate and would be maintained in December. Smaller hikes are very likely, but the question is for how long However, it remains clear that the ECB is not done hiking. It is this also important to consider what happens beyond December. Smaller hikes are very likely, but the question is for how long. We make out some effort by Chief Economist Lane to direct the discussion away from potentially peaking headline inflation to the more persistent elevation of core inflation. He later also stressed that one should not interconnect quantitative tightening and rate hikes too much, though other officials have strengthened the market’s notion that there could very well be a bargain to be made between the ECB’s hawks and doves, for instance an earlier start to quantitative tightening in return for slower hikes. Going back to the issue at hand – today’s ECB minutes – recall that the clearest dovish signal out of October ECB meeting was actually the absence of a further discussion on QT. Today's events and market views Markets will be more eurocentric with US markets heading into today's Thanksgiving holiday and followed by a shortened trading day on Friday. It also means that market liquidity is about to become even thinner than already is. In any case, today's ECB accounts of the October meeting could add to the dovish central bank headlines that have extended the rally in rates yesterday, though less likely the curve flattening we have witnessed until now. In data the German Ifo index follows on the not-as-gloomy-as-expected flash PMI's released yesterday. If one looks for hawkish risks, then the focus should be on today's ECB speakers, who may well use the opportunity to clarify the message coming out of the ECB accounts. With the ECB's Schnabel we have one of the more influential ECB officials delivering a keynote speech at the Bank of England's watchers conference. That same event has of course also prominent BoE speakers lined up with Ramsden, Hill and Mann.   In secondary markets Italy will reopen two shorter dated bonds for up to €2.75bn. TagsRates Daily   Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  U.S. equities and bonds rallied on the November FOMC minutes which has a dovish cast stating “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate”. The 10-year treasury yield fell to 3.69%. Oil prices slid sharply on Wednesday with WTI futures dipping to sub-$77 lows as the EU proposed a higher-than-expected price cap on Russian crude - between $65-70/barrel. EURUSD rallied above 1.04 and USDJPY fell below 140 amid broad-based dollar weakness. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished higher on dovish signals from the Nov FOMC minutes U.S. equities found support and bounced after the release of the Nov 1-2 FOMC minutes in an otherwise thin trading session ahead of the Thanksgiving holiday. As bond yields fell, Nasdaq 100 rallied 1%, and the S&P 500 gained 0.6%. All sectors in the S&P 500 advanced except energy, which was dragged by a 4.3% decline in the price of the WTI crude. Consumer discretionary was the top gaining sector, led by Tesla (TSLA:xnas) that surged 7.8% after a leading US investment bank called the shares of Tesla “a bargain”. Deere (DE:xnys), the largest supplier of farm tractors and crop harvesters in the world, gained 5.1% after reporting an earnings beat and upbeat guidance citing strong demand. Manchester United (MANU:xnys) surged 26.1% after the club’s owner announced that they were exploring a sale. Coupa Software (COUP:xnas) jumped nearly 29% on a report that Vista Equity Partners is exploring an acquisition. Nordstrom (JWN:xnys) dropped by 4.2% after reporting a decline in sales and excessive inventory. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The minutes for the Nov 1-2 FOMC meeting have a dovish cast, saying “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate” and some FOMC members had a concern about rate hikes might ultimately “exceed what was required to bring inflation back”. Yields declined across the curve with buying particularly strong on the long end. The 2-year yield dropped by 4bps to 4.48% and the 10-year yield finished the session 6bps richer at 3.69%. The 2-10-year part of the curve became yet more inverted at minus 79. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) China internet stocks gained, led by Kuaishou Technology (01024:xhkg) up 5.7%, Baidu (09888:xhkg) up 3.4%, JD.COM (09618:xhkg) up 3.3%, and Alibaba (09988:xhkg). Kuaishou and Baidu reported better-than-expected Q3 results. Alibaba shares were boosted by the prospect of coming out of the 2-year-long regulatory overhaul with a fine of over USD 1 billion. Meituan (03690:xhgx) underperformed with a loss of 1.1% following a statement from Prosus, shareholder of Tencent, saying that the Company was planning to unload the Meituan’s shares it received from Tencent. China Aluminum (02068:xhkg) continued its advance, rising 25.3% on Wednesday. Hang Seng Index gained 0.6% and CSI 300 climbed 0.1%. In mainland A shares, infrastructure names surged while pharmaceutical and biotech stocks retreated. Overall market sentiment remains cautious as the number of new cases reached 28,883 on Tuesday, just a touch below the April high of 29,317 cases. Large cities, including Beijing, Chongqing, Chengdu, Guangzhou, Zhengzhou, as well as Shanghai have further tightened pandemic control measures. FX: EURUSD above 1.04 and USDJPY falls below 140 amid broad-based dollar weakness The dovish read of the FOMC minutes from the November 2 meeting is hardly a surprise, given the key message has been around a downshift in the pace of rate hikes as expected. But together with weaker than expected flash PMIs for November (read below) suggesting demand slowdown concerns are starting to pick up pace, and a higher-than-expected jobless claims prints sending some early warning signals on the labor market, the focus has completely shifted away from inflation concerns. Market pricing of the Fed December meeting tilted further towards 50bps, and that resulted in a broad-based dollar sell-off. EURUSD surged above 1.04 while USDJPY slid below 139.50. Crude oil (CLZ2 & LCOF3) Oil prices slid sharply on Wednesday with WTI futures dipping to sub-$77 lows and Brent futures touching $84/barrel as the EU proposed a higher-than-expected price cap on Russian crude - between $65-70/barrel after a $60 level was touted yesterday. This higher price cap means that Russian oil can continue to flow into the international markets as it is above Russia’s production costs. Meanwhile, EIA data showed US crude inventories fell a more-than-expected 3.69 million barrels last week, but US gasoline stockpiles rose by 3 million barrels, the largest buildup since July, suggesting a weaker demand heading into Thanksgiving.   What to consider FOMC Minutes signal a smaller pace of rate hikes The FOMC minutes from the November 2 meeting were released on Wednesday, and the general tone of the members confirmed that the committee was leaning towards moving away from jumbo (75bps) rate hikes to a smaller pace. At the same time, "various" officials noted that the peak rate will be "somewhat higher" than previously expected. The minutes saw participants agree there were very few signs of inflation pressures abating (minutes were pre-October CPI) and they generally noted inflation outlook risks remain tilted to the upside. There were also some concerns about the strength of the labour market, where a few participants said ongoing tightness in the labour market could lead to an emergence of a wage-price spiral, even though one had not yet developed. The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions. US PMIs disappointed, jobless claims rose US S&P flash PMIs for November disappointed, as manufacturing printed 47.6 (exp. 50.0, prev. 50.4) and services fell to 46.1 (exp. 47.9, exp. 47.8), while the composite dropped to 46.3 (prev. 48.2). New orders fell to 46.4, the lowest since May 2020, while employment saw a slight uptick to 50.8 from 50.4. The only good news is that both input and output prices dipped further, offering further positive signals on inflation. The PMIs indicated how concerns are shifting from the supply side to the demand side, with better news on supply chains but demand concerns from weakening new orders. Initial Jobless claims rose more than expected to 240k from 223k and above expectations of 225k, the highest print since August, suggesting that we continue to watch for further signals on whether the tight labor market may be starting to weaken. Better eurozone flash Composite PMI for November This was unexpected. The consensus forecasted that the EZ flash Composite PMI would fall to 47.0 in November from 47.3 in October. It actually improved a bit at 47.8. The increase mostly results from a better-than-expected Manufacturing PMI (out at 47.3 versus prior 46.4 and forecast at 46.0) while the services sector remains stable. There is another positive news. Price pressures are easing quite fast. The PMI price gauge fell to its lowest levels in two years due to a collapse in input prices. On a flip note, the flash Composite PMI Output Index for the United Kingdom (UK) ticked up to 48.3 in November. Surprisingly, the UK seems to hold up better than the eurozone and especially Germany. The jump in the PMI is still consistent with a recession in the eurozone and in the UK but it may be shallow and its steepness will mostly depend from country to country on the impact of the energy shock and fiscal measures taken to mitigate it. China’s State Council is calling on the PBOC to cut the RRR After a meeting on Wednesday, China’s State Council issued a memo calling on the People’s Bank of China (PBOC) to use monetary tools including a cut in the reserve requirement ratio (RRR) at an appropriate time to support the real economy. According to historical observations, the PBOC will do what the State Council says and cut the RRR in the coming days or weeks. Violent protests at Foxconn’s iPhone factory in Zhengzhou Video clips showed violent protests broke out at Foxconn’s iPhone production plant in Zhengzhou. What exactly caused the protests were unclear but speculation was about retention allowance to workers who are willing to stay at the factory until February 15, 2023, and work conditions. New Zealand’s RBNZ hikes 75 basis points to 4.25% The market was divided on whether the bank would go with the larger rate hike after a string of 50 basis points moves prior to the meeting overnight. NZ two-year yields jumped back toward the cycle highs overnight as the market participants raised the anticipated peak in the policy rate by mid-year next year to almost 5.50%, up about 30 basis points after the decision. Xiaomi reported inline revenue and better-than-feared adjusted net profit Xiaomi reported Q3 revenue of RMB70.47 billion, shrinking 10% Y/Y and flat Q/Q. Adjusted net profit came in at RMB2.1 billion, 6% above the Bloomberg consensus, and -59% Y/Y and +1% Q/Q. Excluding new initiative investment, core net profit increased 9% Q/Q to RMB2.9 billion. Blended ASP declined 4% Y/Y.  Gross margin was 16.6% in Q3, falling from 16.8% in Q2 and 18.3% a year ago. Q3 non-IFRS operating margin was 3.0%, down from Q2’s 3.1% and Q3 last year’s 6.7%. Credit Suisse warns of big loss in Q4 The Swiss bank is stating in a press release this morning that it could lose $1.6bn in Q4 driven by losses in its investment banks. In addition, the bank says that it has seen net outflows of 6% relative to AUM in Q3. To improve profitability the bank is one-third of all investment banking employees in its Chinese subsidiary following a recent staff expansion in the country. HP cuts 6,000 employees as PC demand weakens The technology company reported Q4 results yesterday in line with estimates but its FY2023 (ending 31 October 2023) outlook was below estimates with adj. EPS guidance of $3.20-3.60 vs est. $3.61. Over the next two years the company expects to reduce staff level by 6,000 to improve profitability. The Glazer family is exploring the sale of Manchester United The owner of Manchester United said that they are exploring the sale of the English Premier League football club and will consider “all strategic alternatives”. In May this year, Chelsea, another English Premier League club, was sold for around USD5.3 billion. Deere sees strong demand for farm, forestry, and construction machinery Deere said they are expecting high demand for equipment from farmers on elevated prices for agricultural commodities. In addition, the company expects increases in demand for its construction machinery from the oil and gas industry and construction equipment rental businesses. Strong progress in precision agriculture adoption is expected to help boost margins and aftermarket technology product sales. For our look ahead at markets this week - Read our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: https://www.home.saxo/content/articles/equities/market-insights-today-24-nov-2022-24112022

Summary:  US stocks and bonds ended higher on Wednesday while the dollar closed at it weakest level since August after the Federal Reserve’s latest meeting minutes showed most officials backing slowing the pace of interest-rate hike soon, a prospect that was given some support following the release of weaker than expected economic data. Crude oil lost ground on growth concerns while the weaker dollar supported a rebound in gold, silver and copper. Today the US markets are closed for Thanksgiving holiday.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) Bad news is good news in the US with lower than estimated PMI figures for November suggesting the US economy continues to slow down bolstering bets that US interest rates have peaked, and the Fed pivot is alive. The FOMC Minutes also suggested that the pace of interest rate hikes will be lowered going forward.  P 500 futures rallied 0.5% to close at 4,030 getting closer to the falling 200-day moving average at 4,058. In addition to yesterday’s US news, China’s State Council (see below) issued a memo advising the PBOC to use monetary instruments to safeguard and kickstart the Chinese economy. In a time with falling economic growth in the US and Europe, an accelerating Chinese economy would balance the global economy and soften the recessionary dynamics. It is Thanksgiving in the US today so cash equity markets will close at 1300 ET today. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) After a meeting on Wednesday, China’s State Council issued a memo calling on the People’s Bank of China (PBOC) to use monetary tools including a cut in the reserve requirement ratio (RRR) at an appropriate time to support the real economy. According to historical observations, the PBOC will do what the State Council says and cut the RRR in the coming days or weeks. The news helped lift market sentiment which was however tempered by the rise of daily Covid cases to an all-time high of 31,444 in mainland China. Hang Seng Index edged up 0.3% while CSI 300 declined 0.5%. Shares of leading Chinese developers surged by 5% to 12% after several large Chinese banks agreed to provide more than RMB 200bn in total in credit facilities to a number of private enterprise developers. EURUSD above 1.04 and USDJPY falls below 140 amid broad-based dollar weakness The dovish read of the FOMC minutes from the November 2 meeting is hardly a surprise, given the key message has been around a downshift in the pace of rate hikes as expected. But together with weaker than expected flash PMIs for November (read below) suggesting demand slowdown concerns are starting to pick up pace, and a higher-than-expected jobless claims print sending some early warning signals on the labor market, the focus has somewhat shifted away from inflation concerns which remain persistent. Market pricing of the Fed December meeting tilted further towards 50bps, and that resulted in a broad-based dollar sell-off which extended in the Asian session. EURUSD is now attempting a break above 1.0450 while USDJPY slid below 139.00. Japan’s Tokyo CPI for October is due tomorrow and may inch higher again, further fuelling pressure for BOJ to tweak its zero-rate policy and supporting a recovery in the yen even as global yields start to get capped. Crude oil (CLF3 & LCOF3) Crude oil fell again on Wednesday thereby extending what has already been a very volatile week. The FOMC minutes driving a weaker dollar did not add much support with the market instead focusing on a challenged demand outlook in China as Covid cases continue to spread, and a 50% risk of a recession in the US next year. In addition, a price cap on Russian oil in the $65-$70 area currently being discussed by EU officials is far higher than expected and would probably not have a major impact on supply given that Russia is already selling its Urals crude at a 25-dollar discount to Brent. The negative sentiment was also reflected by the markets negative response to an otherwise price-supportive EIA stock report. Gold (XAUUSD) and silver (XAGUSD) Gold and silver both rose in response to weaker US economic data (see below) and after the FOMC minutes talked about moderating the pace of interest rate hike soon. The Bloomberg dollar index dropped to the lowest level since August while US government bonds rallied to send yields lower. Gold was already encouraged by the speed with which it recovered after briefly breaking below support in the $1735 area reached $1756 overnight with silver trading at $21.60 after showing some renewed relative strength against gold this week. With no signs yet of a pick up in demand for ETFs from longer-term focused investors, a further extension will likely require further declines in yields and the US dollar or some other catalyst that sees a run to safety. Resistance at $1757 and $1765. EU gas (TTFMZ2) EU gas jumped 8.3% on Wednesday to close near a one-month high at €130 with weather forecasts pointing to a cold beginning to December and Gazprom threatening to reduced supplies through Ukraine, one of just two remaining pipelines in operation. The Sudzha line is currently sending 42 million cubic meters per day to Europe and while the dispute only relates to part of the 5 mcm/day that goes to Moldova, the market clearly worry that this could lead to a complete closure of the line. However, with Russia’s pipeline flow to Europe already down 79% YoY, the ability to shock the system has been much reduced, hence the limited reaction in the peak winter contract of February which only trades €7/MWh above December US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) yields fell after the Fed minutes The minutes for the Nov 1-2 FOMC meeting have a dovish cast, saying “a substantial majority of participants judged that a slowing in the pace of increase would soon be appropriate” and some FOMC members had a concern about rate hikes might ultimately “exceed what was required to bring inflation back”. Yields declined across the curve with buying particularly strong on the long end. The 2-year yield dropped by 4bps to 4.48% and the 10-year yield finished the session 6bps richer at 3.69%. The 2-10-year part of the curve became yet more inverted at minus 79, thereby strengthening the prospects for a recession sometime next year. What is going on? FOMC Minutes signal a smaller pace of rate hikes The FOMC minutes from the November 2 meeting were released on Wednesday, and the general tone of the members confirmed that the committee was leaning towards moving away from jumbo (75bps) rate hikes to a smaller pace. At the same time, "various" officials noted that the peak rate will be "somewhat higher" than previously expected. The minutes saw participants agree there were very few signs of inflation pressures abating (minutes were pre-October CPI) and they generally noted inflation outlook risks remain tilted to the upside. There were also some concerns about the strength of the labour market, where a few participants said ongoing tightness in the labour market could lead to an emergence of a wage-price spiral, even though one had not yet developed. The message remained less hawkish than what the Fed potentially needs to deliver at this point given the considerable easing in financial conditions. US PMIs disappointed, jobless claims rose US S&P flash PMIs for November disappointed, as manufacturing printed 47.6 (exp. 50.0, prev. 50.4) and services fell to 46.1 (exp. 47.9, exp. 47.8), while the composite dropped to 46.3 (prev. 48.2). New orders fell to 46.4, the lowest since May 2020, while employment saw a slight uptick to 50.8 from 50.4. The only good news is that both input and output prices dipped further, offering further positive signals on inflation. The PMIs indicated how concerns are shifting from the supply side to the demand side, with better news on supply chains but demand concerns from weakening new orders. Initial Jobless claims rose more than expected to 240k from 223k and above expectations of 225k, the highest print since August, suggesting that we continue to watch for further signals on whether the tight labor market may be starting to weaken. Deere shares up 5% on strong results The US agricultural equipment maker delivered better than expected revenue and net income in its Q4 fiscal quarter (ending 31 October) and issued a FY23 net income guidance of $8-8.5bn vs est. $7.8bn. Order books are full into fiscal Q3 next year (ending 31 July) and the company sees an extended replacement cycle indicating that the best years are still ahead of the company. Better eurozone flash Composite PMI for November This was unexpected. The consensus forecasted that the EZ flash Composite PMI would fall to 47.0 in November from 47.3 in October, it actually improved a bit to 47.8. The increase mostly results from a better-than-expected Manufacturing PMI (out at 47.3 versus prior 46.4 and forecast at 46.0) while the services sector remains stable. There is another positive news. Price pressures are easing quite fast. The PMI price gauge fell to its lowest levels in two years due to a collapse in input prices. On a flip note, the flash Composite PMI Output Index for the United Kingdom (UK) ticked up to 48.3 in November. Surprisingly, the UK seems to hold up better than the eurozone and especially Germany. The jump in the PMI is still consistent with a recession in the eurozone and in the UK but it may be shallow, and its steepness will mostly depend from country to country on the impact of the energy shock and fiscal measures taken to mitigate it. What are we watching next? Earnings to watch Today’s earnings focus is Meituan and Pinduoduo. Chinese earnings in Q3 have been mixed and the technology sector continues to experience headwinds from both the economy and regulation. Analysts expect Pinduoduo, which has so far navigated the environment flawlessly, to deliver revenue growth of 44% y/y and EPS of CNY 4.75 up 288% y/y. Friday: Meituan, Pinduoduo Economic calendar highlights for today (times GMT) US cash markets closed for Thanksgiving. Early closes in some futures markets. 0900 – German IFO for November Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: https://www.home.saxo/content/articles/macro/market-quick-take-nov-24-2022-24112022

US stocks spent most of yesterday’s session hesitating between slight gains and slight losses, then the release of the latest Federal Reserve (Fed) minutes helped the bulls take the upper hand, as the minutes confirmed that a ‘substantial majority’ of Fed members thought it was a good idea to slow down the pace of the rate hikes. Stocks The S&P500 gained around 0.60% while Nasdaq jumped around 1%. The US 10-year yield eased, as the US dollar sold off quite aggressively across the board. Economy We saw a decent price action yesterday was oil, and that was well before the Fed minutes. The barrel of American crude dropped up to 5% yesterday on news that the Europeans would set the price cap for Russian oil to around $65 to $70 per barrel, levels at which Russian oil is already exchanged. Tesla and Morgan Stanley On individual stocks, Tesla was one of the biggest gainers of yesterday’s session as Citi and Morgan Stanley revised their views higher, but that rally was maybe… exaggerated. Watch the full episode to find out more! 0:00 Intro 0:21 Fed minutes send stocks higher, USD lower 4:11 Crude oil tanks on EU’s new Russian oil price cap 5:55 Foxconn living a nightmare in China, but Apple holds on 6:32 Tesla rallies on Citi, Morgan Stanley upgrades 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 #minutes #USD #crudeoil #EU #Russia #price #cap #EUR #GBP #ECB #minutes #Thanksgiving #holiday #Tesla #rally #Apple #Foxconn #China #Covid #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

US stocks fluctuated strongly ahead of the Fed minutes as investors anticipate signals of slower rate hikes in the future. Data showed that the S&P 500 and Nasdaq 100 trudged between modest gains and declines. But for today, trading volumes are expected to be lower because of the Thanksgiving holiday in the US. In the EU, investors are more focused on the data showing that private sector activity in Germany and France declined in November. This painted a gloomy picture, pointing to a gradual approach to recession. Similarly, the UK economy is also in recession, and the downturn is expected to worsen in 2023. The USD index fell after data showed US jobless claims rose more than expected. Meanwhile, oil prices fell after the EU discussed higher price caps of about $65 to $70 a barrel. The Fed minutes will indicate whether the central bank succeeded in curbing inflation. Many already think that it has eased, reducing worries for the economy. Key events for this week: - ECB policy meeting report - early closing of US stock and bond markets due to the holiday Relevance up to 19:00 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/327971

Summary:  Today we look at the market continuing to rally despite US Services PMI figures for November missed estimates suggesting the US economy continues to slow down. This means that equities right now interpret bad news as good news because it will force the Fed to pivot on the policy rate which will be net positive for equities. We also discuss expected PBOC easing, Riksbank's expected 75 basis point hike today, and the weakening USD helping financial conditions to ease globally. In commodities, our focus today is the energy market with Europe's gas market holding up well despite low volumes coming from Russia. Finally, we talk Deere earnings as the US agricultural equipment maker is delivering strong results as pricing power remain high on the back of high commodity prices on agricultural products. Today's pod features Peter Garnry on equities, Ole Hansen on commodities. 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-24-2022-24112022

The week's most intriguing day was Wednesday. We also learned about the Fed protocol in addition to receiving fairly sizable packages of statistical data from the UK, the USA, and the European Union. The majority of analysts believe that the minutes of the November meeting were much more significant than the minutes of earlier meetings because the Fed is now at the point where it must choose whether to keep raising rates at their maximum or to begin slowing them down. The FOMC members' recent speeches supported the idea that the rate would increase gradually. Additionally, Jerome Powell alerted the market that rate increases may eventually be greater than anticipated. The most crucial query to which the protocol was required to respond was, "To what level will the rate rise?" The protocol did not respond to this query. Furthermore, it was unable to respond to it. The time lag, which is several months, between the rate hike and the economy's response is a crucial point. In other words, if the Fed increases the rate by 75 basis points today, the impact will be felt over the next two to three months, if not longer. As a result, the rate increase to 4% has yet to cause inflation to respond fully. If this is the case, inflation may begin to decline in March 2023, even without a subsequent increase in interest rates. But since it is unlikely to decrease from 7.7% to 2% in 4 months, as the Fed wants, it makes sense to continue raising it, but more slowly, since the economy should also be remembered: a strong rate increase will slow its growth. This data was presented in the protocol that was made public last night. Most FOMC members agreed that the pace of monetary policy tightening needed to be slowed down, but it was unclear how much longer the rate would increase. Currently, the market anticipates it to grow to 5%, but a gradual decrease in inflation may prompt the FOMC to improve it more significantly. The "insignificant but obvious progress" on inflation, according to FOMC members, indicates that rates still need to be raised. The Fed will thus accomplish two objectives by choosing to slow down the tightening of monetary policy. It will first keep up the difficult fight against inflation. Second, it won't put as much of a strain on the US economy. Generally speaking, a pause is taken for a few months to evaluate the effects of those four rate increases of 75 basis points that occurred in the year's second half on inflation. In the interim, the impact on inflation will be assessed, rates will increase to 5%, and it will be possible to predict how many additional increases will be necessary for March of the following year. Based on the analysis, the upward trend section's construction is finished and has evolved into a five-wave structure. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. Although there is a chance that the upward portion of the trend will become more complicated and take on an extended form, this possibility is currently at most 10%. 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.     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/328100

The struggle continues for the EUR/USD pair: the bulls need to settle in the area of the 4th figure to show the strength of the upward movement, whereas the bears need to settle near the 2nd price level to finally stop the upward momentum and pave the way for the next surge to the parity level. Both sides of the "conflict", in fact, do not need a third figure, which in the current circumstances acts as a point of transit. Take note that both bears and bulls of the pair can boast of their momentary successes, but in reality they failed to consolidate their gains. The contradictory fundamental background is to blame. At the beginning of November, the dollar weakened across the market due to several factors. U.S. inflation slowed its growth, Federal Reserve officials admitted the possibility of a slowdown in monetary policy tightening, and the results of the G20 summit set the warmer tone for U.S.-China relations. All these factors came together to boost interest in risky assets, while the safe-haven dollar was out of action. The euro surged, reaching 1.0480. Then, the news flow changed a bit. The US central bank represented by many of its Committee members (Bullard, Cook, Daley, Waller and others) claims that slowing down the pace of interest rate hikes does not negate the fact that the upper bar of the current cycle may be reviewed upwards. By the way, Fed Chairman Jerome Powell also spoke about this scenario after the November meeting. The focus of the market attention shifted, the hawkish expectations strengthened and the dollar was back on the horse, due to which the pair fell to 1.0225. But bears couldn't settle in this price area. The dollar was under pressure again due to a new report, thereby, allowing the euro bulls to organize one more counterattack. We are talking about the minutes of the Fed's last meeting, which was published on Wednesday. In my opinion this document was not dovish at all. Moreover, all the key theses of the minutes were played back by the market - this report didn't bring anything sensational. But the fact is that traders reflexively reacted to the facts that have already been regarded, which were presented to the market in a "new cover". The essence of the minutes boils down to one simple conclusion: Fed members are ready to move further by smaller steps, i.e. more moderate rates. The document states that a number of Committee members believe that "a rapid tightening of monetary policy could pose a threat to economic growth and financial stability. Given the fact that the November FOMC meeting took place even before the release of data on October inflation growth in the U.S., we can assume that the central bank will slow down the pace of rate hikes at the next (December) meeting. That is, after four increases of 75 basis points, the central bank will raise the rate by 50 points. The minutes only confirmed the assumptions discussed earlier, putting a thick end to the relevant discussion. But the minutes did not answer the main question: how high can the final rate climb? The fact that the Fed will slow the rate hike is no indication that the upper bar of the current cycle will be lowered. In fact, some Fed officials (notably James Bullard) recently said that the "final stop" would probably be at 5.25%. Incidentally, in the same minutes, Fed members indicated that there has been "clear but little apparent progress" on inflation, and that rates still need to be raised. Therefore, in my opinion, the EUR/USD pair is growing on rather shaky grounds. Again, the bulls were supported by a trivial coincidence: The Fed's minutes were published ahead of Thanksgiving in America, amid low liquidity and high volatility. US statistics also weighed on the greenback: according to the latest data, business activity in the US declined again in November - both in the service sector and manufacturing. At the same time, the new orders dropped to the lowest level in 2.5 years. And yet long positions on the pair look risky. In fact, bulls have already played their game - there are no good reasons to develop an uptrend. Only the shortened Friday session (due to Thanksgiving) is on their side, due to which an inertial price growth is possible. Several factors are in favor of the bearish scenario. Firstly, the European Central Bank is also getting ready to slow down the pace of interest rate hikes in December. This was stated by some ECB officials over the past two weeks (in particular, Philip Lane and Mario Centeno), as evidenced by the minutes of the ECB's last meeting, which was published on Thursday. According to the document, back in October several members of the Governing Council were in favor of raising the rate by 50 basis points, not 75. Secondly, the safe-haven dollar (and consequently the EUR/USD bears) may find support from the news from China, where the number of coronavirus infections is growing. For example, on Wednesday the number of infections in China exceeded the 30,000th mark. Chinese authorities are once again forced to tighten quarantine measures, with partial lockdowns and mass testing resumed in major cities. The "zero-tolerance" policy, which has cost the Chinese (and global) economy so dearly, is back on track after easing the Covid policy. Thus, in my opinion, short positions in the pair look more promising, despite the contradictory fundamental background. The first bearish target is 1.0350 (the line Tenkan-sen on the D1 timeframe). The next (and so far the main) target is 1.0210. At this price point the bottom of the Bollinger Bands indicator coincides with the lower limit of the Kumo cloud on the four-hour chart.     search   g_translate     Relevance up to 01:00 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/328088

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.

The loosening in financial conditions is not going unnoticed with central banks. Their pushback is becoming more vocal. Next week's events will be a crucial test for the sustainability of the rally in rates, which looks to have its roots not just in markets' fundamental reassements but is also seeing technical factors at play    In this article Explicit pushback against the market rally from ECB's Schnabel The interdependence between TLTROs, QT and rate hikes Next week's events provide a crucial test to the market rally Today’s events and market view Shutterstock   Explicit pushback against the market rally from ECB's Schnabel ECB’s Schnabel remained true to her role as prominent hawk. Her speech was a clear pushback against any notion of the ECB materially slowing its tightening process. She could hardly have become more explicit in her disapproval of current market developments, saying “market expectations of a pivot have worked against [the ECB’s] efforts to withdraw policy accommodation.” She highlighted that policy is likely too accommodative, with real rates still in negative territory for most tenors. That said, she is but one voice on the ECB, even if an important one. Policy is likely too accommodative, with real rates still in negative territory for most tenors The market’s pricing of the December ECB meeting remains little changed at close to 60bp and also the terminal rate continues to hover just below 3%. The ECB minutes of the October meeting itself did not bring about anything surprisingly new, but served as a confirmation of media reports that already suggested the momentum for another 75bp hike in December was lower. Next week will see the release of the November inflation data, which in the end could tip the balance in the ECB’s decision. However, the ECB has started to shift the focus of the discourse to underlying inflation pressures. This included Schnabel yesterday - stressing that these showed little sign of subsiding just yet.   Negative real rates on much of the EUR curve show policy is still accomodative Refinitiv, ING The interdependence between TLTROs, QT and rate hikes The ECB minutes provided some insight into the ECB’s thinking on how the TLTRO changes fit into the broader balance sheet strategy. Reducing the TLTROs was seen as a necessary first step before considering the reduction of bond holdings. An assessment of the repayments after the adjustments of the TLTROs and impact of financing conditions would also inform the discussion to be had on reducing the reinvestments of the bond portfolio in December. Reducing the TLTROs was seen as a necessary first step before considering the reduction of bond holdings Clearly there is some interdependence between the TLTROs, QT and even rate hikes in the minds of the ECB. According to the minutes the Council deemed the TLTRO recalibration “more efficient” than trying  to achieve the same objective through an earlier start of QT or more aggressive interest rate hikes. Clearly, the first voluntary repayment in November of €296bn was on the low end of expectations and had also limited market impact. Ahead of the December meeting there will be one more repayment opportunity to consider. That amount will be closely watched as it could also be part of the bargaining process between hawks and doves when they decide on the pace of further hikes.     Curve flattening is not a typical reaction to more dovish central bank expectations Refinitiv, ING Next week's events provide a crucial test to the market rally Global rates have seen a significant rally over the past weeks, EUR 10y swap rates alone have pulled back 75bp from their peak in early October. The extent of the long-end rally seems to be more than just hopes for a pivot, noting also that front end rates have proven more stable, helping the strong curve flattening. A more technical component, where extensive short positioning has been reduced amid thin liquidity going into the Thanksgiving holidays and year-end, appears to be at play as well. The extent of the long-end rally seems to be more than just hopes for a pivot The events lined up for next week will this provide a crucial test for the sustainability of the rally lower in rates. In the US all eyes will turn to Fed Chair Powell’s speech on Wednesday. Of late he has taken a more hawkish line than the majority of the FOMC, as evidenced by his last press conference when compared to the subsequent FOMC minutes. On Friday the job market data will speak to the resilience of the economy, with expectations for a 200k increase in payrolls. In the euro area ECB president Lagarde will be speaking to parliament on Monday. More important will the release of the preliminary inflation data, starting with first country readings on Tuesday and the Eurozone-wide measure in Wednesday. Today’s events and market view Market liquidity should remain subdued, with the US only returning for a shortened session in between yesterday's holiday and the weekend. There is little in terms of data to change the course of markets today, with only public appearances of the ECB’s Muller and Visco being of note. But looking ahead that will change - with the crucial events lined up for next week. We have seen a remarkable rally in rates, which has likely been underpinned by market conditions surrounding the Thanksgiving holiday and the nearing year-end. Given the technical facors at play we have already earlier expressed our doubts about the sustainability of this rally and believe that it could be put to the test next week by the Fed's Powell and in the eurozone by the release of the inflation data for November. 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

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

Markets were quiet yesterday, as the US was closed for Thanksgiving. European markets mostly surfed on the positive reaction from the US equities to the Federal Reserve (Fed) minutes released a day earlier. EU Stocks The German DAX advanced to a fresh 5-month high, as the French CAC40 hit a fresh 7-month high, thanks to the euro’s appreciation against the greenback, which somehow eases the inflationary pressures for the European companies, along with the falling energy prices. Central Banks Elsewhere, the latest minutes from the European Central Bank (ECB) released yesterday revealed that ‘a few’ officials favored a smaller rate increase, than the 75bp that the bank delivered last month, citing the other monetary tightening measures that would help restricting the monetary conditions. The Swedish Riksbank raised its interest rates by 75bp yesterday and said that the monetary tightening will continue to tame inflation in Sweden. The Korean Central Bank raised its interest rates by another 25bp to the highest levels since 2012 and the won gained, whereas the Turkish Central Bank CUT its policy rate by another 150bp points, but said that the easing is perhaps enough at 9%, and that risks on inflation – which stands around 85% officially, and 185% unofficially – increase from here. China In China, the central bank signals lower reserve ratios for banks, and conducts reverse repo operations to boost liquidity in the system, as news of fresh Covid restriction measures creep in. The Chinese news certainly prevent oil bulls from jumping in the market right now, and the American crude consolidates below $80pb this morning, with solid offers seen at $82/85 range. Credit Suisse In Switzerland, Credit Suisse continues making the headlines. The stock price flirts with all-time-lows, as UBS sees its share price extend gains as outflows from CS reportedly benefit UBS. Watch the full episode to find out more! 0:00 Intro 0:32 Soft USD boosts European stocks 4:02 Will the USD further soften? 5:40 Central bank roundup 7:44 China re-closing weighs on oil 8:11 Credit Suisse outflows benefit UBS 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. #DAX #CAC #FTSE #EUR #GBP #USD #FOMC #ECB #minutes #Riksbank #CBT #SEK #TRY #China #Covid #crudeoil #CreditSuisse #UBS #Thanksgiving #BlackFriday #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 minutes of the European Central Bank's latest meeting, released yesterday, may indicate that policymakers would not back away from further interest rate hikes, even despite the risk of recession. How is the euro exchange rate reacting? Policymakers at the European Central Bank agreed at their last meeting that the central bank should continue normalizing and tightening monetary policy to combat high inflation, even in the event of a shallow recession, according to a report on the central bank's October meeting, Trading Economics reports. Officials noted that the outlook for inflation continues to deteriorate, with inflation running too high and many times above forecasts, and that there is a growing risk of its perpetuation and the emergence of second-round effects and a wage-price spiral. However, the central bank has hinted that it may want to halt ongoing interest rate hikes if there is a prolonged and deep recession, which could curb inflation to a greater extent. The ECB raised its key interest rate by 75 basis points in October, raising borrowing costs to the highest level since early 2009, with broad support for a meeting-by-meeting approach to future monetary policy decisions, depending on the data, according to minutes released yesterday. Euro exchange rate this week and month For the euro, the current month appears to be the best since July 2020. The EUR/USD exchange rate rose more than 5 percent in November, reaching its highest level since late June 2022. It seems that, in addition to improving data from the European economy, there may also be an overestimation of expectations for further Fed actions. The U.S. dollar may already be "rallied" if no new factors emerge in the U.S. pushing up expectations for more interest rate hikes. Source: Conotoxia MT5, EURUSD, Monthly In front of the EUR/USD, however, there are potential resistances from the chart. We are talking about the lows of late 2016 and the low of March 2020. Thus, the potential resistance zone could stretch between 1.0320 - 1.0640. Nevertheless, looking at the chart, we could see that we are dealing with the biggest correction in the trend since the beginning of 2021. 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.

The end of the week is quiet due to America's lack of activity due to Thanksgiving. The market's attention will be focused mainly on the Asian and European markets. Today, an important report turns out to be the result of the German GDP. Tokyo CPI At the beginning of today, Japan, and more specifically Tokyo, published its inflation report. In this city, Core CPI increased from 3.4% to 3.6% and it was a higher than expected reading (3.5%). The upward trend of this indicator has been going on since the beginning of May, but since May Core CPI has been above 1.0%. Also CPI increased significantly from 3.5% to 3.8%. The consumer price index only in Tokyo excluding fresh food and energy prices held its previous level of 0.2%. In this city, the rate peaked this year in May (0.4%), and then fell twice. After that, from July to September it held the level of 0.3%. Singapore Industrial Production Singapore Industrial Production MoM increased significantly. Comparing October to September, the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities was 0.9%, which is a good result as another decline was expected. The same index comparing the result from October 22 to October 21 has fallen. The fall was expected. The current reading is -0.8%, it is the first result in a year that was below zero, but it was higher than the expected -0.9%. This means that the change in the total inflation-adjusted value of output produced by manufacturers, mines, and utilities has decreased significantly, but not as much as expected. Source: investing.com German GDP In Germany, both the quarterly and annual change in gross domestic product turned out to be a positive surprise. GDP Q3 YoY was 1.2%. Unfortunately, it was a decrease in comparison to the previous period, the reading of which was at the level of 1.8%. This time it was expected to score 0.1% lower. A very positive result for the German economy as well as for the euro zone turns out to be the reading of GDP Q3 q/q. The index increased by 0.3% compared to the previous period and reached the level of 0.4%. An increase to 0.3% was expected, but the result higher than expected may raise some optimism. German GDP figures show the country’s economy has grown slightly more in the third quarter than anticipated on the back of consumer spending. Switzerland Employment Level The Employment Level measures the number of people employed during the previous quarter. As the current reading shows, the exemplary trend is successively maintained. Employment increased this time to the level of 5,362M. The previous reading was about 46M than (5,316M). Such results show the good condition of the economy, because employment increases household income, and thus these households are able to spend more, which drives the economy because money remains in constant circulation. ECB’s speeches Markets expect only two speeches at the end of the week, and this time only from the European Central Bank (ECB). The first speeches took place at 9:50 CET. The European Central Bank Supervisory Board Member Kerstin af Jochnick spoke. The second and final speech of the day will take place at 18:00 CET, with Luis de Guindos, Vice-President of the European Central Bank The speeches of the ECB's officials often contain references to possible future monetary policy objectives, assessments and measures. What's more, statements can give strength to the euro (EUR), or set it in the opposite direction. Summary: 0:30 CET Tokyo CPI 0:30 CET CPI Tokyo Ex Food and Energy (MoM) (Nov) 6:00 CET Singapore Industrial Production MoM 8:00 CET German GDP (Q3) 8:30 CET Switzerland Employment Level 9:50 CET ECB's Supervisory Board Member Jochnick Speaks 18:00 CET ECB's De Guindos Speaks Source: https://www.investing.com/economic-calendar/

US markets are open for limited hours today, and investors are focussed on the World Cup and Black Friday rather than the US dollar. EUR/USD is trading quietly at 1.0392, down 0.18%. German data has not been spectacular this week, but nonetheless is moving in the right direction, as the German economy is in decent shape. Germany’s GDP for Q3 was revised upwards to 0.4% QoQ, up from 0.3% and ahead of the consensus of -0.2%. This follows a 0.1% gain in GDP in Q1 and is all the more impressive, considering the headwinds on the global scene, in particular the war in Ukraine. Germany has made a mammoth effort to stockpile energy supplies and end its dependence on Russia, which should mean that an energy crisis can be avoided this winter. German Consumer confidence remains weak but improved slightly for a second straight month. The November reading rose to -40.2, up from -41.9, although shy of the consensus of -39.6. Business confidence also edged higher earlier this week, as did Business Expectations. ECB says more rate hikes needed The ECB minutes, released on Thursday, indicated that ECB members remained concerned about inflation becoming entrenched. Members were clear about the need to raise rates in order to bring inflation back down to the 2% target, and most members supported the 75-bp hike at the October meeting, with a few voting for a 50-bp move. The markets have priced in a 50-bp increase at the December 15th meeting, after ECB policymakers hit the airwaves and urged that the ECB slow down the pace of rate hikes. Still, with inflation at a crippling 10.6%, there’s little doubt that the ECB will have to continue raising rates, and the markets expect the deposit rate, currently at 1.5%, to hit 3.0% in 2023.   EUR/USD Technical 1.0359 and 1.0238 are providing support There is resistance at 1.0447 and 1.0568 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.  

Bulls on the EUR/USD pair are desperately trying to rise above the 1.0400 level: they repeatedly tried to attack the 4th figure in November, but failed each time. Traders fail to consolidate the success and, accordingly, are not able to develop it in order to claim the next, fifth price level. Their indecisiveness plays against them: as soon as the upward momentum fades, the bears come in, and they pull the price down. This "push-and-pull" takes place amid a contradictory news flow, which prohibits both bulls and the bears to dominate. In addition, the US celebrated Thanksgiving, which lasted through Wednesday, Thursday and most of Friday. The US trading floors were either closed or did work, but in a shortened period. Traders were "fishing in troubled waters", i.e. they took advantage of low liquidity and high volatility. It is obvious that next week, the market will operate the way it does normally, which means that the overall alignment of forces may change significantly, and probably not in favor of the bulls. The pair is now trying to stay within the framework of the 4th figure only by inertia. The market's interpretation of the minutes of the FOMC's November meeting, published on Wednesday, did not work in the dollar's favor: due to this fundamental factor, the bulls reversed the price, rising from 1.0225 to the 1.0450 target (high of the current week). But traders couldn't hold their positions and the pair went adrift. Bulls cannot move to the area of the 4th figure, bears cannot pull the price down to the area of the 2nd price level. Both parties need more information to push the pair. At the same time, all the previous information and events were played out, and some of them even twice. Thus, the aforementioned minutes confirmed traders' assumptions that the central bank is getting ready to slow down the rate of tightening the monetary policy. Actually, it was the only message that was dovish in nature. But it was enough for the pair to surge upwards. Traders were not confused by the fact that Federal Reserve Chairman Jerome Powell spoke about the slowdown of monetary policy at the beginning of November. In addition, some of the other Fed members repeatedly spoke about such intentions. And after the latest US inflation data reported growth, the probability of a rate hike by 50 points at the December meeting increased up to 80%. The Fed minutes that was released on Wednesday reminded the market of such intentions - nothing more. But amid low liquidity, traders decided to win back this fundamental factor by the second round. Given this disposition, the question arises: can the EUR/USD bulls develop their upward attack on such shaky grounds? Definitely not. Friday's price fluctuations show that the bulls are not confident in their own capabilities. Neither are the bears. And in my opinion, the bulls are definitely losing their grip. Figuratively speaking, you won't get far with just "one minutes", at the same time there are currently no additional arguments for a large-scale growth from the pair. But the U.S. currency may receive substantial support ahead of the December FOMC meeting. According to a number of currency strategists, estimates of the terminal rate are likely to be revised upwards in December's "dot-plot" compared to the previous forecast, which was published in September. Powell admitted such a possibility following the results of the November meeting. And if similar assumptions are made by other members of the Fed (before the 10-day "hush-hush" period), we could be witnessing another dollar rally. Again, this scenario is very likely, given Powell's previous rhetoric. In addition, the U.S. currency could receive support from the Nonfarm Payrolls report. If the unemployment rate returns to 3.5% and the growth rate of non-farm payrolls exceeds at least the 250,000 target, the dollar bulls will feel much more confident, even against the euro. The single currency (euro) will then have to react to the European Central Bank's discussion on the pace of monetary policy tightening. There are calls for the central bank to "moderate its enthusiasm" at the December meeting, that is, to raise the rate by just 50 points, and not 75. In particular, the chief economist of the ECB spoke in favor of this scenario. By the way, the preliminary data on inflation growth in the eurozone for November will be published next week. If the report shows at least minimal signs of a slowdown in CPI growth, then the euro will be under significant pressure, as in this case the issue of slowing down the pace of rate hikes can be considered a done deal. Thus, despite the bulls' attempts to settle within the framework of the 4th figure, they still have no good reasons to develop the uptrend at the moment. Long positions look risky - at least until the price stays above the resistance level of 1.0450 (the upper line of the indicator Bollinger Bands on the daily chart). In the medium term, it is better to consider short positions. The first bearish target is 1.0350 (Tenkan-sen line on the one-day timeframe). The main target is 1.0210 (at this price point, the bottom of the Bollinger Bands indicator coincides with the lower limit of the Kumo cloud on the H4 timeframe).       Relevance up to 23:00 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/328215

Thanksgiving day, the closing of the U.S. stock markets and the outflow of liquidity caused the EUR/USD pair to get bored at the end of the last full week of fall. Not surprising, given the tumultuous moves before that. The dollar started the week in good condition and ended it in grief, completely giving up the initiative to the euro. Thanks to the strong data and hawkish speeches of the European Central Bank officials, the euro reclaimed its spot by hitting its 5-month highs and looks forward to important data on eurozone inflation and the US labor market. Strong German GDP statistics for the third quarter also boosted the morale of the euro fans. Positive consumer sentiment, business activity and the business climate were followed by encouraging news from the German economy. It expanded not by 0.3%, but by 0.4%, i.e. it was more resilient to numerous troubles, including the energy crisis, than previously thought. The main driver of growth was the consumers, whose activity increased by 1%. German GDP dynamics The latest data suggest that the recession in the eurozone will be shallow and short-lived, which supports the single currency. The market is optimistic, however the Institute of International Finance decided to add a minor hitch. According to the trade association, which was one of the first to predict the parity in EURUSD, the armed conflict in Ukraine will develop into an eternal war. It will not end in 2023, and the countries that are close to it will suffer first. In particular, the eurozone, whose GDP will shrink 2% next year due to a sharp decline in consumer and business confidence. The U.S. economy will expand by a modest 1% as the Federal Reserve's tightening of monetary policy will have a noticeable effect. The main driver of global GDP will be China, which will defeat COVID-19 and finally open its economy. However, China's efforts will not be enough. The world gross domestic product in 2023 will increase by 1.2%, which will be its worst performance since 2009. It looks like the glass is half empty for the Institute of International Finance, which provides hope to the EUR/USD bears. If the world economy feels as bad next year as it has this year, or maybe even worse, then getting rid of the U.S. dollar is not a good idea. The greenback is the currency of the pessimists. In the short-term, the dynamics of the main currency pair will be determined by releases of data on European inflation and U.S. labor market. Slowing consumer prices in the eurozone and U.S. employment are the keys to reduce the speed of monetary easing by the ECB and the Fed, so EURUSD risks showing mixed dynamics. Technically, the pair has an opportunity to continue the rally towards the 161.8% target on the Crab pattern and to win back the 1-2-3 Reversal pattern. In this regard, let's sell the euro on a breakout of support at 1.038 and 1.033 and buy it in case it grows above 1.044.     search   g_translate     Relevance up to 13:00 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/328180

US Wall Street returns after the Thanksgiving holiday and what a week we have in store. The jobs report on Friday is the obvious highlight, with Fed policymakers keen to see further signs of inflationary pressures easing and less tightness in the labour market. There’s a whole host of other data due next week as well including the core PCE price index – the Fed’s preferred inflation measure – GDP, income, spending, jobless claims, and more. We’ll also hear from Fed policymakers throughout the week including Chair Jerome Powell on Wednesday. EU An action-packed week for Europe, with a plethora of key economic data and ECB policymaker appearances. In the run-up to the ECB rate decision on 15 December, that commentary is going to provide crucial insight into which way the committee is leaning, with another 75 basis points currently heavily priced in. With that in mind, the flash CPI release stands out as the one to watch on Wednesday. UK The UK has repaired some of its tarnished reputation in recent weeks but the economy is still likely in recession and it won’t be an easy road back. There isn’t much data next week to support or refute that but there are appearances from various BoE policymakers that will be of interest. Russia A few economic numbers of note next week include GDP, retail sales, unemployment, real wages, and the manufacturing PMI. Unemployment is expected to tick higher again to 4.1% from its September low of 3.8%. South Africa The SARB continued its aggressive tightening cycle in November with another 75 basis point hike, taking the repo rate to 7%. The central bank expects inflation to remain above its 3-6% target range until the second quarter of next year and only return to the mid-point in the second quarter of 2024. Next week brings the release of unemployment data on Tuesday. Turkey As expected, the CBRT cut rates by 1.5% in November and ended its easing cycle, leaving the policy rate at 9%. Next week its quarterly GDP and the manufacturing PMI on offer as traders look for clues as to the cost of the monetary policy experiment on the economy. Switzerland A data-heavy week that includes the PMI survey and inflation on Thursday – which the SNB has repeatedly stressed is too high – GDP on Tuesday, and KOF and ZEW surveys on Wednesday.  China Official Chinese manufacturing and non-manufacturing PMIs for November will be released on Wednesday as well as the Caixin Manufacturing PMI.  As these figures have been fluctuating above and below the 50-the threshold separating contraction from expansion for the past few months, they suggest that the Chinese economy is still hovering between contraction and expansion. However, the long-term positive fundamentals of the Chinese economy remain unchanged. Industrial profits figures are also released over the weekend. India A number of interesting economic releases next week including GDP on Wednesday and the manufacturing PMI on Thursday. Australia & New Zealand Inflation in Australia and New Zealand remains high, and the new Governor of the Reserve Bank of Australia, Philip Lowe, has said in a speech that he is determined to ensure that the current high inflation is temporary, while the RBA is expected to raise interest rates further in the future.  The RBNZ’s 23 November central bank rate meeting hawkishly raised rates by 75 basis points to 4.25% to continue the fight against inflation, and the market now expects the RBNZ’s terminal rate may rise to 4.75%.    Next week, the focus will be on Australian retail sales and CPI for October on Monday and the speech by the new RBA Governor Philip Lowe on Wednesday. Other data released throughout the week will also be of interest. Japan Coming up next week is data on unemployment, retail sales, and industrial production for October as well as the latest manufacturing PMI for November.  Singapore At the 29th APEC Economic Leaders’ Meeting on 17 November, President Xi Jinping met with Singaporean Prime Minister Lee Hsien Loong in Bangkok. The China-Singapore relationship is forward-looking, strategic, and exemplary, Xi said. Lee Hsien Loong said Singapore sees China’s development as positive, wishes the GDI well, and will explore ways to participate. Both countries expressed their willingness to continue to deepen their cooperative relationship and work together to promote new progress in the all-around partnership between the two countries as they move with the times. According to Caixin Global, on 22 November, Singapore police said it was investigating Binance. This comes after the Monetary Authority of Singapore noted that Binance was being investigated as it may have violated the Payment Services Act. 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 wave marking on the euro/dollar instrument's 4-hour chart is convincing. The upward portion of the trend has corrected itself. Initially, I believed three waves would develop, but it is now abundantly clear that there are five waves. As a result, the waves a, b, c, d, and e have a complex correction structure. If this supposition is accurate, the building of this structure may have already been finished since the peak of wave e is higher than the peak of wave C. In this instance, it is anticipated that we will construct at least three waves downward, but if the most recent phase of the trend is corrective, the subsequent phase will probably be impulsive. Therefore, I am preparing for a new significant decline in the instrument. The market will be ready to sell when a further attempt to breach the 1.0359 level, which corresponds to 261.8% Fibonacci, is successful. The peak of the anticipated wave e was still present, so removing quotes from the lows this week did not violate the wave marking. As a new downward trend segment, most likely segment 2 or b, the most recent increase in quotes can be seen as an internal correction wave. Wave e and the upward portion of the trend will likely take a more extended form if an attempt to break through its current peak is successful. Rates will keep rising, according to an ECB vice president. This week, the euro/dollar instrument experienced positive dynamics. The demand for the euro currency was increasing despite the absence of reports and news. This allowed the instrument to develop an upward wave that still needed to deviate from the established wave pattern. However, the instrument's decline should start as early as Monday or Tuesday to preserve the integrity of the wave marking. A wave 3 or C is supposed to be built right now. The ECB Vice President Louis de Guindos' speech last week was the most interesting for the euro. There were two performances, though they were barely distinguishable from one another. According to De Guindos, the European Central Bank's interest rate will increase in the upcoming months because the European Union's inflation rate is still "indecently high," and the slowdown in economic activity cannot result in a decrease in the consumer price index. As no one who participated in the foreign exchange market questioned further tightening monetary policy, I cannot say that de Guindos' statement sparked a commotion there. The likelihood that the rate will increase further, though, is growing. The euro currency benefits from this, but wave analysis and the news background are now at odds. While the news background suggests an increase, the waves suggest a decrease. We may see both in the end. The tool can create a third wave of a descending trend before starting a new upward trend segment. However, a descending wave needs to be constructed first. If not, the wave markup might become much more difficult to read. Conclusions in general Based on the analysis, the construction of the upward trend section is complete and has become more complicated with five waves. As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. There is a chance that the upward section of the trend will become more complicated and take on an extended form, but this chance is currently at most 10%. The wave marking of the descending trend segment becomes more intricate and lengthens at the higher wave scale. The a-b-c-d-e structure is most likely represented by the five upward waves we observed. After the construction of this section is finished, work on a downward trend section may resume.     search   g_translate     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/328232

Inflation in the eurozone is expected to have reached a new record high of 10.7% in October. The outlook In September inflation amounted to 9.9%. The Baltic countries remain the hardest hit, with annual inflation above 20%. Estonia leads in comparison with estimates of 22.4%. This is mainly because they are particularly vulnerable to fluctuations in the energy markets. According to Eurostat, the price of natural gas for households increased by 154% and 110% respectively in Estonia and Lithuania between the first half of 2021 and the first half of this year. Meanwhile, France maintained its position as the country least affected by the crisis, although annual inflation in October was 7.1%. Forecast Euro inflation is expected to increase to 10.8% y/y from 10.6% y/y, but core inflation will remain stable at 5.0% y/y. These relative price shocks reflect the scale and extent of the energy, pandemic and war shocks. In such circumstances, standard measures of core inflation at the time may not accurately reflect the persistent component of inflation, while forward-looking wage growth rates may play a useful additional role in determining the medium-term inflation dynamics.Long-term inflation expectations now seem well anchored at the 2% target. Inflation and interest rates The European Central Bank, tasked with keeping eurozone inflation close to 2%, broke with more than a decade of negative interest rates this summer in an effort to contain price increases. Central banks use their interest rates to make money more expensive or cheaper to increase or reduce spending as they directly affect the interest rates offered to households and businesses by commercial banks. Central banks, having more and more signs of easing price pressure in the medium term, are increasingly considering slowing down the pace of rate hikes. Minutes from the last Fed meeting and Fed speeches suggest that the majority in the Fed is in favor of lowering the scale of interest rate hikes to 50 bp from 75 bp. However, before the meeting on December 14, we have yet another report on employment and inflation, which will be crucial for the scale of the rate hike. The ECB may also move to 50 bp, but much depends on how next week's November inflation will turn out. Another high printout would probably trigger a 75 bp hike at the meeting on December 15, but the specialists' baseline scenario assumes a 50 bp hike. Economic growth The eurozone economy is believed to have grown in the third quarter, but only by 0.2% from the previous quarter, according to Eurostat's preliminary data, also released on Monday. In the second quarter, the area of 19 countries increased by 0.8%. At least three countries are projected to contract quarterly. Growth in Latvia contracted by 1.7%, while Belgium and Austria grew by 0.1%. According to forecast of the head of the International Monetary Fund (IMF) offered her own grim prediction that half of the countries in the eurozone could enter into recession in the months to come. Europe's economy is projected to be badly hit by the energy crisis triggered by Russia's war in Ukraine. The IMF estimated the eurozone to expand by 3.1% in 2022 but just by a meagre 0.5% in 2023. Next year, Germany and Italy are projected to post -0.3% and -0.2% rates, respectively. Source: IMF, investing.com

On Friday, the EUR/USD currency pair traded extremely calmly, exhibiting no sudden movements, volatility, or trend. However, the pair ended the day above the moving average, and both linear regression channels point upward. Therefore, the development of the European currency is entirely justified from a technical standpoint. Another concern is that it is obvious that the macroeconomics and foundation do not provide the euro currency with enough support for it to grow almost continuously. But since this issue has already been brought up several times, there is nothing new to add now. As we have repeatedly stated, any fundamental hypothesis should be supported by specific technical signals. It is not worthwhile to test this hypothesis if there are no signals. We can wait as long as we like for a correction, but if the majority decides to buy the euro for any reason, there won't be one. However, a correction could still start soon. The fact is that there are currently no fundamental or macroeconomic justifications for the appreciation of the euro currency. Of course, they can be "discovered" or "invented," but if that doesn't happen, how can one explain, for instance, why the European currency increased last week? Whatever it was, we are still watching for the pair to fall and consolidate below the moving average line. The most intriguing report of the week concerns inflation in the EU. The situation will be more intriguing this week than it was last week because of the macroeconomic backdrop. The European Union will host Christine Lagarde's speech on Monday. With the ECB's final meeting of the year scheduled for December, her speeches are gradually regaining importance. The market currently anticipates an additional 0.75% rate increase because, even if inflation slows by the end of November, it is unlikely that it will be able to return to 2% at the same rate level. As a result, several more significant increases are necessary, as Vice-Chairman of the ECB Luis de Guindos discussed last week. Lagarde will likely use "hawkish" language, which could theoretically support the euro. The word "theoretically" is because the market is confident that the rate will continue to grow at its fastest rate even without Lagarde's new rhetoric. There are numerous reasons why the Fed needs to catch up. First, a higher rate abroad causes an imbalance in cash flow and investment. Money comes to the US. Second, a higher Fed rate causes the dollar to rise while the euro declines. Thirdly, a high rate is necessary to reduce inflation, which is still very high and must be done. Therefore, increasing it at the fastest possible rate is necessary since it is ineffective for the European regulator to "pull the rubber." The November inflation report will be released on Wednesday. The consumer price index is expected to slow to 10.3–10.4% y/y, which can be seen as the first step toward success, according to forecasts made by experts. Nevertheless, since this is only a prediction, it might not pass. And now for something interesting. Recall that a few months ago, the US dollar started to decline relative to its rivals when US inflation started to slow down. Since the beginning of the decline in inflation, the likelihood of further aggressive tightening of monetary policy by the central bank has decreased. It can be concluded that a decrease in inflation = a fall in the exchange rate of the national currency. The European currency could lose market support if inflation in the European Union starts to decline. The European Union will release its unemployment rate and business activity index (manufacturing sector) on Thursday. There will be more significant events this week than these reports in the present context. Luis de Guindos and Christine Lagarde will perform as usual on Friday. It's more intriguing this way. As a result, there will be a lot of intriguing events this week in the European Union alone that could cause a market response. As of November 28, the euro/dollar currency pair's average volatility over the previous five trading days was 86 points, considered "average." So, on Monday, we anticipate the pair to fluctuate between 1.0310 and 1.0482 levels. A potential continuation of the upward movement will be indicated by the Heiken Ashi indicator turning back to the top. Nearest levels of support S1 – 1.0376 S2 – 1.0254 S3 – 1.0132 Nearest levels of resistance R1 – 1.0498 R2 – 1.0620 R3 – 1.0742 Trading Suggestions: The EUR/USD pair is still above the moving average. In light of this, we should now consider long positions with targets of 1.0482 and 1.0498 if the Heiken Ashi indicator reverses direction and moves upward or the price recovers from the moving. Only after fixing the price below the moving average line with targets of 1.0254 and 1.0132 will sales become significant. 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.     search   g_translate     Relevance up to 05:00 2022-11-29 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/328254

Summary:  A pivotal post-holiday week ahead kicked off with risk-off due to protests in China over the Zero covid policy, and China PMIs due this week could potentially signal demand weakness as well. The week is also key for US data and Fed as financial conditions are the easiest since May and more pushback may be on the cards with the most hawkish members of the Fed board, Powell and Bullard, on the wires this week before the FOMC quiet period kicks in. We also get ISM manufacturing, PCE inflation and jobs data that will be key for the dollar. Eurozone inflation may soften, but that won’t be enough for the ECB to take the foot off the pedal, while Australian CPI will pressure the RBA to continue with its steady rate hikes. An important week ahead for incoming US data: ISM manufacturing, PCE inflation and jobs data to be key for the dollar This week will offer an interesting test for markets, including the US dollar, which trades at pivotal levels, as we have a look at the next important data macro data points out of the US, especially the PCE inflation data and the Friday November jobs report. Core PCE is forecast to rise 0.3% MoM in October from 0.5% previously. In addition, we’ll have a look at the ISM manufacturing survey for the month on Thursday, which is also expected to slip into contraction after the decline in S&P flash PMIs last week resulted in further easing of Fed tightening expectations. The question for the run-up into the December 14 FOMC meeting and in the month or so beyond is how long the market can continue to celebrate the Fed easing off the accelerator, when the reason it is doing so is that economic slowing and an eventual recession threaten. Normally, a recession is associated with poor market performance as profits fall and credit risks mount. Bullard and Powell speak – pushback against easing financial conditions? While the economic data continues to slow, and markets continue to cheer on that, it will key for Fed members to bring the focus back to easing of financial conditions and consider what that means for inflation. Chicago Fed national financial conditions index eased further in the week of November 18, bringing financial conditions to their easiest levels since May. Most of the Fed members that have spoken since that soft CPI release for October have pushed back against pivot expectations, but it hasn’t been enough. Further pushback is still needed if the Fed is serious about bringing inflation under control, and only the most hawkish members of the committee Bullard and Powell may be able to deliver that. Both will be on the wires this week. Bullard speaks on Monday while Powell discusses the economic outlook and labor market on Wednesday. Other Fed members like Williams, Bowman, Cook, Logan and Evans will also be on the wires. China PMIs likely to show demand weakness, Asia PMIs also due China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Likewise, the Caixin manufacturing PMI is expected to drop to 49.0 (Bloomberg survey) in November from 49.2 in October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. PMIs for other Asian countries are also due to be reported this week, and the divergence between the tech-dependent North Asian countries like Taiwan and South Korea vs. more domestic-oriented South Asian countries like India and Indonesia will likely continue, with the latter outperforming. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Australia’s economy continues to weaken. Retail slides. CPI data is the next catalyst Australia has continued to receive mostly weaker than expected economic data, that support the RBA’s dovish tone. Today Australian retail trade data unexpected fell, showing sales dropped 0.2% from the prior month. This reflects that consumers are feeling the strain of inflation and rising interest rates. As a house, Saxo thinks further weakness in spending is likely ahead in 4Q and into 2023, with the full impact of rate hikes passing through households, and increasing amount of Australian in financial duress. This view is somewhat supported by the RBA’s thinking. The data the RBA will be watching next is ; Australian inflation data for October, released Wednesday 30 November. Inflation is likely to have fallen over the month, however consensus expects inflation to have increase year on year, up 7.6% year on year. If the market thinking comes to fruition, this would show Australian inflation rose from the prior reading (whereby CPI rose 7.3% yoy). Regardless, if inflation does rise, we think the RBA will likely save face, and keep hiking rates by 0.25%, with its next hike due December 6. Twitter to launch its ‘Verified’ service After Musk acquired Twitter last month for $44 billion, he plans to "tentatively" roll out its verified service on December 2, with multiple colours for different types of users. Blue checks will be allotted to people, while verified company accounts will get gold checks and grey marks will be given to governments. Musk said all verified accounts will be manually authenticated, before the check activates, which will be cumbersome. Twitter recently halted the launch of its $8 verified service, as it failed to cease impersonation issues the company has been having. Key earnings to watch this week Peter Garnry highlights earnings results to watch in his note. Pinduoduo on Monday is the key earnings focus in China with analysts expecting Q3 revenue growth of 44% y/y and the EBITDA margin staying at healthy levels around 21.2%. The main menu next week is on Wednesday with earnings from US technology companies Salesforce and Snowflake. Analysts expect Salesforce FY23 Q3 (ending 31 October) revenue growth to decline to 14% y/y down from 27% y/y a year ago and analysts expect Snowflake to report FY23 Q3 (ending 31 October) revenue growth of 61% y/y down from 110% y/y a year ago. Expectations for both companies highlight the slowdown in technology enterprise spending that we have seen from other technology companies including Intel, HP etc. Key economic releases & central bank meetings this week Monday, Nov 28 Eurozone M3 (Oct)UK CBI Retail Sales (Nov)U.S. Fed Bullard at MarketWatch Live Event Tuesday, Nov 29 U.S.  Conference Board Consumer Confidence (Nov)U.S. St. Louis Fed President Bullard speechJapan Unemployment Rate (Oct)Japan Retail Sales (Oct) Wednesday, Nov 30 U.S. ADP Private Employment (Nov)U.S. JOLTS Job Openings (Oct)U.S.  Fed Chair Powell speechEurozone HICP (Nov, flash)Germany Unemployment Rate (Nov)Japan Industrial Production (Oct)Japan Housing Starts (Oct)China NBS Manufacturing PMI (Nov)China NBS Non-manufacturing PMI (Nov)India Real GDP (Q3)Thailand Bank of Thailand policy meeting Thursday, Dec 1 U.S. PCE (Oct)U.S. ISM Manufacturing (Nov)U.S. Initial Jobless Claims (weekly)Eurozone Unemployment Rate (Oct)Japan Capital Spending (Q3)Japan Consumer Confidence (Nov)China Caixin China PMI Manufacturing (Nov) Friday, Dec 2 U.S. Nonfarm Payrolls (Nov)U.S. Unemployment Rate (Nov)Eurozone PPI (Oct)   Key earnings releases this week Monday: Pinduoduo, Capitaland, H World Group Tuesday: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger     Source: https://www.home.saxo/content/articles/macro/saxo-spotlight-28-nov-2022-28112022

Stock markets opened the week lower as investors worry that China may have to further tighten its Covid restrictions. That could undermine global economic growth prospects, and has led to protest across key cities. Data indicates that the S&P 500 cut its monthly rally, with Apple seeing losses after Bloomberg News reported that unrest at its key manufacturing center in Zhengzhou is likely to lead to a production shortfall of nearly 6 million iPhone Pro units this year. Meanwhile, Amazon made gains in retail sales, and analysts say the Cyber Monday results will paint a fuller picture of demand this holiday season. European stock indices also fell, following the US. The unrest in China is complicating the country's path to economic opening. This, along with the potential moderate rate hikes by the Fed in upcoming sessions, has spurred interest towards riskier assets. Analysts at Goldman Sachs have warned that the chances of a disorderly exit from Beijing's Covid Zero policy are also rising. Just as the S&P 500 was trying to break above its mid-November highs, sentiment turned negative, threatening the recent market momentum. The timing is most inconvenient here as the index is approaching an important technical zone in the form of both the 2022 downtrend and the 200-day moving average. If the bullish mood ends, short-term trades could trigger profit-taking. In Europe, ECB President Christine Lagarde said that she would be surprised if inflation in the region peaked. This would mean that interest rate hikes are not over. On the other hand, Fed Chairman Jerome Powell is expected to reinforce expectations that the central bank will slow the pace of rate hikes next month. However, the fight against inflation will last until 2023. Key news for this week: * US consumer confidence, Tuesday * EIA crude oil report, Wednesday * China PMI, Wednesday * Fed Chairman Jerome Powell's speech, Wednesday * Fed Beige Book, Wednesday * US GDP, Wednesday * US PMI, Thursday * US construction spending, consumer income, initial jobless claims, ISM Manufacturing, Thursday * Bank of Japan Governor Haruhiko Kuroda's speech, Thursday * US unemployment and nonfarm payrolls report, Friday *ECB chief Christine Lagarde's speech, Friday     search   g_translate     Relevance up to 19:00 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/328363

The euro's first trading day of the week proved surprisingly active. Although there was no news background on Monday, the movements started in the evening and continued throughout the day and into the evening. There was some news, though, and I will now consider them. The speech by Christine Lagarde, which offered nothing to the market, should be our first point of reference. The market now feels secure in its position and is clear on the actions the European regulator will take in the coming months due to the ECB speakers' appearances just last week. All ECB members agreed that it was important to keep raising the rate as long as inflation was still high. A preliminary report on EU inflation for November will be released this week, and the market now anticipates that it will start to slow down a bit. This might be an exceptional circumstance, or perhaps by the end of November, there won't be any slowdown. Predictions sometimes pan out. Additionally, Isabel Schnabel gave a speech in which she said something crucial. She pointed out that the ECB is currently powerless to halt the rate increase because budgetary initiatives will cause inflation to soar. Budget plans are viewed as various initiatives to reimburse European consumers for rising electricity costs over the past year. Schnabel also pointed out that faulty inflation forecasts by central banks could result in misguided monetary policy. She added that the ECB might need to increase the rate more than initially anticipated. This is reasonable rhetoric, given that budget incentives are almost identical to monetary incentives, which are the primary cause of the EU's (and other nations') current record-high inflation rates. Restrictive measures ought to be more stringent than they would be if the EU implements fiscal stimulus. Such rhetoric is advantageous for the euro. The market will have more justification to increase demand for the euro currency as rates in the European Union rise. We need at least three waves down based on the current wave layout. This is necessary for the markup to be completely unreadable and complex, making it much more challenging to predict something. I do not contest the possibility of a continued quote rise; even yesterday's example demonstrated this. But I'm still hoping to develop a clear trend correction section. The upward trend section's construction is complete and has increased complexity to five waves (or is nearing completion). As a result, I suggest making sales with targets close to the estimated 0.9994 level, or 323.6% Fibonacci. There is a chance that the upward section of the trend will become more complicated and take on an extended form, but this chance is currently at most 10%. The construction of a new downward trend segment is predicated on the wave pattern of the pound/dollar instrument. I can no longer recommend purchasing the instrument 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 form. Relevance up to 05:00 2022-11-30 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/328393

M5 chart of EUR/USD On Monday, the euro/dollar pair showed certain movements that are quite difficult to explain. It started to sharply rise early in the morning and crossed a distance of 150 pips. Then it began to fall by the same amount in the afternoon. The only fundamental background was European Central Bank President Christine Lagarde's speech, which took place in the evening, so it could not have provoked such movements. Therefore, the pair has reached 1.0485, near which the previous local high was formed, and sharply fell. I believe that this pullback could be the start of the long-awaited bearish correction, which I already mentioned last week. The price may cross the critical line in the near future, which will be another technical factor for the fall. I expect the Senkou Span B line to be the first target, but the correction might be much stronger, since the euro's growth for the past few weeks was not quite logical and reasonable. As for trading signals, yesterday's situation was almost perfect. At the beginning of the European trading session, the price broke through the level of 1.0366, after which it rose to the nearest target level of 1.0485 and rebounded from it. Therefore, traders had to open a long position first, and then - a short position. They managed to earn about 90 pips on the first position, and also the same amount on the second one since the price went back to the level of 1.0366. As a result, two deals, good profit. COT report As for Commitment of Traders (COT) reports in 2022, they reflected bullish sentiment in the first six months of the year although the euro was bearish. Then, they illustrated bearish sentiment for several months with the euro being also bearish. Currently, the net position of non-commercial traders is again bullish and increasing. Meanwhile, the euro has hardly retreated from its 20-year lows. This is due to the fact that demand for the greenback is high amid a difficult geopolitical situation in the world. Therefore, despite a rise in demand for the euro, buoyant demand for the dollar does not allow the euro to strengthen. During the reporting week, the number of long positions held by non-commercial traders rose by 7,000 and that of short positions increased by 2,000. Consequently, the net position advanced by 5,000. The euro's recent growth is gradually coming in line with the figures illustrated in the COT report. Still, the greenback may resume growth under the influence of geopolitical factors or the lack of factors for further strengthening in the euro. The green and red lines of the first indicator moved far away from each other, which may indicate the end of the uptrend. The number of long positions exceeds that of short positions by 113,000. Therefore, the net position of non-commercial traders may continue to rise further, but without triggering a similar rise in the euro. When it comes to the total number of longs and shorts across all categories of traders, there are now 39,000 more short positions (635,000 vs 596,000). H1 chart of EUR/USD Lately, EUR/USD has shown absolutely inadequate movements on the one-hour chart. It still hasn't started a downward movement even after it crossed the ascending trend line. Yesterday, the pair updated its last local high, but failed to break through the important level of 1.0485. And now it may start a strong bearish correction, which we already expected a week ago. On Tuesday, the pair may trade at the following levels: 1.0124, 1.0195, 1.0269, 1.0340-1.0366, 1.0485, 1.0579, 1.0637, as well as Senkou Span B lines (1.0207) and Kijun Sen (1.0376). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On November 29, there are no important events planned in the EU and the U.S., but Monday showed us that the pair is ready to move in a volatile manner even without them. What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group.     search   g_translate     Relevance up to 01:00 2022-11-30 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/328371

Another attempt to attack the 4th figure ended in failure. On Monday, EUR/USD bulls hit a five-month price high at 1.0498. However, the pair did not stay at this level for long - the price fell during the US session and finished the trading day at 1.0340. If the impulsive growth was unreasonable and unusual (despite the news from China), then the downward momentum was provoked by quite a specific person - European Central Bank President Christine Lagarde. Lagarde delivered her semi-annual report to members of the European Parliament Committee on Economic and Monetary Affairs. The theme of the report was directly related to monetary policy, so the speech triggered increased volatility in the pair. And it was not in favor of the euro. It's notable that Lagarde voiced quite contradictory rhetoric. There were different ways to evaluate her speech, both in its favor and against. In the end, traders chose the second option: as a result, the euro weakened not only against the greenback, but also in many cross-pairs. So, on the one hand, Lagarde said that the ECB will continue to raise rates, despite the slowdown in business activity in the eurozone. She acknowledged that high levels of uncertainty, tighter financial conditions, and declining global demand are putting pressure on economic growth in the European Union. But the record growth of inflation in the eurozone, according to her, is forcing the ECB to move on. Lagarde expressed doubt that the consumer price index in the eurozone has reached its peak values. She noted that the cost of wholesale energy supplies continues to rise (which is the main driver of headline inflation), so a slowdown in CPI growth in November seems extremely unlikely. Lagarde said that she "would be surprised" if inflation reached its peak in October. Certainly, the talking points are hawkish. In other circumstances, EUR/USD bulls would have taken advantage of the situation and rushed upwards, building on their success (i.e. in our case they would have settled in the area of the 5th figure). If it were not for one "but". The fact is that Lagarde made it clear in the European Parliament that slowing down the pace of interest rate increases in December is still a matter of debate. In doing so she took a neutral position in the corresponding dispute of many ECB representatives. Mario Centeno, Philip Lane, Francois Villeroy de Galo and Klaas Knot, among others, spoke publicly in favor of a lower rate of monetary policy tightening. Whereas the hawkish wing of the central bank, such as Robert Holzmann, Isabelle Schnabel and Joachim Nagel, came out in favor of a 75-point rate hike in December. Lagarde stayed "above the fray." According to her, the central bank will make an appropriate decision based on many factors: "...it will be based on our updated outlook, the persistence of the shocks, the reaction of wages and inflation expectations, and on our assessment of the transmission of our policy stance". Based on a comprehensive analysis of these factors, the ECB will decide how far rates should be raised and how fast. Such statements sobered up the EUR/USD bulls and then the price rolled back and headed to the daily lows, to the area of the third figure. Even in the first half of Monday, the ball was on the side of euro-dollar pair bulls, which took advantage of the weakening of the greenback and the strengthening of the hawkish mood regarding the ECB's further actions. But the diplomatic wording of Lagarde, which allows for various scenarios (both dovish and hawkish) did not allow the bulls to consolidate their success. The bears took the initiative and pulled the price back to its previous positions. On top of that, in the afternoon, the market finally reacted to events in China, which unfolded too dynamically and unexpectedly. First, the number of coronavirus cases in China is surging. Last Thursday, Beijing reported 31,000 new infections, noting that this was the strongest daily rate of increase in the history of the pandemic. But a little later, it turned out that PRC anti-records are updated almost daily. For example, the number of diseases has already exceeded the 40,000 mark on Monday. COVID outbreak in China is fraught with another wave of lockdowns. Strict quarantine has already been imposed in many cities across the country, with millions of people locked in their homes. Enterprises and firms have moved their employees to remote work schedules (where this is possible due to the nature of their work). China is known to have a "zero tolerance" policy for the Coronavirus, so it is not surprising that the authorities reacted to the situation with the utmost severity. And this circumstance gave rise to a second problem: Anti-Coronavirus protests broke out in China. At the moment, it is difficult to talk about the prospects of the protest movement. In most cases, people are protesting against the "zero Covid" policy, which, in their opinion, does not bring results, but hits hard on the pocket. However, in some cases, demands for the resignation of Chinese leader Xi Jinping are also heard among the demonstrators. In any case, these protests are already considered the largest in China for the last 33 years, since the 1989 protests (the events on Tiananmen Square). Judging by the dynamics of the dollar index, traders are wary of the unfolding events. The situation is, in a sense, a stalemate: on one side of the coin - possible turbulence in the markets due to the protests, on the other side of the coin - negative consequences from large-scale lockdowns in major cities of China. Thus, the current fundamental background is clearly not favorable for the euro's upward movement (first of all, if we speak about a stable development, but not an impulsive breakthrough). Therefore, it is better to either take a wait-and-see position or consider short positions. The main bearish target is still at 1.0210 (the middle line of the indicator Bollinger Bands on the daily chart). Crossing this target will pave the way for the bears to reach the parity level.     search   g_translate     Relevance up to 01:00 2022-11-30 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/328381

EUR/USD lost 1,500 points after ECB President Christine Lagarde said she would be surprised if inflation in the eurozone peaked. "I would like inflation to peak in October, but I'm afraid I won't go that far," she noted on Monday. "There is too much uncertainty, particularly in the shifting of high electricity costs from the wholesale level to the retail level'. This suggests that interest rate hikes are far from over. Although consumer price growth has slowed in November, the figure remains above 10%. Investors are obviously looking for hints that the ECB will ease its interest rate increases, especially since the Euro area is nearing recession. Some members of the governing council have already called for a slower pace, following the plans to start writing off around €5 trillion ($5.2 trillion) of bonds that were bought during the recent crises. Others, however, do not see any reason to give up as inflation is more than five times the 2% target. Dutch central bank governor Klaas Knot said earlier that Europe should be prepared for a "protracted period", during which the ECB would return inflation to target. Bundesbank president Joachim Nagel said the ECB should not ease measures "too soon".     search   g_translate     Relevance up to 19:00 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/328367

Summary:  A slew of Fed speakers remained hawkish on Monday, with Bullard saying that markets were under-pricing the risk of a more aggressive Fed This added to the risk-off tone from the protests in China ahead of the focus turning to an array of key US data due in the week. The US Dollar found a fresh bid into the US close, while the yen is being supported by safe haven demand and shifting tone from BOJ officials. Sharp swings in oil prices as well amid demand weakness concerns being reversed by hopes of an OPEC+ production cut, as the cartel meets over the coming weekend. What’s happening in markets? The Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated on China Covid protests and hawkish Fedspeak U.S. equities slid on the outbreak of protests against Covid lockdowns across large cities in China and hawkish comments from Fed officials. Nasdaq 100 dropped 1.4% and the S&P500 lost 1.5%. The selloff was board-based as all 11 sectors of the S&P500 declined on Monday. Energy and materials stocks took a hit as oil and other commodity prices retreated. Apple (AAPL:xnas) fell 2.6% as the iPhone maker could fact a production shortfall of as many as 6 million handsets as a result of the labour unrest in the Foxconn factory in Zhengzhou. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) pared early gains and finished Monday little changed U.S. treasuries caught a risk-off bid in Asian hours as the Covid protests in China triggered buying in safe-haven assets. The gains were pared when New York came with the St. Louis Fed President Bullard saying that the Fed is “is going to need to keep restrictive policy…to continue through -- as least through – next year.” The 10-year finished unchanged at 3.68%. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Mainland China and Hong Kong stock markets retreated as investors were wary about the surge in daily new Covid cases across China and the outburst of anti-strict-control protests in several mega cities, including Beijing and Shanghai. The cut in reserve requirement ratio by the central bank on Friday evening did not give the market much of a boost. Hang Seng Index declined 1.6% and CSI 300 lost 1.1%. The China internet space fell 2%-4% except for Meituan (03690:xhkg) which gained 2% on strong Q3 results reported last Friday. Macao casino stocks bucked the trend and rallied following the Macao SAR Government’s announcement to renew casino licenses with all incumbent operators. Wynn Macau (01128:xhkg) jumped nearly 15%. Stocks of the Chinese catering chains listed in Hong Kong gained some market speculation of earlier exit from the dynamic zero-Covid policy due to the now hard-to-contained outbreaks of inflection across the country. Haidilao (06862:xhkg) surged 6.8%. Buying on Hang Seng Index futures emerged in overnight trading in New Your hours and saw the futures contract jump 1.2% and the Nasdaq Golden Dragon China Index rise 2.8%. FX: USDJPY getting a safe haven bid, but there’s more! Choppy moves in the US dollar on Monday amid risk off and volatility in the US yields. But hawkish Fed speak, with Williams and Bullard both hinting at higher rates than the September dot plot, supported a final leg higher in the USD in the late US session. EURUSD touched highs of 1.0500 but reversed all of the day’s gains later with focus on inflation numbers due tomorrow. USDJPY also touched lows of 137.50 before reversing but a clear shift in tone in BOJ officials is being seen in the last few weeks keeping the BOJ pivot narrative alive into early 2023 before Kuroda or just after Kuroda retires. Kuroda referred to wage gains as being supportive of more stable levels of inflation which gave the yen a boost on Monday. Crude oil (CLZ2 & LCOF3) reversed losses on OPEC cut hopes Crude oil prices made a sharp u-turn on Monday after dipping lower earlier in the session on concerns from protests in China which delayed the hopes of a reopening further and a hawkish commentary from Fed speakers (read below). WTI futures fell to lows of $74/barrel while Brent was down to $81. However, losses were reversed later as OPEC+ delegates said deeper production cuts could be an option when they meet this weekend. OPEC+ is scheduled to meet this Sunday to review its current production plan. At the last meeting it cut output quotas by 2mb/d. Saudi Energy Minister Prince Abdulaziz bin Salman said that OPEC+ was ready to intervene with further supply reductions if it was required to balance supply and demand. Meanwhile, European talks on a price cap have stalled.   What to consider? Fed speakers press for higher rates James Bullard (2022 voter) said markets are underestimating the chances that the FOMC will need to be more aggressive next year, adding tightening may go into 2024. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. John Williams (voter) said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. The central bank isn't near a pause, Loretta Mester (2022 voter) told the FT. Richmond Fed President Barkin also spoke about higher-for-longer rates, despite moving slower BlockFi – another casualty in the FTX saga BlockFi Inc. filed for Chapter 11 bankruptcy, the latest crypto-industry operator to seek court protection in the wake of FTX’s collapse. It sold $239 million of crypto ahead of its filing. ECB’s Lagarde maintains tightening stance ECB President Lagarde repeated her previous comments that the ECB will raise rates further but nothing on how much further, and on how fast they need to go. She said the bank will be data-dependent, adding the ECB may need to move into restrictive territory. She also said that she will be surprised if inflation in the Eurozone (due to be reported on Wednesday 30/11) peaked last month. Even if the November print cools slightly, most likely driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Dallas Fed manufacturing signals job stress is building Dallas Fed manufacturing index came in less bad than expected at -14.4 for November, but the underlying metrics indicated a softening in labor markets. 16% of the factories surveyed indicated net layoffs in November, up from 9% previously, and comments suggested more layoffs may be coming as the backlog and holiday season get over. While it may still be early to see any significant signs of softening in Friday’s jobs report, the jobs data remains key to monitor to see if consumers may be vulnerable to a faster-than-expected pullback in spending. Apple production risk is on the rise Reports suggested that the protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro units this year, roughly about 7% of all iPhones scheduled to be delivered this quarter. Apple shares fell 2.6% on Monday on these reports. Pinduoduo (PDD:xnas) beat expectations, Bilibili up next Pinduoduo, after a strong beat in the prior quarter, surpassed again analyst estimates and delivered a strong Q3 beat. The Chinese eCommerce platform’s revenues grew 65% Y/Y, outperforming its peers, for example, Alibaba”s 3% and JD.COM’s 11% revenue growth in Q3. Adjusted operating margin came in at 34.6% vs 33.5% in Q2. 2022 , and 15.2% in Q3 last year. Adjust EPS of RMB 7.33 was much higher than the RMB4.75 consensus. Bilibili ((09626:xhkg) is scheduled to report 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: Hawkish Fedspeak; OPEC+ to consider production cut – 29 November 2022 | Saxo Group (home.saxo)

Summary:  Markets have been on edge as we await further signs of the official stance in China on Covid restrictions after civil unrest on the issue at the weekend, with signs this morning from Chinese officialdom that a cautious easing will remain underway. This has inspired a comeback in some commodities and the Chinese renminbi after sharp weakening moves yesterday, but there is no profound sense of relief across markets as we also await incoming US data ahead of the December 14 FOMC meeting.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) S&P 500 futures are stuck in a tight range between 3,926 on the downside and 4,054 on the upside as the market is struggling to find a clear signal and direction. The noise is filled by the back-and-forth news stream out of China related to it Covid policies and backstop plans for its struggling real estate sector. Meanwhile, the US 10-year yield is also stabilising and earnings releases are minimal except for tomorrow with reports expected from Salesforce and Snowflake. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland China equity markets rallied strongly with Hang Seng Index and the CSI300 Index each rising more than 3%. The market sentiment was buoyed by new measures from the Chinese securities regulator to relax its restriction on property developers from equity financing. Leading Chinese developers listed in Hong Kong jumped by 5%-12%. In the mainland’s A-share markets, real estate names led the charge higher. Tourism stocks rose on speculation that pandemic control restrictions might be relaxed further. China’s pandemic control regulators are holding a press conference later today. USD firms, but then retreats overnight on hopes China’s reopening prospects Concerns surrounding China’s reopening status after civil unrest at the weekend sparked considerable volatility across FX yesterday, with a US dollar rally yesterday eventually emerging as the dominant development after choppy action. The USD was a bit weaker again overnight, particularly against the USDCNH, which dropped back below the important 7.20 area ahead of a press briefing in China thought to make clear the official central government position on Covid policies. Expect the most volatility in commodity currencies and the Japanese yen depending on how clearly China either a) signals that the path is open to easing restrictions on an accelerated time frame or b) that restrictions will remain in place and could even tighten if virus numbers don’t fall. Crude oil (CLF3 & LCOF3) made a sharp U-turn on Monday ...as one survey after another pointed to an elevated risk that OPEC+, partly depending on the price when they meet next week, will opt to agree on another production cut in order to stem the recent price drop. Having fallen by more than 15 dollars during the past two weeks, a downturn in Chinese demand has been more than priced in, with technical selling and momentum having taken over. Overnight Brent briefly traded $86 after Chinese health authorities announced they would hold a press conference at 7am GMT. At their last meeting OPEC+ cut output quotas by 2mb/d with Saudi Energy Minister Prince Abdulaziz bin Salman saying the group was ready to intervene with further supply reductions if it was required to balance supply and demand. Meanwhile, European talks on a price cap have stalled. Wheat (ZWH3) in Chicago dropped to a three-month low …on Monday on a combination of ample and cheap supply from Black Sea suppliers increasing competing with US origin wheat, and on concerns about the impact of protests in China on growth and demand. Following a bumper crop this summer, Russian wheat continues to be offered at about the cheapest prices in world export markets which is negative for the export prospects of U.S. wheat. In the week to November 22 speculators increased bearish bets on CBOT wheat to the highest since May 2019. Gold (XAUUSD) has recovered from another stronger dollar driven attempt to challenge support ...in the $1735 area after Fed speakers said more rate hikes are coming. pressed for higher rates. Investors will watch this week’s economic data, including ISM on Thursday and Friday’s nonfarm payrolls and US jobs report, for signs the US central bank may soon ease its monetary-tightening trajectory. Total holdings in bullion-backed gold ETFs rose 6 tons last week, the biggest weekly increase since April. During this time investors sold a total of 397 tons, still less than the 400+ tons bought by central banks during the third quarter. After finding support in the $1735 area last week, a break above $1765 may signal a return to key resistance at $1788. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) Weak risk sentiment after the weekend news of civil unrest in China due to restrictive Covid policies there saw a dip in the 10-year yield benchmark yesterday to new local lows below 3.65%. But there was little energy in the move as the market awaits important incoming US data starting with today’s November Consumer Confidence survey, but more importantly this Friday’s November jobs numbers on Friday. What is going on? The wave of takeover bids continues at the Paris Stock Market This is mostly happening in Euronext Growth – the market segment for small and medium-caps. Yesterday, Abeille Insurance (member of Aema Group, the fifth largest insurance player in France) acquired the small bank Union Financière de France (a bank mostly specialized in wealth management advisory). Abeille Assurance bought the company at a price per action of 21 euros. This represents a premium of 51 %. With the sharp drop in values that has happened since January, we have seen a wave of takeover bids at the Paris Stock Market. This will likely continue in the short-term, especially in the segment of wealth management advisory where there is an ongoing process of consolidation happening. Fed speakers press for higher rates James Bullard (2022 voter) said markets are underestimating the chances that the FOMC will need to be more aggressive next year, adding tightening may go into 2024. He also said that rates will need to be kept at a sufficiently high level all through 2023 and into 2024 even if the Fed reaches restrictive territory by Q1 2023. John Williams (voter) said "there's still more work to do" to get inflation down. He also hinted at “modestly higher” path of interest rates than what he voted for in September, sending another signal that December’s dot plot could see an upward revision, while also hinting at rate cuts in 2024. He provided some clear forecasts: unemployment rate rising from 3.7% to 4.5%-5.0% by late 2023; inflation declining to 5.0-5.5% by the end of 2022 and 3.0-3.5% by late 2023; modest economic growth this year and in 2023. The central bank isn't near a pause, Loretta Mester (2022 voter) told the FT. Richmond Fed President Barkin also spoke about higher-for-longer rates, despite moving slower China relaxes its restrictions on developers from attaining equity financing The China Securities Regulatory Commission (CSRC) fired the so-called “third arrow” to ease some of the restrictions previously imposed on property developers from attaining equity financing. While property developers are still barred from doing IPO in the domestic equity market, they are now domestically listed A-share developers and some Hong Kong-listed H-share developers to issue new shares to raise capital as long as the proceeds are used for restricting, M&A activities, refinancing, buying existing property projects, repaying debts, and project construction. However, proceeds are not allowed to be used in land acquisition. Pinduoduo shares rally 12% Strong Q3 results pushed the shares of the Chinese e-commerce platform to the highest level since November 2021. Q3 revenue was CNY 35.5bn vs est. CNY 30.9bn and adj. EPS at 8.62 vs est. 4.75 driven by tailwinds from the strict Covid policies in China. BlockFi – another casualty in the FTX saga The crypto lender BlockFi Inc. filed for Chapter 11 bankruptcy, the latest crypto-industry operator to seek court protection in the wake of FTX’s collapse. It sold $239 million of crypto ahead of its filing. ECB’s Lagarde maintains tightening stance ECB President Lagarde repeated her previous comments that the ECB will raise rates further but nothing on how much further, and on how fast they need to go. She said the bank will be data-dependent, adding the ECB may need to move into restrictive territory. She also said that she will be surprised if inflation in the Eurozone (due to be reported on Wednesday 30/11) peaked last month. Even if the November print cools slightly, most likely driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Dallas Fed manufacturing signals job stress is building Dallas Fed manufacturing index came in less bad than expected at -14.4 for November, but the underlying metrics indicated a softening in labor markets. 16% of the factories surveyed indicated net layoffs in November, up from 9% previously, and comments suggested more layoffs may be coming as the backlog and holiday season get over. While it may still be early to see any significant signs of softening in Friday’s jobs report, the jobs data remains key to monitor to see if consumers may be vulnerable to a faster-than-expected pullback in spending. What are we watching next? US November Consumer Confidence, September home prices up today The Conference Board’s monthly Consumer Confidence survey has historically correlated most closely with the strength of the US labour market, although after a strong recover from the pandemic lows by mid-2021, confidence fall sharply, hitting a 95.3 local low in July of this year, likely due to steeply rising inflationary pressures (the other major US confidence survey, the University of Michigan sentiment survey, hit the lowest level in its 44-year history in July, likely as the survey contains questions more closely linked to inflation). Confidence then bounced strongly from that July local low, hitting 107.80 in September before dropping sharply to 102.50 last month. The November reading is expected at 100.00. With inflationary pressures easing relative to their peak, a weaker than expected confidence reading today could suggest rising insecurity in the labour market. The September S&P CoreLogic Home Price data is expected to show an ongoing drop in US home prices of some –1.2% MoM after 30-year mortgage rates rose 400 basis points this year to 20-year highs. Apple production risk is on the rise The protests in China and the unrest around Apple’s largest manufacturing hub for its iPhone could lead to a production shortfall of close to 6mn iPhone Pro which was a Morgan Stanley estimate and was published before the intensified issues at the Apple manufacturing site. Earnings to watch Today’s earnings focus is Crowdstrike with analysts expected FY23 Q3 (ending 31 October) revenue growth expected at 51% y/y with operating margin expected to demand as pricing power and demand remain robust in the cyber security industry. Today: Li Auto, DiDi Global, Bank of Nova Scotia, Intuit, Workday, Crowdstrike, HP Enterprise, NetApp, Shaw Communication Wednesday: Royal Bank of Canada, National Bank of Canada, Salesforce, Synopsys, Snowflake, Splunk, Hormel Foods, KE Holdings Thursday: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0800 – Spain Nov. CPI 0930 – UK Oct. Mortgage Approvals/Consumer Credit 1000 – Eurozone Nov. Confidence Surveys 1300 – Germany Nov. Flash CPI 1330 – ECB's Schnabel to speak 1330 – Canada Sep. GDP 1400 – US Sep. S&P CoreLogic Home Prices 1500 – UK Bank of England Governor Bailey to testify 1500 – US Nov. Consumer Confidence 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Oct. CPI 0130 – China Nov. Manufacturing and Non-manufacturing PMI Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – November 29, 2022 | Saxo Group (home.saxo)

Lagarde is the latest of a string of central bankers warning against drawing too many conclusions from a single inflation reading. Her warnings, and those of her peers, would make higher eurozone inflation readings today and tomorrow a more market-moving event than a lower print In this article Don’t read too much into a single inflation print Robust control suggests the ECB should err on the hawkish side Today’s events and market view     Don’t read too much into a single inflation print The European Central Bank is fighting hard to prevent markets from undoing the tightening of financial conditions that has been achieved this year. Even once inflation is on a downward trajectory, and once the eurozone is in a recession, any central bank would be loath to let market interest rates dip too quickly, lest inflation fails to fully converge with its 2% inflation target. But this is a consideration for once inflation is already on a downward trajectory. The November inflation readings (Spain and Germany today, the eurozone tomorrow) could bring a down tick but might not be enough to conclude that inflation has peaked. November inflation readings might not be enough to conclude that inflation has peaked This, at least, was the view expressed by ECB President Christine Lagarde in her testimony in front of the European parliament. The core of her message is not new: the ECB will continue tightening policy even as the economy weakens into 2023. This may require taking rates into restrictive territory. This is a vague concept but that is widely understood to mean the deposit rate rising above 2%. Between the lines, it seems the central bank’s communication is increasingly preparing markets for a recession, and for the risk that hikes have to continue regardless. Even after inflation has peaked, the ECB faces an uphill battle to keep real rates positive Refinitiv, ING Robust control suggests the ECB should err on the hawkish side That rates ‘may’ have to rise above 2% may come across as a quite moderate stance when compared to the Fed’s relentless insistence that over-tightening presents less risks than under-tightening. There is also a growing contingent of hawks who argue for forceful action in fighting inflation, illustrated by Isabel Schnabel advocating a ‘robust control’ approach to monetary policy where the ECB would minimise the risk of even more drastic action in the future if inflation fails to quickly converge to target. The likelihood of a further 75bp hike has crept up with the curve now attributing it a 50% chance Until recently, this was not seen as a contradiction with the ECB hiking 50bp at the December meeting, after a cumulative 200bp of tightening since July. The likelihood of a further 75bp hike has crept up with the curve now attributing it a 50% chance. We still think a smaller move is most likely but CPI prints today and tomorrow could make 75bp a clearer market favourite outcome. The result would be a further flattening of the EUR curve relative to its USD equivalent, and also an unwind of the rally in risk assets that last week took Italy-Germany 10Y spreads to their tightest level since the spring. A high inflation print today would flatten the EUR curve further Refinitiv, ING Today’s events and market view Today’s batch of Spanish and German inflation data are a prelude to the release of the eurozone-wide indicator tomorrow. Both EU-harmonised measures are expected to tick down compared to the previous months. The European data docket also features EU confidence indicators, including consumer confidence which is a final release. Given the scale of the rally in bonds and risk assets into this week’s inflation print, we think the most impactful outcome would be an upside inflation surprise. Combined with repeated hawkish ECB and Fed warnings, we expect rates to be skewed upwards today and for the rest of the week. Supply takes the form of the Netherlands selling an 8Y bond and Italy 10Y and floating rates notes. Conference board consumer confidence is the main US release today, alongside mortgage applications and house prices. 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

A new ING survey on a representative panel shows that nine in ten Belgians are reducing their energy consumption and six in ten are even saving on daily expenses. Over the next six months, they plan to step up their efforts. Online spending is also under pressure, even more so than in other countries. This will adversely impact economic activity In this article High inflation prompts six in ten Belgians to save on daily expenses Four in ten Belgians see energy bill more than doubling in last six months Decline in online purchases for all spending categories Belgians are much more cautious than their neighbours when it comes to budgeting Belgian economy dives into the red     High inflation prompts six in ten Belgians to save on daily expenses Belgians are looking for savings to cope with the rising cost of living. An international ING survey, conducted in early November in Belgium, the Netherlands, Germany, Romania, Poland, Turkey and Spain, shows that almost six in ten Belgians are saving on fresh food and groceries (see chart 1). A slight majority of Belgians also cut their clothing expenses. The Belgian urge to save is also slightly higher than in Germany for most product categories. While in Belgium, 58% already save on daily expenses, in Germany this is 'only' 50%. Remarkably, about half of Belgians also cut back on their spending on catering, travel and leisure activities, sectors that benefited greatly from the end of the pandemic. Compared to the results of the same survey in March 2022, the number of households cutting back on their consumption has risen sharply. In addition, many households plan to reduce their spending further in the coming months. While this was only 44% in March, 57% of Belgians say they are already saving on daily expenses and 60% expect to do so in the next six months. More and more Belgians are cutting back on their spending Due to rising prices, I try to save on... (% of respondents) ING consumer survey November 2022 Four in ten Belgians see energy bill more than doubling in last six months The extreme caution of households is obviously due to the energy crisis. According to the survey, the energy bill has more than doubled for four out of ten Belgians over the last six months. For almost one in ten, it has increased more than fivefold. In this context, the number of households taking measures to save energy and try to reduce the impact of the price increase has risen sharply, from 77% in March to 86% today. More than six out of ten Belgians say they are cutting back on heating, while four out of ten respondents say they are more economical with the use of electrical appliances, such as dishwashers (see chart 2). Six in ten Belgians turn down heating In what ways do you try to reduce your energy bills? (% of respondents) ING consumer survey November 2022 Decline in online purchases for all spending categories During the pandemic, Belgians appeared to be very active online shoppers, but the unusually sharp increase during the pandemic seems to be normalising somewhat. Almost a quarter (23%) of respondents say they have been buying online less often since the end of the pandemic, compared to only 15% who say they are buying online more often. When asked whether they expect to spend more online during the holidays than last year, one in four Belgians (25%) said they would spend less. The survey results show that the decline is mainly due to a general deterioration in the economic climate and not to consumers buying more in physical shops since the relaxation of health restrictions. Indeed, the percentage of respondents saying they spend relatively more in physical shops than online (21%) is balanced by the percentage saying they buy relatively more online than in physical shops (23%). Moreover, a significant proportion of the households also say they plan to further reduce their online purchases in the coming year. For instance, only 9% of respondents plan to buy more clothes online in the coming year, while 28% plan to buy less (see chart 3). Although the decline seems stronger for electronics and clothing, the trend is clearly felt across all product categories. It is therefore likely that the decline in online spending will be widespread in the coming months. No sector seems to be able to escape the economic downturn. Lots of families plan to further cut online budgets next year Do you plan to purchase more online in the coming months (% of respondents)? ING Consumer Survey November 2022 Belgians are much more cautious than their neighbours when it comes to budgeting The share of households planning to reduce their online spending is significantly higher in Belgium than in the Netherlands and Germany, and this is true for almost all product categories (see chart 4). While, for example, 28% of Belgian respondents said they would like to buy fewer clothes and shoes online, this is only 14% in the Netherlands and 23% in Germany. Although Belgians' purchasing power is much better protected compared to other eurozone countries thanks to the automatic indexation of wages, the crisis seems to have a greater impact on consumption patterns in Belgium than in other countries. Belgians seem much more cautious and willing to economise more to get through this difficult period. More Belgians cut online budget than neighbouring countries Do you plan to buy less online in the coming months (% of respondents)? ING Consumer Survey November 2022 Belgian economy dives into the red Belgians are massively looking to save money to cope with the rising cost of living. This will have an impact on economic growth in Belgium. The Belgian economy has already contracted slightly (-0.1%) in the third quarter, and this is expected to continue in the coming quarters. We expect economic growth to be negative in 2023. The full study is available in Dutch and French. TagsGDP Eurozone Energy crisis Consumption Belgium 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

Spain's inflation figure fell again sharply in November and is now already four percentage points below its peak level in July. The decline will continue in the coming months In this article Spanish inflation falls for the fourth month in a row Spanish inflation now significantly below eurozone average The light at the end of the inflation tunnel is getting brighter     Spanish inflation falls for the fourth month in a row Spanish inflation was 6.8% year-on-year in November, down from 7.3% in October. Over the month, consumer prices fell by 0.1%. The harmonised index was 6.6%, down from 7.3% in October. This development was mainly due to a fall in fuel prices last month, while they rose in November last year. Also, price increases for clothing and footwear were more moderate last month than in November 2021. Spanish inflation now significantly below eurozone average Spanish inflation has generally been above the eurozone average since the beginning of the year, but has fallen sharply since peaking at 10.7% in July. The weight of food in Spain is much higher than the eurozone average, which turbocharged the sharp price increases within this component. Hospitality also contributed more to price increases than the eurozone average, through a combination of faster rising prices but also a greater weight in the inflation basket. After its peak level, Spanish inflation has fallen sharply, making it unique in the euro area. Energy inflation has fallen sharply and is well below the eurozone average. Energy prices in Spain rose sharply in autumn 2021, making the year-on-year comparison much weaker this year.  Also the VAT cut on gas and electricity eased energy inflation. Details by component for November are not yet available, but October data showed that electricity inflation already turned negative last month (-15.4%) while also gas inflation fell sharply to 13.3% in October from 24.3% a month earlier. This decline will manifest itself further in the coming months. Spain’s inflation slowdown has set in earlier INE, Eurostat The light at the end of the inflation tunnel is getting brighter Price pressures higher up the production chain are starting to ease. Both commodity prices, freight costs for transport and factory prices are starting to fall sharply from their recent peak levels. Last Friday, Spain's statistics office INE announced that producer prices fell again in October. While producer price inflation was still 42.9% in August, it fell to 26.1% in October, its lowest level since September 2021. Moreover, it is also becoming increasingly difficult for companies to implement new price increases as demand has fallen and inventories have risen sharply. Inflation will gradually continue to normalise in 2023, but it will probably take until 2024 before inflation hovers around 2% again, the ECB's target. The development next year will depend on several factors, such as the prices of energy and other inputs on international markets, the fall in demand, the euro-dollar exchange rate and the speed at which falling prices higher up the production chain lead to lower prices for consumers. We expect inflation to reach 4.4% on average next year. TagsSpain Inflation 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

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/

On Tuesday, the EUR/USD currency pair was already trading considerably more steadily than it had the day before. We are still unsure of what caused those "roller coasters" that we saw. Yes, there were several unscheduled speeches by Fed officials on Monday, but for some reason, it is hard for us to recall the last time Bullard or Williams gave a routine speech that resulted in such "flights." Furthermore, none of them provided any brand-new, crucial information. Recall that a few weeks ago, Jerome Powell said that the Fed rate could rise a little bit longer than initially anticipated. If the market had previously set a rate of 5% for the pair, the upper limit is now gradually moving in the direction of 5.25% or even 5.5%. But given that this year's expectations for the rate have only increased, what is surprising about this? Remember how one of the Fed's most vocal "hawks," James Bullard, suggested raising the interest rate to 3% at the beginning of the year? Then, as time went on, this value increased gradually to 3.5%, then to 4.5%, and now we are discussing "5% or more." As a result, rates are expected to rise throughout the year, but inflation has only recently started to fall and is doing so at a slow pace. As a result, we are not surprised by the upcoming increase in the "upper limit" of the rate. Furthermore, the market had to figure out these performances in a convoluted manner if at all. The dollar should increase in strength and speed if there is a growing likelihood that new monetary policy tightening will occur. Remember that we have been anticipating a significant downward correction since early last week, but the market has been looking for any justifications to avoid purchasing US currency. The moving average line needs to fix below for the US dollar to start strengthening. In two attempts, the pair was unable to surpass the Murray level of "6/8" - 1.0498, and the total increase from its 20-year lows is already close to 1000 points. Although we still anticipate a sharp decline, we think the euro currency has grown sufficiently to this point. The euro currency may be under stress as a result of the EU inflation report. To start, market reactions to inflation reports in the European Union are significantly weaker than those to comparable reports in the United States. It so happened that in 2022, market participants received a larger share of any news and messages coming from abroad. So, from the outset, we don't anticipate a significant response to this report. Additionally, it is now quite challenging to comprehend how the market decides anything at all. Perhaps the decline we observed on Monday evening and Tuesday during the day is the market's "advance" response to the inflation report? After all, the European Union's consumer price index may slow down for the first time in a long time. At least, this is what the most recent official forecasts indicate. The rate of price growth is anticipated to decrease from 10.6% y/y to 10.3-10.4% y/y. Let it be a modest triumph nonetheless. This situation might be the start of the end for the euro as a currency. Remember that the dollar started to lose value precisely after US inflation started to slow down a few months ago. The market perceived a sharp decline in the likelihood of a Fed rate hike as a result of the slowdown in price growth. The euro currency is now capable of the same thing. The ECB will no longer need to raise interest rates as quickly as possible if inflation in the EU starts to decline. Of course, the Fed increased the rate by 0.75% twice more following the initial slowdown, so the ECB may follow. But we're attempting to predict how the market might respond. As soon as the market realized that inflation was decreasing, it started to reject buying dollars. Therefore, it makes no difference when the ECB slows the rate of tightening; the market can start selling off the euro right away or has commenced this process. Given the current technical landscape and historical context, we think that this course of events would be the most logical. As of November 30, the euro/dollar currency pair's average volatility over the previous five trading days was 97 points, which is considered to be "high." So, on Wednesday, we anticipate the pair to fluctuate between 1.0262 and 1.0454. A potential continuation of the upward movement will be indicated by an upward turn of the Heiken Ashi indicator. Nearest levels of support S1 – 1.0254 S2 – 1.0132 S3 – 1.0010 Nearest levels of resistance R1 – 1.0376 R2 – 1.0498 R3 – 1.0620 Trading Suggestions: The EUR/USD pair is still positioned close to the moving average. In light of this, we should now consider opening new long positions with targets of 1.0454 and 1.0498 if the Heiken Ashi indicator reverses its trend upward. No earlier than fixing the price below the moving average line with targets of 1.0254 and 1.0132, sales will become significant. 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.     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/328512

Fed Chair Jerome Powell will remind the market of the central bank's hawkish determination today, supporting the dollar. Meanwhile, softer inflation is trimming expectations in the eurozone. Polish inflation will test the central bank's decision not to raise rates. And the EC will publish a statement on Hungary and its rule-of-law progress In this article USD: Holding pattern EUR: Inflation plays second fiddle to Powell GBP: Lack of domestic drivers CEE: Polish inflation will test central bank dovish camp   Federal Reserve USD: Holding pattern Despite geopolitical challenges to the East, it has been a quiet start to the week for FX markets. The trade-weighted dollar index DXY is tracing out a relatively narrow range in the 105.30 to 108.00 area. The next clear catalyst on the agenda is a speech by Fed Chair Powell tonight at 1930CET discussing the economy and the labour market. This comes at a time when the buy-side report two of their top three tail risks as: i) inflation staying high and ii) central banks staying hawkish. (The third being geopolitics.) We would say that Chair Powell has recently shown to be at the more hawkish end of the spectrum and that tonight’s event risk is a positive one for the dollar. Dollar price action after Chair Powell’s speech should also tell us something about FX positioning. If the dollar fails to rally on a hawkish speech it may continue to tell us that the market is caught long dollars at higher levels and that some further consolidation may be due into December. For the time being, however, we think the macro environment continues to favour the dollar and see Powell’s speech, the October PCE price data (Thursday) and November jobs data (Friday) as upside risks to the dollar. Chris Turner EUR: Inflation plays second fiddle to Powell Spanish and German inflation came in lower than expected yesterday. The German CPI fell 0.5% to 10.0% in November, thanks primarily to the energy base effect and lower prices for leisure and entertainment following the autumn holiday period, while food prices continued to rise. Our economics team remains sceptical that this is the series' peak, and we expect inflation to accelerate again in December. Yesterday’s numbers mean that markets are expecting a lower reading in the eurozone-wide CPI today. However, some impact on European Central Bank rate expectations has already occurred, as markets have trimmed around 7bp from December pricing, which is now at 54bp. President Christine Lagarde is scheduled to speak at least twice more before the 15 December policy announcement, but she may not change markets' expectations of a 50bp hike. The impact of the inflation story on the EUR/USD has been, predictably, limited. External factors and dollar dynamics continue to drive the pair's performance, and we see downside risks today given that Fed Chair Powell is scheduled to speak later. A break below 1.0300 could fuel more bearish momentum, bringing EUR/USD back to the 1.0200/1.0250 levels seen earlier this week. This morning, Norges Bank will publish daily FX sales for the month of December. Higher-than-expected NOK sales in 3Q22 contributed to NOK weakness, but the Bank unexpectedly reduced them in November from NOK 4.3 billion to 3.7 billion. Any further reductions may support the currency today. Francesco Pesole GBP: Lack of domestic drivers Yesterday’s testimony by Bank of England Governor Andrew Bailey did not yield any market-moving headlines. Today we’ll hear from Chief Economist Huw Pill, who recently pushed back against a 75bp hike and may therefore keep BoE rate expectations in check. Cable to test 1.1800 as Powell’s speech may support the dollar today. Francesco Pesole CEE: Polish inflation will test central bank dovish camp Today's calendar offers November inflation in Poland, the first print in the CEE region. We expect inflation to be unchanged at 17.9% year-on-year, close to market expectations. However, as usual, the range of surveys is wide, and in addition, Polish inflation has by far posted the biggest surprise in the region over the past three months. Given the pause in the National Bank of Poland's hiking cycle, we can expect a lot of market attention. We will also see the second release of Poland's 3Q GDP, which surprised positively in the flash reading (0.0% vs 0.9% quarter-on-quarter) a few weeks ago. In Hungary, PPI for October will be published and later today the European Commission is expected to release a statement on the progress made in the rule of law dispute and Hungary's access to EU funds. The statement should have been published last week; however, the EC requested more time. Reports from journalists suggest that the EC will recommend freezing part of the cohesion funds with conditions to be met by Hungary but will also recommend approval of the Recovery Plan. Yesterday's reports also suggest that the Ecofin decision will be postponed from 6 December to 12 December, but Hungarian officials remain optimistic about the final decision. In the Czech Republic, the Czech National Bank will publish its semi-annual Financial Stability Report including possible changes to macroprudential tools. We do not expect significant changes to the current mortgage rules or capital requirements for the banking sector, but we will see a press conference later today, which should be attended by the governor, who has not been seen in public very often in recent months. In the FX market, the inflation print will be key for the Polish zloty, which could revive market expectations and support the zloty in the short term. However, unchanged inflation would leave the zloty under pressure from a stronger dollar, moving back above 4.70 per euro, in our view. The Hungarian forint should benefit from the normalisation of EU relations and the end of the risk of a permanent loss of EU money. This should help the forint below 405 per euro. 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

Summary:  A dash of optimism on Tuesday with Chinese officials continuing their commitment to ease the Zero Covid policies, but US economic data continued to disappoint and focus remains on how hawkish Fed Chair Powell can get today. Along with that, a slew of pivotal US data in the week ahead kept the US dollar range-bound. Crude oil market however continued to see volatility despite easing China demand concerns, as OPEC+ production cut hopes were shattered with the weekend meeting moving online. Eurozone CPI on watch today while the softer Australia CPI for October paves the way for RBA to maintain its slower rate hike path next week. What’s happening in markets? The major US indices, the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) continue to retreat The major US indices ended weaker, with NASDAQ100 sliding 0.7% and the S&P500 edging down 0.2% as investors are awaiting Fed Chair Powell’s speech later Wednesday. Powell will likely underscore the Fed’s desire to keep interest rates at elevated levels until inflation eases. The latest US consumer confidence reading (released Tuesday) for November showed US consumer confidence fell to a four-month low. The biggest drag on US markets on Tuesday, were information technology, utilities, and consumer discretionary. Apple (AAPL) shares fell 2.1% after the company said that it would deliver 6 million fewer iPhone Pro units in Q4 due to production disruption in Zhengzhou, China. The real estate, energy, financials, industrials sectors outperformed. United Parcel Services (UPS:xnys) gained 2.8% after the Biden Administration called on Congress to prevent a U.S. rail strike. Apple (AAPL) shares fell 2.1%, continuing their three-day pull back, which totals almost 5% ..on the back of the covid lockdown fallout in China. Apple relies heavily on the key manufacturing hub of Zhengzhou, which is now in lockdown. And as a result Apple’s production shortfall could be close to 6 million iPhone Pro units this year (this is according to people who know about Apple’s assembly operations). These reports are swirling at a time when Apple previously dropped its overall production target to about 87 million units (down from the prior 90 million estimate) on the back of demand slowing. However, Apple and the Foxconn facility are allegedly planning to make up the shortfall in lost output in 2023. But, looking at Apple shares from a technical perspective, its trading 8% lower than its 200 day moving average and the indicators suggest Apple shares could see further downward pressure - as suggested by the weekly and monthly charts. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rose in yields ahead of Fed Chair Powell’s speech Yields edged up across the yield curve with those in the long-end rising the most. The 2-year yield rose 4bps to 4.47% while the 10-year was 6bps cheaper at 3.74%. Large supply from corporate issuance put some upward pressure on yields. There were about 11 deals with a total amount of about USD18 billion, including USD8.25 billion from Amazon, on Tuesday. Fed Chair Powell is scheduled to speak on the economy and labor market at a Brookings Institution event today on Wednesday at 1:30 U.S. eastern time (2:30am SG/HK). Investors are concerned if Powell would give hints of a terminal Fed Fund rate higher than the 5% being priced in by the market. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) surged on renewed optimism about reopening and additional support to the property sector Hang Seng Index surged 5.2% and Hang Seng TECH Index jumped 7.7%. All sectors gained, with information technology, consumer discretionary, and properties leading the charge higher. The CSI 300 gained 3.1%. The market sentiment was first buoyed by new measures from the Chinese securities regulator to relax its restriction on property developers from equity financing. Then the renewed optimism about China reopening from stringent pandemic control added to the market rally. Leading Chinese developers listed in Hong Kong jumped by 3-14%. In the mainland’s A-share markets, real estate, financials, and food and beverage led the charge higher. The strong revenue and margin beat of Pinduoduo (PDD:xnas) aided the surge of Alibaba (09988:xhkg) by 9.1% and JD.COM (09618:xhkg) by 10.9%. The ADR of Bilibili (BILI:xnas) jumped 22% overnight after reporting results beating market expectations. FX: Dollar range-bound ahead of Powell’s speech While the commodity currencies gained on Tuesday after a relief that China officials maintained their commitment to ease the Zero covid policies despite the protests and a recent rise in cases, cyclical currencies like CAD weakened as crude oil futures traded lower. Overall the dollar was range-bound with expectations around a hawkish Powell today picking up given the substantial easing in financial conditions. EURUSD remained stuck below 1.0400 while USDJPY has gains above 139 getting limited. Crude oil (CLZ2 & LCOF3)volatile with large inventory drawdown ahead of OPEC The relief from continued commitment of China officials to ease zero covid restrictions helped crude oil prices gather some momentum early on Tuesday, but the cheer was short-lived as other concerns still clouded the outlook. US economic data showed economic momentum is weakening, while Fed Chair Powell’s speech today will be key for the dollar and the markets. On the supply side, API survey reported a larger than expected crude draw, with inventories down 7.80mm b/d (exp -2.49mm b/d) but production cut expectations from OPEC (read below) this weekend eased as the meeting moved online. WTI futures traded around $79/barrel, while Brent traded lower after touching $86/barrel earlier. Technical update on Brent crude oil from Kim Cramer, our Technical Analyst. The update also takes a closer look at WTI crude oil, Dutch TTF gas and Henry Hub natural gas.   What to consider? US data disappoints, all eyes on Powell Consumer confidence pared back in November to 100.2 from 102.5 (exp. 100.00); the Present Situation Index decreased to 137.4 from 138.7 last month, while the Expectations Index declined to 75.4 from 77.9. Meanwhile, home prices in 20 large cities slipped 1.2% in September, according to the S&P CoreLogic Case-Shiller gauge. More critical data from ISM to PCE to NFP is lined up for the second half of the week, but before we get there, Fed Chair Powell’s speech will be the one to watch. Easing financial conditions raise concerns about inflation shooting back higher, but pushback from Fed officials so far hasn’t been enough for the markets yet. It remains to be seen what more Fed Chair Powell can deliver today. Reopening optimism returned in China While the daily new cases continued to surge and anti-restriction protests sprang up across major cities, investors took comfort from the light-touch reactions from the Chinese authorities and hints of preparing to ease the pandemic control measures further. A Party-controlled newspaper in Beijing published a long article reporting the stories of people having recovered from Covid, which seemingly aimed at easing people’s worries about the disease. The National Health Commission issued a memo pledging to increase the vaccination rate of the country’s senior population. In a press conference later in the afternoon, health officers again emphasized increasing the senior population’s vaccination rate as a priority and highlighted the Omicron variants as being less severe than the original virus. Officials and the state-controlled media have taken a light-touch approach to the recent protests and have not put any political stigma on the incidents. Putting these together, investors are taking the development as hints of the Chinese authorities to prepare for further easing in its Covid policy. China relaxes its restrictions on developers from attaining equity financing The China Securities Regulatory Commission (CSRC) fired the so-called “third arrow” to ease some of the restrictions previously imposed on property developers from attaining equity financing. While property developers are still barred from doing IPO in the domestic equity market, they are now domestically listed A-share developers and some Hong Kong-listed H-share developers to issue new shares to raise capital as long as the proceeds are used for restricting, M&A activities, refinancing, buying existing property projects, repaying debts, and project construction. However, proceeds are not allowed to be used in land acquisition. Softer Australia CPI paves the way for a dovish RBA next week Australian inflation data for October showed inflation is continuing to fall, and far more than expected which supports the RBA’s dovish tone and only hiking rates by 0.25% next week (December 6). Trimmed mean CPI which excludes volatile items, rose 5.3% year-on-year in October, which marks a fall in price rises, compared to the prior read, 5.4% YoY. This also shows prices for consumer goods and services in Australia are falling less than the market expects as Trimmed CPI was expected to rise 5.7%. Meanwhile, headline inflation also rose less than expected, showing consumer prices rose 6.9% YoY, which was cooler than prior 7.3% read, and less than the 7.6% expected. This follows a suite of Australian economic data that supports the RBA remaining more conservative with rate hikes. Earlier in the week, Australian retail trade data unexpectedly fell, showing consumers are feeling the strain of inflation and rising interest rates. As a house, we think spending will likely continue to slow into 2023, with the full impact of rate hikes passing through households under financial duress giving deb to income ratios are some of the highest in the world. China PMIs likely to show demand weakness China’s NBS manufacturing PMI is expected to decline to 49.0 in November, further into the contractionary territory, from 49.2 October, according to the survey of economists conducted by Bloomberg. The imposition of movement restrictions in many large cities has incurred disruption to economic activities. High-frequency data such as steel rebar output, cement plants’ capacity utilization rates, and container throughputs have weakened in November versus October. Economists surveyed by Bloomberg expect the NBS Non-manufacturing to slow to 48.0. in November from 48.7 in October, on the enlargement of pandemic containment measures. OPEC+ weekend meeting goes virtual Instead of meeting in Vienna as planned earlier, OPEC+ has now moved its December 4 meeting online which is downplaying expectations of any significant policy change after production cut expectations gathered hopes this week with crude oil prices falling to test key support levels. Some delegates also suggested that the cartel is leaning towards approving the same production levels agreed in October, when a 2mb/d cut in output was announced. Bilibili (BILI:xnas/09626:xhkg) Q3 beat expectations Bilibili reported 11% Y/Y revenue growth in Q3 and net loss came in at a smaller amount of RMB1.7 billion. User growth was solid, with average daily active users growing 25% Y/Y to 90.3 million, average monthly active users growing 25% to 332.6 million, and average monthly paying users increasing 19% to 28.5 million. Operating margin improved to -31.9% in Q3 from -44.63 in Q2 and -51.1% in Q3 last year. The company guides for a 4-7% Y/Y increase in Q4 revenue, below the consensus estimate of 8% Y/Y. EUR may be watching the flash Eurozone CPI release Eurozone inflation touched double digits for October, and the flash release for November is due this week. The headline rate of the harmonized index of consumer prices (HICP) is expected to ease slightly to 10.4% YoY from 10.7% YoY last month. The core rate that excludes food and energy prices is forecast to however remain unchanged at 5% YoY. This print will be key for markets as the magnitude of the ECB’s next rate hike at the December meeting is still uncertain, and about 60bps is priced in for now. But even with a slight cooling in inflation, which will most likely be driven by lower energy costs, there is a possibility that inflation will likely remain high in the coming months as winter months progress and cost of living gets worse. Crowdstrike (CRWD:xnas) tumbled on guidance miss The shares of Crowdstrike plunged 18.7% in the extended-hour trading after the cybersecurity provider issued Q4 revenue guidance below market expectations. 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: https://www.home.saxo/content/articles/equities/apac-market-insights-30-nov-2022-30112022

Financial markets may focus on two events today. The first may be the inflation reading for the Eurozone for November (estimates), and the second will be a speech by Federal Reserve Chairman Jerome Powell. Yesterday's inflation data from Germany showed that German consumer prices rose 10.0% year-on-year in November, slightly less than the 10.3% predicted by analysts, according to data released by the Federal Statistical Office (Destatis). A month earlier, in October, inflation was 10.4%. On a monthly basis, consumer prices fell by 0.5%, the BBN service reported. The softer inflation reading from Germany may carry over into today's inflation publication for the eurozone as a whole. The consensus calls for a reading of 10.4% versus 10.6% a month earlier. Investors in the interest rate market, along with lower inflation readings, have pushed back their expectations for action by the European Central Bank. As Bloomberg calculates, interest rate traders now see only a 24% chance of a move greater than 50 basis points at next month's ECB meeting, while as recently as Tuesday it was as high as 52%. Inflation data from the zone will be released at GTM+1. Source: Conotoxia MT5, EURUSD, Daily Markets ahead of Jerome Powell's speech According to Bloomberg, implied volatility in the FX options market is rising in the shorter term, as investors position themselves ahead of Fed Chairman Jerome Powell's key speech on the economy and labor market. The speech is scheduled to begin at 7:30 pm GTM+1 at the Brookings Institution. Investors could expect the speech to offer clues on further action on interest rates or where the current cycle would end, as well as whether an interest rate cut in 2023 is possible. According to Bloomberg data, the peak of the U.S. hike cycle is priced by the market for May or June 2023 at a level close to 5 percent, while the federal funds rate is expected to fall to 4.4 percent by January 2024. This would mean that U.S. interest rates could reach their peak in the same year, and then, according to the market, the Fed could opt for two cuts of 25 bps each. Source: Conotoxia MT5, US30, Daily 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.

Inflation stabilised at 6.2% in France in November, but it has not reached its peak. Inflationary pressures are likely to intensify further in 2023 We expect French inflation to be around 5% for the whole of 2023   Consumer price inflation stood at 6.2% in France in November, unchanged from October. The monthly variation in prices was +0.4% against +1% in October. The less dynamic evolution of the price of petroleum products, after October was marked by fuel shortages, made it possible to compensate for the drop in the fuel rebate, which went from €0.30/litre to €0.15/litre in mid-November. As a result, energy inflation stood at 18.5% compared to 19.1% in October. A considerable level, but still much lower than in other European countries. The various measures taken by the government, including the tariff shield on the price of gas and electricity, have removed 2.5 points from inflation. In addition, food prices continue to accelerate, by 12.2% over one year, against 12% in October, as do those of manufactured goods (4.4% against 4.2% the previous month). Services inflation is stable, and comparatively low, at 3%. The harmonised index, important for the European Central Bank (ECB), remained stable at 7.1%. Overall, while this stabilisation of inflation can be seen as good news, it does not mean that inflation has peaked. On the contrary, the peak of inflation in France is still to come. A further acceleration of prices for December It is likely that inflation will rise again in December, probably reaching 6.5%. Indeed, the fuel rebate will be less important during the whole month of December than it was on average in November. In addition, past sharp increases in producer prices will continue to be passed on to consumer prices for manufactured goods and food. According to statistics published today by INSEE, the national statistics bureau of France, producer prices rose at a slower pace in October, with an annual increase of 21.4% compared to 26% in September. Although producer prices appear to have peaked, producer price inflation remains historically high, and this should continue to be reflected in the consumer price index in the coming months. Inflationary pressures will intensify further in 2023 Inflation in France is expected to rise further in early 2023. Indeed, due to regulations and contracts, many price revisions can only take place once a year, usually at the beginning of the year. This is particularly the case in the transport sector. These price revisions will significantly boost inflation in the first quarter of 2023. Moreover, companies seem confident in their ability to pass on past cost increases to their prices. In November, according to the European Commission's survey, companies' expectations regarding selling prices rose again, both in industry and in the services sector, despite the context of slowing demand. Strong inflationary pressures therefore still seem to be on the cards and core inflation is likely to rise further in early 2023. Furthermore, the energy inflation faced by households in 2023 will be influenced by the tariff shield, which foresees a 15% increase in the price cap for gas and electricity (compared to a 4% increase in 2022). The revision of the cap and the end of fuel rebates could add up to one percentage point to French inflation from January. As a result, energy inflation in France will continue to rise sharply next year, while it will start to fall in other European countries due to more favourable base effects. The peak of inflation in France should therefore only be reached later in 2023, and French inflation will fall much less rapidly than in neighbouring countries. The "delayed" peak in French inflation is bad news for the ECB, as average inflation in the euro area is likely to fall less quickly than expected. We expect French inflation to be around 5% for the whole of 2023, after 5.3% in 2022.  TagsInflation France 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

Falling inflationary pressures and energy prices that are well below their peak levels led to a cautious rise in consumer confidence in November. However, this is not enough to prevent a contraction in the fourth quarter Inflation and high energy prices are forcing 40% of Spaniards to cut their daily expenses Spanish consumers slightly more upbeat, but still at depressed levels Spanish consumer confidence rose to -28.7 in November, from -31.6 in October, as published by the Ministry of the Economy and Finance this morning. A faster-than-expected fall in inflation and energy prices that are well below their peak levels is providing some relief for consumers. As reported yesterday, the Spanish inflation rate fell in November for the fourth month in a row and is now already four percentage points below its July peak level. The fall is likely to continue as price pressures higher up the production chain are starting to ease. Both commodity prices, freight costs for transport, and factory prices have already decreased considerably. Energy prices have also moderated somewhat since the end of the summer. Despite this, the index remains at recessionary levels. Inflation and energy prices force four in ten Spaniards to cut daily expenses Despite the improvement, the negative economic impact of high inflation and energy prices remains in place. A new ING survey on a representative panel conducted by IPSOS in early November shows that almost four in ten Spaniards are saving on daily expenses, like fresh food and groceries. More than half of Spaniards are also cutting back on restaurant visits, travel, and leisure activities to cope with the rising cost of living. With high energy prices, Spaniards are also looking to save on energy consumption. Almost half of the respondents say they are more economical with the use of electrical appliances, such as dishwashers, while a third say they are cutting back on heating. Many Spaniards are cutting back on their spending Due to rising prices, I try to save on... (% of respondents) ING consumer survey November 2022 Not out of the danger zone yet The Spanish economy has already slowed significantly in the third quarter and is likely to contract in the fourth quarter. The cost-of-living crisis leads households to consume less, which slows down economic activity. The less tight energy markets and a faster-than-expected drop in inflationary pressures are likely to ease the winter contraction, allowing Spain to narrowly avoid a recession. However, the overall outlook for next year remains subdued. Some favourable factors, such as mild weather and lower liquefied natural gas (LNG) demand from China, have brought some relief this year, but the situation remains very precarious. Next year will be a lot harder to replenish gas supplies, given the reduction in Russian supply. A strong recovery in China is also likely to put strong pressure on the oil and gas market, which could cause another jump in energy prices. The resulting loss of competitiveness of European businesses, together with ECB interest rate hikes that will not take full effect until 2023, will limit Spain’s growth potential next year. Therefore, we expect the Spanish economy to grow by less than 1% next year. TagsSpain GDP Eurozone Consumption Consumer confidence 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 collapse of FTX and its implications for the entire ecosystem of the crypto sector prompted lawmakers around the world to pay more attention to the regulation of the nascent asset class. The U.S. House of Representatives announced they would launch an investigation into the FTX collapse at a hearing scheduled for December 13. The hearing was titled "Investigating the Collapse of FTX, Part I" and is expected to be the first in a series of hearings examining the exchange, its business operations, and the broader implications of its closure. Senate lawmakers are also keen to take a closer look at the FTX crisis, with the Senate Agriculture Committee due to hold a hearing on Thursday, and the Senate Banking Committee is working to schedule its own hearing in the near future.     Lagarde reiterates calls for regulation of cryptocurrencies European Central Bank President Christine Lagarde said that the "stability and reliability" of cryptocurrencies "has been exposed in the most obvious way recently" when answering questions from politicians in the European Parliament concerned about the impact of FTX's downfall. This line of questioning prompted Lagarde to reiterate a previous call for stronger cryptocurrency legislation as parliament awaits a final vote on its Markets in Crypto-Assets (MiCA) regulation, which is expected to pass in early 2023. According to her, the introduction of MiCA will allow Europe to become "pioneers in this world of great inventivity and great unreliability," but added that "here will have to be a MiCA II" to strengthen control over cryptocurrency. "Europe aims to be a leader in that respect," she said. During previous discussions on the topic of MiCA II, Lagarde suggested that the expanded framework should take into account risky connections to traditional finance as well as crypto activities beyond MiCA, such as decentralized finance (DeFi). Lagarde also stressed the need for an alternative to digital payments, which will offer EU citizens unlimited access to the digital euro. "We have to be able to offer that, otherwise somebody else will take that place," Lagarde warned. A decision on whether the EU will move forward with the implementation of the digital euro is expected by September 2023. 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/328569

It continues to be a quiet week for the euro. In the European session, EUR/USD is trading at 1.0363. Eurozone inflation falls to 10.0% The ECB’s number one priority has been bringing down inflation, which has hit double-digits. ECB policy makers are no doubt pleased that November CPI fell sharply to 10.0%, down from 10.6% a month earlier. This beat the consensus of 10.4%, and the euro has responded with slight gains. The drop in eurozone inflation was the first since June 2021, and investors will be hoping that this indicates that inflation is finally peaking. On Tuesday, German CPI showed a similar trend, falling to 10.0%, down from 10.4% (10.3% est). Still, eurozone Core CPI remained unchanged at 5.0%, matching the forecast. One inflation report is not sufficient to indicate a trend, and with inflation still in double digits, nobody is declaring victory in the battle against inflation. Still, the drop in German and eurozone inflation increases the likelihood of a 50 basis-point increase at the December 12th meeting, following two straight hikes of 75 basis points. With market direction very much connected to US interest rate movement, a speech from Fed Chair Jerome Powell later today could be a market-mover. Powell is expected to discuss inflation and the labour market, and his remarks could echo the hawkish stance that Fed members have been signalling to the markets over the past several weeks. The market pricing for the December meeting is 65% for a 50-bp move and 35% for a 75-bp hike, which means that the markets aren’t all on the Fed easing rates. Even if the Fed does slow to 50 bp in December, it will still be a record year of tightening, at 425 basis points.   EUR/USD Technical EUR/USD is testing resistance at 1.0359. Above, there is resistance at 1.0490 There is support at 1.0264 and 1.0131 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Fed Chair Powell signaled the moderation of the tightening pace could start as soon as December and the terminal Fed Fund rate would be “somewhat higher” than the FOMC’s September projections. His tone was overall less hawkish than feared. S&P 500 rose to its two-month high and Hong Kong’s Hang Seng had its best month since 1998. Bond prices surged with the 10-year treasury yield falling to 3.61%. Crude oil and commodity currencies gained. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) surged on Powell’s speech and signs of China relaxing Covid-19 restrictions Fed Chair Powell signaled that the Fed would start to moderate the pace of rate hikes as soon as December and the terminal rate might just be “somewhat higher” than the September FOMC’s projections. The less-than-feared comments stirred up another round of risk-on buying in equities. The sentiment was also bolstered by more signs coming out of China on the country’s course to ease Covid restrictions gradually despite the recent outbreaks. The S&P 500 rose by 3.1% to a two-month high. All sectors within the S&P 500, led by information technology and communication services, each rising by around 5%. Nasdaq 100 surged 4.6% to 12,030. The Dow Jones Index rose 2.2% and was said to have technically entered a bull market, after rising more than 20% from is September closing low. US treasuries (TLT:xnas, IEF:xnas, SHY:xnas) rallied on the lack of new hawkishness in Powell’s speech Yields edged up a few basis points after a mixed bag of data in the morning until Fed Chair Powell’s speech hit the wire in the New York afternoon, seeing yields reversing and yields of the 2-year up to the 5-year tumbling by more than 15bps almost immediately from the intra-day highs. The 5-year performed the best and finished the day 19bps richer at 3.74%. The 2-year yield dropped 16bps to 4.31% and the 10-year yield was 14bps lower to settle at 3.61%.  Powell reiterated his well-telegraphed higher-for-longer message but did not add additional hawkish pushback as some feared. He said that it makes sense to moderate the pace of rate increases as the Fed “approach[es] the level of restraint that will be sufficient to bring inflation down. The time for moderating the pace of rate increases may come as soon as the December meeting”. Further, his remark of terminal rate being “somewhat higher” than the Fed’s September projection was less hawkish than feared. Australia’s ASX200 (ASXSP200.1) about 3% away from its record high The Aussie market is up 12% from its October low, with commodities back in focus and rallying after the Fed signals a possibly smaller pace of rate hikes ahead. That has pressured the US dollar, with the US dollar index now down 5.4% from its peak, and that’s supported commodity prices higher, plus, as above, there is forward looking optimism on China. Locally, equites also appear supported in Australia as monthly inflation data came out weaker than expected yesterday, which supports the RBA remaining dovish and likely only hiking by 25bps (0.25%) next week. However, the important inflation read (quarterly CPI) is due early next year, which will be a more accurate reflection of price rises, and will likely show inflation in Australia is more sticky than monthly inflation read alluded to. Also consider if the best performers of late (who are all commodity companies) can continue to build momentum if stimulus continues in China’s property sector. In November, copper-gold company Sandfire (SFR) rose 45%, energy business Origin Energy gained 41% while Australia’s fourth biggest iron ore company, Champion Iron (CIA) rose 35%, with Nickel company Nickel Industries (NIC) following up 33%. So, it’s clear to say we are watching commodity companies closely as we believe the world will still struggle with the lack of tangible supply. Hong Kong’s Hang Seng (HIZ2) gained on the removal of lockdown in four Guangzhou districts Hong Kong stocks surged on Wednesday afternoon after Guangzhou lifted the lockdown in four districts even when the number of new cases was still rising in the city. Hang Seng Index climbed 2.2% with consumer discretionary, consumer staples, and industrials rising the most. In the consumer space, food and beverage names surged, with Haidilao (06862:xhkg) up 15.5% and Xiabuxiabu Catering (00520:xhkg) up 10.9%. Bilibili (09626:xhkg) jumped nearly 17% on the earnings beat. The three Chinese airlines listed in Hong Kong gained around 5% each on reopening optimism. The share prices of automakers jumped 4% to 11% on speculation for an extension of purchase tax credits for petrol vehicles. EV maker XPeng (09868:xhkg) surged 16% ahead of earnings. Another EV maker, Li Auto (02015) surged 8.9%. Hang Seng finished November up more than 26%.  It was the best monthly performance since October 1998 at the end of the Asian financial crisis. After Hong Kong market closed, XPeng reported Q3 results, missing analyst estimates but the share price of its ADRs jumped 46%. In A shares, CSI 300 was flat with auto names outperforming. FX: NZDUSD broke above 0.63, USDJPY below 137.50 Lower yields drove the US dollar lower after Powell’s speech lacked any hints of keeping the door open for 75bps in December or laying out a path for rate hikes through the course of 2023. The Euro was supported by Powell's dovish speech taking EUR/USD back above 1.04, but lacked conviction as hawkish ECB bets also retreated after a softer Eurozone CPI for November. The biggest gainers were NOK and NZD, and NZDUSD broke above the pivotal 0.63 which is the 200dma. USDJPY heading lower for a test of 137 with 200dma next in sight at 134.50. Crude oil (CLZ2 & LCOF3) higher on weaker USD and lower US inventories Crude oil markets extended recent gains amid signs of strong demand. US crude oil inventories fell by 12.6mbbl last week, the biggest decline since June 2019, according to EIA data. Meanwhile, Chinese authorities announced relaxation of Zero Covid policies in Guangzhou despite worsening Covid outbreak, signalling a better demand outlook as well. The lack of escalation in Powell’s speech also turned the dollar lower. WTI futures rose to $81/barrel while Brent futures rose above $85. The focus is now shifting to the weekend OPEC meeting, with some expecting a cut while others suggest a rollover of the current deal is more likely. Breakout in Silver (XAGUSD), Gold (XAUUSD) up as well Silver broke above the key 22 level to its highest levels since May this year as Powell signalled that the pace of interest rate hikes will slow in December. Gold edged higher as well and finished the month up over 8%, the biggest gains since July 2020. Next key levels to watch in Gold will be the 200dma and key level at 1808 while Silver may likely be heading to the 0.618 retracement at 23.35.   What to consider? Jerome Powell sticks to the script Fed Chair Powell repeated his comments from the November FOMC and what we have heard more generally from the Fed speakers over the course of the month. He said it makes sense to moderate the pace of interest rate hikes and the time to moderate the pace of hikes may come as soon as December, while he added it seems likely that rates must ultimately go somewhat higher than what was thought in the September SEPs. Powell also said they have made substantial progress towards sufficiently restrictive policy but have more ground to cover and they will likely need to hold policy at a restrictive level for some time. While his comments still tilted towards the hawkish side but there was no escalation that the markets had hoped for. His comment that he does not want to over-tighten but cutting rates is not something to do soon was a slight contrast to his earlier acceptance that risk of tightening less is greater that the risk over-tightening. Fed's Cook (voter) also said it is prudent for the Fed to hike in smaller steps as it moves forward and how far the Fed goes with hikes depends on how the economy responds, overall sticking to the consensus. US economic data broadly weaker, focus now on PCE prices and ISM manufacturing The private ADP jobs report showed US payrolls rose 127,000 this month, the slowest pace in nearly two years, as wage gains moderated. Job openings also fell in October to 10.334mln from September's 10.687mln, reversing a surprise jump in the prior month but still remaining elevated, according to the JOLTS report. The biggest downside surprise came in Chicago PMI for November which came in at 37.2 against an expected 47.0, falling from a prior 45.2. While monthly surveys can be noisy, but this one is now flirting with pandemic lows and puts the focus on ISM manufacturing due today. The only ray of positive news came from the Q3 GDP release which was upwardly revised by to 2.9% from 2.6% previously. Softer EU CPI weakens hawkish ECB bets Euro inflation slowed for the first time in 1.5 years to 10% in November from 10.6% YoY in October. ECB officials have highlighted the data will be key for their next rate decision, suggesting lower chance of another 75bps rate hike at the December 15 meeting. Still, it remains hard to say that inflation in the Eurozone has peaked. ECB members also remain broadly hawkish and suggest that the commitment to bring inflation back to target will stay. Guangzhou lifted the lockdown of several districts as a sign of easing restrictions even as new cases at elevated levels Guangzhou, the third largest city in China and the capital of the southern province of Guangdong, removed the “temporary control areas” restrictions of several districts even though the city’s daily new cases of Covid-19 stayed at nearly 7,000. It was an encouraging sign pointing to China’s willingness to continue the fine-tuning measures that it had recently started despite the surge in new cases across the country. Speaking at a pandemic control policy workshop, Vice Premier Sun Chunlian emphasized the importance of gradually fine-tuning the pandemic control measures in response to the lower fatality of the Omicron, higher vaccination rate, and the accumulation of experience in containing the spread of the virus. Equities in focus that could benefit from rate hikes not being as aggressive, and from the festive season spending It’s the world’s first festive season not in lockdown (excluding China), so we are watching retailer shares given they will likely benefit from retail shopping rising. It’s worth watching travel and tourism companies with the market forward looking and seeing that travel-services revenue could likely continue to gain momentum. Carnival shares are up 44% from October with the company seeing some of its strongest sales since pre-covid, Royal Caribbean shares are up 83% from July. We are also watching other travel affiliated companies do well, like Boeing, which is up 48% from September, as well as airlines, such as Singapore Airlines, Qantas, Air New Zealand. However, we think although the travel and tourism sector, especially airlines, will likely see a pick-up in sales amid the seasonality, we wonder if airlines will be able to extend their share price rally into 2023 as fuel costs are not expected offer respite into 2023. This means, those larger companies or those with a wide moat, might be more in focus, as they will be more likely able to sustain the costs pressures.   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: Powell’s lack of new hawkishness; Guangzhou restrictions eased – 1 December 2022 | Saxo Group (home.saxo)

Summary:  The US equity market exploded higher yesterday in the wake of a Fed Chair Powell speech that outlined the Fed’s view on inflationary risks and the preferred course of monetary policy. Powell confirmed the market view that the Fed willl downshift to a smaller 50-bp hike at the December FOMC meeting. Weak US data added to the sense that an economic slowdown is underway, taking long US treasury yields to new local lows.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities exploded higher yesterday after Fed Chair Powell’s speech failed to push back against easing financial conditions and as US yields dropped further. This gives the impression that further soft data from the US (see preview below) that takes yields lower still will see an extension of this market squeeze higher, despite the implications from softer data that a recession draws nearer. The Nasdaq 100 index closed clear of the important 12,000 level for the first time since September yesterday and may extend its rally to the 200-day moving average, currently near 12,550 for the cash index. The S&P 500 spiked to new highs since September as well and cleared its 200-day moving average at 4,050, closing at 4,080 on the day. This is the first time that moving average has fallen since the March-April time frame. THe next major resistance there is the pivot high near 4,325 from August. Hong Kong’s Hang Seng (HISX2) and China’s CSI300 (03188:xhkg) Hang Seng Index climbed 1.7% and CSI300 Index gained 1.5% following the less-hawkish-than-feared speech from the U.S. Fed Chair Powell overnight and China’s Vice-Premier Sun Chunlan, who oversees containing the spread of Covid-19, acknowledged in a pandemic control export workshop that the Omicron variant is less deadly. Mega-cap China internet stocks surged 4-5%. EV maker XPeng (09868:xhkg) jumped 13% after reporting Q3 earnings. Caixin China PMI Manufacturing came in at 49.4 in November, above the consensus estimate of 48.9 and October’s 49.2. USD blasted after Fed Chair Powell’s speech craters US treasury yields, sparks risk-on rally Fed Chair Powell failed to make any notable pushback against easing financial conditions in his speech yesterday (more below), and US Treasury yields downshifted sharply all along the curve after he confirmed the likely downshift to a 50-basis point hike at the December FOMC meeting, with weak US data also pushing US yields lower. The US dollar was lower across the board: EURUSD rushed back higher, and trades this morning not far below the pivotal 1.0500 area, which could open up for 1.0600+, while the action in US yields was a particular tailwind for USDJPY bears, as that pair fell to new local lows well south of the former 137.50 low water mark, hitting 136.21 overnight and possibly on its way for a test of the 200-day moving average near 134.50. Gold trades higher supported by a breakout in silver Silver’s impressive 16% rally last month extended overnight following Powell’s speech in which he signaled a slowdown in the pace of future rate hikes. It trades around $22.25, the 50% retracement of the March to September selloff, and a close above could see it challenge $23.35 next. In addition, the recent dollar and yield slump, the metal has also been supported by improved supply and demand fundamentals.  Gold has built on last month's impressive 8% gain and has now returned to challenging a key area of resistance between $1788 and $1808. Focus on the dollar and incoming US data starting with today’s ISM and Friday’s job report. Crude oil (CLF3 & LCOF3) supported by weaker USD and lower US inventories Crude oil’s three-day recovery has been supported by a weaker dollar and traders assessing signals that China may soften its Covid Zero policy after China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly. Developments that have forced a reduction in recently established short positions ahead of Sunday’s OPEC+ meeting. A meeting that is likely to be strong on words but low on actions, not least considering the unclear impact of an EU embargo on Russian oil starting next week. In addition, US crude stocks fell by 12.6mbbl last week, the biggest decline since June 2019, while the net crude and product export hit a record, highlighting continued strong demand amid Russian sanctions. US treasury yields recovered after dip to local lows. (TLT:xnas, IEF:xnas, SHY:xnas) With Fed Chair Powell confirming a likely downshift to a smaller hike in December and not pushing back against easing financial conditions, the entire US Treasury yield curve fell sharply yesterday, with treasury buying also encouraged by weak US data, including a terrible Chicago PMI and weak ADP private payrolls growth number. The 10-year treasury yield benchmark hit a new local low near 3.60% and is now only 10 basis points above the pivotal 3.50% area, which was the major pivot high from June. What is going on? Jerome Powell sticks to the script Fed Chair Powell repeated his comments from the November FOMC and what we have heard more generally from the Fed speakers over the course of the month. He said it makes sense to moderate the pace of interest rate hikes and the time to moderate the pace of hikes may come as soon as December, while he added it seems likely that rates must ultimately go somewhat higher than what was thought in the September FOMC projections. Powell also said they have made substantial progress towards sufficiently restrictive policy but have more ground to cover and they will likely need to hold policy at a restrictive level for some time. While his comments still tilted towards the hawkish side, there was no specific hawkish pushback against the markets pricing of significant rate cuts in 2024 that the markets feared. His comment that he does not want to over-tighten but cutting rates is not something to do soon was a slight contrast to his earlier acceptance that risk of tightening insufficiently is greater than the risk over-tightening. The Fed's Cook (voter) also said it is prudent for the Fed to hike in smaller steps as it moves forward and how far the Fed goes with hikes depends on how the economy responds, overall sticking to the consensus. US economic data broadly weaker, focus now on PCE prices and ISM manufacturing The private ADP jobs report showed US payrolls rose 127,000 this month, the slowest pace in nearly two years, as wage gains moderated. Job openings also fell in October to 10.334mln from September's 10.687mln, reversing a surprise jump in the prior month but remaining elevated, according to the JOLTS report. The biggest downside surprise came in Chicago PMI for November which came in at 37.2 against an expected 47.0, falling from a prior 45.2. While monthly surveys can be noisy, but this one is now flirting with pandemic lows and puts the focus on ISM manufacturing due today. The only ray of positive news came from the Q3 GDP release which was upwardly revised by to 2.9% from 2.6% previously. Softer EU CPI weakens hawkish ECB bets Euro inflation slowed for the first time in 1.5 years to 10% in November from 10.6% YoY in October. ECB officials have highlighted the data will be key for their next rate decision, suggesting lower chance of another 75bps rate hike at the December 15 meeting. Still, it remains hard to say that inflation in the Eurozone has peaked. ECB members also remain broadly hawkish and suggest that the commitment to bring inflation back to target will stay Guangzhou lifted the lockdown of several districts as a sign of easing restrictions even as new cases at elevated levels  Guangzhou, the third largest city in China and the capital of the southern province of Guangdong, removed the “temporary control areas” restrictions of several districts even though the city’s daily new cases of Covid-19 stayed at nearly 7,000. It was an encouraging sign pointing to China’s willingness to continue the fine-tuning measures that it had recently started despite the surge in new cases across the country.   China’s Vice Premier in charge of fighting Covid acknowledged the Omicron variant is less deadly Speaking at a pandemic control policy workshop, Vice Premier Sun Chunlan emphasized the optimization measures of the pandemic control were supported by a lower fatality rate caused by the Omicron variant, an increasing vaccination rate, and the accumulation of experience in containing the spread of the virus. She called for the acceleration of vaccination and preparation of therapeutic drugs and the news report did not quote her mentioning the dynamic zero-Covid policy What are we watching next? Melt-up in risk if US data remains tepid or worse? The reaction to Fed Chair Powell’s speech yesterday and soft US data comes ahead of a string of US data through tomorrow’s November US jobs report. If the data is in-line or especially if it is a bit softer than expected, the market may continue to celebrate the implications of a lower peak for the Fed policy rate, as well as for the impact on valuations if longer US treasury yields also continue falling. Despite Chair Powell specifically indicating that peak Fed rates next year are likely set to rise above the Fed’s own forecasts from the September FOMC meeting, the market dropped its forecast for peak rates yesterday by several basis points in the wake of his speech. Eventually, market may begin to fret the impact of an incoming recession on asset valuations, but for now, the one-dimensional focus on the monetary policy outlook and rates persists. For the risk-on to continue, we would likely need to see a benign PCE Core inflation data point today, in-line or below expectations of +0.3% MoM and +5.0% YoY (vs. +5.1% in September and Feb. peak of 5.4%). The ISM Manufacturing survey today (expected: 49.7, which would be first sub-50 reading since 2020) is less important than Monday’s ISM Services, but the jobs report tomorrow is important, as a slackening US jobs market will be a key ingredient to confirm a slowdown (and the weekly jobless claims usually give off a warning for many weeks before the evidence shows up in the monthly report – the latest weekly number is up today and it will take some time for this indicator to point to weakness in the US jobs market. The market will be in for significant churn if we get a hotter core inflation reading and a strong jobs report. Earnings to watch A heavy focus on Canadian banks today, as three are reporting, including the largest of them all, Toronto-Dominion. Marvell Technology is a significant semiconductor company with 5G solutions and has been on the comeback trail, up some 30% from its lows ahead of today’s report after the market close, as will Veeva Systems. Today: Canadian Imperial Bank of Commerce, Bank of Montreal, Toronto-Dominion Bank, Marvell Technology, Veeva Systems, Ulta Beauty, Zscaler, Dollar General, Kroger Economic calendar highlights for today (times GMT) 0815-0900 – Eurozone Final November Manufacturing PMI 0930 – UK Final November Manufacturing PMI 1000 – Eurozone Oct. Unemployment Rate 1230 – US Nov. Challenger Job Cuts 1330 – US Oct. PCE Inflation 1330 – US Weekly Initial Jobless Claims 1420 – US Fed’s Logan (Voter 2023) to speak 1500 – US Nov. ISM Manufacturing 1530 – US Weekly Natural Gas Storage Change 1645 – ECB Chief Economist Lane to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – December 1, 2022 | Saxo Group (home.saxo)

At the beginning of the last month of the year, and thus the last month of the quarter, a lot of reports appear. The focus today is on the Manufacturing PMI reports. Japan Capital Spending The change in the overall value of capital investment made by companies in Japan has increased significantly. The current reading is at 9.8%, an increase of 5.2%. Australia Private New Capital Expenditure The change in the total inflation-adjusted value of new capital expenditures made by private businesses dropped significantly from 0.0% to -0.6%. So new capital expenditures made by private businesses have decreased and this may affect the economic situation of the country. UK Nationwide HPI The National House Price Index shows that the average change in house prices across the country has slowed year-on-year and month-on-month. Nationwide HPI (YoY) dropped from 7.2% to 4.4% while MoM fell below zero at -1.4%. This monthly decline was significant as it was expected to rise from -0.9% to -0.3%. To put it simply, the average houses dropped significantly in the analyzed periods. This study is carried out by the National Housing Association. Retail Sales Reports published by two countries of the old continent show a significant decrease. In Germany, M/M retail sales fell from 1.2% to -2.8%. Which shows that the German economy is not in good shape and retailers are exposed to financial difficulties because fixed costs such as rent and energy bills will not change, and if they sell less they may not earn. In Switzerland, the situation is similar to Germany, but the decline was larger. Sales fell from 2.6% to -2.5%. Growth was expected, and a significant fall may affect the condition of the country's currency (CHF). Switzerland Consumer Price Index In Switzerland, inflation remained at the previous level of 3.0%. However, there was a change in CPI M/M. CPI M/M fell from 0.1% to 0.0% In the monthly change, we can expect a return to the level below zero, ie deflation. Source: investing.com Speeches There won't be many speeches today. The first one took place at 7:00 CET and was addressed by a member of the Bank of Japan, Governor Haruhiko Kuroda. Traders watch his speeches closely as they are often used to drop subtle hints regarding future monetary policy and interest rate shifts. Speeches by members of the European Central Bank attract further attention. At 9:00 CET, Andrea Enria, Chair of Supervisory Board of the European Central Bank, spoke. Further speeches will take place in the second part of the day. At 17:45 CET, Philip R. Lane, member of the Executive Board of the European Central Bank will speak, followed by a speech at 18:30 CET Frank Elderson, member of the Executive Board and Vice-Chair of the Supervisory Board of the European Central Bank. These speeches may give clues to the future of the eurozone's monetary policy. Manufacturing PMI The main report from the European, American and Chinese economies today is the Manufacturing PMI. In China, the report appeared first. The current reading is positive, the current level is 49.4 and is higher than the previous one (49.2) and also higher than expected (48.9). In Europe, the first report came from Spain and was positive. In Spain, it rose from 44.7 to 45.7. In Italy it also rose to 48.4. France and Germany also saw growth, but it was lower than those economies expected. In France, the current readings showed a level of 48.3, and an increase to 49.1 was expected. In Germany, a larger increase to 46.7 was also expected, but the readings showed a level of 46.2. In all countries of the European Union and the euro area, there was an increase in the PMI index, and thus also for the EU Manufacturing PMI. For the Eurozone, it increased from 46.4 to 47.1. And similarly to the main economies (Germany and France) of this region, a larger increase was expected to the level of 47.3 Also in the UK there was an increase in the Manufacturing PMI. The current level of 46.5 is higher than the expected (46.2) and the previous reading (46.2). We have to wait until 16:00 CET for the reading from the United States, but it is expected that the U.S. The ISM Manufacturing Purchasing Managers Index will drop to 49.8 from the previous reading of 50.2. EU Unemployment Rate The unemployment rate fell slightly in the EU from 6.6% to 6.5%. Brazil GDP (YoY) (Q3) Brazil's economy expects GDP growth from 3.2% to 3.7%. US Core PCE Price Index Report about the changes in the price of goods and services purchased by consumers for the purpose of consumption, excluding food and energy will also appear today. It is expected to fall from 0.5% to 0.3%. The Core Personal Consumption Expenditure (PCE) Price Index measures price change from the perspective of the consumer. It is a key way to measure changes in purchasing trends and inflation. Initial Jobless Claims The weekly report on the number of individuals who filed for unemployment insurance for the first time during the past week will also appear today. The last reading was very negative and showed a significant increase in the number of people applying for this insurance (240K). This reading is expected to be better and drop to 235K. Summary: 0:50 CET Japan Capital Spending (YoY) (Q3) 1:30 CET Australia Private New Capital Expenditure (QoQ) (Q3) 2:45 CET Caixin Manufacturing PMI 7:00 CET BoJ Governor Kuroda Speaks 8:00 CET UK Nationwide HPI 8:00 CET German Retail Sales 8:30 CET Switzerland Retail Sales 8:30 CET Switzerland Consumer Price Index 9:00 CET ECB's Enria Speaks 9:15 CET Spanish Manufacturing PMI 9:45 CET Italian Manufacturing PMI 9:50 CET French Manufacturing PMI 9:55 CET German Manufacturing PMI 10:00 CET EU Manufacturing PMI 10:30 CET UK Manufacturing PMI 11:00 CET EU Unemployment Rate 13:00 CET Brazil GDP (YoY) (Q3) 14:30 CET US Core PCE Price Index 14:30 CET Initial Jobless Claims 16:00 CET ISM Manufacturing PMI 17:45 CET ECB's Lane Speaks 18:30 CET ECB's Elderson Speaks Source: Economic Calendar - Investing.com

Summary:  Saxo's hallmark Outrageous Predictions will be out next week. The provocative publication has never been about being right - it has always been about being outrageous. Still, sometimes the world catches up and becomes just the right amount of outrageous for the predictions to become true. We've checked our archives to find out which Outrageous Predictions from the past were much closer to the truth than anticipated. All large market moves are driven by something that surprises expectations - sometimes outrageously. Crystal gazing with this in mind is the core of our annual Outrageous Predictions, as we try to suggest what events that seem unlikely right now could unfold and cause outrage in our world and financial markets - and provoke you to think differently along the way," says John J. Hardy, Head of FX strategy in Saxo.In this article, we thought it would be fun to go back in time and see which of the past predictions came true even though truth isn't a measure of success with these: "Our Outrageous Predictions are not our baseline forecasts for what will happen in the New Year. Rather, they are meant as an exercise in provoking thought on what unanticipated developments can shock our world and financial markets," says Hardy. 2013 Outrageous Prediction: Gold corrects to USD 1,200 per ounce "Our $1,200 call, at the time of writing, signaled a one-third drop in the price," says Head of Commodity Strategy, Ole S. Hansen who, in 2013, had the first correct Outrageous Prediction. Here's what he had to say about it: "Gold corrected to and actually went below USD 1,200 per ounce in 2013, as investors increasingly turned their attention to stocks and the dollar as central banks supported a post-GFC recovery in global growth. A major trigger was the April 2013 break below key support at $1,525 - a move that in our mind raised the risk of a bear market taking the price down towards $1,100," says Hansen. 2015 Outrageous Prediction: Brexit in 2017 In the Outrageous Predictions for 2015, our Strats wrote that the UK Independence Party (UKIP) would win 25% of the national vote in Britain’s general election on 7 May, 2015, sensationally becoming the third largest party in parliament. UKIP would then join David Cameron’s Conservatives in a coalition government and calls for the planned referendum on Britain’s membership of the EU in 2017. UK government debt suffers a sharp rise in yields. The timing was a bit off, but the circumstances around it were pretty accurate. “We had a very strong sense that ‘protest votes’ would be coming both in the US election and also ultimately in a vote on Brexit” said Steen Jakobsen, CIO at Saxo.“We, to some extent, correctly talked about the ‘social-contract being broken’ – meaning society no longer benefitted as a whole with monetary policy, creating increased gap in equality. “This call was too early, but context and reasoning was spot on. The split in the Tory Party could not be healed and the modus operandi of ‘Talking down to the voters’ was blatant mistake, which we used for this call.” 2017 Outrageous Prediction: Huge gains for Bitcoin as the cryptocurrencies rise As cryptocurrencies, particularly Bitcoin, began to gather momentum in the public eye, our Strats predicted that the then leading currency would have a huge bump in value. The rationale behind the jump was justified by the Trump regime overspending, causing high national debt to rise and inflation to skyrocket. Combining this with the global public wanting to break away from the currencies of central banks, Bitcoin would become a preferred alternative. The Outrageous Prediction ended up coming to fruition and more, with the price of Bitcoin growing to almost USD 20K at its 2017 peak.However, the circumstances around the prediction weren’t entirely correct for the time. It wasn’t as much due to the macroeconomic movements of the Trump era, but rather the speculation around Bitcoin that fueled its initial meteoric rise. However, when looking at the more recent spikes in cryptocurrencies, particularly Bitcoin in 2021, the justifications outlined in the 2017 Outrageous Prediction held true.   2018 Outrageous Prediction: Volatility spikes after flash crash in stock markets "We did not get a 25% drop in a single 1987-like event, but we did get two dramatic events in 2018 that vindicated our point," says Peter Garnry, Head of equity strategy. He further explains how the prediction came about: "We got the idea about this Outrageous Prediction in late 2017, as the year was about to end with astonishingly low volatility and Bitcoin had gone from just below $1,000 in late 2016 to around $10,000 in November 2017 (Bitcoin eventually rose to almost $20,000 before year end). Everyone speculated in Bitcoin and selling volatility in currencies and equities were heralded as easy predictable money. That's where we got this super awkward feeling from that the entire euphoria and these types of positions can have dramatic outcomes if conditions change even the slightest."Garnry says that the volatility started in February and ended in dramatic fashion over Christmas: "The ‘Volmageddon’ event in February 2018 almost completely wiped out short volatility funds including some famous ETFs in these strategies as the VIX Index exploded from 13.64 to 50.30 in just two trading sessions. The event changed the short volatility complex in the subsequent years. Later in 2018, the market was trying to tell the Fed that it was doing a policy mistake by hiking its policy rates because the economy was deteriorating. It led to a selloff of 20% from the peak in October to the intraday bottom on 26 December 2018 with the most dramatic trading sessions happening over the Christmas holiday period when liquidity was drying up. Dramatic events that set the stage for the crazy bull-run in 2019 as investors again forgot everything about risk." 2022 Outrageous Prediction: The plan to end fossil fuels gets a rain check As we headed into 2022, Ole S. Hansen, Head of Commodity Strategy, wrote that policymakers would kick climate targets down the road and support fossil fuel investment to fight inflation and the risk of social unrest, while rethinking the path to a low-carbon future. The overarching prediction also came into fruition, but it was regrettably fueled even further by the unforeseen invasion of Ukraine by Russia."Little did we know last November that the world was galloping into an energy crisis triggered by Russia’s war in Ukraine," says Ole S. Hansen, Head of Commodity Strategy, who explains how he then caught on to the idea that fossil fuels would become relevant again in 2022:"Lack of investments and an increasingly urgent need to support gas over coal led us to come up with the 'The plan to end fossil fuels gets a rain check' which basically envisaged a more investor friendly environment for (up until then) shamed investment in so-called 'dirty energy production.  A move that supported a decision by the EU to classify gas and nuclear as green investments," he says. Read next: Steen Jakobsen: ECB strategy is praying, hoping and waiting... not exactly action which gives hope for real economy| FXMAG.COM How will the Outrageous Predictions turn out for 2023? Not all of our Strats' predictions come true, but they are guaranteed to be Outrageous. If you want to read what they have to say about 2023, be sure to check back with Saxo on December 6, 2022, or open an account to get the Predictions sent straight to your inbox.      Source: https://www.home.saxo/content/articles/thought-starters/outrageous-predictions-that-werent-so-outrageous-02122022

EUR/USD is unchanged on Friday, trading at 1.0524. US nonfarm payrolls expected to drop to 200K The week wraps up with one of most important releases on the calendar, US nonfarm payrolls. The robust labour market is showing signs of cooling down, as rising interest rates have slowed economic activity. Nonfarm payrolls have been falling and the trend is expected to continue, with a consensus of 200,000 for November, down from 261,000 a month earlier. With the Fed holding its policy meeting on December 14th, the NFP report will be closely watched by policy makers, who have relied on a strong job market to press ahead with an aggressive rate cycle. The US dollar has been in retreat since Jerome Powell’s speech on Wednesday. The speech was balanced, with Powell reiterating that inflation remained too high and rates would continue to rise higher. Still, the markets focussed on the fact that Powell strongly hinted the Fed would ease rates at the December meeting with a 50-bp hike, and the optimism sent equities higher and the dollar lower. The euro has made the most of the dollar’s weakness, and EUR/USD posted its best month since 2012, with gains in November of 5.3%. Still, the euro has been on a prolonged decline and started 2022 close to 1.14. The outlook for the euro is weak, as the European Commission expects the eurozone economy to decline in Q4 2022 and Q1 2023. The driver of the expected decline is the huge jump in energy prices caused by the war in Ukraine. The eurozone has been hit hard by double-digit inflation, and the ECB will have to continue raising rates, despite weak economic conditions, until it is convinced that inflation has peaked. Read next: If ECB policymakers should make a decision between fighting inflation and avoiding recession, they will likely choose fighting inflation says Ipek Ozkardeskaya| FXMAG.COM EUR/USD Technical EUR/USD faces resistance at 1.0583, followed by a monthly line at 1.0683 There is support at 1.0490 and 1.03537 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.  

Fertiliser supply decreased in 2022 and prices rose to record highs causing a global drop in demand. High gas prices, sanctions, and export restrictions have resulted in a shift in trade which will continue into 2023. Meanwhile, the lower use of fertilisers will weigh on crop yield expectations for the upcoming season In this article High prices create ripple effects Considerable shifts in fertiliser trade Prospects for 2023 Impact on food production   High prices create ripple effects The war in Ukraine, Western sanctions on Russian and Belarussian exports, and Chinese export restrictions have created turmoil in fertiliser markets. The surge in fertiliser prices that started in 2021 led to deteriorating farmer affordability during 2022 and lower demand. Uncertainty about the amount of fertiliser that farmers are going to need for the upcoming season leads to a more muddied outlook for next year’s crop yields. This has an upward effect on commodities futures. Although the urgency of the situation for global food security is increasingly being recognised, there are reasons to be cautious about any quick improvements in the situation. History shows that unwinding sanctions often prove to be quite a sticky process against a backdrop of geopolitical tensions. Fertiliser prices are still high despite recent falls Monthly prices per metric ton Refinitiv, ING Research*DAP = Diammonium phosphate Considerable shifts in fertiliser trade Buyers have been busy this year finding alternative suppliers due to the sharp drop in fertiliser exports from Russia (nitrogen, potash), Belarus (potash), China (nitrogen, phosphate) and the EU (nitrogen). In the EU, lower local ammonia and urea production in combination with a reduced inflow of Russian products has been partially offset by imports from other countries such as Egypt and Algeria. This is also happening with potash where Belarussian exports to the EU have ceased and Russian imports dropped by more than 70% up until September. Those decreases are partially made up by a 25% increase in potash imports from Canada. In the process, European buyers are crowding out other buyers, similar to what has been happening in liquefied natural gas (LNG) markets. Meanwhile, other large importers, including Brazil, China, India and the US, have not turned away from Russian fertilisers and absorbed some of the flows that have become available, as they have generally worked out how to deal with any additional red tape. The EU is turning to other countries for ammonia imports Import volume in tonnes, 3-month average, January 2020 to September 2022 Eurostat, ING Research Prospects for 2023 High prices drive producers across the globe to ramp up production at existing sites and increase investments in new capacity which has a downward effect on prices. Still, it’s likely that part of the supply gap in 2023 will remain. Geopolitics is a major factor in how the market will evolve in 2023 as European sanctions on exports from Russia and Belarus are particularly influential. Both a de-escalation of the war in Ukraine and global pressure to reduce restrictions on fertiliser trade flows for the sake of food security could lead to a winding down in sanctions. This could, for example, result in the reopening of the Tolyatti-Odessa ammonia pipeline (output: 2.5 million tonnes, 1.5% of global production) and the release of fertiliser cargoes stuck in European ports. However, further tightening of sanctions cannot be completely ruled out in case the war in Ukraine escalates. Impact on food production In our view, the impact of the increase in fertiliser prices on crop yields has been soft this year as many farmers buy fertiliser ahead of the season and affordability was still quite favourable at the start of 2022 due to high commodity prices. But during the course of 2022 fertiliser imports in major markets such as India and Brazil have dropped below the levels of the previous year. The impact on yields could become more pronounced in 2023, especially in African and Asian countries where farmers have generally fewer means to adapt and get less government support compared to their counterparts in Europe, the US and China. Still, the process is likely to be gradual for two reasons. First, while the lower application of nitrogen fertilisers is directly affecting yields, the reduced use of phosphate and potash has a longer lag before it kicks in. Second, some of the impact can be mitigated by farmers and such mitigation can also be in the interest of food traders and manufacturers. Farmers could invest in the more precise application of (liquid) fertilisers, increase the use of organic fertilisers (like biochar) or opt to shift to crops that require less fertiliser (such as legumes or cassava). All of these have their drawbacks and limitations. Shifting to a different crop, for example, requires specific knowledge to be successful. So overall it will be hard to match the effectiveness of synthetic fertilisers. As always, favourable weather in the major growing regions during the season can ease some of the impact of under-fertilisation, while bad weather can cause more problems. TagsUS Food & Agri European Union Emerging Markets Commodities Outlook 2023 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

EU There are a number of economic releases on the calendar next week but it’s almost entirely made up of tier two and three data. That includes final PMIs, revised GDP and retail sales.  The most notable events for the EU over the next week are speeches by ECB policymakers ahead of the last meeting of the year a week later – including President Lagarde on Monday and Thursday – and the final negotiations on the Russian oil price cap as part of a package of sanctions due to come into force on Monday. UK  Compared with the soap opera of the last few months, next week is looking pretty bland from a UK perspective. A couple of tier two and three releases are notable including the final services PMI, BRC retail sales monitor and consumer inflation expectations. I’m not convinced any will be particularly impactful, barring a truly shocking number. Russia The most notable economic release next week is the CPI on Friday which is seen moderating further to 12% from 12.6% in October, potentially allowing for further easing from the CBR a week later. South Africa Politics appears to be dominating the South African markets at the moment as efforts to impeach President Cyril Ramaphosa go into the weekend. The rand has seemingly been very sensitive to developments this week, with the prospect of a resignation appearing to trigger sharp sell-off’s in the currency and the country’s bonds. Under the circumstances, that could bring weekend risk for South African assets depending on how events progress over the coming days.  On the data front, next week brings GDP on Tuesday and manufacturing production on Thursday.  Turkey Ordinarily, especially these days, inflation releases are widely followed but that is less the case for a country and central bank that has such little interest in it. Official inflation is expected to ease slightly, but only to 84.65% from 85.51% in October, hardly something to celebrate. The central bank has indicated that its easing cycle will now pause at 9% so perhaps another reason to disregard the inflation data. Switzerland A quieter week after one of repeated disappointment on the economic data front. Whether that will be enough to push the SNB into a slower pace of tightening isn’t clear, although it has repeatedly stressed the threat of inflation and need to control it. The meeting on 15 December remains this months highlight while next week has only unemployment on Wednesday to offer. China The PBOC announced on 25 November its decision to cut the reserve requirement ratio for banks by 25 basis points, lowering the weighted average ratio for financial institutions to 7.8% and releasing about 500 billion yuan in long-term liquidity to prop up the faltering economy.   In response to the various property crises that have emerged in the real estate sector over the past year or so, i.e. debt defaults by real estate companies, mortgage suspensions leading to unfinished buildings, and real estate-related non-performing loan crises, the Chinese government has issued a new 16-point plan. Focus next week will be on the Caixin services PMI, trade data, CPI release and the protests. China’s strict zero-Covid measures are hammering growth and the public is clearly becoming increasingly frustrated. It will be a fine balance between managing protests and easing Covid-zero measures to support growth in a country not used to the former. India The RBI could potentially bring its tightening cycle to a close next Wednesday with a final 35 basis point hike, taking the repo rate to 6.25%. While the outlook remains cloudy given the global economic outlook, there is some reason to be optimistic. The tightening cycle may soon be at an end, the economy exited recession in the last quarter and Indian stock hit a record high this week, something of an outlier compared with its global peers. Australia & New Zealand Recent figures show that inflation (YoY) in Australia rose to 7.3% in the third quarter, compared to the target range of 2%-3%. The RBA began to weaken their hawkish stance in the past two months, raising rates by just 25 basis points each time to bring the official rate to 2.85%. The market is currently expecting a 25 basis point rate hike next week as well. Also worth noting is Australia’s third quarter GDP trade balance figures. New Zealand inflation (YoY) surged 7.2% in the third quarter, compared to the RBNZ’s inflation target range of 1%-3%. Previously, the RBNZ had been raising rates by 50 basis points but that changed last month as they ramped it up with a 75 basis point hike. The current official rate is now 4.25%. Japan The Japan Tokyo CPI rose by 3.8% year-on-year in November, up from 3.5% in October and the 3.6% expected. Ex-fresh food and energy it increased by 2.5%, up from 2.2% and above the 2.3% expected. Japan’s manufacturing PMI fell to 49.4 in November, the worst in two years, with both new export orders and overall new orders declining and falling below 50 for the fifth consecutive month, which alines with the unexpected 0.3% fall in Japanese GDP in the third quarter. Japan department store sales rose 11.4% year-on-year in October, down from 20.2% in September.    The poor PMI and retail sales data may have reinforced the BOJ’s view that domestic demand is weak and CPI inflation is largely input and cost driven and, therefore, unsustainable. The central bank will likely continue to pursue an accommodative monetary policy, especially in light of the current poor global economic outlook. Final GDP for the third quarter is in focus next week, with the quarterly figure expected to be negative meaning the economy may be in recession. Lots of other releases throughout the week but the majority, if not all, are tier two and three. Singapore Singapore’s CPI for October was 6.7% (YoY), below expectations of 7.1% and the 7.50% reading. GDP for the third quarter (YoY) was 4.1%, below expectations of 4.2% and 4.40% previously. On the quarter, it was 1.1% down from 1.50%. Next week the only release of note is retail sales on Monday. Economic Calendar Saturday, Dec. 3 Economic Events ECB President Lagarde chairs a roundtable on “The Global Dimensions of Policy Normalization” at a Bank of Thailand conference Sunday, Dec. 4 Economic Data/Events Thailand consumer confidence OPEC+ output virtual meeting ECB’s Nagel and Villeroy appear on German television Monday, Dec. 5 Economic Data/Events US factory orders, durable goods orders, ISM services index Eurozone Services PMI Singapore Services PMI Australia Services PMI, inflation gauge, job advertisements, inventories China Caixin services PMI India services PMI Eurozone retail sales Japan PMI New Zealand commodity prices Singapore retail sales Taiwan foreign reserves Turkey CPI European Union sanctions on Russian oil are expected to begin ECB President Lagarde gives a keynote speech on “Transition Towards a Greener Economy: Challenges and Solutions” ECB’s Villeroy speaks at a conference of French banking and finance supervisor ACPR in Paris ECB’s Makhlouf speaks in Dublin EU finance ministers meet in Brussels The US Business Roundtable publishes its CEO Economic Outlook survey Tuesday, Dec. 6 Economic Data/Events US Trade Thailand CPI RBA rate decision: Expected to raise Cash Rate Target by 25bps to 3.10% Australia BoP, net exports of GDP Germany factory orders, Services PMI Japan household spending Mexico international reserves South Africa GDP Georgia’s US Senate runoff The first-ever EU-Western Balkans summit is held in Albania Goldman Sachs Financial Services conference Wednesday, Dec. 7 Economic Data/Events US Trade MBA mortgage applications China reserves, Trade Australia GDP, reserves Eurozone GDP Canada central bank (BOC) rate decision: Expected to raise rates by 25bps to 4.00% India central bank (RBI) rate decision: Expected to raise rates by 25bps to 6.15% Poland central bank rate decision:  Expected to keep rates steady at 6.75% Singapore reserves Germany industrial production Japan leading index BOJ’s Toyoaki Nakamura speaks in Nagano EIA crude oil inventory report Foreign policy forum is held in Moscow with Russian Foreign Minister Lavrov speaks at a foreign policy forum in Moscow. Thursday, Dec. 8 Economic Data/Events US initial jobless claims Australia trade Indonesia consumer confidence Japan GDP, BoP Mexico CPI New Zealand heavy traffic index South Africa current account, manufacturing production ECB President Lagarde speaks at the European Systemic Risk Board’s sixth annual conference SNB’s Maechler participates in a panel discussion ECB’s Villeroy speaks at the Toulouse School of Economics European Defence Agency holds its annual conference in Brussels Friday, Dec. 9 Economic Data/Events US PPI, wholesale inventories, University of Michigan consumer sentiment China CPI Russia CPI  China PPI, aggregate financing, money supply, new yuan loans Japan M2 New Zealand card spending, manufacturing activity Spain industrial production Thailand foreign reserves, forward contracts Portuguese PM Costa, Spain PM Sanchez, and French President Macron attend a meeting in Spain Sovereign Rating Updates United Kingdom (Fitch) EFSF (Moody’s) ESM (Moody’s) Netherlands (Moody’s) Saudi Arabia (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.  

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

Markets prefer to shoot first and then think later. Otherwise, they would miss the moment. When ECB President Christine Lagarde said that central banks should pursue policies that would anchor inflation expectations, investors began to buy the euro with renewed vigor, pushing EURUSD quotes to the highest levels since June. In reality, however, Lagarde's phrase does not guarantee that the deposit rate will rise by 75 bps in December. No matter how this shot turned out to be a blank. The logic of investors selling the U.S. dollar is clear: inflation is slowing and will continue to do so, which means the Fed does not need to take giant steps down the road of tightening monetary policy. The factor of an aggressive federal funds rate hike, along with U.S. exceptionalism and high demand for safe haven assets, was the key driver of the EURUSD rally. If the ECB starts to catch up with the Fed, the dollar has one less trump card to play. Lately, the macrostatistics of the euro area has been pleasantly surprising, which is reflected in the growth of the index of economic surprises. It is quite possible that the currency bloc will either manage to avoid recession or the recession will be quick and insignificant. It looks like the U.S. is not as far from the eurozone as previously thought. A change in investors' outlook on the matter has given EURUSD a helping hand. Dynamics of Economic Surprise Indices In fact, the U.S. dollar has only one trump card left—its status as a safe-haven asset, and even that fails. When the yield of Treasury bonds grew, the competitors of the grenback in the face of gold, yen and franc were in disgrace. However, the decline in interest rates on debt has turned them from outsiders into favorites. As a global recession approaches, investors will no longer park their money in North America, but will prefer Japan, Switzerland, or a perpetual asset. Jerome Powell had a chance to turn things around. Had he voiced his dissatisfaction with financial conditions, the EURUSD pair would hardly have been able to soar above 1.05. The weakening of the latter makes it difficult for the Fed to fight inflation, but the central bank also seems to believe that the PCE will continue to slow. Dynamics of financial conditions in the USA Unlike Lagarde, who believes that the global economy is entering an era of volatile inflation. That is why central banks should anchor inflation expectations at the target level of 2%. Households must trust that their work will lead to price stability. That's the only way to win. Volatile inflation makes it doubtful that EURUSD will continue to go further upward in the same way as in October and early December. Most likely, it will be stormy. In technical terms, the euro approached the target by 161.8% by the Crab pattern within an arm's length. It is located near the $1.061 mark. A rebound may follow from it or from the 1.057 pivot point, which will allow to partially take profits on the longs formed above 1.0395. Subsequently, we use pullbacks to buy EURUSD Relevance up to 06:00 2022-12-10 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/328928

Today, the focus is on the Services PMI from multiple economies. ECB President Lagarde Speaks and Eurogroup Meetings This morning (2:45 CET) there was one and only speech of the day. the speaker was European Central Bank (ECB) President Christine Lagarde. As head of the ECB, which sets short term interest rates, she has a major influence over the value of the euro. Services PMI (Nov) At the beginning of the day data from Asia appeared, followed by data from Europe. The Japanese Services PMI rose slightly from 50.0 to 50.3. The Caixin China General Services PMI fell to 46.7 points in November 2022 from 48.4 in October, marking the third straight month of decline. It was also the biggest contraction in the services sector since May, due to Covid containment measures that could impact demand and service activity. Looking at the PMI results from the European Union, there was a decrease in the main economies of Reginau, and an increase in two others. Growth occurred in Spain and Italy. Spain's services PMI rose to 51.7, above the expected 50.5, and in Italy it rose significantly from 46.4 to 49.5. The German and French Services PMIs fell and were lower than expected. For Germany, the result was only 0.4 lower than the previous one and reached the level of 46.1, while in France there was a greater decrease from 51.7 to 49.3. Thus, there was a slight decrease in the euro area from 48.6 to 48.5. In the UK, the Services PMI (Nov) and Composite PMI (Nov) held their previous reading at 48.8 and 48.2 respectively. The United States will also release data on this indicator today. It is expected that the level will be the same as last time, i.e. 46.1. Eurogroup Meetings Today the Eurogroup brings together ministers from the euro area to discuss matters relating to their common currency. EU Retail Sales (MoM) (Oct) Retail sales in the European Union fell significantly. The current level of M/M retail sales is -1.8%, down from 0.8%. The level achieved is lower than expected. ISM Non-Manufacturing PMI (Nov) U.S. The ISM Non-Manufacturing Purchasing Managers Index (PMI) expects another decline. The last reading was at e54.4, also down from 56.7. The reading is expected to fall to 53.3 this time. A reading above 50 percent indicates the non-manufacturing sector economy is generally expanding; below 50 percent indicates the non-manufacturing sector is generally contracting. Currently, it remains above 50, but as the data shows, the downward trend continues, i.e. the sector is starting to contract. BCB Focus Market Readout and RBI MPC Meeting Minutes Brazil and India publish reports on the state of their economies or expectations. The Focus Market Report provides weekly mean market expectations for inflation over the following month, while The Monetary Policy Meeting Minutes are a detailed record of the Reserve Bank of India's policy setting meeting, containing in-depth insights into the economic conditions that influenced the decision on where to set interest rates. Canada Building Permits (MoM) (Oct) Canada awaits improvement in the change in the number of new building permits issued by the government. Canada Building Permits MoM is forecast to reach 3.9%, a large increase from the previous reading which was -17.5%. This may mean that the real estate market has improved in the analyzed term. Summary: 1:30 CET Japan Services PMI 2:45 CET ECB President Lagarde Speaks 2:45 CET Caixin Services PMI (Nov) 9:15 CET Spanish Services PMI (Nov) 9:45 CET Italian Services PMI (Nov) 9:50 CET French Services PMI (Nov) 9:55 CET German Services PMI (Nov) 10:00 CET EU Services PMI (Nov) 10:30 CET Services PMI (Nov) 11:00 CET Eurogroup Meetings 11:00 CET EU Retail Sales (MoM) (Oct) 12:25 CET BCB Focus Market Readout 12:30 CET RBI MPC Meeting Minutes 14:00 CET Canada Building Permits (MoM) (Oct) 15:45 CET Services PMI (Nov) 16:00 CET ISM Non-Manufacturing PMI (Nov) Source: Economic Calendar - Investing.com

Summary:  Today we note that the market seems to be in see-no-evil, hear-no-evil mode, as hot earnings data from the US on Friday was unable to sustain a reaction in treasury yields, with financial conditions at their easiest in months. Still, key economic indicators point to an incoming recession in Europe even as the EURUSD manages to pull above 1.0500. We also preview tonight's RBA meeting, interesting earnings reports this week and much more. Today's pod features Peter Garnry on equities, with John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Financial conditions continue to ease, ease, ease | Saxo Group (home.saxo)  

A weak start to the fourth quarter as the retail correction continues. Expect the trend to continue with real wage growth still negative   The declining trend in retail sales continued at the start of the fourth quarter after a brief uptick in September. The drop of 1.8% month-on-month was broad-based. We saw declines for both food and non-food retail trade with only fuel sales ticking up. We saw a broad-based decline by country, too. Germany and France both experienced drops of almost 3% while the Netherlands saw a small dip. Spain was the exception among bigger countries with an increase of 0.4%. The peak in sales was in the fourth quarter last year but we’ve seen a correction since. This is because of slowing demand related to the large purchasing power squeeze Europeans are experiencing, as well as the shift in the consumer's preference from goods to services since the economy reopened post-Covid lockdowns. The retail environment remains very tricky for the months ahead. We don’t expect an immediate recovery as real wages remain deep in negative territory. Inventories in retail were depleted in 2021 as shortages and high demand resulted in a struggle to keep the shelves filled for retailers. Now this situation is quickly reversing. Retailers have been stocking up as supply-side problems have been fading, but demand has also quickly started to fade. That has resulted in quickly filled storage sites and uncertainty about whether sales will live up to expectations in the holiday period. The number of retailers that expects to raise prices fell in November. Read this article on THINK 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

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

We expect pre-FOMC profit-taking on Treasury longs. The ECB shouldn’t take the calm in peripheral bond markets as a sign that QT is no big deal The Treasury rally stalls at 3.5% 10Y Treasuries bounced on the 3.5% resistance level after a surprising rally that took them down 75bp from the 4.25% reached as recently as the end of October. The rally occurred with no encouragement from the Fed. On the contrary, the Fed has been at pains to stress that, if anything, it saw a higher terminal rate than in its September projection. Since then, data has been mixed, with a slowdown in various measures of inflation being balanced by still strong labour market indicators. What’s skewed market reaction in favour of a dovish interpretation to the recent data flow has been the Fed signalling a downshift to 50bp hikes. Momentum towards lower rates has indeed stalled Market participants may see a vindication of their recent dovish inclinations if US PPI does slow down on an annual basis as is expected in Friday’s release, but we feel the lack of other ‘tier one’ economics publications this week and the proximity of the 14 December FOMC meeting, suggest momentum towards lower rates has indeed stalled. We think 3% is a reasonable forecast for 10Y yields in 2023. The recent rally from 4.25% to 3.5% has taken rates more than halfway towards that level so we suspect many short-term investors will consider that the risk-reward balance of chasing the rally further is poor and will take profit. That profit-taking should mean yield will rise into next week. The November rally has taken bond yields too close to our end-2023 forecast Source: Refinitiv, ING Calm in the bond market can breed complacency The Fed is now in the midst of its pre-meeting quiet period, meaning we’re expecting no policy guidance until next Wednesday’s press conference. The ECB’s start on Thursday, which leaves two more days for its officials to skew expectations. So far, only a minority has pushed for a 75bp hike at the 15 December meeting, thus cementing expectations of a smaller 50bp move. Instead, focus has been on the timing and size of its bond portfolio reduction (QT), with little noticeable market impact so far. Indeed, 10Y Bund yields have rallied 50bp since their October peak, and 10Y Italy has outperformed them by more than 60bp. Focus has been on the timing and size of its bond portfolio reduction (QT), with little noticeable market impact so far Hawkish voices have pushed in favour of a QT start as soon as early 2023 with, for instance, Gabriel Makhlouf arguing for end Q1/early Q2 2023. Whilst we would expect QT to take the form of a progressive phasing out of APP (one of the two ECB QE portfolios) redemptions, Joachim Nagel said last week that markets were able to handle an abrupt end. We expect this view to be in the minority but it does illustrate an important point: it’s not just central bank policies that influence markets, the reverse is also true. The decreasing dispersion between euro sovereign yields has given the impression that QT is no big deal, and has emboldened the hawks. Italy-Germany 10Y spreads standing below 190bp is probably below where most would have put them just one week before the ECB takes decisive steps towards unwinding its bond portfolio. This tool has been instrumental in compressing spreads, most would expect that its going into reverse would put widening pressure to spreads, even if the effect might not be felt immediately. Sovereign and credit spreads have tightened into the ECB QT announcement Source: Refinitiv, ING Today's events and market view Construction data features prominently on today’s calendar, with construction output from Germany and the UK’s construction PMIs all to watch out for today. In bond supply, Germany is scheduled to sell €5bn of 2Y debt. Lack of supply and data has favoured bond bulls in recent weeks but we think the Treasury rally has stalled at a psychologically important level, and will now run into pre-FOMC profit taking. 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

Industrial orders rebounded slightly in October, on the back of strong bulk orders. However, Germany's descent into an industrial recession continues   German industrial orders rebounded somewhat in October but were unable to reverse the negative trend. After the sharp fall in August and September, industrial orders increased by a meagre 0.8% month-on-month in October, from -2.9% MoM in September. Excluding bulk orders, industrial orders would have dropped by 1.2%. Over the year, industrial orders were down by almost 3.2%. Since the start of the year, German order books have shrunk by almost 15% and have fallen in seven out of ten months. Despite the ongoing order deflation, order books are still filled and the reported backlog is high. Supply chain frictions are still disrupting industrial production. According to a recent Ifo survey, more than half of all German industrial companies are still affected by supply chain problems. In recent weeks, there had been some encouraging signals from the German and European economies, suggesting that the recession might be less severe than many had thought. The jury is obviously still out but the collapse in German industrial orders is one important signal that shows that the long slide into (industrial) recession continues. Read this article on THINK TagsIndustrial propduction Germany 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

The end of this year is extremely intriguing. It shows how economies cope with rising inflation and what lies ahead. Despite the difficulties, there is still development in many areas of our lives. In this article: Prospects of Norwegian companies EU and borrowing money from the US Gig Workers US economy Norwegian companies can Reuters company, in its tweet, writes about the deteriorating prospects of Norwegian companies. Norway companies see weaker outlook, central bank survey shows https://t.co/Hs0kOmgOee pic.twitter.com/KlWSqICCBq — Reuters Business (@ReutersBiz) December 6, 2022 The Norwegian market is also deteriorating. Inflation significantly reduces activity. Data on the condition of firms provide key information for the future policy of the central bank. Norges Bank raised interest rates, which are currently at 2.5% and it looks like they will continue to rise. Further actions may worsen the situation of companies that are already struggling with difficulties. EU and borrowing money from the US CNBC tweets about Germany's stance on borrowing money from the US. Germany says borrowing more money to compete with the U.S. would be a 'threat' to Europe https://t.co/4R6jZqWVRT — CNBC (@CNBC) December 6, 2022 Germans believe that borrowing can threaten competitiveness  The EU is vocal about its concerns about the US Inflation Reduction Act (IRA) that threatens European businesses. Of course, there are advantages to borrowing money, but the greater the dependence can have a negative effect. For this reason, there may be skeptical attitudes as to further sources of financing. The rise of digitization J.P. Morgan tweets about gig workers Through the rise of digitization, gig workers are enhancing many shopping experiences. Learn how payments can help to attract and retain these workers. — J.P. Morgan (@jpmorgan) December 5, 2022 The future of shopping will require different types of employees to provide a topnotch customer experience. For many businesses, gig workers will serve a significant role in the future of shopping experience. These workers are becoming more and more common for two reasons. First, they redefine many roles and responsibilities in companies' business models (discussed below). Second, they provide structure to an otherwise disorganized labor pool; these workers now have a platform and business model to perform ad hoc tasks. In short, the development of employees means better quality of work and thus the development of the company. US economy may soft landing in 2023 Morgan Stanley tweets about US economy. While 2022 saw the fastest pace of policy tightening on record, has the Fed’s hiking cycle properly set the U.S. economy up for a soft landing in 2023?Read more about this episode: https://t.co/RSjBBIX7xm pic.twitter.com/7Qa248UKIW — Morgan Stanley (@MorganStanley) December 5, 2022 This year has undoubtedly been full of events. From the continuation of the fight against the effects of the pandemic, through the war in Ukraine to the fight against inflation. Central banks around the world are trying to fight inflation so as not to worsen the state of their governments and lead to a recession. While many economies believe they are already entering a recession cycle, it is believed that the US economy may land softly in this situation. Increases in interest rates in the fight against inflation cause difficulties for companies, as well as for households. Many experts believe that the Fed has prepared its economy for all eventualities. The coming months will be crucial to confirm this. Share price performance in metals and trading UBS tweets about its report results. Can measures to hold down cost of equity help drive share price performance in metals and trading? Find out how in our #UBSResearch report. #shareUBS — UBS (@UBS) December 6, 2022 UBS conducts numerous studies that are important to many markets as well as their sectors. UBS believe efforts to control COE are now likely to become a more important factor in maintaining and expanding multiples against this backdrop. Its analysis indicates several cases wherein CoE has functioned as a key share price driver.

Appetite for high beta fixed income has allowed the ECB to reduce its overweight in peripheral bonds. There is no sign of US curve dis-inversion yet - we think this is most likely to occur with a long-end sell off. ECB reduces its peripheral bond overweight The ECB didn’t use the flexibility offered by the PEPP’s redemption to lean against wide sovereign spreads in the months of October and November. On the contrary, data show that it increased its holding of core (eg Netherlands and Germany) and reduced its holding of periphery (eg Spain, Portugal and Italy). The changes may be explained in part by different timing between redemption and reinvestment of the proceeds but there seems to be a trend here: the overweight in peripheral countries is at least being partially unwound. The higher-beta sovereign bond markets require less of the ECB’s support Looking at market moves of late, this is understandable. Spreads have been on a tightening spree, suggesting the higher-beta sovereign bond markets require less of the ECB’s support. This is good news, until it isn’t anymore. As long as the ECB retains the flexibility to lean against volatility in the sovereign bond markets all should be well. The looming QT announcement is one key risk to this. So far, spreads have tightened alongside the improvement in global risk sentiment. That tightening cannot be entirely explained by the rally in core rates, and suggests instead genuine risk appetite for high beta fixed income. The ECB has partially unwound its summer intervention in peripheral markets Source: Refinitiv, ING No sign of re-steepening yet If the bond rally has stalled, which itself is still unsure, there is no sign yet of curve re-steepening. In the US in particular, where the Fed has presumably the most room to cut rates, the curve remains as inverted as ever. Dis-inversion can occur for two reasons. Firstly, front-end rates can drop on expectations of imminent Fed easing. In our view, this is only realistic once inflation is clearly on a path towards reaching the Fed’s target, and the economy is near a recession. We think these conditions will only be met by mid-2023. It is not yet clear that the Fed is near the end of its cycle The other reason for a curve dis-inversion is if long-end rates reverse some of their November rally. This looks a more realistic scenario in the near-term. Risk appetite, from stock to credit, has received a boost once it became clear that the Fed was easing off on the pace of hikes. This has also boosted demand for duration on the Treasury curve as investors look more kindly to any kind of investment risk. The problem is that it is not yet clear that the Fed is near the end of its cycle. Fed Funds forwards are steeply inverted from late 2023, implying the odds of a rate cut are rising. We think this is right but that pricing may be reversed soon if data doesn’t worsen quickly. The rally in long-end bonds has come with Fed Funds forwards pricing rate cuts in 2024 Source: Refinitiv, ING Today's events and market view The headline Q3 Eurozone is less liable to surprise markets, this being the third and final release but the details of the report, including employment, will be of interest. The EU has mandated banks for the sale of a new 15Y bond for €6.5bn. The same deal will also features a smaller tap of a 30Y bond. The deal may weigh on bonds but supply this week is otherwise light. Today is the last day before the start of the pre-ECB meeting quiet period. Fabio Panetta and Philip Lane, both doves, are scheduled to speak. Any hawkish comment would catch the market off guards and push yields higher. The US Q3 unit labour cost publication is also a final release but, as it is key to the Fed’s decision-making, any revision will be of importance. 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 darkening economic outlook drove fresh safe-haven demand for the US Dollar on Wednesday. The US dollar changed little after some of America's biggest banks warned of an impending recession The Fed, Bank of England (BoE) and European Central Bank (ECB) will set interest rates next week and central bankers will enter a period of silence before meetings. Positive reports appeared in the euro zone. Policymakers enter a period of calm ahead of key meetings of the Bank of England, the Federal Reserve and the European Central Bank Australian Dollar is facing renewed pressure. BoJ board member Nakamura once again encouraged the JPY bears Read next: Euro: Is There A Broader Correction To Be Feared? Aussie Got Little Support From The RBA Decision | FXMAG.COM EUR/USD may be bearish? The EUR/USD pair trades close to 1,050. Any breakout lower than 1.045 will be considered bearish. Economists at ING note that the pair could move lower to 1.0400. The European currency is expected to closely follow the dynamics of the dollar, the impact of the energy crisis on the region and the divergence between the Fed and the ECB. Additionally, the markets' overestimation of the potential Fed policy reversal remains the sole driver of the pair's price action for now. There were further concerns about the impact of colder winter conditions, especially in the context of the still uncertain energy situation. Positive reports appeared in the euro zone. Employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. Speeches by members of the European Central Bank will also take place today, but they are not expected to have a significant impact on the euro exchange rate. GBP/USD holds gains above 1.2150 The GBP/USD pair is trading around 1.2190. The pound strengthened against the dollar on Wednesday to a nearly six-month high as policymakers enter a period of calm ahead of key meetings between the Bank of England, the Federal Reserve and the European Central Bank. There are no significant macroeconomic events for the pound today. The Bank of England raised interest rates from 0.1% to 3.0% in the current monetary policy tightening cycle, with markets pricing in an interest rate peak of around 4.6% next year. Economists predict the Bank of England will decide to raise interest rates by 50 basis points next Thursday. One BoE policymaker said higher interest rates could lead to a deeper and longer recession. Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1% The Australian dollar failed to hold its gains and it is facing renewed pressure after data showed that the Australian economy expanded less than expected in the third quarter. Annual GDP by the end of July was 5.9% instead of the expected 6.3% and the previous reading of 3.6% was revised down to 3.2%. Overall, national data show a strong economy. Yesterday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, taking borrowing costs to a level not seen in a decade, and further tightening is expected to bring down inflation. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature The currency pair is trading around 137.3590. BoJ board member Nakamura once again encouraged the JPY bears with his statement. A board member of the Bank of Japan (BoJ) said that adjusting monetary policy would be premature. Source: dailyfx.com, investing.com, finance.yahoo.com

On Wednesday, the EUR/USD currency pair kept moving. Since there are no fundamental or macroeconomic backgrounds, such a movement today shouldn't be considered surprising in theory. Yesterday, the pair was able to adjust to the moving average line once more but failed to get past it. As a result, the upward trend is still present, and the US dollar still needs to grow, as we have been hoping for more than two weeks. Despite the technical picture, we do not even see general signs that the pair is ready to start correcting, as all indicators continue to signal an upward movement. Typically, as an impulse approaches completion, each peak moves steadily closer to the previous one. Nothing comparable can be found today. In the absence of significant news or events, the market pauses but does not close long positions. And for that reason, there is no correction. Similar circumstances existed with the US dollar for a protracted period, as the pair could not move higher by more than 400 points. The situation is now reversed. The lack of current growth factors in the euro currency is what I find most intriguing. If they could have been located a week or two ago (and then only with a strong desire), they are now impossible to locate. There were two more or less important reports this week, one on Monday and two on Wednesday. Retail sales in the European Union fell short, and the US ISM index turned out to be stronger than expected. This week's overall score is 2:1 in favor of the dollar as a result of yesterday's report on the third quarter of EU GDP coming in slightly higher than expected. However, the US dollar could not reap any particular benefits from this. It is currently unable to gain a foothold beneath the moving. The market has forgotten the "tough" stance taken by the Fed. The European currency did not increase in value over the past month for unique reasons, as we have recently stated on numerous occasions. Some factors support the US dollar, but you can find individual reports that back the euro, and you can recall the Fed's readiness to start easing up on the pace of tightening monetary policy. The European currency has grown too much compared to the available resources, even though it has grown reasonably. There is now a lull, but the two cannot start adapting. In light of this, it is currently unnecessary to consider and analyze macroeconomics' "foundation." Why would you do this if the market is already buying? This is sarcasm because no one can predict when market participants will realize that you can sell and buy. We need to pay attention to upcoming meetings of the Fed or the ECB in light of recent changes in the foreign exchange market. It is well known that the ECB will most likely increase rates by 0.75% and that the Fed will only increase rates by 0.50%. Even considering this factor, the euro has already grown too much. It may, however, currently support the euro currency. In any case, a correction is overdue at this point. We will wait for a downward correction even if it turns out tomorrow that the ECB tightens monetary policy more than the Fed. However, we also want to remind you that with specific technical indicators and support, it would be a good idea to sell the pair right now. The situation is as follows: you must wait for a correction and be prepared for it, but it is also advised to only open short positions in the presence of signals. The market is currently trading irrationally, and this irrationality might last for a while. Additionally, it brought about the unjustified strengthening of the euro. As of December 8, the euro/dollar currency pair's average volatility over the previous five trading days was 115 points, which is considered "high." So, on Thursday, we anticipate the pair to fluctuate between 1.0378 and 1.0609. The Heiken Ashi indicator's turning downward indicates a new phase of the corrective movement. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0864 Trading Suggestions: The EUR/USD pair is still in an upward trend. So, until the price is fixed below the moving average, new long positions with targets of 1.0742 and 1.0620 should be taken into consideration. No earlier than fixing the price below the moving average line with targets of 1.0376 and 1.0254 will sales become relevant. 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 2022-12-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/329243

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

The euro stabilized against the US dollar on Thursday and the U.S. dollar clawed back some of the previous day's declines, as the market weighs in on the Fed's rate hike path. The euro benefited from the weakening of the US dollar The Australian dollar against the US currency fell sharply the 10-year Treasury note has fallen almost continuously EUR/USD was unable to overcome its late-June high EUR/USD hit a five-month high earlier this week but was unable to overcome its late-June high of 1.0615. The pair's mood remains bearish today. Compared to the previous day, the EUR/USD pair has fallen and is trading around 1.0469. The euro gained overnight after better-than-expected euro-wide GDP data showed an increase of 0.3% q/q in the third quarter instead of the expected 0.2%. This may indicate that the economic slowdown in Europe may not be as serious as previously feared. The European Central Bank will review its policy on 15 December. The broader weakness of the US dollar also helped strengthen the euro. GBP/USD The pound fell 0.3% against the dollar to $1.2175 and fell 0.35% against the euro. Sterling falls as falling UK house prices add to recession fears. The UK is facing a winter of strikes as rail workers, teachers and nurses demand better wages as the cost of living soared, exacerbated by rising energy costs after the Russian invasion of Ukraine. What's more, the prospects for next year are equally bleak. The UK economy could contract in the coming months. AUD/USD- commodity prices have a negative impact The Australian dollar against the US currency fell sharply this week. Currently, the pair is trading at mid-September levels. From The Australian Dollar (AUD) perspective, commodity prices have a negative impact on the currency coupled with yesterday's weaker GDP data. This morning started positively for the Australian dollar with a better-than-expected trade balance for October, but today the main focus will be on the US labor market data. If the reports turn out to be positive for the dollar, they will bring bears for the AUD/USD pair. Most recently, the Australian dollar got support from the easing of COVID restrictions in China, but that has since dissipated due to the rising number of COVID cases causing concern. The RBA's decision on interest rates also failed to support the Aussie. Overall, the current fundamental headwinds facing the AUD outweigh the US Dollar, which could suggest a potential downside risk for the Australian Dollar over the next few weeks. JPY is weaker The Japanese Yen is slightly weaker so far today despite GDP there narrowly beating forecasts. Annualised GDP was -.08% for the third quarter instead of -1.1% anticipated. The Japanese yen (JPY) which is highly sensitive to shifts in U.S. Treasury yields, fell 0.2% to 136.82. Instead the dollar-yen pair jumped. Currently, the pair is trading around 136.8130. The yield on the 10-year Treasury note has fallen almost continuously since hitting a 15-year high in late October. The Bank of Japan's ultra-loose monetary policy at a time when other central banks around the world are aggressively raising interest rates has made the yen the weakest major currency in the world in recent months. As a result, the USD/JPY exchange rate increased. However, according to some experts, the yen may rise against the US dollar next year. Source: finance.yahoo.com, dailyfx.com, investing.com

Next week the US Federal Reserve and the European Central Bank will hold their last meetings of the year. These events will be the final chord of the year - at least for euro-dollar traders. The Fed will announce its verdict on December 14 and the ECB the next day. Also, the US core inflation data will be released on December 13, which will also trigger higher volatility amongst the dollar pairs. In other words, the currency market is going to experience a lot of turbulence next week which will be followed by a pre-Christmas, pre-New Year's (and then post-New Year's) calm. As a rule, the market's activity slows down for a few weeks after the December meetings of the key central banks. Although, given the general unstable situation in the world (geopolitical tensions, COVID in China), 2022 may be an exception in this regard. At the moment, the EUR/USD pair is drifting within the 5th figure, just continuing its current movement, reflexively reacting to the current information flow. Recently, bears have repeatedly tried to settle within the 4th figure, while bulls still try to conquer the 6th price level. But both sides are acting quite cautiously ahead of high-profile events in December, which is why the pair is actually winding circles around the 1.0500 mark. If we consider intraday trading, then, as they say, "day to day is not necessary." Bears dominated on Monday and Tuesday, pulling the price to the 1.0460 mark. Then bulls seized the initiative, regaining the lost positions. At the moment, the pair is just trading around 1.0550-1.0560. Looking ahead, the current information flow is not able to provoke a stable price movement of the pair – either down or up. Any trader, who opens short or long positions, will do so while thinking of next week's events. Therefore, at the first opportunity, the trader will lock in the profit and will not "play for a long time". Consequently, any price fluctuation is unreliable. Considering last week's dynamics, we can say that the pair is trading in the range of 1.0450-1.0570. But again, this is a temporary price tier. So far, the bullish/bearish momentum emerges and eventually ends within this range. It is obvious that traders will surpass this range by next week, the only question is in which direction. This will depend primarily on the outcome of the Fed and ECB meetings. And at the moment, traders are forced to make decisions under conditions where they don't have any "relevant" information. The Fed members observe the "blackout period" (a 10-day period prior to the meeting), so now traders are left "on their own" - one-on-one with an army of specialized experts and insiders. Information coming in is quite diverse and most importantly, contradictory, so they cannot decide on the vector of their movement. For example, on Thursday the analysts of Danske Bank published their forecast, which provoked increased volatility while the economic calendar is empty. According to currency strategists of this Danish bank, the Fed and the ECB will raise interest rates by 50 points in December. Experts revised their earlier forecast, according to which the Fed was to raise the rate at the December meeting by 75 points. Now they see the following actions of the US central bank: 50 basis points in December, then 50 points in February and 25 in March. That is the final point, according to Danske Bank, will be at the level of 5.25%, but it will be achieved at a slower pace. As for the ECB, Danske Bank analysts suggest a hawkish bias. According to their forecasts, the ECB will raise rates in December by 50 points and will continue to raise them during the first quarter of 2023 - at least to 2,75%, but with possible "prolongation" towards further hikes. In addition, according to Danske Bank, at the end of the December meeting, the ECB will present key principles of the end to reinvestments under the APP process, in which reinvestments will almost come to a full stop. The Danish bank's forecast was interpreted in favor of the euro, thanks to which the bulls could again get close to the middle of the 5th figure. As you know, ECB representatives are divided into two camps (or voice a neutral position) - some are in favor of continuing aggressive policy, while others are in favor of slowing down the pace of tightening of monetary policy. Therefore, there is still intrigue on this issue. ECB President Christine Lagarde, who made a speech on Thursday, did not add clarity, as her speech was ceremonial in nature. Opening the annual conference of the European Council on systemic risks, she voiced common phrases, saying that the unstable global environment "poses sizable risks for financial stability in Europe", while the deteriorating prospects of the global economy only increase these risks. Therefore, the EUR/USD pair, most likely, will drift further in a conditional price range of 1.0450-1.0570 with possible testing of 1.0600, if the only significant releases on Friday (the index of producer prices in the US and the consumer sentiment index from the University of Michigan) will come out in the red zone. But again - any price fluctuations this week should be treated with a certain amount of skepticism, because the decisive battle of bears and bulls is still ahead.     Relevance up to 01:00 2022-12-10 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/329358

Whether it is the end of the rally or not, there are good reasons to take a breather. The Fed meeting next week is drawing closer, with a crucial CPI release just ahead of it. Resuming Treasury supply will add another technical headwind. But already today we see a consumer inflation survey that has swayed the Fed before. The ECB will announce the TLTRO repayment Source: Shutterstock Rates rally puts in a breather, but the Fed's patience is likely tested already Just as we were starting to wonder whether the rally was ever going to stop, Treasuries put in a breather yesterday. The extent of the move and its contrast to the messaging from the Fed would have been reason enough already earlier on. But now the actual FOMC meeting next week is within grasp, including another crucial inflation report just ahead with Treasury supply to top it off. Already today will see data that could give reason for pause Already today will see data that could give reason for pause. While the PPI data is seen to confirm easing pipeline inflation pressure,  the University of Michigan consumer survey could be a bit more of a wildcard. One is tempted not to place too much weight on the reading given the relatively small sample size, but we recall the FOMC having had an eye on that measure when they decided to hike 75bp in June, despite earlier guidance of a 50bp hike. Currently, market consensus looks for unchanged consumer inflation expectations. The June meeting set a recent precedent about the Fed swerving way from prior guidance. We do not know what it would take to tip the Fed towards placing another sounding with the press in order to steer market expectations ahead of a meeting. But the way current money market and yield curves are plotting for the path of key rates, at least beyond the upcoming meeting, is not aligned with the narrative that the Fed is trying to instil in markets.        10Y Treasury yields have dropped through 3.5% into the December FOMC Source: Refinitiv, ING A TLTRO piece to the ECB's balance sheet puzzle Today at 12.05 CET the ECB will announce the amount that banks will repay of their currently outstanding TLTROs ahead of year end. That amount will come on top of the €52bn TLTRO.III tranche that matures this month. We are looking for an early repayment of around €200bn, but admittedly it is not a high conviction call. Already ahead of November’s repayment, polling pointed to a wide range of forecasts from €200bn to €1.5 trillion for total repayments this year. The close to €296bn that materialised last month was clearly at the lower end of expectations, and likely also a disappointment for the ECB itself. The TLTRO repayments were seen as an important first step in the ECB balance sheet reduction process From the October ECB accounts we gathered that the TLTRO repayments were seen as an important first step in the balance sheet reduction process. The amounts repaid could also inform the decision on the reduction of the asset portfolios. According to the minutes the Council deemed the TLTRO recalibration “more efficient” than trying to achieve the same objective through an earlier start of (quantitative tightening) QT or more aggressive interest rate hikes. Taken at face value, that would imply another disappointing repayment could prompt a more hawkish reaction from the Council to achieve the desired pace of policy tightening – be it via rates or faster QT. However, one should also be aware that year-end considerations can influence repayment decisions and one should not move to rash conclusions. In any case it could spice up the Governing Council deliberations, where our economists have been seeing the risk of another 75bp rate hike on the rise again. Our main take remains that there is an overarching desire by the ECB to withdraw the exceptional accommodation provided via its balance sheet. And we have repeatedly said that we think the ones that have benefitted the most now also most at risk for an adverse market reaction. Yet, especially sovereign bond spreads of the eurozone periphery have proven remarkably resilient so far. While there was some widening in the 10Y Italian-German spread of around 5bp, it still remains at a relatively tight 186bp overall.        The ECB has incentivized early TLTRO repayments, with modest results so far Source: ECB, ING Today's events and market view The rates rally has finally put in a breather. A level of 10Y US Treasury yields below 3.5% still looks stretched and today's data could give first reason for pause. Less so the PPI data, where the consensus is looking for a clear decline in wholsale prices. Probably more eyes will fall on the preliminary readings on surveyed consumer inflation expecations by the University of Michigan. Consensus is not seeing any change here, making it a bit of a wildcard. But there is a precendent for the Fed putting some weight on this measure.  Away from the US the focus in the Eurozone is on the ECB's TLTROs and the annoucement of banks' early repayments for December.  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 dollar was broadly flat against major currencies on Friday as concerns about the health of the US economy resurfaced, as well as ahead of producer inflation data later in the day and the Federal Reserve's interest rate meeting next week Investors are expecting a series of interest rate decisions from central banks - including the Fed, the European Central Bank and the Bank of England - next week. Markets bet all three will limit pace of rate hikes, with hikes of 0.5bp The dollar index continued its decline yesterday keeping the Euro bulls on the front foot. The GBP/USD pair is rising for the third day in a row. The yen benefiting from growing expectations AUD/USD tried to regain ground today Read next: The FTC Is Trying To Block Microsoft's Merger With Activision| FXMAG.COM EUR/USD EUR/USD continues its grind higher in early European trade as key US data events lie ahead. The euro/dollar pair is trading in a better position than yesterday. This morning the euro rose 0.25% is $1.0581. The pair is currently trading at 1.0513. The dollar has a tendency for weakness in December. The dollar index continued its decline yesterday keeping the Euro bulls on the front foot. There has been comments this week from some ECB members discussing the possibility of further rate hikes. Later in the day attention turns to the US economic calendar as we await the US PPI as well as University of Michigan data. A positive data print could offer some support for the dollar while a weaker print could push EUR/USD lower. As for the US PPI, it is expected to maintain its previous level of -0.2%. A University of Michigan date specifically Michigan Consumer Sentiment is important, it is expected to increase by 0.1 to reach 56.9. GBP/USD GBP/USD Pair is on the buyers radar today. The GBP/USD pair is rising for the third day in a row and steadily climbing to the upper end of its weekly range. The pair points to a well-established short-term uptrend. A combination of factors is bringing the US dollar back to near the multi-month low reached earlier in the week. The Bank of England set to announce its monetary policy decision next week, with another interest rate increase of 50 basis points expected. It also can impact on the pound. Moreover, the gloomy outlook for the UK economy may keep investors from betting aggressively around the British pound and limit the GBP/USD pair, at least for now. Investors are now looking at Friday's US economic breakdown, which will release the Producer Price Index and flash Michigan Consumer Sentiment Index. This, along with US bond yields and broader risk sentiment, could influence USD price dynamics and provide some impulse for the cable market. AUD/USD AUD/USD tried to regain ground today China’s loosening Covid restrictions also lent optimism to the market, though renewed global recession fears and uncertainty around US Federal Reserve policy tightening kept sentiment in check. Meanwhile, latest data showed that Australia’s economy expanded less than expected in the third quarter as persistent inflation and rising interest rates dampened domestic consumption. The Reserve Bank of Australia raised its policy rate by 25 basis points to 3.1% at its December meeting. USD/JPY Currently, the pair is trading at 134.4750. On the daily chart, you can see that the dollar against the Japanese yen is falling. The recent weakness of the dollar affects the pair's advantage. The Japanese yen appreciated to around 136 per dollar, heading back to its highest levels. Also the yen benefiting from growing expectations that the Bank of Japan could end its ultra-easy monetary policy with inflation around 40-year highs. Source: investing.com, dailyfx.com, finance.yahoo.com

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

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.  

Bulls and bears of the EUR/USD pair impulsively react to the current information flow. The initiative is to change hands, but in fact the price stalls above 1.0500 but below 1.0600. The fifth figure acts as a springboard for a large-scale attack, which will inevitably occur next week. The only question is in which direction, down or up. Obviously, the vector of the EUR/USD price movement will depend on the Federal Reserve and the European Central Bank: next week the central banks will sum up the year results and outline further prospects. In the meantime, traders have to act cautiously, so to speak, "according to the situation". The intraday market sentiment is changing fast, but all the downward and upward price bursts are short-lived. For instance, on Friday morning, EUR approached the limits of the 6th figure, marking 1.0589. Amid a nearly empty economic calendar, the forecast of currency strategists of Danske Bank had a certain influence on the pair. This forecast was interpreted by the market in favor of the single currency (and not in favor of the dollar). Danske Bank economists expect the ECB policy rate to peak at 2.75% in the first half of 2023, but the risks will be shifted towards a further increase. At the same time, they revised their hawkish forecast on the pace of monetary tightening by the Fed. According to them, the Fed will increase the rate twice more by 50 points (in December and February) and once more (in spring) - by 25 points. As a rule, such forecasts have a limited (and short-term) influence on the pair, but under current circumstances, apparently, traders especially pay more attention to this analytical report. But again - in anticipation of the high-profile events that will take place next week, any price spikes are temporary in nature. On Friday afternoon, the bears took the initiative, reacting to the inflation report. The US producer price index was published at the beginning of the US trading session on Friday, which did not disappoint the dollar bulls, contrary to pessimistic expectations. The overall PPI in annual terms came out at 7.4% (with the forecasted slowdown to 7.2%). On the one hand, it was expected to slow down, but, on the other hand, the rate of deceleration was not as fast as previously expected. The core index, excluding food and energy prices, reached the 6.2% target year-on-year, while most analysts predicted a decline to 5.9%. The situation here is similar: the index has been declining consistently for the past 8 months, but the rate of decline slowed in November. The pair then retreated from the daily highs, going down to the base of the 5th figure. The greenback received additional support from another report, which was released in the U.S. We are talking about the consumer sentiment index from the University of Michigan. This index showed positive dynamics contrary to the pessimistic forecasts. Thus, in December the index grew up to 59.1 points while experts expected further decline down to 55 points. However, the downward dynamic of the pair is likely to be of limited nature. It's just that the aforementioned reports turned out to be in favor of the dollar, and so the bulls locked in profit, not risking to leave short positions till Monday. The notorious "Friday factor" played its role here, which weighed on the pair. But taking into account the current fundamental background, we can say with confidence: both short and long positions on the pair are risky. Even within the fifth figure. Next week, the pair is likely to experience the strongest price turbulence, even before the announcement of the Fed verdict. The day before that event, i.e. on December 13, the key report of the Consumer Price Index growth will be published in America. If it reflects further slowing of inflation growth in the US, the market will play a conditionally dovish outcome of the Fed meeting in advance, i.e. the dollar will be under strong pressure. But if the report is contradictory, it is difficult to predict the reaction. So, taking into account the high degree of uncertainty, it is risky to open longs or shorts for the pair. It is better to take a wait-and-see position. Big events of the forthcoming week will completely redraw the current picture - both fundamental and technical. Relevance up to 17:00 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/329439

Rarely have predictions for an upcoming year been so difficult and wide-ranging. But we are sure of some things, and we are doing our best to help you navigate this unprecedented uncertainty  In this article Goodbye to all that Different shades of recession The widest range of possible outcomes and forecasts 3 calls for 2023: Recession, inflation and central banks Carsten Brzeski on what he's expecting in 2023 Goodbye to all that 'May he live in interesting times' is a Chinese proverb that many of us have heard, perhaps a little too often in recent times. The list of unprecedented crises gets longer by the year. 2022 was supposed to be the year of post-pandemic and post-lockdown reopenings. But it became the year of war, inflation, energy and commodity price crises, drought and floods. It was also a year which saw a paradigm shift at major central banks, trying to fight inflation at all costs. It's where we said goodbye to low interest rates for longer and that easing bias. Central banks got all of us used to jumbo-size rate hikes and, at least in the US, the policy rate is almost back at levels last seen prior to other financial crises. 2022 was also the year of what the Germans call 'Zeitenwende' or 'game changer', at least for Europe: a war in the EU’s backyard, which is still ongoing with no end in sight; an end to cheap energy, and an end to globalisation as we knew it. Combined with the well-known longer-term challenges of population ageing, a lack of international competitiveness, and the never-ending debate on further European integration, Europe's to-do list is long. The chances are very high that the continent will have a hard time returning to a pre-crisis growth trajectory any time soon.  Different shades of recession So what will 2023 bring? A natural reflex of many forecasters is to simply extrapolate recent trends and developments into the new year. And, indeed, many of this year's issues will also be prominent in the next: war, the energy crisis, inflation, trade tensions and even Covid are likely to affect the global economy significantly. This is not the moment to identify potential new black or grey swans... nor even pink ones. Our predictions and calls for 2023 reflect our base case: median forecasts backed by this year’s events and assumptions. We expect to see several different shades of recession in 2023. We should get a rather textbook-style recession in the US with the central bank hiking rates until the real estate and labour markets start to weaken, inflation comes down, and the Fed can actually cut policy rates again.  Expect a recession that feels but doesn’t read like a recession in China with Covid restrictions, a deflating real estate market and weakening global demand, bringing down economic activity to almost unprecedented low levels. And finally, look forward to an end to the typical cycle in the eurozone, where a mild recession will be followed by only very subdued growth, with a risk of a 'double dip', as the region has to shoulder many structural challenges and transitions. These transitions will first weigh on growth before, if successfully mastered, they can increase the bloc’s potential and actually add to growth again. The widest range of possible outcomes and forecasts Inflation will continue to be one of the key themes of 2023. We expect it to come down quickly in America, given the very special characteristics of the US inflation basket, allowing the Fed to stop rate hikes and eventually even cut before the end of the year. In the eurozone, inflation could turn out to be stickier than the European Central Bank would like and also perhaps afford. Still, with interest rates entering restrictive territory in early 2023, the looming loss of economic wealth and a large need for investment, the bank will be forced to stop earlier than it perhaps might like. Or, alternatively, it could commit a policy mistake if it hikes rates far beyond mildly restrictive levels. In any case, we are entering a year with the widest range of possible outcomes and forecasts in years. And this is not even taking into account potential blind spots such as the start of a pandemic or a war in Europe that markets simply did not have on their radar screens at the end of 2019 or 2021. It is both interesting and challenging, for the economy, for financial markets, for companies, for households but also for economists like us. 'May he live in interesting times'. A friend of mine just told me that this is actually not a Chinese proverb but more a curse. We shall see. In any case, Merry Christmas and a Happy New Year.   This article is part of ING’s Economic Outlook 2023: ‘May he live in interesting times’ 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   View 21 articles

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

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

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. The dollar may strengthen again. A strong US economy and aggressive interest rate hikes are strong assets for the US dollar, but not the only ones. The USD index rose as a result of strong demand for safe assets at a time when fear dominated the markets. A deep recession would increase the demand for the US dollar as a safe-haven asset. Read next:The Fed And Slowing Down The Pace Of Rate Hikes On Last Meeting This Year?| FXMAG.COM EUR/USD This week the pair started at 1.0545. This level was followed by a weekly high of 1.0585. On Wednesday, the pair met the expectations of ING economists and moved around 1.0400, thus reaching the lowest levels of the week at 1.0452. The mood was gloomy and the bulls had challenges ahead. The pair gradually recovered from losses and returned to trading above 1.0500. Currently, the pair is trading at 1.0572 There were no economic events during the week that could significantly affect the currency pair. On Wednesday, the euro received support from the eurozone as the domestic gross production reading was higher than expected. Moreover, the weak us dollar during the week added strength to EUR/USD. EUR/USD price movement will depend on the Federal Reserve and the European Central Bank. Next week the central banks will sum up the year results and outline further prospects. EUR/USD Weekly Chart GBP/USD The cable market started the week well at 1.2295. On the same day, GBP/USD hit its highest level of the week, trading at 1.2336. Tuesday and Wednesday were the weakest days for the couple. Just like EUR/USD, the pound/dollar also hit a low on Wednesday, dropping to 1.2107. After that, the pair rose and recorded a correction. Currently, the price of the pair is at 1.2239. This week has been empty in terms of reports. The movement of the pair was influenced mainly by the situation of the dollar. Next week brings a lot of emotions among traders. British reports will open in the coming week with data on industrial production and GDP for October. This report presents aggregated economic data and will have a major impact on the Bank of England's monetary policy decision (Thursday). GBP/USD Weekly Chart AUD/USD The pair of Australian dollar (AUD/USD) started the week at 0.6799. Like the British pound, the Aussie hit a weekly high on Monday. The highest price level was 0.6848. Then the pair began to wane. Following the trend of currencies from the old continent, Wednesday was the lowest level of the pair, 0.6672. And just like the pairs above, AUD/USD tried to recover. The pair closed the week at 0.6772. China's announcement of easing covid restrictions added support to the Australian dollar. On Tuesday, the Reserve Bank of Australia recently raised its key interest rate by 25 basis points to 3.1%, but the bank's decision did not add strong support to the AUD price. AUS/USD Weekly Chart USD/JPY USD/JPY started the week at a low of 134.4900, on the same day it recorded a weekly low of 134.1300. The upward trend continued until Wednesday. On that day, the Japanese yen pair peaked at 137.8010. There were declines after that. The week ended with USD/JPY at 135.0740 Undoubtedly, the weakness of the dollar and the statement of the representative of the Bank of Japan added support to the Yen. USD/JPY Weekly Chart Source: investing.com, finance.yahoo.com

The European Central Bank meets next Thursday and looks set to slow the pace of aggressive interest rate hikes as inflationary pressures finally show signs of abating. Read naxt: FX: Movement Of Major Currency Pairs This Week| FXMAG.COM Forecast The ECB has already raised its main lending rate by 2% since July in three separate increases. The ECB is due to meet again on December 15 amid expectations that rate will be increased again. Comments from ECB officials this week saying inflation was probably close to its peak have bolstered expectations that the central bank is likely to slow its pace of interest-rate increases to half a point from 75 basis points previously, on December 15. Markets anticipate a 50 basis point, or half point, rate hike after two straight increases of 75 basis points each, slowing the pace of tightening. Recent comments from ECB officials wouldn’t lead one to believe that a pace decrease is in sight but market participants are still leaning towards a smaller rise, with 55bps priced in, after 75bps hikes in September and October. The dovish emphasis came from the October meeting minutes which highlighted the progress that had been made from removing the accommodative policies. In its October decision, the ECB said "substantial progress" had been made in withdrawing policy accommodation and the lags involved in the transmission of the earlier tightening measures. But the ECB is likely to stay hawkish and investors will also look for clues on where the deposit rate is going. Deutsche Bank economists see the terminal rate at 3%, with risks skewed to the upside. The ECB meeting coming after the Fed, so some may question whether the Fed’s decision will have an impact at all. Data A sharp slowdown in inflation in the US in October and the eurozone in November has encouraged investors to believe the worst may be over in terms of price pressures, causing global yields to drop sharply in recent weeks. Germany's 10-year bond yield, seen as the benchmark for the eurozone, rose one basis point to 1.8%, while the Irish and French 10-year yields traded at around 2.3%. Many investors say the sharp drop in eurozone yields has gone too far, given that annual inflation is still running at 10% and that the ECB is set to raise rates to at least 2% next week. Eurostat said area inflation rose 10% in the year to November, which is a decline on October's 10.6% and lower than the consensus expectation amongst economists for a reading of 10.4%. Excluding food, fuel, alcohol and tobacco, inflation is at 5% and pipeline pressures remain abundant. Closely-watched business activity data points to a mild recession and latest forecasts should show how the ECB views the coming slowdown. In September, it forecast 0.9% eurozone growth in 2023, a significant downgrade from its June prediction. Recent reports have shown that employment rose slightly and the GDP Y/Y and GDP Q/Q readings turned out to be higher than expected. GDP Y/Y increased to 2.3% against the expected 2.1%, while GDP Q/Q increased by 0.1% to 0.3%. A positive GDP reading may influence the ECB's decision. Retail sales in Europe continue to fall. It came down to -2.7% in October, which is far worse than the expected. EUR/USD Euro exchange rates would be set to benefit if the European Central Bank (ECB) defies expectations next week by hiking 75 basis points, an outcome some economists say is likely. A 50bp move would therefore be a neutral outcome for the Euro to Dollar exchange rate. Source: investing.com, ecb.europe.eu

    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)  

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

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

This week is one of the most macro-packed so far this year, with four major central banks holding their final policy meetings of the year, plus consumer inflation data from the United States that could be instrumental in determining the outlook for U.S. interest rates and the dollar. The U.S. Federal Reserve, the European Central Bank, the Bank of England and the Swiss National Bank will all release rate decisions. Overall, risk assets came under pressure on Monday despite further signs from China that it may be moving away from its very restrictive Covid-19 policy. Read next: Rivian Break Down Of Joint Venture Negotiations With Mercedes | Amgen Inc. Begins Action to Acquire Pharmaceutical Company Horizon Therapeutics| FXMAG.COM Euro Holds Above $1.05 Ahead of Key Policy Meetings A package of positive readings from Great Britain appeared. Against the yen the dollar rose 0.2% EUR/USD EUR/USD has been rising since reaching a 20-year low of 0.9536 in October. The rate reached the level of 1.0595, but was unable to break the breakout point and the previous high at 1.0615 and 1.0638 respectively. It is currently trading around the 1.0560 level with an upside bias. The euro is weaker today as the US dollar gains ahead of a crucial week of central bank meetings and data. There are no key macro economic events for the EUR/USD pair today. The European Central Bank is expected to deliver a dialed-down 50 bps rate hike on Thursday. Meanwhile, all eyes turn to CPI numbers from the US due on Tuesday GBP/USD The overall look of the cable market looks bearish. The GBP/USD pair is currently trading close to the level it closed last week at 1.2239. On the daily chart, we can see that the price of the cable has increased to this level. Trading on the daily chart shows the price around 1.2280. The British pound was subdued in reaction to the breaking of British GDP this morning, however, after the start of the European session, the reaction may be more positive. Other reports were also positive with only Industrial Production (MoM) (Oct) dropping to 0.0%. Source: investing.com GBP/USD daily chart AUD/USD The Australian dolar was last down 0.4% at $0.6772. Today, the AUD/USD pair reached 0.6795 during the day and then started to fall. On the daily chart, we can see that the pair is trading at 0.6756. USD/JPY USD/JPY started the week with gains. The pair rose from 135.0740 – the last week close level - to 136.8440 - current trade. This means that the Japanese yen is negatively compared to the US dollar. In other words against the yen the dollar rose 0.2% Today there were reports of the Japanese PPI, which was higher than expected. Year on year PPI reached 9.3% and PPI m/m 0.6% However, they did not support the yen. The last statement of the representatives of the Bank of Japan still plays a role. Bank of Japan Governor Haruhiko Kuroda recently said it was too early to discuss the possibility of reviewing the central bank's monetary policy framework. However, an analyst close to policy makers suggested that the BoJ may drop the 10-year bond yield cap as early as next year. Source: investing.com, dailyfx.com, finance.yahoo.com

On Monday, the movements of the euro and the pound were comparable, although the news background was only present in the UK and absent from the US and the EU. However, both instruments initially decreased (even at night), increased, then again decreased. The beginning of the new week turned out to be calm, but the market may face several unexpected decisions and events. This week will feature various events, as I've mentioned in previous articles, that have the potential to impact the market's mood significantly. Of course, the Bank of England, ECB, and Fed meetings are first and foremost. I previously stated over the weekend that it would be appropriate for the ECB and the Bank of England to continue raising interest rates by 75 basis points, which is the same rate as at the previous meeting. But several studies and economist surveys indicate that all three central banks can raise interest rates by 50 basis points. A few weeks ago, such a turn of events might have warranted some skepticism, but not anymore. Analysts' and other agencies' predictions typically come true. It rarely happens that the market correctly predicts the central bank's future course of action. This is because a few weeks before the meeting, the bank's representatives start preparing the market for this decision. This is the situation, at least in the case of the Fed. Members of the ECB and the Bank of England made significantly fewer comments, but even in them, one could detect the hesitation to increase the rate by another 75 points. In Europe and the UK, there are concerns about a recession. In the USA, people are also afraid of it. However, based on the state of these nations' economies, neither the United States, the European Union, nor Britain has much fear of it. If not, how else can we explain the sluggish pace of tightening monetary policy in the EU and Great Britain at a time when inflation hasn't even started to decline? In America, Finance Minister Janet Yellen said on Monday that the American economy could face a recession in 2023. However, she believes that it is not a bad thing because there is maximum employment in the nation. She pointed out that the country did not currently require such high growth rates because the economy recovered quickly from the pandemic. The Fed will continue to take all necessary measures to ensure that inflation declines and economic growth are slow because bringing inflation to target levels is of far greater importance. The most crucial factor, according to Yellen, is preventing job losses. After inflation slows down, economic growth can resume. Recession is thus a possibility in the US, but it's more likely in the UK and the EU. The US dollar should take advantage of this opportunity. 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. The likelihood of this scenario is increasing, and there is a chance that the upward portion of the trend will become even more extended and complicated. 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. Thus, I advise sales with targets located near the estimated 0.9994 mark, which corresponds to 323.6% Fibonacci   Relevance up to 06:00 2022-12-14 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/329623

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%.

When the ECB meets for the last time this year, it is likely to give markets a stern warning on inflation. This should push yields up as we see limited downside below 1.75% and 2.5% for the 10Y Bund and swap rates, respectively, even in 2023. For now, the impact on EUR/USD should not prove long-lived. Here are our four scenarios with market implications Source: ING A hawkish ECB will push yields up The European Central Bank's job is not yet finished. Far from it. There is still much work to be done on inflation before the central bank can end its hiking cycle, and the drop in market rate expectations in recent weeks means the risk of a 75bp hike has increased. Still, 50bp remains our base case at this meeting although this will likely come with a stern hawkish warning on inflation. This should steer the short-term direction of euro rates. The drop in 10Y Bund yields and 10Y swap rates has stalled above 1.75% and 2.5% respectively, and we think a retracement higher will be triggered by the ECB’s tone. Current valuations don’t leave much space for rates to drop further in 2023 This should also set the tone for rates in 2023. As we wrote in our rates outlook, current valuations don’t leave much space for rates to drop further in 2023, even in the case of a deeper-than-expected recession, as our economics team forecasts. At around 2.5%, 10Y swap rates are already where we see the ECB’s terminal rate in this cycle. This isn’t high enough for markets to price subsequent cuts, and so the case for curve inversion is much weaker than, say, in the US. In fact, we think long-end EUR rates should rise by 2024, as the curve re-steepens thanks to quantitative tightening, and possibly on a greater inflation premium. If there is any downside risk to rates, it is to the front end of the curve. The swap curve implies a terminal rate of 3%, 50bp above our own estimate. This is likely to only affect rates up to the 2Y point, however, as the impact on longer tenors will be dented by the fact that forwards currently price subsequent cuts that aren’t likely to materialise. The Estr swap curve is pricing a 3% terminal rate in 2023, and then cuts in 2024 Source: Refinitiv, ING The QT dog that didn't bite bonds One compromise between the hawks and doves could be that a ‘downshift’ from 75bp to 50bp is accompanied by a faster quantitative tightening timetable. This meeting shouldn’t be about making final decisions on the size or timing of the reduction of its bond portfolio, but about highlighting its guiding principles. Our view is that the ECB will phase out reinvestments of its Asset Purchase Programme portfolio throughout 2023 by gradually removing the reinvestment cap. Perhaps in part because no decision is expected at this meeting, sovereign spreads have failed to react. In fact, they’ve been happy to tighten alongside the improvement in risk appetite on global markets. 200bp seems a more natural home for 10Y Italy-Germany spreads than any level below If we’re right in saying that core rates are headed higher around this ECB meeting, this implies the same is true for sovereign spreads, and this is before accounting for the risk of a hawkish surprise on QT. In a world where the ECB tightens policy, via rate hikes, by draining liquidity, or via QT, 200bp seems a more natural home for 10Y Italy-Germany spreads than any level below. Bear in mind, too, that January will fire the starting gun on a highly seasonal primary market for bonds. We wouldn’t be surprised to see sovereign yields rise relative to swaps in the first quarter before resuming their tightening for the rest of 2024. Faster TLTRO repayments and more bond lending helped narrow swap spreads Source: Refinitiv, ING Balance sheet reduction gaining traction with TLTRO repayments QT is but the next step in the ECB’s plans for reducing its balance sheet. The first steps were already made in October with the revision of the terms for targeted long-term refinancing operations (TLTRO) and giving banks more opportunities to repay these ahead of their final maturities. Taking into account the latest sizeable repayment announcement, the outstanding TLTROs will have declined by €796bn to €1.3tn before the year is out. TLTRO reductions could provide the doves with leverage to press for less aggressive QT That should still pitch the level of excess reserves in the banking system at around 4tn, still sufficiently high to leave spot spreads of 3m Euribor over the risk-free ESTR OIS unimpressed. Yet futures contracts are already implying a decent widening towards 16bp by the end of the first quarter of 2023. Lower excess reserves with further repayments will likely make Euribor fixings more sensitive to credit risk again. The more immediate impact surrounding the TLTRO developments has been the easing of collateral scarcity fears, particularly at year-end. The pricing of German sovereign paper versus swaps has started to ease dramatically with the 2Y Schatz ASW spread now close to 70bp after witnessing levels above 110bp in October. In the overall bargaining between ECB hawks and doves that will take place this week, the TLTRO reduction could provide the dovish camp with leverage to press for a less aggressive approach on QT. But that has to be weighed against the notion that QT may be one of the few levers the ECB has left to steer financial conditions determined by longer-dated rates. FX: The ECB remains a secondary driver for the euro The recent rally in EUR/USD has been driven by a combination of a weak dollar environment and a slight improvement in growth sentiment in the eurozone. But, when looking at EUR/USD moves in the second half of 2022, it’s hard to isolate a clear and direct impact of ECB policy/rate expectations; we have long highlighted how our quantitative tools show a very small beta of the EUR-USD short-term swap-rate differential to EUR/USD. Recently, this relationship has modestly restrengthened, but in our view, this mostly reflects the positive impact of easing Federal Reserve hike expectations on global sentiment (to which EUR/USD is highly sensitive) rather than a direct impact on the pair. All of this means that the implications of this ECB meeting on the euro may not prove very long-lasting, and global market factors - like risk sentiment and energy prices - should move back into the driving seat quite rapidly. Still, while the reaction to the latest ECB announcement has been rather contained in the FX market, we could see stronger volatility in EUR/USD on this occasion as markets could receive some guidance on quantitative tightening and new projections will be released at the same time. Given growing speculation around a 75bp hike, we could see a small negative reaction in EUR/USD should our 50bp call prove correct. However, the downside should be limited if the ECB offers some hawkish guidance on QT. Read this article on THINK TagsInterest Rates Foreign exchange ECB meeting 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 dollar was stable on Tuesday ahead of the release of the US inflation data and the last Federal Reserve meeting this year, and investors waited for an updated interest rate outlook. US stocks rose on Monday as investors gained confidence in experts' forecasts of a 7.3% increase in the US consumer price index in November. If this forecast comes true, it will be the fifth consecutive decline and the lowest level in 11 months. Even if this would still leave inflation well above the Fed's 2% target, it may be enough justification to hold back the pace of monetary policy tightening EUR/USD The rate increased slightly to 1.0543 from 1.0538. The EUR/USD daily range is 1.05281 - 1.06287 Today's data from Germany on CPI met expectations, holding the level of 10%. Source: investing.com The EU ZEW economic sentiment index improved to -23.6 in December from -38.7 in November, data released on Tuesday showed, but it still points to more pessimism than optimism. Thursday's meeting of the European Central Bank remains the focus of the week, at which an interest rate hike of 50 basis points is expected. Read next: The Huge Order Boeing 787 Dreamliners By United Airlines | Former FTX CEO Sam Bankman-Fried Was Arrested| FXMAG.COM GBP/USD The pound was broadly stable on Tuesday as gains from the UK employment data were offset by caution ahead of a key US consumer inflation reading. Also, today's UK data could ignite the cable rally fuse should the US CPI data be bound. The release of employment data showed that unemployment met estimates, while wages and the employment rate improved. The number of employees on the payroll increased by 107,000. to a record level of 29.9 million. The number of job vacancies recorded a fifth straight decline, reflecting the uncertainty stemming from economic pressure on recruitment. Wage growth turned out better than expected, with both total and regular wages increasing by 6.1% y/y, which is the fastest rate in history outside of the pandemic. The forecast for core US inflation YoY is 6.1% while overall inflation YoY is expected to come in at 7.3% compared to October’s print of 7.7%. Sterling recently rose 0.2% to $1.2296 ahead of the Bank of England's (BoE) policy decision on Thursday. Last week it hit a nearly six-month high at $1.2345. The Bank of England meets Dec. 15, when a 50 basis point rate increase is expected. USD/JPY USD/JPY hit a 32-year high of 151.95 in October, the day the Bank of Japan intervened for the second time to prevent the yen from depreciating. From this peak, the price is in a downtrend channel. The general mood of the pair is bullish. The Japanese yen stabilized below 138 to the dollar. Price is now approaching the upper band of the channel but is struggling to break above the breakpoint and recent high of 137.67 and 137.86 respectively. USD/JPY Pair slipped to 137.3270 from 137.6498 In a recent announcement, Mana Nakazor, a potential candidate for Vice Governor of the Bank of Japan next year, said the central bank should change its policy statement to give itself more room to adjust interest rates. She suggested that the Bank of Japan should "admit that interest rates may go up or down depending on economic developments" and that he should signal that "massive monetary easing will be over". The Bank of Japan is expected to maintain its monetary policy stance at its next meeting on December 19-20. Source: investing.com, dailyfx.com, finance.yahoo.com

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)

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

Production fell by 2% in October with declines across the board in the large countries. As the positive effects of easing supply-side issues fade, the outlook remains bleak for the winter months A factory in the Netherlands   Industrial production has started the quarter poorly, although we have to note that this is a volatile data series. As we have noted in recent months, Ireland continues to impact the overall figure with huge swings in production on a monthly basis, but October also saw consistent declines among the largest economies: -0.9, -2.6 and -1% in Germany, France and Italy, respectively. Overall, the trend in production is stagnant at the moment as production has moved more or less sideways since late 2020. Industry is dealing with slowing new orders but at the same time, is seeing some relief from easing supply-side problems. That dampens the negative impact on production to a degree as this results in some catch-up production. This has resulted in a rebound in car manufacturing in recent months, for example. Although October saw a small decline in production, car manufacturing is up 25% since March. From here on, the outlook for the manufacturing industry remains bleak. The slowing trend in new orders is set to continue as goods consumption is experiencing a broad correction at the moment. At the same time, energy prices have increased again, which will continue to dampen the performance in energy-intensive industries. As post-pandemic effects fade, expect weaker production figures over the winter months. Read this article on THINK 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  

Dollar bears have come out of hibernation. After gaining 16% in the first 10 months of the year, the dollar index, which measures the dollar against a basket of currencies, lost 5% in November. It has since fallen another 1%, reflecting a smaller-than-expected increase in consumer prices in November. Fed ahead In currency markets, the dollar fell again after tumbling against a range of major currencies on Tuesday. The dollar is also facing more headwinds. The Federal Reserve is expected to reduce the scale of future interest rate hikes, which would allow other central banks to close the interest rate gap that attracts investment to the United States. US interest rates, which are the lower bound on both government and corporate bond yields, range from 3.75% to 4%, which is well above rates in other major economies such as the Eurozone where the deposit rate is 1.5%, or Japan, where interest rates are actually negative. Today the Fed will make its last decision of the year. Futures pricing shows markets expect the Fed will slow the pace of hikes. The latest rate hike is expected to raise rates by 50 bp this time. Fed officials say interest rates will go up. They want investors to focus on trajectory, not pace, and are signaling that interest rates could peak above market-expected 4.8% and stay there for most of 2023. If the Fed sticks to the "higher for longer" mantra central banks in Europe, the UK and China will struggle to catch up given the volatile state of their economies. EUR/USD The EUR/USD benefited from the release of inflation data, breaking the level above 1.06. The euro rose by 0.9% yesterday, and the pan-European Stoxx 600 index saw gains of 1.29%. However, the European Central Bank is also getting ready for a 50bps rate hike tomorrow. In Europe, the ECB will announce its latest monetary policy decision tomorrow. Both the Fed and the ECB are expected to raise interest rates by 50 basis points, keeping the rate differential between them the same, but central banks may differ in their forecasts for the coming months. Differences in the forecasts of the two central banks for the coming months will determine where EUR/USD will trade in the short to medium term. Read next: "Candid Stories" - Instagram like BeReal? Supermarkets Are Doubling The Number Of Their Own Product Lines | FXMAG.COM GBP/USD Yesterday, GBP/USD opened the prospect of a move towards 1.2750 after breaking 1.2300. The pound rose by 0.82% against the dollar yesterday to reach a 6-month high. The upward price movement was due to newly released inflation data from the US. Today, decisions on monetary policy will be announced by the Fed, and on Thursday, next to the ECB, the Bank of England. The Bank of England will have to contend with the biggest drop in living standards in history as the energy crisis, fiscal austerity and lack of growth eat into British household budgets. After positive GDP data on Monday, UK Chancellor Jeremy Hunt warned that the economy could get worse before it got better. While yesterday's employment figures were largely positive, they indicated a slowdown in employment as firms prepare for a tough start to 2023. The Bank of England released its Financial Stability Report yesterday, warning that 2023 will be a tough year for British households due to a combination of falling real incomes, rising mortgage costs and higher unemployment. AUD/USD The Aussie Pair benefited from lower-than-expected US inflation. Yesterday, the pair was trading low in daily levels in the 0.6733-0.6793 range. Today, the quotes are higher above 0.68, oscillating close to the highest levels in three months The lack of events on the Australian market makes the AUD/USD pair dependent on reports and events from America. USD/JPY The Japanese yen held its recent advance to below 136 per dollar. Yesterday, the USD/JPY traded above 137. The decline will occur after the release of US inflation data. The drop took place from the level of 137.2760 to the level of 135.3800. Currently, the pair is trading at a price of 135.0040.   Source: finance.yahoo.com, investing.com, dailyfx.com

Summary:  The FOMC meeting and accompanying economic and Fed Funds projections saw the Fed attempting to bolster its inflation fighting credibility with forecasts of a weaker economy and higher inflation and policy projections than in September. But after some back-and-forth churning, the market decided it was largely a non-event, with very minor shifts in the USD and US yields. Today, we have four more G10 central banks on the menu.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) The market initially took the hawkish FOMC rate and inflation projections at face value last night, plunging sharply, if briefly, before rebounding slightly into the close. The trading ranges for the main indices are generally sandwiched in a narrow zone between important support and resistance. In the case of the S&P 500, the upside range high is clearly marked at just above 4,100, while the downside support level comes in the 3,900-20 area. FX: The USD merely churned around with little conviction on latest hawkish Fed blast The new FOMC monetary policy statement and economic and policy projections (more below) were hawkish as the Fed raised the median policy forecast for the end of next year to above 5%, but after a volatile reaction, traders decided they were unimpressed and the US dollar largely fell back to where it was trading ahead of the meeting as only the shortest part of the yield curve was marked slightly higher in recognition of the Fed’s hawkishness and risk sentiment stabilized. If the market is willing to ignore Fed guidance, what should we expect from the market’s treatment of today’s central bank meetings? Watching USDJPY cycle lows and the 200-day moving average where the pair is sticky (currently near 135.65) and the cycle top in EURUSD just ahead of 1.0700 after yesterday’s stab at posting new highs. Crude oil (CLF3 & LCOG3) Crude oil trades softer ahead of the reopening of a key pipeline in the US and following a strong session on Wednesday where prices found support after the IEA warned 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 and more gas-to-oil switching. Overall crude consumption is expected to rise 1.7mb/d next year to average 101.6mb/d. China’s reopening and a weaker US dollar despite the Fed’s hawkish shift in the dot plot also underpinned prices, while the unexpectedly large 10mb increase in US inventories and signs of slowing demand for gasoline and diesel were shrugged off. Both Brent and WTI are now facing resistance at the 21-day average, at $83.25/b and $77.80/b respectively. Gold (XAUUSD) was little changed after the FOMC raised its terminal rate forecast ... and Fed Chair Powell said the central bank isn’t close to ending its battle against inflation. Supported by ten-year US yields holding steady around 3.5%, the most inverted yield curve in four decades on recession angst and the dollar trading near a six-month low. However, following a 180-dollar rally during the past five weeks and after struggling to break resistance around $1808 this week, the metal increasingly looks ripe for a period of consolidation which may see it drift lower towards $1745, the 38.2% retracement of the run up since early November. A correction of this magnitude may setup an eventual and potential healthier and robust attempt to break higher. US treasury yields underwhelmed by FOMC meeting (TLT:xnas, IEF:xnas, SHY:xnas) The FOMC accompanying projection materials saw the Fed projecting significantly higher inflation for 2023 than expected, and a higher median Fed Funds rate projection just north of 5%. This sparked a sharp reaction in Treasury yields, with the 2-year rising more than 10 basis points briefly before sawing that move in half, while the 10-year yield only rose about 5 bps before wilting back just below 3.50%. Incoming data will set to the tone from here as the market was largely unmoved by the Fed’s rather bold rate projections of its policy rate and inflation for 2023 in last night’s FOMC meeting. 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 is going on? 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. The 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. The 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. 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. What are we watching next? The 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. ECB is 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 of 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 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. Norges Bank and Swiss National Bank also up this morning The Swiss National Bank is expected to hike another 50 basis points, taking its policy rate to 1.00%, with little anticipation of pointed guidance coming into this meeting as Swiss inflation has peaked at 3.50% for the cycle and was 3.0% for the most recent print. The Norges Bank, meanwhile, seems more interested in signaling that policy tightening is set to cease and may indicate that today’s expected 25 basis point hike to 2.75% could be the last for now as it is concerned about weakness in the “mainland” (non-oil & gas) economy after the worst Regions Survey outlook since the global financial crisis. Earnings to watch The big name reporting today is Adobe Inc., the former high-flyer that trade north of 700 before rolling over to below 300 on the rise in interest rates and as its steady pace of top-line growth decelerated in recent quarters. The stock closed yesterday at 339. Many highly-valued growth stocks have been extremely sensitive to both execution for the current quarter and revenue expectations for the coming quarter, so traders should brace for this earnings report after market hours today. Today: Adobe Friday: Accenture, Darden Restaurants 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 Economic calendar highlights for today (times GMT) 0830 – Switzerland SNB Policy Rate Announcement 0900 – Switzerland SNB press conference 0900 – Norway Norges Bank Deposit Rate announcement 1200 – UK Bank of England Rate Announcement 1315 – Eurozone ECB Rate Announcement 1315 – Canada Nov. Housing Starts 1330 – US Dec. Empire Manufacturing 1330 – US Nov. Retail Sales 1330 – US Weekly Initial Jobless Claims 1330 – US Dec. Philadelphia Fed Business Outlook 1345 – Eurozone ECB Press Conference 1415 – US Nov. Industrial Production 1530 – EIA's Natural Gas Storage Change 1900 – Mexico Rate Announcement 0001 – UK Dec. GfK Consumer Confidence Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source:Financial Markets Today: Quick Take – December 15, 2022 | Saxo Group (home.saxo)

US Dollar Index rebounds from six-month low, snaps two-day downtrend. Fed announced 50 bps rate increase, showed readiness to keep it higher for long. A reassessment of Fed’s rate bias seems favoring US Treasury yields and the greenback. Multiple central bank announcements, US Retail Sales eyed for fresh impulse. US Dollar Index (DXY) remains mildly bid around 104.00 as it prints the first daily gains in three during the early Thursday morning in Europe. In doing so, the greenback’s gauge versus the six major currencies traces the firmer US Treasury bond yields amid sluggish market sentiment. That said, the DXY initially failed to cheer the US Federal Reserve’s (Fed) 0.50% interest rate hike and the readiness to keep it higher for long as traders didn’t find anything new from the statements or Fed actions that were unexpected. However, a reassessment of the Federal Open Market Committee’s (FOMC) moves highlights upward revision of inflation forecasts and a cut in the growth forecasts, as well as the 5.1% terminal rate, as the key hawkish actions and propelled the US Treasury bond yields and the DXY. 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 That said, the US 10-year Treasury bond yields probe a two-day downtrend near 3.50% while the two-year US bond yields also extend recovery from the monthly low while printing the first daily positive in three near 4.25%. Also likely to have stopped the US dollar’s downside could be the cautious mood ahead of the multiple central bank announcements, including from the Swiss National Bank (SNB), European Central Bank (ECB) and the Bank of England (BOE), etc. Amid these plays, the S&P 500 Futures remain directionless while the Asia-Pacific shares grind lower. Moving on, the aforementioned central bank announcements will join the US Retail Sales for November, expected -0.1% MoM versus 1.3% prior, to direct short-term DXY moves. Technical analysis A one-month-old descending support line, close to 103.50 by the press time, joins the oversold RSI conditions to tease DXY bulls. 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 Also read: US Dollar Index Price Analysis: Monthly support teases DXY bulls amid oversold RSI

Business sentiment remained stable in December and is still above its long-term average. If this is confirmed by the other indicators, it could mean that the French economy will escape the contraction of activity in the fourth quarter. The recovery after the winter is likely to be sluggish The business climate in France remained stable in December for the fourth consecutive month   The business climate in France remained stable in December, at 102, for the fourth consecutive month. It remains above its long-term average. Stability can be seen in the service sector, industry, and construction. While the assessment of order books, especially foreign ones, continues to deteriorate, the production outlook seems to have improved slightly, and the assessment of past production rebounds. In addition, sentiment is improving in the retail sector, thanks to an increase in order intentions. Employment sentiment rebounded in December to 111 from 107 in November, as companies still seem ready to hire. Business leaders' opinions on price expectations for the next few months are once again on the rise, signalling that inflationary pressures are far from easing in France. Overall, the picture painted by the business climate indicator is one of stability for the French economy in the fourth quarter of 2022. If this were to be confirmed by the other indicators, it could mean that the French economy escapes the contraction in activity in the fourth quarter, or even grow slightly. However, the sharp deterioration in the PMI indices in November and the significant contractions in industrial production and consumption in October make us cautious about the stabilisation signal sent by the business climate. The probability of a recession this winter remains high. 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 Beyond the recession, the question of recovery after the winter is very important. We believe that the recovery will be sluggish. Indeed, household purchasing power is still deteriorating. Energy prices are likely to remain high throughout 2023 and the winter of 2023/2024 holds a major supply risk. Public finances, which have largely mitigated the impact of the economic shock, are likely to be less generous, which will slow the recovery. Finally, rising interest rates will have an increasing impact on the most interest-sensitive sectors. Ultimately, we expect sluggish economic growth in all four quarters of 2023, leading to stagnant GDP for the year as a whole. Inflation will rise again in early 2023, before falling very gradually. Changes to the tariff shield, which was implemented by the government to freeze gas prices amid rising costs, mean energy bills will rise by 15% in 2023 compared to 4% in 2022, leading to a sharp rise in inflation. As many more general price revisions can only take place once a year, food and service inflation is expected to rise sharply in the first quarter. French inflation should therefore be higher in 2023 than its average level in 2022. We expect 5.8% on average for the year, compared to 5.3% in 2023.   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 Read this article on THINK TagsInflation GDP France Eurozone Business climate 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

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

You can disbelieve the Fed as much as you like, but going against it is like death. Gold perfectly understands this, reacting sensitively to monetary policy. And if the lion's share of FOMC officials predicts that the federal funds rate will rise by 75 bps in 2023, to 5.25%, and not by 50 bps, as the futures market expected before, then it would be nice for the bulls on XAUUSD to fix part of the profit on longs. Inflation is still very high by historical standards, the Fed's work is not yet done, and all this means that a stable upward trend in precious metals should not be expected. There will be serious pullbacks. Fed forecasts for the federal funds rate In fact, FOMC members are human beings first and foremost, and human beings make mistakes. At the end of 2021, the Committee predicted an increase in the cost of borrowing by 75 bps, to 1%, but in fact the rate rose to 4.5%. Twelve months ago, there was hope that inflation would slow down on its own without much intervention from the central bank. Now the dominant idea is that prices can be reduced to 3%–4%, but further movement towards the target looks very problematic. If not impossible. 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 In any case, the current 7% CPI is still very high, and it is inappropriate to say that the Fed's job is done. The further trajectory of the federal funds rate will depend on new data. Its 50 bps hike in February is not out of the question, which brings back investor interest in the disgraced U.S. dollar. Gold is anti-dollar and usually goes down when the American currency goes up, so the decline of the XAUUSD quotes looks quite logical in response to the hawkish rhetoric of the Fed. Dynamics of the U.S. dollar and gold What's next? In my opinion, the fall of the USD index has gone too far, and it would be nice for the precious metal to go for a correction amid profit-taking on longs by speculators. If the nearest U.S. macro statistics convince of the strength of the economy, the chances for the federal funds rate to rise to 5% in early February will increase, and the U.S. dollar will strengthen. On the contrary, worsening data will benefit Treasury bonds. Rising prices for these papers leads to a decrease in yields and turns on the green light before EURUSD and gold. 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 depends on the main currency pair. The share of the euro in the structure of the USD index is 57%. At the moment, EURUSD remains stable due to the expectations of the ECB's "hawkish" rhetoric at the December 15 meeting. If the market is disappointed, the pair will collapse, dragging XAUUSD with it. Technically, on gold's daily chart, the "bears" are trying to implement the Anti-Turtles reversal pattern and the inside bar. If their opponents fail to catch the lower boundary of the latter at $1,796 per ounce, it will be an evidence of their weakness and a reason to form short positions. They can be increased later on a breakout of supports at $1,789, $1,783 and $1,777. At the same time, I wouldn't be too keen on selling. As the precious metal quotes move down, we're looking for an opportunity to fix profits and reverse. Relevance up to 08:00 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/329899

The pace of hikes has slowed, but central banks have warned that more needs to be done. The ECB has been unusally clear in its pushback against market pricing. In the near term markets will have to question the sustainability of the recent rally. But look ahead into 2023 as a whole and lower yields still look like the right macro move Source: Shutterstock Slower hikes, but more needs to be done Despite having slowed the pace of hikes, central banks this week have made clear that their job is not done yet. To what degree that message got across to markets though not only depended on the determination conveyed by officials' communication, but also on the data backdrop against which those actions took place. Central banks this week have made clear that their job is not done yet US bonds for instance looked more comfortable sticking to their gains despite Fed Chair Powell signaling that rates would have to rise further. The latest two inflation prints coming in lower than expected - mind you, they are still far too high – allows the US market to have more conviction that the peak in inflation has been straddled, and now concerns shift to the downturn ahead as softer economic data undermines the Fed’s message. The Bank of England  still warned it could act forcefully after yesterday's 50bp. But as our economist writes, the Bank also showed signs of more caution given the balancing act it has to perform 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. The ECB managed to land a hawkish punch on the EUR front-end, the Fed and BoE failed to Source: Refinitiv, ING ECB offers clear pushback against market pricing The ECB is communicating against a backdrop where inflation is proving stickier - President Lagarde had a less arduous task of convincing markets from the onset than her US counterpart. Nonetheless, she was unusually strongly worded in her hawkishness, signaling further “significant” rate increases at “a steady pace”. She later clarified that this meant more 50bp rate hikes for “a period of time”. Summing it up she said that the ECB needs to do more than the market is pricing. It doesn’t get any clearer and money markets have ratcheted up their hike discount accordingly, with the terminal rate shifting up 27bp to 3.1%. That said, pricing in 123bp over the next three meetings, not quite the series of 50bp hikes, also shows markets still grappling with the tension between inflation and recession. Markets still grappling with the tension between inflation and recession To drive home the hawkish message the ECB also surprised markets by providing a concrete start date for quantitative tightening. We don’t have all technical details yet, but the 15bn on average per month that will roll off from March next year through the end of the second quarter represent roughly 50% of the overall amount maturing in that period. It is a faster start than we had anticipated and signals a readiness to pick up speed. The impact in EUR sovereign spreads over Bunds was a widening of the 10Y Italy/Bund spread by more than 10bp. It ended above 200bp for the first time since mid-November.  The QT announcement led to widened sovereign spreads but rates implied volatility is still declining Source: Refinitiv, ING Final words for the year This week’s central bank meetings point to higher rates in the short term as markets will have to question the sustainability of the recent rally, also given technical headwinds from resuming supply early next year. 2023 as a whole is shaping up to be a year of turning points. We look for market rates to peak out and drop and curves to re-steepen as rate cuts are contemplated, especially in the US. Another theme that has crystalized amid the flurry of central bank meetings is our call for a convergence of US and EUR rates. Read more about what we expect for 2023 in our rates outlook which we published in November. With that we conclude our daily coverage for this year. We wish you Happy Holidays and a successful New Year! 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

Tapering of the CSPP and CBPP3 is the next ingredient in the credit cocktail and is more severe than expected. Markets reacted to yesterday's ECB event with a mix of higher rates and a widening of CDS spreads. Credit spreads remained steady, but what will dominate? Is this a bear trap or will the bulls swim in higher yields? Faster tapering than previously expected Tapering reinvestments of the asset purchase programme (APP) will begin in March 2023, thus we will see lower reinvestments under the corporate sector purchase programme (CSPP) and third covered bond purchase programme (CBPP3). The tapering will be in the form of a decline of €15bn per month as of March until the end of the second quarter, with the subsequent pace to be determined later. Many details, such as the breakdown of which programme will see what decline in reinvestments, and the choices between bonds, have been left very unclear, but more information will come in February.   The €15bn reduction in holdings is a much faster tapering than previously expected, averaging at just 50% of reinvestments. On the back of this, we have seen some small spread widening, but nothing substantial. The big moves in rates have made yields more attractive with many buyers stepping in. However, this may be the setup of a bear trap, as fundamentally credit is looking slightly weaker. The hawkish stance of the European Central Bank (ECB) makes it clear that it is still concerned about inflation, so we could see inflation putting more pressure on corporates and ultimately credit markets in 2023. Combined with the more severe tapering, we could see some spread widening from these levels. Although long term, any widening will add more value to credit in our view, adding more magic into the credit markets, as we remain constructive on credit for the full year 2023. This of course will also be added to the list of risks and drivers of increased volatility in credit, alongside the recessionary environment, high inflation, the Russia/Ukraine war, the energy crisis and supply chain shortages. Covered bonds may be under a bit more pressure from this tapering if Bund asset swap spreads normalise further, as they are still relatively tight to begin with. As we highlighted in our report 'Tapering could be the next ingredient in the credit cocktail'. We foresee the following: The lower level of support will add to the turbulence and increase volatility, as well as reprice spreads wider, ultimately adding more value to credit. More pressure and spread widening in the case of an even faster tapering come July or an abrupt stop as the market becomes more exposed, with a large number of participants no longer active at all. Selling of holdings will have much more negative implications on spreads. Based on current oversubscription levels, deals can still get done even with lower CSPP participation. Thus, primary market activity shouldn’t struggle to price, meaning less pressure on spread widening. An indirect implication may be supply indigestion, as many corporates may push to issue earlier in the year for a better chance of having the ECB involved in the deal (this may mostly be seen in January). This will add some extra volatility and perhaps underperformance. The tapered CSPP reinvestment levels in the chart below illustrate how low reinvestments will likely be assuming an equal ratio of tapering for each programme, and assuming a continuation of a €15bn reduction. Initially, reinvestments would pick up in 2023 and support with between €2-4bn per month. Now reinvestments will be notably lower between €1-2bn per month, offering very little support from March onward. Therefore, if the ECB continues to reduce the holdings by €15bn per month, CSPP reinvestments will total no more than €11bn for the year. Forecasted CSPP reinvestments Source: ING, ECB   A pro-rata distribution of the lower reinvestments of redemptions across the different purchase programmes under the APP means that the CSPP3 will only reinvest €21bn in 2023 instead of €35bn in the event of full reinvestments. We assume here that the €15bn will remain stable from March until year-end. If reinvestments were to drop to 0 after June, CSPP3 reinvestments will sum to €16bn in the first half of 2023. At our estimate of €118bn supply in 2023 by eurozone issuers, €21bn represents 18% of the total supply by eurozone banks expected for next year. Most reinvestments are centred in the first quarter of the year when most supply is also expected. Nonetheless, reinvestments will still make up about a quarter of the amount of eligible covered bonds we expect to be brought to the market in that quarter. If 40% is reinvested via the primary market, the order size of the CBPP3 in the primary could still be around 15% in that quarter. It will likely decline to 5-10% from 2Q23 onwards. The impact on spreads will consequently likely become more meaningful from the second quarter onwards. The biggest impact on covered bonds will still come from the indirect effect on sovereign asset swap spread levels, more so than from the direct effect of the CBPP3 being less present in the primary and secondary markets. CBPP3 reinvestments of redemptions (at €15bn lower APP reinvestments divided pro-rata per programme for Mar-Dec '23) Source: ING, ECB Read this article on THINK TagsMonetary policy Inflation ECB Tapering ECB Credit Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  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)

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)

OANDA Senior Market Analyst Craig Erlam reviews the latest market news with Jonny Hart. They discussed the Fed, ECB and BoE interest rate decisions as well as the latest moves in oil. 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 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

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.

The ECB has warned that aggressive interest rate hikes are far from over, suggesting that rates for the eurozone will remain increasing just as recession begins. This statement is quite striking because even though each rise in borrowing costs helps contain inflation, it risks a more severe damage to the economy. And now that inflation is in double digits and officials predict it will remain above the 2% target in the coming years, this week's meeting set the tone for further tightening of monetary policy. Unsurprisingly, EUR/USD surged by 1,200 pips after the ECB press conference. Although the accompanying rate hike is slower than the previous ones, ECB President Christine Lagarde insisted that there are still a few half-point moves ahead. This is despite an economic slowdown that is probably taking place already. Officials are now expecting a 0.5% increase in GDP next year, following the contraction in the current quarter and another in the next three months. It could recover, but it will not go beyond 2%. Even so, the ECB did not let such a weak outlook to discourage itself from achieving price stability. The ECB plans to raise the rate by another 75 basis points, but there may be disagreements among officials next year, which will make the task of reaching consensus in the Governing Council more difficult. Relevance up to 08:00 2022-12-17 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/330019

The dollar was little changed on Friday after jumping in the previous session as traders analyzed a string of central bank rate hikes and grappled with the prospect that borrowing costs could still rise. This week has been hot in central bank events. The Fed raised its key interest rate by 50 basis points on Tuesday. Jerome Powell's speech at the press conference sparked volatility in the market.Further tightening is excellent news for the US dollar. Yesterday, the ECB and the BoE also followed the Fed and raised rates by 50 bp. GBP/USD Thursday's Bank of England rate hike of 0.5 percentage point pushed base rates to highs not seen since 2008 (3.5%). But even that wasn't enough to prevent GBP/USD from its biggest daily drop in six weeks The markets interpreted the move as a "dovish" increase in interest rates, even though six of the nine members of the Monetary Policy Committee in London voted for it, and another member wanted stricter action. This division does not suggest that the Bank is willing to refrain from further rate hikes. Thursday's close of the day showed that GBP/USD fell convincingly below the uptrend line that had previously held back bearish enthusiasm for five weeks. This puts clear downward pressure on the pair. The pound fell on Friday against the euro and the U.S. dolar. Sterling fell 0.2% to $1.2160 against the dolar, versus the euro , the pound exchanged hands at 87.39 pence, 0.2% lower on the day. EUR/USD EUR/USD touched a post-ECB high of 1.0736 yesterday before consolidating gains around the 1.0650 area. The technical set-up for the pair remains positive. Yesterday the European Central Bank raised interest rates by 50 bp as expected. Thus, the rate level reached 2.50%. This level was last seen in 2008. The ECB expects it to increase further. The European Central Bank (ECB) will raise interest rates "significantly" in the coming months to fight entrenched inflation, The ECB President Christine Lagarde said yesterday, sending a hawkish signal to the market. This signal turned out to be crucial for the strength of the euro. The ECB's hawkish stance, if fully realized, suggests that the single currency has room to grow in the coming weeks. Read next: Knorr-Bremse Strengthens Its ESG Measures In Partnership With Deutsche Bank | Arizona Is Attractive For The EV Market | FXMAG.COM USD/JPY Against the Japanese yen, the dollar fell 0.54% to 137.01 on Friday. The Japanese yen held above 137 per dollar, facing renewed pressure after the US Federal Reserve offered a more hawkish outlook on its policy. The yen clearly depreciated after the Fed meeting. However, it may fall as the Bank of Japan meeting approaches early next week (19-20/12) AUD/USD The Australian dollar fell sharply to around $0.67, facing renewed pressure as major central banks presented a more hawkish monetary policy outlook than markets anticipated, adding to fears of a potential recession next year. In the European session, it will fall even more and is below $0.67. Moreover, the latest data showed that consumer inflation expectations in Australia hit a seven-month low in December, while the country's unemployment rate remained at 3.4% in November. Investors also reacted to data showing that Australian private sector activity contracted for the third straight month in December. Source: investing.com The RBA has now raised the cash rate for eight consecutive months and said it expects further tightening to bring down inflation. Source: finance.yahoo.com, investing.com, dailyfx.com

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

Summary:  A chorus of hawkish Fed speak and weakening US PMI data, together with global tightening concerns elevating further last week, continued to weigh on risk sentiment. The Japanese yen will remain in focus amid BOJ policy review chatter as the central bank meets this week. Musk’s Twitter saga continues, weighing further on Tesla. China’s reopening concerns also remain as the Covid waves spreads rapidly, but a steady economic growth focus by the authorities is seen. Oil and gold start the week being bid. What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) retreated for the third day on concerns about the Fed’s rate path in 2023 On Friday, the U.S, stock market continued to slide for the third day in a row since Fed Chair Powell’s hawkish leaning comments on the post-FOMC presser on Wednesday. Remarks from several other Fed officials reiterating that the Fed may have a long way to go and may need to raise rates beyond the 5.1% peak projected added to the risk-off sentiment. S&P 500 shed 1.1% and Nasdaq 100 declined 0.9%. All sectors within the S&P 500 lost, with real estate, consumer discretionary, and utilities falling the most. Ford Motor (F:xnys) was the biggest losing stock within the S&P500. The automaker dropped nearly 7% on Friday after it announced a price increase for its electric truck due to rising material costs and supply chain issues. Tesla (TSLA:xnas), falling 4.7%, was the second biggest laggard with the Nasdaq 100, following Moderna (MRNA:xnas) which declined 6.7%. Adobe, gaining 3% after reporting an earnings beat, was the best performer within Nasdaq 100, followed by Meta (META:xnas) which rose 2.8% on an analyst upgrade. US Treasury yield curve (TLT:xnas, IEF:xnas, SHY:xnas) steepened as the 2-year yield fell and the 10-year yield rose The 2-year notes were well bid and finished the Friday session 6bps richer at 4.18%. The 2-year notes are now yielding not only less than the 3-month Treasury bills but also the lower bound of the Fed Fund target rate. Softer than expected S&P Global US manufacturing as well as services PMI added fuel to the demand for the front end of the Treasury curve. Hawkish comments from the Fed’s Williams, Daly, and Mester might have contributed to the selling in the long end of the curve. Yields on the 10-year notes rose 4bps to 3.48%. Hong Kong’s Hang Seng (HIZ2) and China’s CSI300 (03188:xhkg) Hong Kong and mainland Chinese stocks had a morning session on Friday. 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 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 0.4% higher. 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 outperformed, gaining 2% to 6%.  In A-shares, CSI300 was modestly lower, driven by profit-taking in semiconductor names and weaknesses in autos. Real estate and educational services outperformed. In the evening, a readout was released setting out the key results of the Central Economic Work Conference. FX: Dollar starts the new week on a weaker footing as JPY gains on 2023 policy review speculations The US dollar ended last week lower again, albeit modestly, with majority of weakness against the NOK. EURUSD also took a brief look above 1.07 on ECB hawkishness but is heading below 1.06 this morning as peripheral spreads remain a concern and continue to cast doubts on how far ECB’s hawkishness can run. USDJPY had a volatile week as a drop below 135 was not maintained despite US yields remaining capped. A fresh bout of strength in coming to JPY this morning on reports of Japan PM Kishida considering a tweak in BOJ’s 2% inflation goal next year (read below). GBPUSD also reversed back below 1.2200 after a look above 1.2400 last week. AUDUSD traded close to 0.67 to start the new week, with one eye on RBA minutes due this week but another on China reopening delays resulting from a large number of workers calling in sick. Crude oil (CLF3 & LCOG3) prices advance on China’s growth push and US refilling SPR Oil prices started the week on a firmer footing, with WTI rising towards the $75/barrel mark and Brent heading back towards $80. While there are unconfirmed reports of massive number of cases and fatalities in China from the spread of Covid, the government’s official message continues to stress upon the need to expand consumption as the key economic priority for 2023. This helps paint a better demand outlook for oil, as global demand slowdown concerns continue to mount. Moreover, it was reported that the US is starting to replenish the Strategic Petroleum Reserve (SPR), starting with a 3-million barrel, fixed-price purchase.   What to consider? Hawkish Fed speak continues A number of Fed speakers on Friday continued to highlight the case for higher-for-longer inflation as investors give too much weight to peaking inflation in the US. Fed’s Daly (non-voter in 2023) said she was prepared to hold peak rates for more than 11 month if necessary, and highlighted the core services ex-housing inflation which is still quite elevated. Mester (non-voter in 2023) said she expected the Fed to hike more than its median forecast, and the Fed will need to maintain rates for an extended period once hikes are done. Williams (2023 voter) said it is possible that Fed hikes more than terminal rate forecast. US flash PMIs send warning signals Flash December PMIs for the US slumped to fresh lows, sending more warning signals about the economic momentum going into 2023. Manufacturing PMI came in at 46.2, below last month’s 47.7 and the expected 47.8, while the services PMI receded to 44.4 from 46.2 previously. Markets have however understood the Fed’s message on hiking rates into a possible recession, and do not take bad news as good news anymore. Japan PM Kisihda hinting at altering inflation goal for central bank Reports suggested that Japan PM Kishida plans to revise a ten-year-old accord with the BOJ and will consider adding flexibility to the agreement's 2% price goal. Kishida will discuss the matter with the next central bank governor, who'll take office in April. Furthermore, some more comments from officials this morning continued to signal that the authorities may be considering a policy review in 2023, and more hints are awaited at the BOJ meeting tomorrow. Ex-BOJ Deputy Governor Yamaguchi said that the BOJ must stand ready to tweak YCC next year if Japan's economy can withstand overseas economic risks, while also warning that once inflation expectations become entrenched, it is very hard to control them. China’s Central Economic Work Conference emphasized economic stability and had a conciliatory tone towards platform companies The Chinese Communist Party held its annual Central Economic Work Conference (CEWC) on Dec 15 and 16 to formulate China’s macroeconomic policy frameworks for 2023. According to the readout released, the CEWC emphasized policy priorities as being economic stability and high quality of development. Fiscal policies will be expansionary and monetary policies will be forceful and precise. The focus is however more on quality than quantity and the choice of words tends to imply “best effort” rather than hard targets. Mainland economists are expecting the GDP growth target, which will not be released until the two-session meetings in March 2023, to be around 5% for 2023. While there will be supportive measures to ensure stability in the housing markets, the rhetoric of “housing is for living in, not for speculation” is once again in the readout. Domestic consumption is a key focus. In industrial policies, weak links in manufacturing technology, energy, mining, agriculture, new energy, AI, biomanufacturing, green and low carbon, quantum computing, and the digital economy are priorities. Encouragingly, the CEWC removes last year’s “preventing the disorderly growth and expansion of capital” from its readout this year and instead pledges “support to platform enterprises in leading development, creating employment, shining in competing globally” and “support the development of the private sector and private enterprises”. EU considering cutting the proposed natural gas price The EU nations are likely to discuss cutting the gas price cap by almost a third today after the EUR275 per megawatt-hour was proposed last month. As energy crisis continues to threaten a fresh surge in inflation and growth slowdown in the region, it is also stretching government budgets to maintain popularity. But this will eventually be inflationary again, as price caps hardly work effectively. Elon Musk hinting at stepping down from Twitter Elon Musk is seeking new investors for Twitter at the same price he paid when he took the company private in October, Semafor reported. Musk is asking on Twitter the question that “should I step down as head of Twitter? I will abide by the results of this poll”. He said he is going reverse his prior decision to suspend the Twitter accounts of several journalist and reinstate them based on the results of a Twitter survey. Meanwhile, Musk's actions are weighing heavily on Tesla shares — and the selloff may continue.   For a global look at markets – tune into our Podcast. Source: Market Insights Today: Fed’s hawkish speak; BOJ’s policy review hints – 19 December 2022 | Saxo Group (home.saxo)

Euro has every chance of rising as recent data from the US hints at a possible recession in the country by next year. Activity indices in the US remained in negative territory, below 50 points, which is very bad. The first one that was hurt was the real estate market, followed by the service sector and the manufacturing sector. The only one that is still holding on is the labor market, but last week Fed Chairman Jerome Powell said he will make use of wages to fight inflation. Wages have a very large impact on inflation as they are a particularly large item of expenditure. According to Powell, the labor market will be the key to a further rise in inflation, so something must be done about it. Right now, wages are rising much higher, which is not in line with the Fed's policy of returning to 2% inflation. The key question for Fed officials is whether the sharp rise in US wages over the past 18 months is a one-off action, or whether, after companies have adjusted to labor shortages, higher cash wages will be the norm. If this is the case, Powell can maintain a tight monetary policy. Forecasts published by the Fed last week already suggested that the key rate for next year could hit 5.1%, which is higher than the expected value. This led to the stock market crashing down. Labor shortages, which were caused by coronavirus-related constraints, have provided more opportunities for employers and workers to raise wages as competition for hiring intensified. But in most cases, households have barely kept up with the rising cost of living. As the figures show, total employer payroll spending increased by 5% in the 12 months to September, up from 3.7% a year earlier. Although earlier wages were not a big part of the story, now that companies are trying their best to retain employees, it is likely that the central bank will take a closer look at what is happening in the labor market and not just regulate its level. Talking about the forex market, demand for euro is still weak, but there is a chance for a return to December highs if the European Central Bank retains its hawkish monetary policy. However, traders need to keep the quote above 1.0660 because only by that will euro hit 1.0700 and 1.0740. In case of a decline below 1.0580, pressure will surge, which will push the quote to 1.0540 and 1.0490. In GBP/USD, trading is taking place within the sideways channel, so buyers need to break above 1.2200 in order for the quote to rise to 1.2250 and 1.2301. But if sellers take control of 1.2130, pound will fall to 1.2070 and 1.2000.

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

Volatility has been extremely high for financial markets last week due to the Fed, Bank of England and ECB meetings and the release of economic data. All of them caused sell-offs in risky assets, primarily because nothing new has happened and nothing substantial has been said. The ECB and the Fed raised interest rates as expected, while the latest statistics were in line with expectations. Most central banks also noted that tight monetary policy will continue in 2023. Basically, last week's events have brought back the expectations that a widespread recession could start as early as next year. This led to another stock market crash and a rise of dollar to recent highs. However, the decline is likely just a correction, not a full-scale downward trend as demand could return if market sentiment improves. That could also lead to a weaker dollar and more stable treasury yields during the last two weeks of the year. Forecasts for today: AUD/USD 0.6680 is a key support level in AUD/USD. If market sentiment improves today, the pair could bounce up to 0.6800, then go to 0.6915. USD/JPY Even if USD/JPY is bullish, a rise in risk appetite could prompt the pair to rebound to 138.00.   Relevance up to 06:00 2022-12-21 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/330121

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

This report finds that tight labour markets ahead of a recession cause employment to fall less than normal. So, given that we expect a shallow recession in the eurozone, labour shortages are not going to disappear in all countries and sectors, and modest upward pressure on wages is set to stay A Labour Day rally in France earlier this year   The European Commission has joined the long list of organisations now expecting a recession to happen in the eurozone this winter. Only a few optimists seem to be holding out and expect the economy to avoid recession altogether. To us, the evidence is adding up to a modest recession with two quarters of negative growth and a very shallow recovery. From an unemployment perspective, most seem to expect that the impact will be relatively small given that labour markets are currently exceptionally tight. Despite that, we do see hiring intentions falling, and some countries have noticed small increases in unemployment already. So the question to answer is, does a tight labour market at the start of a recession actually matter for the employment outcome during the recession? We think it does; here's why.  Expect unemployment to increase as recession starts As an economy enters recession, we see an increase in unemployment. When looking back at the six previous eurozone recessions since the 1970s, we find that this has been the case. As you can see in the chart below, the increase in unemployment generally starts when the recession begins but drags on much longer. 2020 is the exception as furlough schemes and an exceptionally quick recovery resulted in a break with the trend, three quarters after the start of the recession. Unemployment increases in times of recession Source: Eurostat, The Area Wide Model, ING Research   The furlough scheme safety net seems unlikely to be used to the extent it was during the pandemic as governments reign in support and because the nature of the downturn is different. Also, labour markets are already exceptionally tight at the moment, which means that a certain amount of labour turnover will be welcomed as a relief to some. Without a government response, but with very tight labour markets at the start of this downturn, the question is whether companies will engage in labour hoarding; keeping people on the payroll to make sure that they have good workers available when the downturn ends because it’s so hard to find workers in this economy. In times of labour shortages, recessions have a smaller labour market impact A marginal labour market impact of the upcoming recession seems to be the consensus view, also iterated by the European Commission in its autumn forecast: “The unemployment rate is thus projected to increase only marginally from a historic low”. We take some comfort from past episodes regarding this call. Analysing downturns by country and sector in the eurozone since 2006, we find that high labour shortages at the start of a downturn resulted in a smaller negative impact on employment. This finding is statistically significant, indicating that in general, we can expect a weaker decline in employment because we now see current high labour shortages. As the two charts below indicate, we find a flatter relationship between GDP and employment in downturns that were preceded by high vacancy rates (so high labour shortages). So it looks like businesses indeed engage in labour hoarding in times of very tight labour markets. The employment response to a decline in output is smaller when labour shortages are high Source: Eurostat, ING Research calculations   To arrive at this conclusion, we use quarterly vacancy rates, gross value-added, and employment data by eurozone country and sector, which gives us a large dataset in which ample downturns occur. We identify periods of high labour shortages as vacancy rates that are in the highest 10% of vacancy rates across sectors and countries at that time. For downturns, we use periods of at least two quarters of consecutive declines in gross value added. The employment response is one that we measure both coincidentally and with four quarters of lags. We stopped the sample of data used in the fourth quarter of 2019 because of the impact of furlough schemes, which likely distorted the relationship. We have tried slightly different models, of which most show a statistically significant impact of high vacancy rates on employment. Results from our panel data regression show that employment behaves differently in recessions when vacancy rates are high Labour shortages are therefore unlikely to disappear despite an expected recession Taking the previous exercise into account, this means that a modest increase in unemployment is to be expected given the already mild recession that we forecast for the eurozone over the course of the winter months. While that is set to cool the labour market somewhat, the question is whether this will be enough for shortages to disappear. That seems doubtful at this point. The unemployment rate fell to a new historic low of 6.5% in October despite the economy slowing quite dramatically. It looks like the countries and sectors with particularly hot labour markets could remain tight despite the economy contracting over the winter and experiencing just a mild recovery. Don’t forget that demographics also weigh more and more on potential labour supply, which means that shortages are set to become more structural anyway. The fact that the upcoming recession is unlikely to cool the market much means that structural shortages will likely be quite visible over the coming years. With unemployment at record lows now, shortages are set to become more structural Source: Eurostat, ING Research Read this article on THINK 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

The US dollar fell on Monday as improved market sentiment pushed stocks and riskier currencies up. The US Dollar Index (DXY) - which tracks the dollar against a basket of six major currencies - fell 0.2% to 104.580 The euro gained 0.4% to $1.06260 , while sterling strengthened 0.7% to $1.22195. However, both remained lower than their levels before last week's central bank moves. EUR/USD The EUR/USD pair started trading above $1.06 this week. The technical outlook for the euro remains positive and reasonably well supported. The single currency appreciated against the US dollar The latest publication of the German Ifo shows that the sentiment in Europe's largest economy "improved significantly" at the end of the year. The business climate rose to 88.6 from 86.4 in November, breaking the index's six consecutive declines, while the expectations reading hit 83.2, up from 80.2 the previous month. GBP/USD And EUR/GBP GBP/USD generally trades in the range of 1.2170 - 1.2200 during the day. The intraday high was above 1.2240. Currently, the cable pair is trading in the range of 1.2170- 1.2180 The British pound crept back toward the previous week's six-month high against the US dollar on Monday, days after the Bank of England (BoE) raised its benchmark interest rate to its highest level since 2008. The Bank of England made its ninth consecutive interest rate hike on Thursday, raising interest rates by 50 basis points (bps) to 3.5% as the central bank battled double-digit inflation. Read next: Russian Drones Attacked Kyiv Again | Most respondents do not want Musk| FXMAG.COM The euro fell 0.1% against the pound to 86.94 pence. The single currency hit a month-high against the pound sterling on Thursday after decisions by the BoE and the European Central Bank (ECB). ING analysts believe the pound sterling could be vulnerable against the euro, and their target is to move to 89p in the first quarter of 2023. USD/JPY The Japanese yen galloped higher amid illiquid trading conditions on Monday morning on news of a possible change in the Bank of Japan's (BoJ) monetary policy targets. The Bank of Japan currently has a prime interest rate of -0.10% and maintains yield curve control (YCC), setting a range of +/- 0.25% around zero for Japanese government bonds (JGB) for up to 10 years. The BoJ and the People's Bank of China are the only two major central banks with loose monetary policies. Much of the rest of the world is tightening financial conditions to deal with uncomfortably high and volatile inflationary pressures. The BoJ meeting will take place tomorrow, but at this stage the market does not expect any changes. USD/JPY has been in a downtrend since it peaked at 151.95 on the day of the BoJ intervention. At the end of last week, the price moved towards the upper band of the channel but was unable to sustain the move above it. The downtrend may continue to resist, currently at 137.45. Looking at the chart of the pair, you can see the strengthening of the yen against the us dollar. The pair returned to trading around $135 but is now trading above $136, meaning the yen's strength was short. AUD/USD The uplifting Australian dollar is trading slightly higher against the US dollar this Monday. This comes after China announced its intention to stimulate the economy with loose monetary policy and fiscal support. Looking at the chart, it is clear that the beginning of the week for Aussie is strong. Comparing to the close, the can pray increased significantly and is now trading above $0.67. Source: investing.com, dailyfx.com, finance.yahoo.com

The European Union has reached a deal to cap the TTF natural gas benchmark at 180 euros per megawatt hour to try to contain the economic damage in the bloc as Russia curbs energy supplies Higher cap, smaller impact The new cap is above the current price of around 110 euros per megawatt hour, but still below the highs seen back in August. The decision follows months of disputes and divisions in the bloc with the gas market correction mechanism set to apply for one year from 15 February. The higher the cap, the smaller the impact this intervention will have on the European gas market. The new cap is significantly lower than an earlier proposal of 275 euros per megawatt hour by the European Commission, which wouldn’t have prevented the spikes that the region saw earlier this year. The TTF natural gas benchmark prices have declined in recent months to recently trade around 110 euros per megawatt hour. It briefly soared to nearly 340 euros per megawatt hour over the summer. The new cap will only take effect if the price difference with global LNG prices is greater than 35 euros per megawatt hour. Prices would have to stay above both ceilings for three days to trigger the mechanism. Once activated, it would remain in place for at least 20 working days. It will apply to all EU gas-trading hubs, with a possibility to opt out later. Germany supported the final deal, while Austria and the Netherlands abstained, according to the Bloomberg report. Hungary voted against the deal. The agreement unlocks other measures to mitigate an energy crunch Europe is facing following Russia’s invasion of Ukraine, including joint gas purchases and a future new benchmark for pricing gas. How effective these measures will be is still questionable. Capping the TTF natural gas benchmark increases the risk that we see more of the trade moving to the over-the-counter market, which will be excluded from the cap. This in turn would reduce liquidity on European natural gas exchanges and also reduce transparency in these markets. Furthermore, the longer-term goal of setting up a new benchmark is not going to solve the issue of bottlenecks in European gas infrastructure. At the end of the day, the only viable long-term solution for Europe is increasing supply and removing some of the bottlenecks facing the industry. "It is not a silver bullet but a powerful tool we can use when needed." - Energy Commissioner Kadri Simson European prices set to remain elevated in 2023 We believe 2023 will be a tough year for the European natural gas market. It is unlikely the region will be able to build storage at the same pace as seen in 2022. Annual Russian gas flows will fall in the region of 60% year-on-year, even if flows remain at similar levels to what they are currently. Unfortunately, the LNG market will not be able to fully offset losses. Therefore, demand destruction will need to continue to ensure adequate supply for the 2023/24 winter. In order to see this demand destruction, prices will have to remain at elevated levels. We forecast TTF to average €175/MWh over 2023. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  US equities 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)

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.

European Central Bank (ECB) Vice-President Luis de Guindos said on Thursday that “we should expect to raise interest rates at this pace for a period of time.” Additional quotes   Indication for Q4 2022 is that we are perhaps in negative territory, but not very deep, with GDP expected to contract by 0.2%. Over the course of the next two or three months inflation will be somewhere around its current level, in q2 2023 it will see a drop to hover around 7% by the middle of the year. We have no choice but to act. If we do nothing, the situation would be worse because inflation is one of the factors behind the current recession. Increases of 50 basis points may become the new norm in the near term. Our interest rates will then enter into restrictive territory. I am concerned that markets could underestimate the persistence of inflation. I am concerned that markets might consider fiscal policy to be incompatible with monetary policy, that there is a potential conflict. Banks have a solid capital position and can withstand a shock, but i have a lot more doubts about non-banks, notably hedge funds.   Market reaction In reaction to the above hawkish comments, EUR/USD keeps its upbeat momentum intact at near-daily highs of 1.0650, up 0.43% so far.

The EUR/USD instrument has been immobilized in the final days of the current year. The upward wave e has already assumed a sufficiently extended form and should be finished, so the market sees no reason to start building a correction wave at this time. Although there hasn't been much news this week, some information has been received. Luis de Guindos, who serves as Christine Lagarde's "right hand," in particular, spoke twice this week. He stated on Monday that he had no idea how much higher ECB rates would go or how high they could go. Such statements from one of the founding members of the ECB, in my opinion, do not boost public confidence in the euro. I'm sure that the demand for the euro currency would be waning right now if the market hadn't taken its vacation earlier than expected. Just as the British pound, which also constructed a sizable wave e but has already begun to decline, is being hit by it. Luis de Guindos provided new commentary on monetary policy on Thursday, stating "The ECB will raise interest rates "at such a pace" for a predetermined period." We mean a step of 50 basis points when we say "at this rate," as was the case at the meeting in December. I'm not sure what is meant by "a certain time," though. Both "two more meetings" and "five more meetings" can be meant by this expression. The market must, however, be aware of the potential magnitude of the rate increase. Since its limit value of 4% and 6% differs, the market response and the euro exchange rate will also vary. In other words, de Guindos omitted to address the crucial issues. He asserted that the EU economy could contract by 0.2-0.3% by the end of the fourth quarter, which could signal the start of a recession. Let me remind you that two consecutive "negative" quarters at the beginning of this year, despite strong growth in the third, could have signaled the beginning of the US recession. In contrast, the economy in Britain and the EU grew only moderately in the first two quarters, shrank in the first quarter of the third, and may shrink in the second quarter of the fourth. As a result, both European economies could experience negative economic growth, which would require central banks to exercise greater caution in tightening monetary policy. In America, there are no such issues at the moment, and the rate is already getting close to its final value. The Fed no longer needs to raise rates by 75 or 50 basis points at each meeting, even though the recession may start in 2023. This situation, in my opinion, will affect the dollar in the coming month or two. This assumption fits the current wave markup very well, as a decrease is anticipated for both instruments. 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. 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/330612

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

After two years of lockdowns, COVID deaths, and rising sentiment and unrest, it was hoped that 2022 would bring some relief. Instead, 2022 turned out to be a difficult year in a year where no gnews would fall very well. We have wars, rising interest rates, rising inflation. Central banks around the world have taken action to combat the high level of inflation, including the ECB. The data is far from the expected 2% and as you can see the fight is not over. Inflation reports from the old continent will be presented next week. CPI data The week between Christmas and New Year's is usually very data-poor, and there were no Tier 1 events in Germany or the Eurozone this week. Spain released flash CPI estimates for December, which showed that inflation continued to weaken. CPI fell to 5.8% from 6.8% and below estimate of 6.0%. Inflation in Spain fell for the fifth consecutive month as energy costs continue to fall. The next week may prove to be more important for the European Union, as the inflation report will appear. Moreover, reports from Member of UE will be just as important. The ECB will be keeping a close eye on these inflation reports and the data will be an important factor in the ECB's decision on the pace of future rate hikes. Next Friday, Eurostat will give its first look at consumer prices in the euro area at the end of 2022. It predicts a decrease in the annual growth rate of basic consumer prices from 10.1% in November to 9.6% in December. Source: investing.com Energy situation Russian President Vladimir Putin's invasion of Ukraine on February 24 triggered a price shock, sparked an energy crisis and brought supply chains to a halt. Not to mention thousands dead, millions homeless and a kind of Cold War that pits Russia, with the exception of Iran and North Korea, against the rest of the world. The high volatility in the markets has persisted since the invasion and there is no end in sight. In 2021, Europe imported $117 billion worth of energy from Russia, which was about 40% of Europe's consumption of natural gas and 30% of its oil. It has yet to move away from relying on Russia, leaving European countries struggling to replenish their underground gas reserves for the colder winter months. Until recently, Europe received large amounts of natural gas from Russia via the Nord Stream pipeline. However, flows were halted in late August when Russia cut off flows to Europe via Nord Stream in response to Western sanctions. Russia is set to increase diesel exports next month before EU oil sanctions go into effect in February. Fuel deliveries from Russian ports in the Baltic and Black Seas will increase to 2.68 million tons in January. By February 5, the European Union will ban imports of Russian petroleum products, which it heavily relies on for diesel production. This follows a ban on Russian oil that came into effect in December. Should a recession be expected? Recessions in Europe seem inevitable as gas prices rise. Meanwhile, the central banks of Europe and the UK are determined to bring down inflation by continuing to raise interest rates. While recessions around the world have been suggested, analysts say they will only be mild. The outlook for 2023 remains uncertain. The war continues. Interest rates will go up until inflation goes down. Source: investing.com

Ulrich Leuchtmann, Head of FX and Commodity Research at Commerzbank, notes that EUR/USD stays near 6-month highs to start the new year and the US Dollar Index holds near six-month lows Eurozone is facing a recession "USD weakness remains the dominating subject on the FX market. Because the market still does not believe the Fed’s affirmations that it will not cut the key rate. It has revised its expectations a little since the last FOMC meeting, but not substantially." "This mistrust must not surprise, as the FOMC members have been incorrect with their forecasts too many times in the past. I still remember very clearly their – in retrospect – absurd dots from 2009 and the following years." Read next: Twitter Did Not Pay $136,260 Rent, Microsoft Reported Its Worst Quarterly Results In Years| FXMAG.COM "In contrast all those who celebrated New Year’s eve in a T-shirt in Europe are likely to feel less concerned about a shortage of gas. This factor that had been putting pressure on the euro, which had already eased in Q4, is thus disappearing even more quickly." "Of course, the Eurozone is facing a recession. However, if this is one that is “only” due to a tightening of monetary policy it will not be as damaging for the EUR exchange rates as a recession caused by a shortage of gas would have been." "And in comparison to the US where the real economy is having to deal with a much more aggressive Fed monetary policy the FX market seems to consider the ECB's policy as not that unattractive any longer." "Our colleagues in macro research like to refer to the long-term risks of inflation of the more cautious ECB interest rate policy. These dangers are not likely to be concrete enough for the FX market yet. It will take some time yet before it prices these in. I am not sure whether that will become an issue this year or whether that is more likely to become the subject of my outlook for 2024."

The US dollar appreciated, mainly due to the minutes from the December meeting of the Federal Reserve. The U.S. central bank raised interest rates by 50 basis points last month after four consecutive increases of 75 basis points in a year, but said it may have to keep interest rates higher for longer to bring inflation under control. Minutes from the December Fed meeting are due to be released on Wednesday, with investors looking for clues as to what rate path is likely to be taken in 2023. The market seems to be struggling to interpret the change in China's Covid-19 strategy. On the one hand, it is predicted that it is likely to unleash the world's second largest economy and its associated supply chains. The Chinese data remains soft and the Caixin manufacturing PMI released today came in with a narrow miss. In December it was 49.0 instead of 49.1 forecast and 49.4 earlier. Moreover, there was a desire from the Chinese side for better relations with the US after their foreign minister said they would look for more open channels of communication. It is worth noting, however, that the exchanges point to a risky market environment, which usually makes it difficult for the US dollar to find demand. USD/JPY The Japanese yen continued to strengthen today with USD/JPY dipping below 130 for the first time since June last year. It has now returned to trading above 130 and is close to 131. The yen, which hit a seven-month high during the Asian trading hours, was recently trading low at 130.45 to the dollar. The pair's decline was mainly driven by a new Japanese yen buying spurt as US equities futures fell at the open and bolstered safe-haven inflows into the yen. Speculation that the BoJ was about to start moving away from its very lax policy flared up in December when the central bank extended the yield cap on 10-year Japanese government bonds (JGB). This was further reinforced by the Nikkei report on Saturday. Read next: The Korea Fair Trade Commission (KFTC) Will Impose A Fine Of $2.2 Million On Tesla Inc| FXMAG.COM GBP/USD GBP/USD drops below the key 1.2000 level for the first time in 4 weeks as the dollar index recovers. Today's morning drop in GBPUSD is due to the recovering dollar index. The risk-positive market environment does not appear to be helping sterling find support so far. As noted above, the decline is attributable to the stronger dollar and not to UK-specific factors, which may also have exaggerated the impact. The UK economy is weighed down by recession fears, high inflation and the cost of living crisis. The Bank of England has raised interest rates nine times since December 2021 to try to bring down inflation, which remains close to a 41-year high. EUR/USD EUR/USD lost traction and fell towards 1.0550 early Tuesday after climbing above 1.0700 on Monday. It's hard to stop the driving force of the pair's recent actions as the market recovers with the US dollar strengthening again. Nevertheless, technical forecasts point to a bearish slope after the sharp decline seen during the European session. Euro still awaits German CPI data release, which may help EUR/USD move towards 1.06. Source: investing.com Read next: New Record For Electric Car Manufacturer - Tesla Deliveries Increased By 40% Year-On-Year| FXMAG.COM AUD/USD The Australian pair fell from above 0.68 to 0.6695 Weaker than expected official Chinese PMI data released over the weekend may have contributed to the decline. The Australian remains supported by expectations that the Reserve Bank of Australia will raise interest rates later this year as part of its ongoing effort to bring down inflation. Markets are currently divided on whether the RBA will deliver another rate hike in February. Australia's trade balance remains at a record high and the AUD/USD exchange rate weakens due to interest rate differentials, and the domestic economy continues to benefit from this. Source: investing.com Source: dailyfx.com, investing.com, finance.yahoo.com

Today's European trading session began with a sharp strengthening of the dollar, including against the euro. Perhaps this is how market participants, who follow euro quotes, reacted to yesterday's publication of European macro data, which turned out to be rather weak (yesterday, major world exchanges did not work, and there was low activity of traders and low trading volumes on the market). The S&P Global manufacturing PMI for December came out at 47.1 against the forecast and the previous value of 47.4. The manufacturing PMI for the entire euro area remained at around 47.8. The indices are also below the value of 50, which separates the growth of activity from its slowdown. It is also possible that on the first trading day of the new year, market participants are trying to protect themselves from the risks related to the rising coronavirus infections in China, high inflation, geopolitical tensions, and the threat of a global recession, seeking refuge in a protective dollar. Thus, the EUR/USD pair lost 1.2% in the first hours of today's European session, falling by 130 points to the opening price of today's trading day. As of writing, EUR/USD is trading near 1.0544, very close to the strong support at 1.0525. Considering such a sharp drop, literally in a couple of hours, as well as reaching a zone of strong support, from a technical point of view, near the current levels, we can assume consolidation with a subsequent rebound, given the general upward trend of the pair. European Central Bank Governing Council member Joachim Nagel said yesterday that the ECB needs to take further action to contain inflationary expectations, i.e., continue to tighten their monetary policy. As for today's economic calendar, the preliminary harmonised consumer prices (HICP) for Germany will be released at 13:00 (GMT). The index (CPI) is published by the EU Statistics Office. It is an indicator for inflation and is used by the Governing Council of the ECB to assess the level of price stability. In normal economic conditions, rising prices force the country's central bank to raise interest rates to avoid excessive inflation (higher than the target set by the central bank). Therefore a rise in the index is positive for the national currency (under normal circumstances), and a decrease in the index (expected to 10.7% from 11.3% in November) is negative. At the beginning of the U.S. trading session, the updated PMI for the U.S. manufacturing sector (from S&P Global) will be released. Previous values were 47.7, 50.4, 52.0, 51.5, 52.2, 57.0, 59.2. The forecast for December is 46.2 (the preliminary estimate was 46.2), indicating a continued slowdown in this sector of the U.S. economy, which is a negative factor for the dollar. Relevance up to 12:00 2023-01-06 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/331373

The US dollar is showing strong gains against the majors on Tuesday, with the exception of the Japanese yen. EUR/USD has tumbled by 1.27% and is trading at 1.0528 in Europe. Investors eye German CPI EUR/USD is sharply lower today, despite a very light economic calendar. The only release of note is German CPI, which will be released later today. Despite the lack of fundamentals, the US dollar is taking advantage of risk aversion in the markets. There are headwinds everywhere you look. The war in Ukraine, the threat of recession in the US and the eurozone and China’s slowdown all make for a gloomy outlook as we start the new year. Germany’s inflation has been falling, and the downtrend is expected to continue. The consensus for December CPI is 9.0%, compared to 10.0% in November. If the consensus proves accurate, it could put further pressure on the euro, as the ECB may have to reconsider its hawkish stance on rate policy. The International Monetary Fund didn’t bring any festive cheer with its pessimistic message on Monday. The IMF warned that 2023 would be tougher than 2022, as the US, EU and China would all see a decline in growth. Adding to the gloom, the IMF said that it expected one-third of the global economy to be in recession this year. In October, the IMF cut its growth outlook from 2.9% to 2.7%, due to the war in Ukraine as well as central banks around the world raising interest rates. After the Christmas and New Year’s holidays, the markets are easing back in, as the data calendar gets busier as of Wednesday. We’ll get a look at the Fed minutes from the December meeting, which was a hawkish affair that surprised investors and gave the US dollar a boost. On Friday, the US releases the employment report, which always plays an important factor in the Federal Reserve’s rate policy.   EUR/USD Technical EUR/USD is testing support at 1.0528. Below, there is support at 1.0469 There is resistance at 1.0566 and 1.0636 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.   Source: EUR/USD slides to three-week low - MarketPulseMarketPulse

Celebrating the drop in German inflation may be premature and headwinds to bond performance, especially for those denominated in euros, remain. The Fed minutes might not fulfil all of the markets’ dovish hopes Keeping the bubbly in the fridge a little while longer The characteristic ‘pop’ of opening champagne bottles could be heard across Europe when Germany’s statistical office published a dramatically lower set of inflation figures for December 2022 than in the month preceding. More cautious investors may want to keep their bubbly in the fridge a while longer however, lest they face a rising tide of core inflation with the equally characteristic champagne hangover. As our economics team noted, core inflation may have, if anything, accelerated last month. What’s more, the government measures responsible for artificially capping inflation rates may also lengthen the time it takes for it to return to the 2% target. Core inflation may have accelerated last month This makes us uneasy about the drop in market rates yesterday. Yes, 10Y Bund yields are still up more than 60bp since their mid-December trough, and many participants returning from a two-week break may struggle to understand why yields have risen so much. To cut a long story short, the reasons centre on China reopening, Bank of Japan gradually raising the yield cap on Japanese Government Bonds, and European Central Bank (ECB) officials hammering home the message that more tightening will need to be delivered if inflation is to be brought back under control. We would venture that December inflation data so far will do little to assuage their inflation fears, but perhaps better news awaits in the remaining inflation indicators to be published this week, starting with France today, and culminating with the eurozone on Friday. Bund yields reached new highs in late December, and converged to Treasury yields Source: Refinitiv, ING EUR rates the outlier More than a jump in rates over the last two weeks of 2022, what is most notable is the underperformance of EUR-denominated bond markets. The hawkish shift at the ECB explains a great deal of the 10Y Bund bear-tightening 20bp to Treasuries and it was interesting to see Treasuries outperform Bund again on the day of the German inflation downside surprise. Upshot is: the convergence between USD and EUR rates is here to stay although we think the next leg will most likely be driven by a fall in USD rates once Fed cuts come into view. The convergence between USD and EUR rates is here to stay Speaking of the Fed, the minutes of the December meeting are published this evening. Chair Powell is increasingly understood to be one of the most hawkish members of the Federal Open Market Committee (FOMC) but after two subsequent slower inflation prints in October and November, markets chose not to heed his hawkish warning after the last meeting. The minutes will be an opportunity to test that assumption. In short, we think markets go into the release with dovish expectations, which means a hawkish surprise is more likely to move rates. Mind you, if the December meeting is any guide, market reaction should not be dramatic. This should also reduce Treasuries abilities to widen relative to Bund. The US curve re-steepening is set to be one of the most notable moves of 2023 Source: Refinitiv, ING And a brief snyopsis of what we expect as we look through 2023 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 upwards 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 is back down at 3% and the Eurozone 10yr swap rate at 2.5%. But we should not go below these levels for long. Today's events and market view The events calendar is dominated by business sentiment indices. European services PMIs in the morning will mostly be second readings with the exception of Spain and Italy. French December CPI will follow hot on the heels of the (energy-related) drop in German inflation yesterday. This will be followed in the afternoon by ISM manufacturing. Its price paid sub-index is now well below the 50 ‘neutral’ level. Its fall since the second quarter of 2022 has been one of the indicators forewarning a slowdown in inflation. The employment component on the other hand has dipped besides still tight labour market indicators, although investors might interpret a further drop as an ominous sign ahead of Friday’s US job report. Also on the topic of jobs, job openings will conclude the list of US economic releases. The main event, however, is likely to be the release of the December Fed minutes (see above). There was a dovish bias in the market reaction to the December meeting and a failure to confirm this hunch in the minutes is likely to send Treasury yields up. In sovereign supply, Austria has mandated banks for the launch of a new 10Y benchmark. Germany is scheduled to sell 2Y debt via auction. KFW and EIB also mandated for 5Y benchmarks.  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

Bond yields continue their plunge on hopes that falling energy prices will help in the fight against inflation. The strength in the US labour market may not last but it is preventing Treasuries from joining the party. The Fed has also reiterated its unfinished rate hike work through the latest minutes. The next big cue comes from Friday's payrolls report. Fed insists on higher for longer in their latest minutes Market reaction to the FOMC minutes was muted. Breakevens, real rates and nominal rates did not do much at all. Although at the margin there has been a tendency for rates to test a tad higher, especially on the front end. The Fed has given a clear bias to continue to hike rates in the months ahead, so that makes a degree of sense. Further out the curve, the market is not paying too much attention, mostly as there is not a whole lot new from the minutes. There is not a whole lot new from the minutes On the technical front, the Fed noted the ease lower in use of the reverse repo facility, and noted that this went hand-in-hand with upward pressure on market repo. The Fed also notes an expectation for this to continue in the months ahead, in tandem with the ongoing bond roll-off from their balance sheet. The Fed also notes that this reflected the move of money market funds away from the reverse repo facility and towards market repo. Our observation here is that this has been quite minor so far. SOFR is struggling to make it much above the reverse repo rate (at 5bp over the fed funds floor, now at 4.30%). But it should gather more pace as we progress further through 2023. As SOFR eases above the Fed’s reverse repo rate in a more material fashion in the months ahead, there should be a larger reduction in cash going back to the Fed on their reverse repo facility. Rates shrugged off hawkish Fed minutes to continue to bet heavily on 2024 cuts Source: Refinitiv, ING The fall in energy prices triggers another 'everything rally' Bund yields are down almost 30bp since the start of the year, which is to say they’ve dropped almost 30bp in three days. As we discussed in yesterday’s Spark, we think the (mostly energy-related) drop in inflation in December is a red herring. Whilst helpful at the margin, we think core inflation should be a better predictor of European Central Bank policy. This drop in yields has been as sudden and relentless as the rise into year-end. Swaption implied volatility is down since its September peak but there are no signs so far that 2023 will prove a calmer year. There are no signs so far that 2023 will prove a calmer year Of course, anyone in search for a cause to explain the bond rally should look farther than backward-looking inflation indicators. The fall in yields has come alongside a collapse in energy prices. That trend is nothing new, explained in Europe by milder weather than normal and in the wider world by fear of a growth slowdown, in particular in China, but also reinforced by a weak ISM manufacturing in the US. This has resulted in another case of ‘everything rally’ where both stocks and safer bonds benefit from hopes that central banks will have an easier job tackling inflation. Students of the late 2022 playbook know that the ‘everything rally’ comes with tighter peripheral spreads. The 10Y Italy-Germany spread for instance has retraced almost half of its 36bp post-December ECB meeting widening. Implied volatility is down as peripheral bonds outperform Source: Refinitiv, ING US labour market strength is tough for Treasuries One area of persistent strength has been US labour market indicators. The ISM employment sub-index rose back above the 50 level, a development that our US economist thinks is hardly sustainable in light of the fall in other components. Together with higher-than-expected job openings, they offer little relief to a Fed concerned about wages feeding into core services inflation, as Fed Chair Jerome Powell is fond of repeating. If current inflation is a guide of how much further the Fed has to hike, recent data points to an imminent end to this hiking cycle. But if the job market is a guide of how long it would take before it decides to cut rates, there is still a protracted period of restrictive monetary policy ahead. A re-steepening of the US curve is on the cards At face value, this means a re-steepening of the US curve is on the cards. And indeed, the US curve has shown signs of re-steepening from very inverted levels. Our own view is that both growth and inflation will soften enough to allow the Fed to loosen policy in the latter half of 2023. Much of the action in recent days, however, has been driven by the duration rally. This means that longer bonds outperformed and the curve flattened. This isn’t necessarily consistent with the data but it seems markets are comfortable with the longer maturity skew in supply, starting today with long-end auctions and syndications from Europe (see events section below). Today's events and market view Portugal and Ireland mandated banks for the launch of new benchmarks which we expect today. Both deals are at the long end, respectively 15Y and 20Y. This will be the second green bond on the Irish curve. They will add to scheduled long-end auction from France, with maturities of 9-43Y. The drip-feed of eurozone inflation data continues today with December CPI from Italy, and PPI for the whole of the eurozone. The US data slate comprises Challenger job cuts, ADP employment, jobless claims, and services PMIs. We think the strength in US albour market indicators and heavy long-end supply will dent the performance of bonds, a bear steepening of yield curves appears most likely into the end of the week. 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 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

Inflation fell back to 9.2% in December, but rising core inflation means that not much will sway the European Central Bank from the hawkish path it set out late last year Inflation fell in December on the back of slowing energy price rises   A combination of price caps and lower oil and natural gas prices have caused a significant dip in energy inflation (from 34.9% to 25.7%), which was the main driver of the decline in headline inflation. The decline was broad-based by country, with all the major eurozone economies showing significant drops in price growth. It is likely that the peak in inflation is behind us now, but far more relevant for the economy and policymakers is whether inflation will structurally trend back to 2% from here on. Core inflation continues to show little sign of relief for now. It increased from 5% to 5.2% and saw sizable increases for both goods and services. The next two months will be critical as many businesses traditionally change prices at the start of the year. It could therefore be that core inflation rises further from now. While consumption remains under pressure and retail sales have been trending down for quite some time now, businesses continue to adjust their prices to the supply-side shocks of 2021 and 2022. So while supply-side shocks are fading – not just energy, but also think of container prices and various production inputs – core inflation is still adjusting with a lag. The ECB has taken a very hawkish stance towards this development and has indicated that it will hike through a mild recession to bring inflation structurally down to 2%. With energy inflation dropping quickly and energy supply forecasts improving, 2% could be reached much sooner than expected. Still, rising core inflation will be enough for the ECB to continue to hike by 50bp in February and March. Read this article on THINK TagsInflation Eurozone ECB 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 eurozone unemployment rate was unchanged in November despite economic conditions pointing to contraction. This leaves the labour market historically strong, but also makes it a key risk for second-round inflation effects for the ECB   November 2022 was another strong month for eurozone labour markets. Unemployment was unchanged from October at 6.5%, the lowest rate since the data series began in 1998, with many of the larger countries seeing the rate decline, such as France, Italy and Spain, however large increases in Austria and Portugal offset these developments. Overall, the resilient labour market is a positive for Europeans who are already seeing incomes come under pressure due to high inflation. This dampens the negative economic consequences of the inflation shock. With a mild recession as the most likely economic outcome for this winter, there is some cooling of the labour market to be expected. Still, with a labour market this tight, it is unlikely that unemployment will run up enough to make labour shortages a thing of the past. That makes this a key risk for the ECB at the moment. While inflation expectations are fairly well anchored right now, chances of higher trending wage growth remain an upside risk to inflation for this year. While there is no evidence of a wage-price spiral so far, the ECB has taken a hawkish turn and will remain worried about wage growth rising further anyway. Read this article on THINK TagsInflation GDP 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

The European Central Bank forecasts wage growth to be very strong in the coming quarters, strengthening the case for further rate hikes. In an Economic Bulletin article published on Monday, the bank said wage growth has been "relatively moderate" since the start of the pandemic, but is now close to its long-term trend. And, over the next few quarters, it is expected to be very strong compared to historical patterns. "This reflects resilient labor markets, which so far have not been significantly affected by the economic slowdown, an increase in the national minimum wage and some lag between wages and the high rate of inflation," the article explained. Over the last 1.5 years, price growth has exceeded the ECB's target of 2%. There is a chance that it will exceed 10% at the end of 2022 as the core inflation indicator, which excludes volatile goods such as food and energy, reached a record high in December. With forecasts showing that 2% inflation will not be achievable before the end of 2025 and unions pushing for generous compensation packages, the ECB conducted an unprecedented series of rate hikes, pushing the deposit rate up to 2% last month. Against this backdrop, EUR/USD continued to rally, approaching the top of May-June last year. To avoid a wage and price spiral, ECB chief Christine Lagarde flagged another half-point hike at the February meeting. After all, weaker economic growth is unlikely to help in the near term, especially as a shortage of skilled labor encourages businesses to retain workers and pay them well. ECB chief economist Philip Lane noted that it will take several years for wages to fully adjust to the recent shocks, but "there are signs of stronger wage growth in the service sector", primarily in those where there is a shortage of staff. However, the expected slowdown in economic growth in the euro area and uncertainty about the economic outlook are likely to put downward pressure in the near term. 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/331773

We see fair value for 10Y EUR swaps around 3% for the rest of this cycle, equivalent to a 10Y Bund around 2.25-2.5%. Federal Reserve cuts and a sluggish European recovery mean a dip in EUR rates around the middle of the year, but this will prove temporary 2023, year of the turn 2023 starts with a number of dilemmas for European rates. On the macro front, milder weather has allowed gas storage to hold up much better than expected at the start of the winter season, and commodity prices more broadly have continued their decline. The resulting slowdown in energy prices has taken European inflation off its peak. But there is a catch: core inflation has not yet turned a corner, and the encouraging situation in the gas market means that the European Central Bank doesn’t face as worrying a growth picture when it decides to raise rates as was feared even a few months ago. The ECB has fewer qualms about tightening policy further The net effect is an ECB with fewer qualms about tightening policy further. Our economics team now forecasts two more 50bp hikes at the February and March meetings, possibly followed by another 25bp increase in May. Contrast that with a Federal Reserve widely expected to reduce further the pace of hikes in February to 25bp, and to conclude its hiking cycle this quarter, and you have the second dilemma facing market participants: should EUR rates continue their climb until a clearer turn appears in ECB policy, or should they follow their USD peers lower, assuming that the ECB pivot will necessarily follow the Fed’s, albeit with a lag? A hawkish shift at the ECB has also come with greater rate cut expectations in 2024 Source: Refinitiv, ING A 3% fair value for 10Y swaps until the end of this cycle The first step is to update where we see the long-term fair value (FV) for traded interest rates. Our economists’ expectation of a 3.25% peak in the ECB deposit rate, followed by cuts back to 2.5% by mid-2025, is close to the path implied by Euribor forwards. That path doesn’t include any inevitable cutting cycle beyond that year, as neither economists nor markets are comfortable with making recession calls more than three years ahead. This may seem surprising, but we think this state of play will persist until much closer to any rate-cutting cycle.  Hiking rates well above neutral typically results in an inverted curve, and means hikes aren’t transmitted to longer interest rates Assuming Euribor fixings will gradually rise relative to ECB policy rates as liquidity conditions are tightened, we have a fair value for 10Y EUR (against 6M Euribor) hovering around 3%. This estimate can move up or down based on the path of inflation and ECB policy but what matters even more is the market’s understanding of where rates would be cut to in a neutral setting. As the experience of the US has shown, hiking rates well above neutral typically results in an inverted curve, and means hikes aren’t transmitted to longer interest rates. We’re already seeing evidence of this in Europe. Whether the 10Y Bund settles around our 10Y EUR swap estimate depends on whether the swap spreads tightening trend continues. A lot of tightening has occurred in late 2022 so the pace will likely slow down but, as far as long-term fair value is concerned, a 2.25-2.5% range seems fair to us. Swap spreads are a wild card in 1Q but tightening should resume later in 2023 Source: Refinitiv, ING US read-across and a softer economy This has to be weighed against a likely muted economic recovery in Europe, if it can be called that. Our economist colleagues forecast that, even taking lower gas prices into account, the eurozone economy will stagnate in 2023, at best. A softening global economy and the prospect of Fed cuts in the latter half of 2023 should put downward pressure on traded interest rates. The deep inversion of the US curve is an early illustration of this dynamic, although it has probably gone too far too quickly and will eventually reverse. Even taking lower gas prices into account, the eurozone economy will stagnate in 2023, at best A trough in Bund yields around 2% by the middle of 2023 is entirely possible, as are temporary dips below that level in periods of economic gloom. Translating this to 10Y swap rates means that dips to 2.5% cannot be excluded. Bear in mind, however, that we see this coinciding with periods of economic angst, so this won’t necessarily bring better risk appetite in riskier markets. As 2023 progresses, we expect a re-steepening of EUR yield curves, and long-dated rates rising back to our fair value estimate. Swap spreads at the beginning of the year are a potential wild card The tightening in the fourth quarter, on easing collateral pressure and in anticipation of the first quarter supply surge, was the correct move but uncertainty remains about how the ECB will decide to treat government deposits placed at the Eurosystem. If nothing changes, these could amount to a significant amount of funds chasing collateral again by the end of April. This will be combined with still healthy swap paying flows in the first quarter as the ECB keeps market participants on their toes about the eventual end point of this tightening cycle. All this is to say that we wouldn’t be surprised to see swap spreads widen this quarter, before returning to their long-term tightening trend. Read this article on THINK TagsInterest 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

A lot of central bank comments will hit newswires today, but the odds of any meaningful signal being communicated to markets are low. On balance, we expect bonds to retain their bullish bias as long as today’s deals are well absorbed Bonds keep their bullish bias and look past Powell Bonds continue to trade with a bullish bias. After weakness at the open yesterday, fixed income markets recovered the ground lost thanks to the New York Fed consumer expectations survey seemingly confirming that inflation upside is abating. Most notable was the reduction in inflation uncertainty and falling probability of three-years ahead inflation remaining above 4%. Taken together, they aren’t sufficient to conclude that inflation is heading back to the Fed’s 2% target, but they will comfort investors in their view that the period of jumbo hikes from Fed trying to cap inflation upside is behind us. Too sharp a fall in market interest rates is detrimental to the Fed’s objective The end of the Fed’s interest rate shock therapy is proving particularly beneficial for risk assets. In rates, the long-end has benefitted the most, courtesy of growing rate cut expectations: almost 50bp from the Fed Fund peak this year, and a further 150bp in 2024. While we agree, too sharp a fall in market interest rates is detrimental to the Fed’s objective. Indeed, while encouraging inflation news may spell the end of the aggressive phase of this tightening cycle, we expect the Fed to continue pushing back against cut expectations. This is in order to prevent financial conditions from easing too fast and undoing its policy tightening work. Raphael Bostic was for instance insisting yesterday that the Fed should hold rate above 5% thorugh 2024. Chair Jerome Powell is listed among today’s speakers. His attempts to impress his hawkish view on markets in recent months ended in failures. Recent data have, on balance, made his job even more difficult. For now, focus is on the size of the next hike. Markets think 25bp is more likely, and both Bostic and Mary Daly said yesterday this is one of the options on the table. But the next step absent an effective pushback from the Fed is for the curve to price out any subsequent hikes, or even to price no more hike in this cycle. Markets don’t need much encouragement to see the dovish side of everything. US consumers see lower inflation upside and inflation uncertainty within three years Source: Refinitiv, ING Headline and supply risk today in Europe Over in Europe, a paper by the European Central Bank (ECB) seemed to foresee a further acceleration of wages in the comign quarters. Whilst ECB economic papers aren’t a conduit for policy signals, wages are a key piece of the inflation puzzle in Europe and elsewhere. We expect the view of research staff on that topic is something that resonates with governing council members, and by extension with markets. Along a similar vein, Bank of England (BoE) chief economist Huw Pill listed the reasons why inflation in the UK risks being more persistent than in Europe. The speech was full of hawkish soundbites but the fact that it was mostly backward-looking provided an excuse for bonds to ignore them. Issuance has failed to make much of a dent in the (US-led) rally in bonds There is also a long list of ECB and BoE speakers today. If recent history is any guide, a hawkish tone will dominate but the format of panel discussions brings the risk of out of context comments being reflected in headlines in news services. The other main potentially market-moving event today is supply. So far, issuance has failed to make much of a dent in the (US-led) rally in bonds but much will depend on how well each deal is received. Falling implied volatility shows markets think the central bank shock therapy is behind us Source: Refinitiv, ING Today's events and market view November industrial production figures from France and Spain start today’s list of economic releases, followed in the afternoon by US small business optimism survey. The questions relating to hiring intentions and prices will as usual be more closely watched. The Riksbank symposium speakers list include central bank household names such as Isabel Schnabel of the ECB, Andrew Bailey of the BoE, Hurahiko Kuroda of the Bank of Japan, and Jerome Powell of the Fed. All are listed as taking part in panel discussions which isn’t an obvious format to send policy signals but brings the risk of misleading headlines. As is usually the case in January, bond supply is what will keep a large part of market participants busy today. On the sovereign side, Belgium (10Y) and Italy (20Y, green) mandated banks for syndicated deal which should materialise today. This will come on top of scheduled auctions from the Netherlands (3Y), Austria (3Y/24Y) and Germany (10Y Linker). The US Treasury starts this week’s issuance slate with a 3Y T-note auction, this will be followed by 10Y and 30Y sales later in the week. 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

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.  

The US dollar improved slightly against its major trading partners early on Tuesday. The National Federation of Independent Business's monthly small business sentiment reading fell further in December as small businesses continue to struggle with high inflation that is dragging down profits. The economic outlook has deteriorated further this year. Markets are increasingly doubting whether the Fed will need to raise interest rates above 5% to cool down inflation as the effects of its aggressive rate hikes last year are already being felt in the economy. The focus for today will be Fed Chair Powell’s comments. USD/JPY So far, the Japanese yen has changed little against the dollar this week. USD/JPY was little changed on the news, but the Bank of Japan’s ability to maintain a loose monetary policy setting may come under closer scrutiny. USD/JPY is currently bullish and trading at 132.2600. In the earlier trading hours, the pair was even below 132. Japanese inflation appears to be accelerating after the headline Tokyo CPI hit a 40-year high at 4.0% year-on-year to the end of December. This was in line with forecasts, but core CPI was also 4.0% for the same period, above the 3.8% anticipated and 3.6% prior. EUR/USD EUR/USD has lost its traction and declined toward 1.0700 in the early American session on Tuesday. The EUR/USD was even above 1.0750 today. But the current level shows that the pair failed to break through the 1.0740 level, and the daily chart shows that the pair is barely down. It is possible that the EUR/USD pair will drop below 1.0700. While the US dollar remains under pressure from lower rate expectations, the Euro continues to be bolstered by the ECB’s insistence that rates will need to go higher to dampen ongoing price pressures. With the Fed coming to the end of its rate hike cycle, and with the ECB still in full flow, rate differentials between the two will continue to favor Euro strength. The EUR/USD pair as focus shifts to FOMC Chairman Powell's speech. GBP/USD The British pound traded above to $1.2, near a two-and-a-half-week high against the dollar, which hit Monday, The Cable Market is currently below that level, far from it. Trading is at the time of writing around 1.2120. The Bank of England's chief economist, Huw Pill, warned of the risk of continued inflationary pressures from a tight labor market, even if natural gas prices stabilize or fall. The UK central bank is likely to raise interest rates again to 4% next month. Meanwhile, markets are divided as to how much more interest rates will rise. On the data front, all eyes are on the monthly UK GDP figures. AUD/USD The Aussie pair stayed above 0.69 in the early hours of trading, but failed to maintain that level and found itself below it again. Currently, the Australian pair is trading around 0.6860. In addition, the market is also slightly favoring a quarter point hike from the Reserve Bank of Australia (RBA) to 3.35%. The probabilities may change data on monthly prices of consumer goods and services and retail sales for November, which will be published on Wednesday. After a surprise dip in October, inflation picked up again to an annualized 7.3%, while retail spending is expected to rise by a solid 0.7% thanks to major sales this month. Source: finance.yahoo.com, investing.com

The problems of climate change are becoming a frequent topic of discussion. Many governments and central banks are taking action to increase ecological transformations. The difficult economic situation raises the question of whether, in the fight against inflation, it is necessary to undertake investment activities in ecology? In this article: Digitizing Asia Financing the ecological transformation through monetary policy Digitizing Asia The development of technology and digitization is very important. This was shown by the time of the pandemic, in which technology played a significant role. The digital landscape of Asia has grown in recent years, and its further development may be an even greater opportunity for the inhabitants of this region. Digital technologies can increase the efficiency of the public and private sectors, expand financial inclusion, improve access to education and open up new markets by enabling companies to serve distant customers. During the pandemic, for example, digitalization has improved the allocation of valuable resources to health and social services, enabling quick relief while controlling public spending leaks. Digitization helped maintain resilience during the pandemic, where combined with heavy fiscal support, remote working and online sales, it protected employees, students and businesses. The pandemic has accelerated the trend of digitization of the region. The percentage of patent applications related to remote working and e-commerce technologies has increased during the pandemic. As the data shows, Asia is the leader in online retail. But despite this, there are still regions in Asia where digitization is not at a satisfactory level, and the differences between highly digitized and low digitized regions may be of key importance for the whole of Asia. Greater digitalization can help boost productivity growth in Asia, which already has shown itself to be a leader in fields from robotics to e-commerce. See our latest blog for more. https://t.co/QDPoYNFZiM pic.twitter.com/cN22xOfdtv — IMF (@IMFNews) January 10, 2023 Read next: Pietro Beccari Will Be The Louis Vuitton’s CEO, Departures Several Top Executives At Rivian| FXMAG.COM Should the role of central banks in the fight against climate change be active? There are divisions among the world's most powerful central banks over their role in tackling climate change as policymakers focus on curbing inflation. US Federal Reserve Chairman Jerome Powell said the Fed would not become a "climate policy maker" or engage in matters beyond its congressional mandate. The Governor of the Bank of Japan, Haruhiko Kuroda, said that any climate-driven policy decisions must remain within the relevant mandates of central banks and avoid compromising the market neutrality of policy makers. Whereas, from the ECB, Isabel Schnabel said the Frankfurt-based institution needs to become more climate-friendly. Soaring inflation and rising interest rates have thwarted the ECB's plan to redirect its corporate bond holdings towards greener assets to support the energy transition. Should banks participate in the ecological transformation? There are many who are in favor of it, because by financing such investments, the country in which the bank undertakes such activities builds a positive image for future investors. But in a difficult economic situation where it is difficult to implement, the question arises whether to take action in this direction. It all depends on whether the governments of the countries will be able to undertake this task. Major central bankers dispute role in tackling climate change as they battle inflation https://t.co/tN2NI4I6oy — CNBC (@CNBC) January 11, 2023

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

The euro is drifting on Wednesday, trading at 1.0730. EUR/USD has climbed about 1% this week, and Monday’s high of 1.0760 is its highest level since June 22nd. Can the euro continue to push higher? ECB unlikely to change aggressive stance Eurozone inflation has fallen back into single digits, raising hopes that inflation may have finally peaked. The headline rate slowed to 9.2% in December, down from 10.1% in November and beating the forecast of 9.7%. The slowdown is welcome news for the ECB, but investors shouldn’t count on the central bank becoming dovish and ending its current rate-tightening cycle, even if inflation continues its downturn in the coming months. The drop in headline inflation has been fuelled by energy subsidies by governments in Germany and other eurozone members, as well as lower energy prices. Core inflation rose to 5.2% in December, up from 5.0% in November, which indicates that underlying price pressures remain strong. The ECB is unlikely to ease its pace of hikes until the core rate shows a sustained fall as well as a drop in wage growth. In the meantime, the ECB’s message remains hawkish. ECB President Lagarde said in December that the markets were underestimating how high rates would go and noting that the ECB was likely to continue raising rates in 50-bp increments “for a period of time”. The US releases December CPI on Thursday, and we’ve seen in recent months how inflation reports can move the equity and currency markets. The consensus for headline inflation stands at 6.5%, following the November gain of 7.1%. The core rate is also expected to ease, with a forecast of 5.7% in December, compared to 6.0% in November. In recent months, soft inflation reports have sent the US dollar lower, as the markets have assumed that the Fed will not be able to continue hiking in the face of falling inflation. I would expect a similar reaction if December’s inflation numbers are lower than expected. Read next: The EUR/USD Pair Maintains A Steady Upward Trend, The Aussie Pair Keeps Close To 0.69| FXMAG.COM EUR/USD Technical EUR/USD has support at 1.0711 and 1.0612 There is resistance at 1.0800 and 1.0953 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.  

FX markets are consolidating ahead of tomorrow's important December US CPI release. But the dollar bias is lower. Business surveys point to a slowing US economy and, if inflation allows, the Fed will be in a position to ease policy later this year. Commodity markets remain bid on the China rebound story and we expect emerging and commodity FX to remain bid USD: Business pessimism builds We highlighted in yesterday's publication that the day presented two event risks to the building dollar negative sentiment. Those were Federal Reserve Chair Jerome Powell's comments at a Riksbank symposium and the US NFIB small business confidence reading. In the end, Chair Powell avoided discussing monetary policy and instead warned against central bank mission creep into climate policy. And the NFIB survey was very pessimistic indeed, including a view on pricing power which ING's US economist, James Knightley, says is consistent with US core inflation dropping to a more comfortable 2-3% year-on-year area by the late summer. That core reading is currently running at 6.0% year-on-year and is expected to drop to 5.7% YoY in tomorrow's December CPI release - the key US release this week. Thus this year's FX market proposition remains whether US inflation can acquiesce enough to allow the Fed to cut later this year. The markets price a 50/60bp hike into the spring, then a cut of a similar magnitude by year-end. A further 150bp of easing is priced into next year. ING's house view is a little more aggressive, looking for 100bp of cuts this year and then a further 150bp next year. Assuming no upside surprises in inflation then and the increasing focus on China firmly supporting domestic demand, the risk environment is being read as positive. We note copper, a key barometer of Chinese demand, climbing back to $9000/MT in Asia today. We think investors will therefore be looking to sell the defensive dollar on rallies as they put money to work in 2023. As always, we think the short end of the US yield curve will play a major role in FX markets and as long as two-year US Treasury yields continue to hover near the range lows at 4.20/4.25%, the dollar will stay on the soft side.  DXY remains soft and we would say the near-term bias remains towards the 102.00 area, unless tomorrow's US CPI release throws a hawkish curveball. The US event calendar looks exceptionally light today, although we will start to see US quarterly earnings releases build through the week. Chris Turner EUR: Options market turns more bullish EUR/USD remains gently bid, buoyed by expectations of a Fed U-turn in the second half of this year, China reopening and a belatedly hawkish European Central Bank. On that subject, we have four ECB speakers today. Market expectations are firmly set on a further 125-150bp of ECB tightening this year - seemingly 50bp hikes in both February and March and a final 25bp in May to take the deposit rate to 3.25%. Our eurozone team agrees with this pricing.  Looking at the FX options market we can see EUR/USD optimism continuing to build. Measures such as the risk reversal - the cost of a 25 delta EUR/USD call option versus a similar EUR/USD put option - continue to move in favour of EUR/USD upside. As recently as October, the markets were prepared to pay 2% extra in volatility terms for a 3-month 25 delta EUR/USD put option. That skew for euro puts has now narrowed to 0.67%. The skew turning positive - in favour of EUR/USD calls - would be a big moment for the FX market. As above, the seemingly benign investment environment (despite the horrors in Ukraine) probably has investors wanting to buy EUR/USD on dips. It is the time of year when FX markets move on fixing flows from the asset management community. Today's EUR/USD bias looks towards resistance at 1.0785 and potentially towards the 1.09 area tomorrow, should the US CPI release oblige. Chris Turner JPY: Lots of focus on the BoJ USD/JPY is consolidating at the lows and the focus very much remains on Bank of Japan (BoJ) policy after December's surprise widening in the 10-year JGB yield target band. 10-year JGB yields continue to press the topside of the new +/- 0.50% band, with the expectation growing that the band will be widened to +/- 1.00% over the coming months. Despite the BoJ marketing these adjustments as a measure to address JGB market functioning, investors are reading this as BoJ tightening - and yen positive. Focus on the exit of the ultra-dovish BoJ governor in April means that investors will be very cautious selling the yen over coming periods. One month realised USD/JPY volatility is still at an incredibly high 16.5% - making the JPY far too volatile for any kind of funding currency - and we think USD/JPY can end the quarter somewhere near 128. Chris Turner CEE: Czech inflation to rise again Yesterday's meeting of the National Bank of Romania (NBR) brought a 25bp rate hike to 7.00%, as expected. Although we consider this to be the last hike in this tightening cycle, we feel that the NBR wants to keep the door open if needed. But probably the most interesting part is the dropping of the "firm liquidity control" commitment. While dovish in essence, we read this more like an after-the-fact acknowledgement rather than any forward guidance. The Romanian leu barely changed yesterday but we still think it should benefit from global factors, catch up with the lag behind the region and make another move below NBR levels. Today, the focus shifts to the Czech Republic. December inflation we think will show a rise from 16.2% to 16.4% year-on-year, above market expectations. However, as we showed earlier, there is still room for upside surprises. Moreover, fuel prices are the main reason for slower inflation than we have been used to, while inflation remains strong in other parts of the CPI. For the market, the higher number should be a reminder that the inflation problem is still with us and this may be the first opportunity this year to reassess the strong dovish expectations built up recently. At the one-year horizon, markets expect a 170bp rate cut, which is hard to believe given the current Czech National Bank rhetoric, the record strong koruna and the inflation profile. However, the koruna is looking the other way and ignoring domestic conditions. More important for it and the entire CEE region at the moment is the global story, the massive improvement in sentiment in European markets and gas prices below EUR70Mwh. This, in our view, should keep the positive sentiment in the region at least for the rest of the week and keep FX steady.                                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

There is the potential for a big reaction to today's US CPI report. The biggest one would be on a disappointing report that identifies sticky inflation, especially with the market tending to choose to believe that the dominant likelihood is for another surprise to the downside for inflation Auctions plus inflation expectations shine a very positive light on Treasuries - there's risk there The market has come through the auction test so far We had been quite intrigued as to the size of interest at auction yesterday in the 10yr, fearing that the recent run into money market funds might have been a signal of a reduced desire to take down duration. But in the event the auction went very well, on tight pricing, good cover and decent client interest based off the auction statistics. Today's 30yr auction will be a further test of duration appetite, although the 10yr event yesterday was the more relevant one; more representative of wider market sentiment. Bottom line the market has come through the auction test so far this week, and will now take its cue from an incredibly important CPI report today. The market will be expecting a good US CPI report. Falls in energy prices will bring down the headline monthly outcome; indeed a moderate fall is anticipated. This together with a notable base effect brings down the headline year-on-year rate to 6.5% for December. Even the core number has the capacity to surprise to the downside given the reversals being seen in prior rises from other elements, like second-hand car prices. But watch services inflation in particular. This represents about 40% of the index, and despite everything this was still running at 0.4% on the month for the previous month, which still annualises to 6%. This needs to slow, else the pressure from the Fed will remain as intense as ever. The biggest reaction would be on a disappointing CPI report We note that the Bloomberg financial conditions index is now back to neutral territory, driven there by falls in market rates, tighter credit spreads and a lower TED spread. The Fed won't mind this if the inflation story is really on the wane. But if it's not, the Fed will want to see a reversal in many of these factors. The market is in a remarkably relaxed mood right now based off this, and likely fully expecting a market-friendly CPI report. There is the potential for a big reaction to this report. The biggest one would be on a disappointing report that identifies sticky inflation, especially with the market tending to choose to believe that the dominant likelihood is for another surprise to the downside for inflation. EUR curves flatten, with the ECB still toeing the hawkish line With supply out of the way European rates managed to eke out a decent curve flattening and outperforming US rates. 10Y EUR swaps rallied 10bp lower, while the front end 2Y only nudged 2bp lower.    Front-end rates are held up with the European Central Bank continuing to signal its intention to hike rates further and officials sticking to the hawkish narrative. We have seen headline inflation drop back to single digits, but core inflation has still crept higher to a new record. With the labour market still historically strong in the eurozone, it remains one of the key risks for second-round effects as our economists have pointed out.   ECB's determination is not changed as long as core inflation has not peaked The ECB’s Holzmann stated yesterday that the central bank’s determination is not changed as long as core inflation has not peaked. Chiming in on the timelines floated by colleagues he concurred that the terminal rate could be reached by the summer, dropping the possibility that this might need another four 50bp hikes. That would be 75bp more than our economists are expecting currently, but Holzmann is also one of the most hawkish members of the ECB. And it may also reflect a view that rates should remain the ECB’s primary monetary policy tool, as he noted that the central bank should be cautious about moving too quickly on quantitative tightening – perhaps somewhat surprising coming from a hawk. All segments of the euro swap curve are now inverted Source: Refinitiv, ING EGB spreads tighten despite supply deluge Currently the ECB is slated to melt off its APP portfolio by €15bn per month starting in March and continuing at that pace through the second quarter. If we assume a doubling of that pace starting in the second half of the year and look at the overall shifting balance of government debt that will have to be digested by private investors, one can see where Holzmann's caution may stem from: The effective net supply of European government bonds (EGB) to private investors taking into account the ECB portfolio changes could rise to €600bn, an increase of €400bn over last year. Effective EGB net supply to private investors could rise to €600bn Yet so far European government bond spreads over their Bund peers have continued to narrow in the first weeks of the year. The first bulk of syndicated bond deals has been straddled and more generally risk sentiment has improved as the worst of recession fears have been placated by easing energy prices and China starting to reopen. Yesterday's chatter about possibly more joint EU financing to provide a European counterweight to the US green investment plans is also helping. 10Y Italian bonds have retightened towards 180bp, having stood at around 210bp at the turn of the year. Outperforming were Greek bonds, though, helped by market expectations that they could regain investment grade status already this year.   Euro sovereigns need to find a lot more demand for their debt this year Source: Refinitiv, ING Today's events and market view Today’s main release is the US CPI data. Expectations are largely geared towards a softer reading which would confirm market pricing converging towards a 25bp Fed hike in February. As such, the surprise impact of a higher reading than expected could be larger, as it would give more credence to the ongoing hawkish yet ineffective tones coming from the Fed. To that end we will hear from the Fed’s Bullard after the data today. He is one of the hawkish Fed speakers, although he is not a voter in the Federal Open Market Committee this year. Other speakers are the Fed’s Harker and Barkin.   Other data releases today are the US initial jobless claims. In the eurozone the main focus should be on the ECB's consumer expectations survey and its inflation measures. In the past, ECB proponents of quicker action such as the ECB's Schnabel have also drawn on these indicators to flag the risks of deanchoring inflation expectations.  In supply the focus is on the 30Y US Treasury auction while in the eurozone we will see bond auctions from Spain and – in smaller size after the recent 20Y bond syndication – Italy. 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 European Central Bank continues to demonstrate a hawkish attitude amid contradictory data on inflation growth in the eurozone. Last week, a report on the growth of the consumer price index was published. The overall CPI was in the red zone, falling to 9.2% (with a forecast decline to 9.6%). While core inflation, excluding volatile energy and food prices, on the contrary, continued to gain momentum, rising to a record 5.2%. Energy prices  The structure of the report suggests that the growth of energy prices slowed down in December to almost 26%. While food, alcohol and tobacco rose in price by almost 14%, services increased in price by 4.4%, and industrial goods by 6.4% (in November – by 6.1%). This suggests that the decline in overall inflation is due to warm weather in the European region: the purchase price of gas in European countries in December was almost five times lower than in August. The cheapening of the blue fuel had an impact on electricity prices, as many European power plants produce electricity using gas. In particular, in France, the purchase price of electricity at the end of August exceeded €1,000 per megawatt-hour, and at the end of last month it dropped to €240. Germany also contributed to the slowdown in overall inflation: last month, German government provided a one-time compensation for electricity bills. The slowdown in the overall CPI In other words, the slowdown in the overall CPI was not due to the ECB but Mother Nature, which spoils the European region this year with warm days. The growth of the core consumer price index indicates that the problem of high inflation has not only not been resolved, but is getting worse. The ECB Hawkishness Representatives of the European Central Bank understand this very well, and therefore do not lower the degree of intensity in their rhetoric. Moreover, members of the ECB have been sounding clear hawkish signals lately. For example, Latvian central bank governor Martins Kazaks said that he expects a "significant" rate increase at the February and March meetings, after which the steps could become "less as necessary." We are talking about two 50-point rate hikes. The ECB could then slow the pace of monetary tightening to 25 bps. Isabel Schnabel ECB Governing Council member Isabel Schnabel also called for further rate hikes this week, as "inflation will not subside on its own." In turn, Austrian central bank chief Robert Holzmann said there are no signs of weakening market expectations regarding inflation at the moment. However, he added that rates would need to "raise significantly to reach levels sufficiently restrictive to ensure that inflation returns to the target level." His colleague, Bank of Finland Governor Olli Rehn, made a similar statement yesterday, saying that rates should be raised significantly "in the next couple of meetings" to keep inflation in check. The ECB will raise rates As you can see, the members of the European Central Bank remain hawkish, at least in the context of the next two meetings. However, they prefer not to specify where the final point of the current cycle of tightening monetary policy is. For example, French central bank chief Francois Villeroy de Galhau said last week that it was desirable to peak interest rates by summer, "but it's too early to say at what level." At the same time, he stressed that rates will remain at the peak level "for as long as necessary." Thus, now we can say with confidence that the ECB will raise rates at the February meeting by 50 points and very likely by the same amount at the March meeting. This scenario is the base case despite a slowdown in overall inflation in the euro area. EUR/USD Meanwhile, the prospect of a 50-point Fed rate hike at the February meeting is highly questionable. For now, the CME FedWatch Tool says there is a 74 percent chance of a 25 basis point rate hike next month. If today's U.S. inflation report comes out at least at the predicted level (not to mention the red zone), the probability of the 25-point scenario will increase to 80%–90%. In this case, the difference in interest rates between the U.S. and Europe will continue to shrink, and this circumstance will provide background support to the euro. However, this fundamental factor will play on the side of the euro even before the actual implementation—the hawkish attitude of the ECB against the background of slowing inflation in the United States will allow buyers of EUR/USD to organize another offensive upward, to the borders of the 8th figure. Technically, the pair is currently testing the upper line of the Bollinger Bands indicator on the daily chart, which corresponds to 1.0750. Overcoming this target will open the way not only to the next price barrier at 1.0800, but also to the main resistance level at 1.0930 (the upper line of the Bollinger Bands indicator, coinciding with the upper boundary of the Kumo cloud on the W1 timeframe). A slowdown in U.S. inflation, a softening of the Fed's rhetoric, and an increase in the hawkish mood of the ECB will create the necessary information background for the implementation of the upward scenario.   Relevance up to 09:00 2023-01-13 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/332090

Financial markets started Thursday with optimism putting some pressure on the US dollar, although activity remained subdued ahead of the release of the US Consumer Price Index (CPI). Traders, meanwhile, seem reluctant to place aggressive bets and prefer to wait for the release of US consumer inflation data on Thursday. The headline CPI is expected to rise by 6.5% in the 12 months to December, much better than previously at 7.1%, and further decline from a multi-year high of 9.1% recorded in June. Investors will pay particular attention to the underlying reading, which excludes fluctuations in food and energy prices. Core inflation peaked at 6.6% y/y in September, falling to 6% in November. A key US CPI report should clarify whether the Fed will need to raise its interest rate target above 5% to curb stubbornly high inflation. December inflation data from the US may significantly affect the valuation of the US dollar. Apart from inflation data, the US will publish preliminary jobless claims data for the week. USD/JPY The yen gained ground on Thursday amid expectations that the Bank of Japan will review the side effects of monetary easing. Due to the strengthening of the yen, USD/JPY fell to the level of 130.7030. Overall, the yen also indirectly benefited from the more dovish move markets are pricing in for the Federal Reserve. Markets are clearly pricing in a Fed turnaround that will come early after weaker US economic data earlier this month. The upcoming BOJ 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 change in policy. Read next: The New Disney Drama: Disney Is Opposing Activist-Investor Nelson Peltz| FXMAG.COM EUR/USD The EUR/USD daily chart has seen an impressive series of green candles this year, extending its rally from deep below par that started in September 2022. EUR/USD keeps trading above 1.0750. On the “EUR” side, further interest rate hikes from the European Central Bank are expected. The bottom line is that expectations for future interest rate support will continue to favor the euro. GBP/USD The GBP/USD Pair lost the momentum of its rebound and dropped below 1.2150 ahead of Thursday's US session amid cautious market sentiment. The short-term technical outlook suggests that GBP/USD's bullish bias remains intact. What's more, the pound fell to its lowest level since late September on Wednesday as the rising euro hit a seven-month high amid hawkish messages from European Central Bank officials. AUD/USD In the Asian session, the pair traded above 0.69, only in the European session did it drop below this level. Currently, the pair of the Australian has regained strength and again trades above $0.6910 The Australian and New Zealand dollars rose on Thursday as markets assumed incoming US data would confirm a cooling in inflation, while Australia boasted a surprisingly large trade surplus amid falling imports. Local data showed how Australia continued to benefit from being a net exporter of resources when commodity prices were still relatively high. The country's trade surplus rose to A$13.2bn ($9.13bn) in November, well above forecasts. Source: dailyfx.com, finance.yahoo.com, investing.com

The turn in inflation sentiment has been nothing short of spectacular, in particular in the US. To be fair, it's been supported by benign inflation breakevens. At the same time there is a lot of positive extrapolation going on. Bonds are continuing to ride this narrative, and the looming recession one. We have reservations, but momentum is one way for now US CPI came in as expected, but was enough for the markets to view things as glass half full Market rates edged lower post the CPI number, but not for good reason. The report was in line with expectations in terms of the headline numbers. But moreover, an issue for bonds here is services less energy, which accounts for almost 60% of the index, which is up to 0.5% month-on-month for December (was 0.4% MoM in the previous month). That’s still hot. It annualises to over 6%. The jobless claims number was hot too (claims fell again and remain close to 200k). Enough here to worry the Fed. Note that the Bloomberg version of financial conditions moved into loose territory this week as market rates fell and credit spreads tightened. Not the ideal combination from the Fed’s perspective, at least to the extent that they have concern that the job is not yet done on inflation. Financial conditions moved into loose territory this week From the market’s perspective, note again the large spread from 3mth SOFR to Treasury yields. The US 10yr is in the 3.5% area versus 3mth SOFR at 4.6%. Any spread above 100bp (inversion) is extreme from an historical context. We’ve been higher, but typically not for long. And as the Fed hikes in the coming months, that spread stretches wider. Therein is the pressure for market rates to be pulled higher from a carry perspective, even if logic suggests that rates should collapse lower on recession risks. The issue here is a lot of that move has already been priced. But the market is one-way at the moment, helped by a strong 30yr auction. This presents clear evidence of demand for duration, despite the recent run to money market funds. Funds are getting the best of both worlds here, with rolling longs on the front end resulting in high running yield, plus performance further out the curve. Glass half full seen from this the CPI report helped too. Overall this market is finding good excuses to continue to test the downside for yields. We have some reservations, as stated before, but that's clearly the path of least resistance. 10Y rates dipping more than 100bp below Fed Funds make them vulnerable to a re-pricing higher Source: Refinitiv, ING The next TLTRO repayment to shrink the ECB's balance sheet The European Central Bank will announce banks’ next targeted longer-term refinancing operations (TLTRO) repayment today. After the tweaks to the TLTRO terms in October, close to €800bn have already been repaid or have matured. With the bulk of early repayment decisions likely having been made already and the largest part of the remaining €1.3tn to mature over the second half of the year, we do not see any particular reason to expect another larger repayment this time around. The median expectation surveyed by Bloomberg is €213bn, but as with past early repayments the range of estimates is wide, from €75bn to €450bn.   ECB’s balance sheet is on a clear downward trajectory, regardless of today's figure From a policy perspective the ECB’s balance sheet is already on a clear downward trajectory, regardless of today's figure. The TLTROs winding down has had and will have the largest impact on the excess reserves in the banking system near term, but also the asset portfolios have been announced to start melting off come March. That reduction in excess reserves was also seen as one factor contributing to the tightening of Bund asset swap spreads (ASW), as less liquidity now seeks a home in high quality collateral. Indeed the peak in excess liquidity broadly lines up with the peak in Bund ASW spreads, and the further trajectory of the former leaves room for more tightening of the latter. Easing collateral scarcity has tightened short-end swap spreads Source: Refinitiv, ING   A reinstated 0% cap for government deposits still poses a risk of another collateral squeeze Another factor that had contributed to the tightening of ASW was that the ECB chose in September to suspend temporarily the 0% remuneration cap on government deposits held at the ECB. That has prevented these cash holdings, substantial at the time, from pushing into the already tight market for collateral. The suspension only runs until the end of April, which still poses a risk of another collateral squeeze. General government deposits have declined substantially since the first half of 2022, halving towards now €327bn with the latest ECB financial statement. But the previous two year-ends have also seen reductions of around €200bn, which then proved to be temporary seasonal phenomena. Later in February we will have more confidence in judging whether risks for another squeeze have subsided.   Today's events and market view The US CPI report has removed one obstacle for a further rally in rates. To the extent that this rally is more driven by confirmation bias, today's University of Michigan consumer survey could prove more market moving than comments from Fed officials. Slated to speak today is the Fed's Kashkari. We will also hear from the Fed's Harker again, who already yesterday called for raising rates by 25bp "a few more times". Markets currently price in less than 50bp combined over the next two Fed meetings. In a typically hawkish fashion, Bullard was arguing for Fed Funds to be raised above 5% 'as soon as possible' yesterday, noting better growth prospects than expected. In the euro area we will get final infation readings for December out of several countries, and for the bloc as a whole we will also get industrial production and trade balance data. The TLTRO repayment announcement comes at 12.05 CET. 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  

An on-consensus US December CPI release has allowed the FX markets to revert back to the main event – a potential sea-change in Bank of Japan (BoJ) policy and perhaps plenty of downside in USD/JPY. That is the hottest story in town right now. Soft US consumer sentiment and softening inflation expectations should also keep the dollar bias bearish today Looking at the FX options market, USD/JPY remains the stand-out interest USD: Slip sliding away An on-consensus US CPI release yesterday did not interrupt this year’s narrative of the US Federal Reserve being able to cut rates later in the year and the dollar being able to fall. As our US economist James Knightley wrote in his review of the release, it seems that it is mainly the shelter component holding the core month-on-month reading up here and shelter should start to come sharply lower in the second quarter. Consensus is now behind consecutive 25bp Fed hikes in February and March, followed by a Fed turning dovish over the summer and starting to deliver rate cuts later in the third quarter. The Fed taking rates back towards less restrictive territory remains a tailwind to risk assets – especially to emerging risk assets buoyed by China rebound expectations. Fund flow data show good momentum in Chinese equity ETFs, which is normally very supportive of the renminbi. It is a quiet day for US data, and a soft University of Michigan consumer sentiment plus declining inflation expectations can keep the dollar on the back foot. With USD/JPY expected to stay under pressure into next Wednesday’s Bank of Japan meeting, the DXY can stay biased to the 102.00 area near term. Chris Turner EUR: ECB will be happy with the stronger euro The ECB’s trade-weighted euro has now returned to levels seen last February. And actually, the year-on-year change in EUR/USD is now mildly positive. This will be welcome news to the ECB, where last summer’s 6% YoY EUR/USD decline was contributing to the inflation problem. With short-dated (two-year) USD swaps drifting to new lows for the move, EUR/USD swap differentials continue to move in favour of EUR/USD. And this is a theme which we suspect will play a greater role in EUR/USD pricing over the next 12 months. For today, the eurozone data calendar sees the release of November industrial production and the trade balance. We will also find out how much European banks have repaid of their targeted longer-term refinancing operations (TLTROs) drawings in January. The expectation is around €200bn, with the range being around €50bn-450bn. Any higher-than-expected repayment might be positive for two reasons: i) it would reduce excess euro liquidity and would be supportive of eurozone rates and ii) it might be seen as a sign of confidence as precautionary borrowing is paid back. Let’s see. EUR/USD remains on course for 1.0900 and possibly 1.0950. Weekend profit-taking may pose the biggest risk to EUR/USD, but 1.0750 should now be a good near-term base. Chris Turner JPY: Off to the races Looking at the FX options market, USD/JPY remains the stand-out interest. One-week implied volatility remains at a very high 20% and volatility for the Bank of Japan (BoJ) meeting next Wednesday is priced as high as 40% or a near 1.7% move in spot USD/JPY. As events showed yesterday with the 2% USD/JPY fall, even at these levels the FX options market may still be under-pricing volatility. This huge interest in USD/JPY is understandable. The BoJ may be on the verge of its biggest policy change in decades. Even short-dated JPY Interest Rate Swaps have started to move and are at the highest levels (near 30bp) since 2008! Clearly, USD/JPY has come a long way very fast, but some of the longer-term skews in the FX options market point to a structural shift in the market’s view in USD/JPY. We suspect few will want to stand in the way of the USD/JPY downside. 126.50 looks like the clear near-term target for USD/JPY. Chris Turner CEE: Higher EUR/USD is a small boost for region All the important numbers have already been published this morning. Romania's December inflation fell from 16.8% to 16.4% YoY, more or less in line with market expectations. In Hungary, on the other hand, inflation rose from 22.5% to 24.8 % YoY, less than the market expected. Later today, we will see the final December inflation number in Poland, which surprised in a flash estimate to the downside to 16.6% YoY. We'll also have some secondary data such as the current account in Poland, Czech Republic and Romania, and today, after the end of trading, Fitch will publish a rating review of Poland. The country is currently rated A- with a stable outlook and we do not expect any changes today. Also in Poland, the lower house of parliament will vote on a bill that should help unlock EU money and get access to €35.4bn. On the FX market, we found the CEE currencies almost unchanged after yesterday's US inflation number. However, higher EUR/USD today will give them a chance to erase this week's losses. But still, it shouldn't change much in the picture of a flat week. For the Polish zloty we see a return below 4.680 EUR/PLN and for the Czech koruna levels below 24.00 EUR/CZK. Hungarian inflation numbers should be good news for forint and we can go back below 396 EUR/HUF. 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

The German economy grew by 1.9% in 2022. This implies a stagnating, not contracting, economy in the fourth quarter. Will the widely-predicted recession simply fail to materialise? We remain doubtful. Avoiding the worst does not suggest the economy is doing well. The economy has just returned to its pre-pandemic level   Same procedure as every year. The German statistical office just released a first estimate for GDP growth in 2022, without having any single hard data point for the month of December. According to this first estimate, the German economy grew by 1.9% year-on-year, from 2.6% in 2021. Definitely not bad for a year with lockdowns and a war. However, to put things in perspective: the German economy has only just returned to its size of late 2019. Three years of crisis have not passed by unnoticed. First estimate points to stagnation not contraction in fourth quarter The most important element of this annual growth rate is what it means for fourth quarter growth. According to the statistical office, the German economy stagnated in the fourth quarter, after growing by 0.4% quarter-on-quarter in the third quarter. In the past, these implied estimates for the final quarter were very accurate. However, at the current juncture, the economic performance in December could have been more volatile and disruptive than in the past; think of the weather impact, longer Christmas breaks and stronger-than-expected impact from the energy crisis on consumption and production. We think that this estimate for the fourth quarter will still be revised somewhat. In any case, today’s data shows that for the entire year 2022, the catch-up effect after the end of lockdowns, both for consumption and production, outweighed the economic fallout from the war in Ukraine. In the final months of the year, fiscal support also cushioned the downswing. Avoiding the worst doesn't mean that growth will rebound strongly Looking ahead, the post-lockdown catch-up is over and will not support economic activity in 2023. The adverse effects from the war and the energy crisis are likely to prevail and will be a drag on the economy. Weakening new industrial orders since February last year and weak consumer confidence are just two of many reasons for more trouble ahead for the German economy. Still, the New Year started on a more optimistic footing for the German economy. The mild temperatures almost seem to have ended the energy supply crisis, at least for now. National gas reserves have increased again, and consumption is clearly below historical averages. While the warm weather should actually ring alarm bells in terms of climate change, it is a welcome surprise for the economy. That said, the weather is far from predictable and the economic safety net is built on fiscal stimulus. More generally, let’s not forget that the German economy is still facing a series of challenges which are likely to weigh on growth this year and beyond: energy supply in the winter of 2023/24, changing global trade with more geopolitical risks and changes to supply chains, high investment needs for digitalisation and infrastructure and an increasing lack of skilled workers. Today's data suggests that the widely-predicted recession might not happen. We remain very cautious. The sheer fact that the German economy avoided the worst, unfortunately, does not mean that all of the economic problems have disappeared. Read this article on THINK TagsGermany GDP 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

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

The final inflation figures show that Spanish core inflation strongly accelerated to 7% in December, from 6.3% in November. Although lower energy prices have brought some temporary relief to headline inflation, this shows that inflationary pressures are still very high Spanish core inflation above headline inflation for the first time The final inflation figures and details by component revealed by Spain's statistics office INE this morning show that core inflation rose more sharply than expected in December. The core CPI reached 7% in December, a new record, and a strong acceleration from the 6.3% in November. As a result, core inflation is now above headline inflation for the first time. This shows that the underlying price pressures in the economy are still at record levels. The current drop in headline inflation to 5.7% is thus solely due to the recent sharp fall in energy prices, such as electricity and fuels. Thanks to warm winter weather, gas stocks in Europe are above the five-year average, easing some pressure on energy markets. These favourable base effects in the energy component bring some relief to headline inflation. Spanish core inflation above headline inflation for the first time Underlying inflationary pressures will remain high Although the coming headline inflation will fall further thanks to these favourable base effects for energy, inflationary pressures in the rest of the economy will remain high. Besides core inflation, the food component will also continue to contribute positively to inflation figures. The details show that food prices continued to rise further to 15.7% year-on-year in December, from 15.3% the month before. This puts food inflation at its highest level since measurements began in January 1994. Food inflation will also remain high in 2023. Moreover, fertiliser exports were severely disrupted last year, which might also affect global food production in 2023. In other eurozone countries, favourable base effects in the energy component will cause further declines in headline inflation in the coming months. However, the ECB will not determine its policy based on the more volatile energy prices but will mainly look at whether core inflation is cooling sustainably. It will therefore be careful to announce a policy reversal before core inflation also starts to fall. Moreover, we should not forget that energy prices will rise again later in 2023, especially if a reopening of the Chinese economy drives up demand for liquefied natural gas. Read this article on THINK TagsSpain Inflation Eurozone ECB 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 Franklin Templeton Fixed Income (FTFI) Central Bank Watch is a qualitative assessment of the central banks for the Group of Ten (G10) nations plus two additional countries (China and South Korea). See full methodology on page 6. Key highlights Stepping down pace of hiking ≠ outright dovish pivot. A majority of developed market (DM) central banks should gradually reach their respective peak policy rates through the first half (H1) of 2023. The US Federal Reserve (Fed) and the European Central Bank (ECB) remain on the most hawkish end of the spectrum. The Bank of Korea (BoK) may well be the closest to a dovish pivot. Tight labor markets and sticky inflation are still the primary concerns. Although headline inflation may be receding, central banks remain concerned about tight labor markets keeping wages elevated, which in turn can spill over into the stickier components of inflation. Bank of Japan (BoJ) surprises with a policy tweak. A wider trading band for 10-year Japanese government bonds (JGBs) has already had implications for global bond markets and US dollar dominance. Although the BoJ insists its latest move isn’t a step toward broader tightening, a policy move in 2023 is very much on the table. Latest thoughts on global central bank policy Far from done on tightening policy; markets think otherwise As expected, the Fed downshifted to a 50-basis point (bp) hike at the December Federal Open Market Committee (FOMC) meeting. “Ongoing increases” in the policy rate were deemed to be appropriate— giving the Fed optionality in February. Despite recent downside surprises in inflation, the Fed raised its median inflation projections, prompting a higher median peak policy rate in 2023. Fed Chair Jerome Powell welcomed the deceleration in monthly core inflation but noted that services inflation excluding housing remains uncomfortably high. Meanwhile, in our view, the ongoing strength of the labor market and a still-elevated level of demand-supply imbalance will keep wage and services inflation well supported. Despite Powell’s hawkish rhetoric, markets continue to price in a peak rate of just 4.9, with rate cuts beginning in September 2023 and 50 bps of cumulative cuts by the end of the year. We, on the  other hand, expect a total of 75 to 100 bps of increases, given the still-negative real policy rate and the likely persistence of services inflation. However, smaller (25 bp) hikes wouldn’t come as a surprise  since the FOMC intends to “feel their way” to an appropriate policy stance. Once at the peak rate, the Fed will signal a pause through 2023 as it gauges the full economic impact from all the tightening. Closing in on a pause? After raising rates at a record pace of 400 bps over the past nine months to 4.25%, the BoC signaled  a willingness to pause at its next policy meeting on January 25. The December statement was in sharp contrast to the one from October, when the bank was expecting rates to go even higher. However,  the Bank did not firmly close the door on future rate hikes, placing the onus on the evolution of economic data to determine future action. The BoC noted that the economy continues to operate in excess demand, and that while sequential measures of core inflation may be losing momentum, they remain uncomfortably high. We believe the BoC’s adoption of a more neutral tone is meant to gauge how tighter monetary policy is working its way through the economy; it is not indicative of an outright dovish pivot.  If inflation data were to surprise to the upside, we would not rule out a final 25-bp hike in January. While we expect the BoC to remain on pause throughout 2023, it faces a challenge in convincing markets not to expect a shift to cutting rates—especially as bond yields fall. Smaller hikes = more tightening The ECB raised its policy rates by 50 bps in December, slowing the pace from two consecutive 75-bp jumbo hikes. However, the message coming from the statement and press conference was extremely hawkish. ECB President Christine Lagarde affirmed that rates need to go significantly higher, at a steady pace (of 50 bps) and over a period of time. This effectively erases any dovish pivot expectations of a  more careful calibration going forward, reinforced by explicitly pushing back against market pricing of a sub-3% terminal rate, and indicating that rates will remain in restrictive territory to dampen demand  and inflation expectations. The balance sheet shrinkage will accelerate in 2023 with the beginning of passive quantitative tightening (QT) on its asset purchase program (APP), starting in March at a pace of EUR 15 billion per month (approximately half of expected redemptions) to be reviewed in June. Inflation is forecasted to remain above target until mid-2025, supported by higher wages, while a soft-landing scenario for growth looks increasingly optimistic over the medium-term. We now see the terminal rate at a minimum of 3.25% with upside risks linked to the inflation dynamics of the next two quarters. Source: cbw-0123-u.pdf (widen.net)

The eurozone economy came under tremendous pressure in the aftermath of Russia's invasion of Ukraine in February 2022, when energy and food costs soared last year. In an effort to fight rising prices, the European Central Bank raised interest rates four times in 2022. Previous data The reopening of the European economy in 2021 after the sudden shock of COVID-19 in 2020 is behind a number of factors that have driven prices up so rapidly in recent months. Global supply chains have yet to recover from production issues, travel restrictions, and labor issues caused by the pandemic. Rising energy costs have only exacerbated supply problems, especially in the transport sector. Europe and most of the world were already hit by soaring energy prices - which contribute to inflation - even before Russia invaded Ukraine in late February. The conflict has exacerbated the energy crisis, fueling global fears that it could lead to an interruption of oil or natural gas supplies from Russia. Moscow said in September that it would not fully resume gas supplies to Europe until the West lifted sanctions. Russia typically supplies around 40 percent of Europe's natural gas. Euro area annual inflation is expected to be 9.2% in December 2022, down from 10.1% in November according to a flash estimate from Eurostat, the statistical office of the European Union. Of the components of inflation, energy continued to be the biggest driver in December, but declined from previous levels. According to the latest data, energy costs fell from 34.9% in November to around 25.7% in December. Unusually high temperatures in the fall and winter drove energy prices back to pre-war levels. In terms of countries, the Baltic states once again recorded the highest spikes in inflation, which amounted to around 20%.The Baltic countries continue to be the hardest hit. In particular, Latvia experiences the highest level of inflation in the Eurozone, which stood at 20.7 percent in December (down from 21.7 percent in November), compared to 7.4 percent a year ago. The sharpest fall in inflation was in Estonia, one of the countries where prices rose the most in recent months, where it fell to 17.5 percent. in December compared to 21.4 percent. Source: investing.com Inflation estimate Currently, the December inflation reading is expected to maintain the previous level (9.2%) and stay above 9% this time. Source: investing.com HICP To facilitate country comparisons, EU Member States calculate the Consumer Price Index according to international definitions and methods. The European Central Bank (ECB) uses the HICP to formulate its monetary policy in the euro area. In addition, most countries produce their own national consumer price index. Prices rose the fastest in Hungary, where the inflation rate was 23.1%. By contrast, Spain's inflation rate was 6.7%, the lowest in the EU this month. Inflation in the EU last month was higher than ever before. ECB interest rate While the new figures are undoubtedly positive, inflation in Europe remains well above the European Central Bank's (ECB) target of keeping the eurozone below 2%. Despite further signs that inflation is coming down, analysts say it is too early to celebrate and do not expect a return from the region's central bank. In an effort to fight rising prices, the European Central Bank raised interest rates four times in 2022 and has said it will likely continue to do so this year. The bank's main interest rate is currently 2%. Speaking earlier this week, ECB Governing Council member and Bank of France governor Francois Villeroy de Galhau said interest rates could peak this summer. We must expect that the ECB would be prepared to remain at the terminal rate as long necessary Source: investing.com

The data from the US revealed that the Consumer Price Index declined by 0.1% on a monthly basis in December. The Core CPI, which strips volatile energy and food prices, was up 0.3% in the same period. Finally, annual Core CPI arrived at 5.7%, down from 6% in November, as expected. Although the US Dollar struggled to find direction with the initial reaction to the US inflation report, dovish comments from Fed officials triggered a sharp decline in the US T-bond yields and weighed heavily on the currency. Atlanta Federal Reserve Bank President Raphael Bostic said that he was comfortable with a 25 basis points (bps) increase at the next meeting. On the same note, Philadelphia Fed President Patrick Harker noted that it was time for future Fed rate hikes to shift to 25 bps increments. Dovish comments from Fed officials, however, made sure that investors continued to move away from the US Dollar. The latest Michigan Consumer Sentiment report showed consumer sentiment remaining low. Year-ahead inflation expectations fell to 4% from 4.4% while the five-year reading nudged a touch higher to 3% from 2.9% in December. USD/JPY USD/JPY started the week trading at 130.8020. Over the next days, trading was in the range of 131.50-132.50. The USD/JPY pair reached its highest level on Wednesday, a record high was set at 132.8370. After that, the pair began to fall below 130. The pair recorded a low just before the end of the trading week at 127.53, and ended the week just above the weekly low of 127.8340. The Japanese Yen ended last week on the front foot from both USD weakness driven by softening inflation in the U.S. as well as market hopefulness around a more aggressive Bank of Japan (BoJ). A change from the current ultra-loose monetary policy due to elevated inflationary pressures could be something that can take place next week. The Bank of Japan meets on January 18. EUR/USD For the EUR/USD pair, this week was in an uptrend. The pair started the week at 1.0669. And around 1.0660 it recorded its lowest weekly level. In the following days it was growing, exceeding the level of 1.07. On Thursday, the EUR/USD pair crossed the threshold of 1.08 and above this level reached the weekly maximum - 1.0870. The trade for the pair ended above 1.08 at 1.0828. European Central Bank (ECB) policymaker Martins Kazaks said there was no reason for markets to be betting on an interest rate cut. While the Fed is now widely expected to ease further policy tightening, ECB policymakers are scrambling to ensure markets understand their commitment to the hawkish outlook. GBP/USD The cable pair started the week at 1.2114 and finished much higher at 1.2234. GBP/USD traded the low for the week at 1.2097. The record high level in the week was reached by the pair at the level of 1.2242. GBP/USD has benefited from the broad-based selling pressure surrounding the US Dollar and reached its highest level since December 15 at 1.2250. The pair's near-term technical outlook suggests that the bullish stays intact. Gross Domestic Product Growth was 0.1% when the markets had been looking for a 0.2% contraction. However, as manufacturing and industrial production missed expectations. Interest rate support for sterling is likely to remain fitful as the economic numbers trickle out. Continued poor labor relations and the prospect of recession, possibly accompanied by a degree of ‘stagflation’ will keep the Pound a nervous bullish bet. AUD/USD The Australian pair started the week at 0.6901. In the following days, trading was in the range of 0.6865-0.6950. The lower border of the range was also the weekly low of the AUD/USD pair. The Aussie Pair's weekly peak traded close to the 0.70-0.6984 level. The pair finished trading near 0.70 at 0.6980 Source: finance.yahoo.com, investing.com

The euro is almost unchanged on Monday, trading at 1.0831. The euro is coming off a strong week, as EUR/USD rose 1.8%. Earlier in the day, the euro hit 1.0874, its highest level since April 2022. Will Eurozone inflation sink? Eurozone inflation has been dropping and slipped into single digits in December. This is a remarkable turnaround after a year in which inflation soared and constantly beat expectations after Russia invaded Ukraine. In December, the ECB projected that inflation wouldn’t fall to the 2% target until 2025, but it now appears that the target could be reached much earlier, perhaps in Q4 of 2023. One of the key drivers of higher inflation was soaring energy prices, triggered by the Ukraine war. Oil and gas prices have since fallen substantially, and a relatively warm winter in Europe and extensive efforts to diversify supplies have eased concerns of an energy crisis in Europe. The downtrend in energy prices could of course change before the winter ends, but in the meantime, inflation is dropping and the economic outlook for the eurozone appears brighter. Last week, Goldman Sachs revised upwards its 2023 GDP forecast for the eurozone from -0.1% to a small gain of 0.6%. The positive news on the inflation front is unlikely to result in any change in policy from ECB policy makers. Headline inflation fell from 10.1% to 9.2% in December, but the core rate, which is a key factor for the ECB, has been rising. The ECB has said more rate hikes are coming in 2023, a stance that was echoed by ECB member Rehn earlier today. In the US, UoM Consumer Sentiment jumped to 64.6 in December, beating the forecast of 60.5 and above the November reading of 59.7. Inflation expectations for 2023 decreased to 4.0%, down from 4.4%, although long-term expectations inched higher. Read next: 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)| FXMAG.COM EUR/USD Technical 1.0829 is a weak support line, followed by 1.0691 There is resistance at 1.0921 and 1.1010 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.

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

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

The US currency is working hard to stay afloat and not slide to the lowest levels. Nevertheless, the greenback occasionally slumps, unwittingly giving a chance to the euro. The latter willingly uses this opportunity and tries to rise as much as possible, having accumulated a certain amount of growth. Analysis The greenback started the week lower, hitting a 7-month low against other currencies, but stabilized later on. On Monday evening, January 16, EUR/USD soared to a new 9-month high of 1.0874 but then pulled back to the critical 1.0816 mark. As a result, the pair lost 0.16%, but started recovering by the next trading session. On Tuesday morning, January 17, EUR/USD traded in the range of 1.0829-1.0830, having partly recouped its earlier losses. The technical situation According to analysts' estimates, the technical situation has stabilized slightly. At a certain moment, the pair reached the highest level since April 2022, but then retreated to the lower limit of the current range. This is because risk appetite has decreased, which supports the dollar and is a "headwind" preventing the euro's growth. Disappointing US macro data, published last week, contributed to the dollar's downfall. Recall that in December 2022, US consumer prices fell for the first time in more than 2.5 years. This had a significant impact on the greenback, as aggressive Federal Reserve rate hikes were the key driver of its growth (by 8%) in 2022. EUR/USD The US currency is gradually recovering from a seven-month low. This puts significant pressure on the EUR/USD pair. Traders and investors are worried about the economic problems triggered by the outbreak of COVID-19 in China, as well as the protracted Russian-Ukrainian conflict. This increases fears about the global economic downturn and restrains optimism in the markets. In such a situation, experts record a massive outflow of capital to USD as a safe asset. This limits the euro's growth and worsens its future prospects. US inflation  On the bright side, US inflation is gradually easing, which recently reached its highs in the last 40 years. Against this background, investors expect the Fed to pause rate hikes. In addition, market participants believe that interest rates will not be raised immediately, but gradually and by a certain amount. Most economists (91%) expect a 25bp hike and only 9% expect a 50bp hike. The Fed would soften its hawkish stance According to experts, a significant recovery of the dollar is still elusive. Market participants used to be confident that the Fed would soften its hawkish stance after seeing signs of continued easing of inflation pressures. However, assumptions that the central bank is close to ending its rate hikes were not justified. At the moment, it will probably continue to raise rates, but may slow the pace of rate hikes (only by 25 basis points in February). According to economists at Deutsche Bank, most of the current factors are in favor of a continued decline in the greenback and a relative stabilization of the euro. A combination of China's economic reset after the removal of covid restrictions and an improving energy situation in the EU have set the USD back. In addition, recent hawkish statements from the European Central Bank have provided support for EUR/USD and the euro. At the same time, there is growing confidence in the markets that inflation in the US will peak, so EUR/USD could rise to 1.1500 in 2023 and the dollar could remain in a downtrend Relevance up to 09:00 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/332491

The US dollar is under pressure as the market seems to expect the Federal Reserve to ease its aggressive monetary policy later this year. USD/JPY The yen was close to a seven-month high as investors took a breather ahead of a potential change in policy at the Bank (BOJ). At the last meeting, the Yield Curve Control (YCC) program was changed, setting a range of +/- 0.50% around zero for Japanese government bonds (JGB) for up to 10 years. They previously targeted +/- 0.25% around zero. While they are not expected to change their prime interest rate, which currently stands at -0.10%, another change to the long-term yield target range is being discussed. Today, USD/JPY managed to break above 129 but failed to hold. The USD/JPY pair stabilized above 128.50. AUD/USD The Australian dollar jumped towards yesterday's six-month high against the US dollar, with China's GDP much better than forecast. China's GDP printed at 2.9% year-on-year in the fourth quarter versus expectations of 1.6% and 3.9% previously. At the same time, other Chinese data were released, and industrial production for the year to end-December was 1.3% instead of the expected 0.1%. On the monetary policy side, the local market favors a quarter-point hike from the Reserve Bank of Australia (RBA) to 3.35% in February, with some chance it could stop at its first meeting since May. Australian government bond yields remained stable, albeit close to last week's one-month lows. Monday's drop in the AUD/USD pair did not affect the prevailing uptrend. The pair of the Australian in the morning session was approaching the key level of 0.6975, the pair managed to exceed this level, but did not hold it and fell in the European session. Currently the Aussie Pair is trading above 0.6955. Read next: Alibaba And Its Share Buyback Program Which Is Supported By Ryan Cohen, Microsoft Corp. Plans To Incorporate AI Tools| FXMAG.COM GBP/USD The British pound edged higher on Tuesday after data showed a tight labour market and accelerating pay growth. GBP/USD trades above 1.2200, bouncing back from daily lows after the UK jobs report. The UK unemployment rate stabilized at 3.7% in November, while average hourly earnings rose more than expected. GBP/USD raises bids to reverse early-week pullback from monthly high. Broad US dollar pullback lays foundation for cable pair recovery ahead of key jobs report. Talks of Brexit labor shortages, UK labor strikes and British Prime Minister Sunak's difficulties are being explored by the GBP/USD bulls. The Bank of England is expected to raise interest rates at its tenth consecutive meeting on February 2 in an attempt to bring inflation down further. Today's UK employment data becomes more important for GBP/USD traders. The pair traded close to 1.2200 in both the Asian and European sessions and also fell below 1.2200. Currently, the cable pair is rising and trading above 1.2260 EUR/USD The latest German economic sentiment index, ZEW, rose in January, beating both last month's reading and market forecasts. The positive reading, the first since February 2022, points to "a notable improvement in the economic situation over the next six months" Today's ZEW release had little or no impact on the euro, which has been treading water against the US dollar so far. EUR/USD remains above 1.0800. The euro is expected to take center stage as the European Central Bank (ECB) aims to peak interest rates by the summer. The EUR/USD pair started Tuesday trading around 1.0830. In the European session it fell below this level. It managed to cross 1.0840 but dropped to around 1.0835 Source: investing.com, dailyfx.com, finance.yahoo.com

The fundamental background for the EUR/USD pair remains ambiguous. On the one hand, the dollar is under pressure amid growing confidence in the slowdown of the Fed rate hike to 25 points. On the other hand, traders need additional information impulse for the upward movement. The pair consolidated within the 8th figure (for the first time since last April), but to conquer the 9th price level, not to mention the 10th figure, they need a powerful informational trigger. Chinese anti-records Experts pinned certain hopes on China, which today published key data on its economic growth. However, these hopes were not justified. The data turned out to be negative, but for the most part they came out in the green zone. Neither the dollar nor the euro were the beneficiaries of today's release. In terms of figures, the situation is as follows. China's GDP grew 3.0% last year, down from 8.4% in 2021. If we exclude the 2.2% growth after the first blow of the coronavirus crisis in 2020, this is the worst performance since 1976. Clearly, this result reflected the effects of the "zero tolerance" policy on COVID, which Beijing abandoned only at the end of last year. A sharp 180-degree turn suggests that in 2023 there will be conditions for economic growth in China. In addition, according to The Wall Street Journal, the Chinese authorities have significantly eased pressure on technology companies, relaxed strict regulation of real estate and recently lifted the ban on coal imports from Australia (which was in effect for more than two years). However, another question remains regarding the overall global demand for Chinese goods, given the global economic slowdown and the threat of recession in the world's largest economies. In addition, another alarming signal was published today: it became known that the population of the People's Republic of China decreased last year for the first time in more than 60 years. According to a number of analysts, this is a historic shift, which in the future will have long-term consequences for both the Chinese and the global economy. According to data, Chinese population decreased by 850,000 people last year to 1.41 billion. The reverse side of a coin However, despite the set anti-records, the safe dollar could not benefit from the situation, including in pair with the euro. Several factors acted as a counterbalance. First, almost all the components of today's release came out in the green zone. China's fourth-quarter GDP beat forecasts despite growth at the slowest pace since the 1970s, with China's economy expanding 2.9% (slowing down from 3.9% growth in the third quarter), while the consensus forecast was 1.8%. As mentioned above, in 2022, the Chinese economy grew by 3.0%, while the forecast was at 2.7%. Other indicators are also green: for example, retail sales in December fell by 1.8%, while experts were more pessimistic in their estimates, expecting a decline of 9.5%. In turn, the volume of industrial production grew by 1.3% (in annual terms), with a weak growth forecast of 0.5%. The official unemployment rate fell to 5.5% (forecast was 5.8%). The second support factor that somewhat smoothed over the negative emotions on the market from today's release was the fact that Beijing still abandoned the frankly destructive policy of zero-COVID policy. Thus, contradictory signals from China could not tip the scales—neither in the direction of buyers nor in the direction of sellers of EUR/USD. Moreover, some support for the euro is provided by the ECB representatives, who voiced hawkish comments. In particular, European Central Bank chief economist Philip Lane said in an interview with the Financial Times that "interest rates should be much higher than they are now." Earlier similar messages were voiced by other representatives of the European regulator, in particular Martins Kazaks, Isabel Schnabel, Robert Holzmann, Olli Rehn and Francois Villeroy de Galhau. Conclusions The pair is holding within the 8th figure, against the background of the general weakness of the greenback and the 90% probability of the implementation of the 25-point scenario at the February meeting of the Fed. The hawkish comments of the ECB only fuel interest in buying EUR/USD, but do not allow the pair's bulls to organize a large-scale counterattack. In my opinion, short positions on the pair are too risky and fundamentally unreasonable. Whereas it is advisable to consider longs only after overcoming the 1.0860 resistance level, which corresponds to the upper line of the Bollinger Bands indicator on the D1 timeframe. It is likely that the price turbulence (which may not be in favor of the dollar) will be provoked by representatives of the Fed, many of whom will voice their position in the second half of the week. The market is expecting speeches by Lorie Logan, Susan Collins, Lael Brainard, Patrick Harker, Christopher Waller and John Williams. Perhaps they will shift the balance of power towards EUR/USD buyers. However, in the current, rather shaky situation, it is best to take a wait-and-see attitude Relevance up to 10:00 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/332508

On Tuesday, the EUR/USD currency pair continued to rise and showed no signs of wanting to begin a reversal. The first two trading days of the week had essentially no fundamental or macroeconomic background, but traders still could not see any reason to fix at least some of the profit on long holdings. Therefore, the technical situation is unchanged at this time. While we have been anticipating a significant downward correction for more than a month, we also recognize that this is merely a basic hunch. We cannot think of any justifications for the European currency to have grown so strongly in such a short amount of time. There is now no sell signal, but the price is still above the moving average line on the 4-hour TF and above the lines of the Ichimoku indicator on the 24-hour. Many analysts' recent economic and currency forecasts have made mention of the Chinese economy. They present completely disparate arguments at the same time that frequently conflict with one another. For instance, the removal of COVID's "zero tolerance" policy is considered a benefit for the world economy and volatile currencies. Everyone is aware that the US dollar often emerges as the most secure and stable currency when uncertainty occurs. Right now, the situation is reversed. The Celestial Empire's economy is expanding, but at the same time, birth rates are declining, and population growth is declining for the first time in 60 years. We've long accepted that the Chinese population is growing, but since 400 million of the nation's 1.5 billion people are seniors, international experts are now raising the alarm. Since there will always be more retirees, if there is no growth, there will also be no economic growth and a recession. The Chinese government has already started encouraging more children to be born by removing limitations on having one or two children in a family and instead giving financial advantages to each child. This news, in our opinion, only serves as background information and does not directly affect the movement of the euro/dollar pair. The ECB officials' language continues to be "hawkish." The ECB and Fed's interest rates are currently one of the most important factors affecting the foreign currency market, as has been stated numerous times. We think that market participants are still buying euros because they anticipate a significant rate increase in the European Union but not a comparable process in the United States. It's straightforward: Since the Fed's rate has nearly reached its maximum, it makes no sense to raise it quickly. The next two meetings are expected to see two increases of 0.5% each, followed by an increase of 0.25%, according to the ECB rate. Representatives of the ECB claim that by the end of 2023, inflation should have reached the target level. They also anticipate that a dramatic fall in the price of gasoline and oil will have a favorable impact on the inflation rate. While we somewhat concur with Philip Lane and Isabel Schnabel, we think that inflation may not be moderate enough to prevent rate increases in the coming months. In any scenario, the euro currency will no longer have any motivation to demonstrate growth if the ECB also completes the tightening program. So far, we are unable to identify any causes for the European currency to increase during the majority of this year. We might claim that it is currently partially fortunate because the market frequently ignores favorable news for the currency. Lucky is the lucky one, though. One cannot dismiss the expansion of the euro as completely irrational. It is unstable and not very promising, in our opinion. One of the riskier currencies is still the euro, and nobody can predict what surprises 2023 will bring. We are certain that the euro may plunge once more if new global tensions develop. The euro could quickly decline once the ECB has finished hiking rates. The euro may drop quickly if the EU economy does go into recession. As of January 18, the euro/dollar currency pair's average volatility for the previous five trading days was 89 points, which is considered "normal." So, on Wednesday, we anticipate the pair to fluctuate between 1.0704 and 1.0882. The Heiken Ashi indicator will turn back up to signal the start of the upward movement. Nearest levels of support S1 – 1.0742 S2 – 1.0620 S3 – 1.0498 Nearest levels of resistance R1 – 1.0864 R2 – 1.0986 Trading Suggestions: The moving average has undergone a new micro adjustment in the EUR/USD pair. At this point, we can take into account opening additional long positions with goals of 1.0864 and 1.0882 if the Heiken Ashi indicator reverses direction and moves higher or the moving average recovers. After the price is locked below the moving average line, you can start opening short positions with targets of 1.0704 and 1.0620. 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/332572

Inflation is convincingly lower and falling. And, at the very least, we’re heading into a growth recession. So, shouldn’t market yields be collapsing? They could. But, then again not necessarily. There are technical factors pushing in the other direction, ones that can in fact pressure longer-dated market yields higher, or at least mute any fall The US 10yr yield looks one-way biased to fall for macro reasons, but the absolute level is already quite low Here are four factors to consider: 1. History shows that the 10yr yield trades below the funds rate as the rate hiking cycle peaks. Typically it would get to 75bp through. It has been 150bp through in the past (e.g. dotcom bust), but not till just before the Fed cut. Recently it’s been some 150bp through the likely peak in the funds rate. So, right here at 3.5%, the 10yr is not that cheap. 2. There is better risk / reward from ultra-front end positions, where handles of 4% + are attainable. The price risk here is minimal (to zero). The only risk is the Fed starts to cut rates, which would adjust down the yield on roll-overs. This trade, by definition, means lower buying of duration. Recent flows into money market funds suggest this is happening. 3. While US Treasury yields offer a generous yield for influential Japanese-based players, that’s not the case for hedged positions. The cost of a 3mth hedge back into the Japanese yen is 4.9%, well in excess of any running yield along the Treasury curve. With hedged positions yielding a negative yield, this important rump will not play in Treasuries. 4. Importantly, the monetary tightening story is not just a US one. Ultra-low rate economies like the eurozone and Japan are also tightening policy. Indeed, more tightening is likely from the ECB than from the Fed in the coming months. So even unhedged longs will see attainable spreads becoming less attractive as we progress through 2023. Bottom line, we’re suggesting that the US 10yr yield is in fact not that high, we identify better risk/return on the ultra-front end, and suggest that external demand can become more fickle from a relative value sense. This is further amplified should the US dollar maintain a weakening trend, and bond markets that are inversely related to the USD start to perform better (e.g. some emerging markets). Future Fed cuts must mean room is made for a much steeper curve Source: Macrobond, Federal Reserve, ING estimates Also, to end up with a proper upward sloping curve there needs to be room made by the 10yr yield There is another important technical factor to consider too, centered on finding room for the curve to steepen out appropriately. Typically, as the cycle morphs from Fed hiking to cutting we evolve towards an upward sloping curve. At the very minimum the 2/10yr should get to 50bp, and even that is very conservative, as it more often than not gets to 100-200bp. The evolution from dis-inversion to a positively sloped curve limits the room for the 10yr yield to fall. The 2yr yield can fall by lots. The 10yr too, but it depends on what’s feasible. So what is feasible? Let’s take our relatively aggressive view for the funds rate – as we see the Fed cutting later in 2023, and getting the funds rate down towards 2.5%. That’s the starting point for the curve. When the funds rate gets there, it has bottomed, and the 2-10yr yield curve should be positively sloped. Let’s pitch the 2yr at flat to the funds rate, at 2.5% in 2024. Given that, the 10yr yield really has no business getting below 3%, as at 3% that’s only a 50bp curve. It should in fact be a 100bp curve, which would bring us all the way back to 3.5%, where we currently are. In fact, if the 10yr were at 4% while the funds rate targetted 2.5%, that would not be an unusual combination. The target for the 10yr is 3% and no lower, but don't be surprised if it reverts to 4% So as a call for 2023, we are looking for the 10yr to rally down to 3%, mostly as the Treasury market can get all excited as the Federal Reserve winds up for rate hikes. But that should in fact prove to be an overshoot to the downside. The 10yr really has no business getting to below 3%, unless there is the emergence of some (unknown at this point) crisis. In fact, a fairer level is 3.5%. Moreover, if the market gets its head around this, there is a neat route back to 4%. Now that would be a more credible curve, and one more consistent with the renewed ability for economies to generate inflation in the future. We could even skip the 3% and go for straight to 4%. We understand that the average US 10yr yield over the past decade is 2.15%, and indeed the 2% area has been crossed on a frequent basis over that period; a mean-reversion tendency. Fine, but that does not mean we are heading back down there. There is simply neither room nor logic for that to happen, apart from an anchoring to the recent past when 2% seemed normal.  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  

Mixed European Central Bank messages and better economic data continue to benefit core and peripheral bonds alike. Markets increasingly think the ECB will cut rates shortly after the Fed. We think bonds don’t price properly higher sovereign funding needs this year. We also note that US 10yr yield is already priced quite low versus the future funds rate Sticky US Treasuries, despite the one-way macro data US Treasuries are bascially back to where they were just before the consumer price inflation release of last Thursday. Even the front end, which had dropped in an almost precipitous manner in yield, has snapped back to practically where it was. Yesterday's drop in the Bund yield also did not have a lasting effect on Treasuries, taking them down in yield initially, but then yields eased back up again. It seems the downdraft in yield is no longer the path of least resistance. It seems the downdraft in yield is no longer the path of least resistance We'd note that the 10yr Treasury yield is not exactly cheap here. It is practically at, or has been recently, some 150bp through the terminal funds rate being priced by the Fed funds future. That's quite a spread. History shows it has been wider, but not by much, and not for too long. History also shows that it is rare for it to trade through the funds rate by this much. The macro impulses are clearly bullish, but technical relative value suggests that precipitous falls in yields from here will not be as straightforward as many suggest. Future Fed cuts must mean that room is made for a much steeper curve Source: Macrobond, ING ECB mixed messages expose the market's underlying strength We warned in yesterday’s Spark that bond markets face a number of bearish risks in what is evidently a strong bullish trend. Sometimes, contradictory events and the way markets react to them provide us with a golden opportunity to test our theory. This was the case yesterday in which markets pretty much shrugged off European Central Bank chief economist Philip Lane’s hawkish message – from no less than one of the most dovish members of the board – to instead focus on a vague anonymous ECB sources story. Market participants have faced an uninterrupted string of hawkish comments since the December meeting Since the December meeting, participants have faced an uninterrupted string of hawkish comments since the December meeting so perhaps Lane’s comments were less surprising to markets. They, however, increasingly contrast with the swap curve pricing 80bp of cuts in 2024. The way markets think of Fed policy heavily influences the way they think of the ECB too. The ECB sources story highlighted the prospect of a downshift to a 25bp hike in March after a 50bp hike in February, contrary to Lagarde and other officials signalling two 50bp hikes. This seems to have reinforced not only the view that the end of the ECB’s hiking cycle is close, but also that cuts are imminent. Bond markets have so far shrugged off the wall of supply they're facing in 2023 Source: Refinitiv, Debt Management Offices, ING High beta sovereigns are the clear winners but supply looms large Euro sovereigns have benefitted doubly from the improvement in inflation and growth expectations. First, lower inflation lets markets hope for a world with less aggressive central banks. The related drop in core rates has also benefitted higher beta fixed income, for instance peripheral bond markets. Second, as the sharp improvement in the Zew index yesterday illustrates, markets no longer price a disastrous recession for the eurozone. This is reflected in better appetite for riskier investment, and has accelerated the outperformance of riskier bonds over safer ones. In one word spreads tightened. The two developments could prove contradictory, however, as better growth might slow down the decline in inflation. We expect bond yields to continue to rise relative to swap rates You wouldn’t guess it looking at the strength of sovereign bonds this year, but these markets are faced with a wall of supply. The ECB will shift from being a net buyer in 2022 to being a net seller in 2023. Combined with wide deficits, this results in a dramatic increase in funding needs. We find that euro sovereign bond markets do not reflect this wall of supply properly. For one thing, we expect bond yields to continue to rise relative to swap rates. Secondly, we expect markets to better take into account supply dynamics in pricing relative sovereign yields. The chart below gives a rough guide of where each sovereign 10Y swap spreads trade compared to our estimate. Euro sovereign bonds don't reflect coherently new supply dynamics Source: Refinitiv, Debt Management Offices, ING Today's events and market view The main release this morning will be the eurozone’s December inflation report, although this is a final reading and so less likely to surprise markets. The US calendar is more substantial with retail sales and producer price index. Both are expected to decline and so shouldn’t prove a challenge to the market’s expectation of the Fed easing as soon as this year, barring an upside surprise. The NAHB housing market index should prove equally gloomy. Germany is scheduled to sell 30Y debt. Francois Villeroy of the ECB, alongside Raphael Bostic, Patrick Harker, and Lorie Logan of the Fed, are the speakers listed on the World Economic Forum in Davos but we’re sure to get quotes from others. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

Summary:  The focus is squarely on the Bank of Japan decision today and significant volatility may be on the cards. Mixed earnings, ranging from a weaker Goldman Sachs report but better-than-expected Morgan Stanley results, kept the US equity markets broadly range-bound. China’s activity data surprised to the upside, but population decline is a concern. Stage is being set for a dovish turn in the ECB, and UK’s CPI will be on the radar today. Industrial metals regained momentum, while Gold continues to face correction risk.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) finished nearly unchanged while the Dow Jones Industrial slipped 1.1% on Goldman’s miss in earnings Nasdaq 100, up 0.1% and S&P 500, down 0.2% were little changed in a choppy session, supported by a 7.4% gain in Tesla (TSLA:xnas) and an increase of 4.8% in Nvidia (NVDA:xnas).  The Dow Jones Industrial however fell 1.1%, dragged by the declines of 6.4% in Goldman Sachs (GS:xnys) and 4.6% in Travellers (TRV:xnys). Goldman Sachs reported a 66% Y/Y fall in Q4 earnings to USD3.32 per share, much below the USD5.56 consensus estimate. On the other hand, Morgan Stanley (MS:xnys) rose 5.9%, after reporting a 40% fall in earnings to USD1.26 per share, beating the USD1.25 expected by street analysts. Among sectors in the S&P, the material sector, falling 1.1%, was the biggest laggard. US Treasuries (TLT:xnas, IEF:xnas, SHY:xnas) ended mixed as curve steepened A much weaker-than-expected print of the Empire Manufacturing Index, shrinking to -32.9 vs consensus of -8.7, and a Bloomberg report suggesting that the ECB may slow its next rate hike to 25bps in March from 50bps, saw the yields on the Treasury front ends lower. Yields on the 2-year fell 3bps to 4.20%. Yields on the longer ends however rose. The 10-year notes finished 4bps cheaper at 3.55%. On Wednesday, traders are eyeing the outcome from the Bank of Japan. Hong Kong’s Hang Seng (HIF3) retreated and China’s CSI300 (03188:xhkg) was flat despite Q4 GDP better than feared The Hang Seng Index pulled back 0.8% and the CSI300 Index was flat 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 1.6%; Q3: 3.9%). Healthcare names were the biggest drag to the Hang Seng Index as Wuxi Biologics (02269:xhkg) tumbled 6.1% on placement by its majority shareholder. XPeng (09868:xhkg) slipped 2.3% after cutting the prices of its EVs by around 12% and dragged down the share prices of other EV makers. Chinese property names finished the session mixed in a tug-of-war between optimism from supportive policies and continuously sluggish sales data. China’s residential property sales fell 26.7% Y/Y in December. Infant and toddler product stocks fell on the record low 0.677% birth rate released in China. In A-shares, baijiu (Chinese white liquor), food and beverage, bank, media, and pharmaceutical names retreated while electronics, defense, and machinery stocks gained. FX: All eyes on JPY GBPUSD was the best performer in the G10 FX space on Tuesday, rising to test the 1.23 handle, as labor market data came in better than expected. Focus shifts to the UK CPI release today where a further deceleration in price pressures remains likely. NZD and AUD also gained further, bumped higher more so in the US session rather than China’s better-than-expected activity data in the Asian hours. AUDUSD may be looking at another break above 0.7000. EURUSD plummeted from 1.0869 to 1.0775 on dovish ECB expectations (read below). The key focus today however will be on USDJPY and yen crosses with BOJ decision due today. Crude oil (CLG3 & LCOH3) pushes higher Crude oil edged higher as OPEC set a more optimistic tone on demand. Secretary General Haitham Al Ghais said he’s optimistic about the outlook for the global economy. The oil producer group said that a potential slowdown in advanced economies is countered by accelerating growth in Asia. The market is expected to tighten as Russia’s supply suffers from G7 price caps and China’s demand recovery underpins. Meanwhile, the growing case of a soft-landing this year has cooled off global demand slowdown concerns, while reports of ECB’s slowing the path of its rate hikes (read below) also underpinned. WTI futures rose to $81/barrel while Brent was at $86. IEA’s monthly market outlook will be released today. Metals boosted by upbeat China data Better than expected economic data from China helped boost sentiment in the base metal sector. China’s December activity data came in better-than-expected, while protests in Peru continued to cloud the supply outlook for Copper. HG Copper was back above $4.20. Prices for Iron ore also rose in Singapore to back above $120, locking in gains of over 1%. Gold, however, continues to face correction risk as ETF flows and risk reversals have remained flat for weeks with no sign of demand despite the recent rally. We believe the direction in gold is correct but the timing is wrong, raising the risk of a short-term correction driven by recently established speculative longs.  Read next:GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting| FXMAG.COM What to consider? Bank of Japan meeting playbook – bracing for volatility The highly-watched Bank of Japan policy decision due Wednesday has spooked tremendous volatility and warrants a cautious stance. But whether we see further policy tweaks this week or not, speculation for BOJ to remove its yield curve control will likely to build into BOJ chief nominations due February 10, spring wage negotiation in March and a change of hands at the helm in April. Read our full preview here or listen to yesterday’s podcast. China GDP and activity data came in better than expected At 2.9% Y/Y, China’s Q4 GDP print was well above the consensus forecast of 1.6% while decelerating from 3.9% Y/Y in Q3. Full-year GDP growth came in at 3% in 2022, higher than the consensus forecast of 2.7%. Retail sales, shrinking 1.8% Y/Y in December (vs consensus: -9.0%, Nov: -5.9%), were better than feared. Nonetheless, the positive surprise largely came from a surge of 39.8% Y/Y in medicine sales and a rise of 10.5% Y/Y in food sales on stockpiling in December when China abandoned Covid-19 containment measures. Industrial production growth slowed to 1.3% in December, above the median forecast of 0.1%, from 2.2% in November. Fixed asset investment growth picked up to 3.1% Y/Y in December from 0.8% Y/Y in November, with infrastructure investment slower to 10.4% Y/Y in December from 13.9% Y/Y in November and manufacturing investment improved to 7.4% Y/Y in December from 6.2% in November. China’s population declined for the first time in six decades According to the National Bureau of Statistics, China’s population fell to 1.4118 billion in 2022, a decline of 0.85 million, from 1.4126 billion in 2021. The birth rate slipped to 0.677%, the lowest since records began in 1949. China is planning new restrictions on live streaming According to the Wall Street Journal, Chinese regulators are planning to impose new regulations to cap internet users’ digital tipping as well as tighter censorship of the content. ECB’s dovish surprise likely as inflation slows The ECB is considering a slower pace of rate hikes than Christine Lagarde indicated in December. While a 50bps increase next month remains the most likely outcome, a 25bps move in March is gaining support. Inflation in the Eurozone is slowing, and a sharp drop in natural gas prices suggest that we can continue to expect lower inflation in the months to come atleast until the 2023 winter risks emerge. The final CPI print for December for the Euro-are will be released today and ECB’s minutes of the December meeting are due tomorrow. Gloomy US survey data – NY Fed manufacturing The NY Fed's Empire manufacturing survey tumbled to -32.9 in January from -11.2 in December, well beneath the consensus -9 and marking the lowest level since mid-2020 and the fifth worst reading in the survey’s history. Both new orders and shipments plummeted sharply, and moderation in input and selling price growth was seen. Fed member Barkin (non-voter) repeated that median CPI is still too high, saying that he needs to see inflation convincingly back to target before Fed pauses rate hikes and that he is not in favour of backing off too soon. UK December claims data improves, November earnings data rises again, CPI up next The UK reported November Employment and earnings data yesterday, 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. Also 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. UK CPI is due to be released today. Vietnam’s political shakeup The latest political shakeup in Vietnam highlights the stability risks that emerging markets generally face. President Nguyen Xuan Phuc has announced he is stepping down, sparking a potential power shift among the communist-ruled country's leaders. The news that he is quitting comes during an anti-corruption drive led by hard-liners. The shift in power could potentially have repercussions on the ability of Vietnam to continue to capture manufacturing moving out of China.   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: D-day for Bank of Japan; ECB’s dovishness; China’s growth is a positive surprise but population falls - 18 January 2023 | Saxo Group (home.saxo)

Summary:  The Bank of Japan was going to surprise overnight no matter what it decided, and with the market leaning for some kind of further tweak in policy after a December move, Governor Kuroda and company surprised by indicating no change at all in the initial statement, sending the JPY sharply lower. Elsewhere yesterday, the euro was marked lower on a story that the ECB is set to slow the pace of hikes already after the February ECB meeting. US December Retail Sales on tap today.   What is our trading focus? Nasdaq 100 (USNAS100.I) and S&P 500 (US500.I) US equities continue to trade in a pivotal area ahead of the heart of earnings season set for the coming couple of weeks, with the 200-day moving average and 4,000 area in focus for the S&P 500. Financial conditions remain very easy as corporate credit spreads and the VIX continue to poke into the low range of the last year as the market hopes for a soft landing for the economy and as the Fed is seen as easing away from its tightening regime after another two 25 basis point hikes at coming meetings.  Hong Kong’s Hang Seng (HIF3) and China’s CSI300 (03188:xhkg) Hang Seng Index ticked up by 0.3% and CSI300 edged down by 0.1%. Online and mobile gaming names led in both the Hong Kong and mainland bourses. China released 88 new licenses of online/mobile games, including one title from Tencent (00700:xhkg), up 1.2%. and one title from NetEase (09999:xhkg), up 4.6%. The other internet names, however, traded weak, with around 1% to 3% losses. Vice-Premier Liu He’s speech at Davos attempted to assure the audience about a 2023 recovery in the Chinese economy and stability in the real estate sector. He also sang from the same recent hymn book of other Chinese leaders to try to assure the world about China’s openness and not resorting to equalitarianism in its drive for common prosperity. FX: JPY weakens as BoJ refuses to tweak policy, ECB surprises with dovish shift. The market was leaning for further policy tightening from the Bank of Japan after December’s surprise widening of the yield-curve-control “band”, but the Bank of Japan failed to deliver, leading to the yen getting shocked back lower, in part on the unwinding of the largest spike in implied volatility for over-night options over the event in years. More below on the BoJ. Elsewhere, officials from the ECB were quoted late yesterday afternoon, indicating a that, while the expected 50 basis point hike is likely for February, there is increasing support for a deceleration to 25-basis point hikes at subsequent meetings. This development took the euro sharply lower yesterday as, for example, German 2-year yields dropped over 10 basis points on the news. Crude oil (CLG3 & LCOH3) pushes higher Crude oil edged higher, thereby erasing early January losses, after OPEC’s Secretary General Haitham Al Ghais said he’s optimistic about the outlook for the global economy and with that demand for crude oil. The oil producer group said that a potential slowdown in advanced economies is countered by accelerating growth in Asia. The market is expected to tighten as Russia’s supply suffers from G7 price caps and China’s demand recovery underpins. Russia said it expects Western sanctions to have a significant impact on its oil product exports, likely leaving it with more oil to sell. Focus today the dollar following the BOJ meeting and not least IEA’s Oil Market Report for January. EIA’s weekly stock report delayed until Thursday.  Gold correction risk with dollar the key focus Gold traded softer overnight in response to dollar strength after the Bank of Japan failed to deliver another tweak to its interest rate policies (see above).  While industrial metals such as copper continues higher on China demand hopes, the yellow metal continues to get most of its directional input from the dollar. ETF flows and risk reversals in the options market have remained flat for weeks with no sign of demand despite the recent rally, potentially signalling increased risk of a short-term correction driven by recently established speculative longs. US Treasury yields rebounded slightly Friday (TLT:xnas, IEF:xnas, SHY:xnas) The Bank of Japan stood pat on its current policy mix even as the market was leaning for some further policy tweak, sending JGB’s sharply lower and taking US yields down a few notches as well overnight, with the 10-year benchmark Treasury yield poking back below 3.50%. The focus remains on incoming data and the shape of the US yield curve, with December US Retail Sales data up today. Read next: GBP/USD Is Strengthening And Trading Above 1.2260, Investors Took A Breather Ahead Of The Bank Of Japan Meeting| FXMAG.COM What is going on? BOJ maintains policy unchanged, launches new tool to support bond market The Bank of Japan left its policy levers unchanged at the January meeting, defying heavy market speculation of another tweak after the surprise in December. The announcement saw the yen plunge by over 2%, as the central bank said it would continue large-scale purchases of government bonds and increase it on a flexible basis as needed. The central bank, in a new measure to maintain yield control policy, also extended a loan offer to banks for funds of up to 10 years against collateral for both fixed- and variable-rate loans. Meanwhile, the BOJ still sees inflation getting back to sub-2% range this year. Core CPI estimate for FY2022 was only slightly raised to 3.0% for 2.9% previously, while the FY2023 estimate of 1.6% was maintained. In the press conference, BoJ Governor Kuroda said that the sustainable inflation goal is not yet in sight, suggesting low odds that he will declare victory on bringing back inflation before his exit in April. Goldman Sachs plunges, Morgan Stanley soars after both banks report earnings Goldman Sachs plunged yesterday after its earnings report, dropping more than 6% on rising expenses and on rising compensation costs for employees. Revenues dropped on reduced M&A activity and its foray into retail banking continues to drag on results. Morgan Stanley, meanwhile, was the S&P 500’s second best performer on the day, jumping over 5% after reporting Q4 earnings, with strong results in its wealth management division noted Industrial metals boosted by upbeat China data Better than expected economic data from China helped boost sentiment in the base metal sector. China’s December activity data came in better-than-expected, while protests in Peru continued to cloud the supply outlook for copper. HG Copper trades above $4.25 after surging to the highest since June, and up 11.6% this month after recording nine consecutive daily gains. Prices for Iron ore also rose in Singapore to back above $120, locking in gains of over 1%. Gloomy US survey data – NY Fed manufacturing The NY Fed's Empire manufacturing survey tumbled to -32.9 in January from -11.2 in December, well beneath the consensus -9 and marking the lowest level since mid-2020 and the fifth worst reading in the survey’s history. Both new orders and shipments plummeted sharply, and moderation in input and selling price growth was seen. Fed member Barkin (non-voter) repeated that median CPI is still too high, saying that he needs to see inflation convincingly back to target before Fed pauses rate hikes and that he is not in favour of backing off too soon UK Dec. CPI out this morning and slightly hotter than expectations as the headline rose +0.4% MoM and +10.5% year-on-year vs. +0.3%/+10.5% expected, respectively while the core CPI level rose +6.3% YoY vs. +6.2% expected and +6.3% in November. Sterling traded slightly firmer after the data. What are we watching next? ECB’s dovish surprise likely as inflation slows The ECB is considering a slower pace of rate hikes than Christine Lagarde indicated in December. While a 50bps increase next month remains the most likely outcome, a 25bps move in March is gaining support. Inflation in the Eurozone is slowing, and a sharp drop in natural gas prices suggest that we can continue to expect lower inflation in the months to come at least until the 2023 winter risks emerge. The final CPI print for December for the Euro-are will be released today and ECB’s minutes of the December meeting are due tomorrow. Earnings to watch The Q4 earnings season continues today with more US financial services companies reporting, including the retail-focused PNC Financial Services and Charles Schwab. Kinder Morgan is a company operating an extensive pipeling transportation and energy storage network, while EQT is a US-based natural gas producer and the second largest producer in the largest US shale gas production area in Appalachia (the Marcellus shale). Guidance on the future productivity of its reserves could be a focus there after the wild ride for natural gas this year on Russia’s invasion of Ukraine. Today: EQT, Charles Schwab, PNC Financial Services, Kinder Morgan Thursday: Procter & Gamble, Netflix Friday: Investor, Sandvik, Ericsson, Schlumberger Economic calendar highlights for today (times GMT) 0900 – IEA's Oil Market Report for January1000 – Eurozone Final December CPI1330 – US Dec. Retail Sales1330 – US Dec. PPI1400 – US Fed’s Bostic (non-voter) to speak1415 – US Dec. Industrial Production and Capacity Utilization1500 – US Jan. NAHB Housing Market Index1900 – US Fed Beige Book1900 – US Fed’s Harker (voter 2023) to speak0001 – UK Dec. RICS House Price Balance0030 – Australia Dec. Employment Change / Unemployment Rate   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – January 18, 2023 | Saxo Group (home.saxo)

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

The wave marking on the euro/dollar instrument's 4-hour chart is still quite compelling and getting more intricate, and the entire upward segment of the trend is still quite convoluted. Although its length is better suited for the pulse portion, it has taken on a powerful corrective and extended form. The waves a-b-c-d-e have been combined into a complicated corrective structure, with wave e having a form that is far more complex than the other waves. Since the peak of wave e is substantially higher than the peak of wave C, if the wave markings are accurate, construction on this structure may be nearly finished. I'm still planning for a decline in the instrument because we are predicted to build at least three waves down in this scenario. The demand for the euro currency was increasing again in the first week of 2023, and the instrument was only able to deviate somewhat from its prior highs during this time. A new attempt to surpass 1.0721, which according to Fibonacci amounts to 200.0%, was successful, allowing the wave e to take on an even longer form. Unfortunately, there is another delay in starting to build the trend correction part. The Eurozone's inflation rate dropped to 9.2%. Despite having a high amplitude throughout the day on Wednesday, the euro/dollar instrument did not change in value. Just like that, demand for the euro rose in the morning while demand for the dollar rose in the afternoon. Two motions in separate directions that were almost identical were received. Since wave e is still under construction, it cannot be said to be finished. Since the data for the same month of December had already informed the markets of a decline to 9.2%, many experts did not pay the report on European inflation the proper attention. The final evaluation and the original one agreed. However, this report continues to be crucial in my opinion, which is why. Because central banks "dance" on inflation, it is currently a top concern in many countries around the world. Therefore, it is irrelevant whether it is the first or second assessment. The most important development is that inflation has begun to fall and is doing so swiftly. Perhaps Andrew Bailey and Christine Lagarde were correct when they predicted that lower energy prices would lead to lower inflation (which we are now seeing). Similar remarks were made by the ECB president at the same time last year. Since the ECB won't need to hike rates in increments of 75 or 50 basis points anymore, I think that over time, the European Union's declining inflation rate will start to put pressure on the euro. But as of now, inflation is still too high, so a slowdown in the rate of interest rate hikes is out of the question. Even if the consumer price index experiences a new, significant slowdown the next month, I believe the plans to increase the rate in the European Union by another 100-125 basis points will stand. However, the ECB might then decide to tighten by 25 points. Conclusions in general I conclude that the upward trend section's building is about finished based on the analysis. As a result, given that the MACD is indicating a "down" trend, it is now viable to contemplate sales with targets close to the predicted 0.9994 level, or 323.6% per Fibonacci. The potential for complicating and extending the upward portion of the trend remains quite strong, as does the likelihood of this happening. The market will be ready to finish the wave e when a bid to break through the 1.0950 level fails. The wave marking of the descending trend segment notably becomes more intricate and lengthens at the higher wave scale. The a-b-c-d-e structure is most likely represented by the five upward waves we observed. After the construction of this portion is complete, work on the downward trend segment can start.   Relevance up to 06:00 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/332711

M5 chart of EUR/USD EUR/USD tried to cross 1.0868 on Wednesday twice, but by the end of the day it still moved away from this mark. If we weren't already used to the fact that the euro could rise by more than 1000 pips over the past months, we would say that the market is now in a flat. The pair has been between 1.0780 and 1.0868 for several days. But it might be just the calm before the euro surges. Do recall that the euro is desperately unwilling to correct, and only takes pauses from time to time. Yesterday the EU published a totally uninteresting inflation report. "Uninteresting" because it was the second estimate of the indicator for December, and it was not at all different from the first. Moreover, inflation fell quite noticeably, by 0.9%, which could in no way provoke a rise in the euro in the first half of the day. The euro was already falling even more during the US session, though the US reports were also weak. Despite the unusual behavior, Wednesday's trading signals were actually quite good. The first buy signal was not formed at the beginning of the movement, near 1.0806. After that the price managed to rise to 1.0868 and rebound from it, which was exactly ideal. The profit is 40 pips. The rebound from 1.0868 should have been used to open a short position, but the price failed to reach 1.0806, so this trade was closed with a Stop Loss at breakeven. Then followed a buy signal around 1.0868, which turned out to be false, the loss was 20 pips. And the last sell signal near the same level brought traders the profit of about 60 pips, as the price dropped below the critical line. In general, the day was very successful. COT report The COT reports for the euro in the last few months have been fully consistent with what is happening in the market. You can clearly see on the chart that the net position of big players (the second indicator) has been growing since early September. Around the same time, the euro started to grow. At this time, the net position of the non-commercial traders has been bullish and strengthens almost every week, but it is a rather high value that allows us to assume that the upward movement will end soon. Notably, the green and red lines of the first indicator have moved far apart from each other, which often means the end of the trend. During the given period, the number of long positions held by non-commercial traders increased by 16,000, whereas the number of short positions rose by 11,000. Thus, the net positions increased by 5,000. The number of long positions is 135,000 higher than the number of short positions opened by non-commercial traders. So the question now is how long will the big players increase their longs? Moreover, from a technical perspective, a bearish correction should have started a long time ago. In my opinion, this process can not continue for another 2 or 3 months. Even the net position indicator shows that we need to "unload" a bit, that is, to correct. The overall number of short orders exceeds the number of long orders by 48,000 (702,000 vs. 655,000). H1 chart of EUR/USD You can see on the one-hour chart that EUR/USD has a chance to move down. Crossing the critical line is quite an important signal, unless the price manages to rise above it today. This is a possibility, because lately the pair's movement seems more like a flat. On Thursday, the pair may trade at the following levels: 1.0658-1.0669, 1.0736, 1.0806, 1.0868, 1.0938, 1.1036, 1.1137 and also Senkou Span B (1.0675) and Kijun Sen (1.0802) . Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On January 19, European Central Bank President Christine Lagarde will give a speech in the EU, which might be interesting. Then there are just minor reports and a few speeches from the Federal Reserve in the US. What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group.   Relevance up to 05:00 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/332705

The rates rally is extending, but also looking increasingly stretched, especially in the euro area where 10Y Bunds are back below 2% and 2023 European Central Bank rate cut expectations are creeping in. Today's session holds fewer data to feed the rally, and we might get more pushback from the ECB against the notion of slowing hikes   The belly of the curve leads the rally as the focus increasingly turns to Fed cuts The bond bulls got all they could hope for yesterday to extend the rates rally with US dictating the way. The 5Y part of the curve led the way lower in Treasury yields dropping by more than 18bp on the day, and the 10Y yield dropped below 3.40% in a session capped off by a strong 20Y auction. The BoJ and softer US data provided the backdrop for a further bid Certainly, the Bank of Japan leaving its policy of yield curve control in place paved the way for lower rates ahead of the session, US data later provided the backdrop for a further bid. Softer-than-expected retail sales, a producer price index hinting at weaking pipeline inflation pressures and a miss in industrial production data suggest that the Fed is close to the end of its hiking cycle with recession on its way. Near term the market is now homing in on a 25bp hike from the Fed at the February meeting and the possibility of another hike following in March. This implies the peak of the Fed funds upper bound target rate at 5%. The Fed hawks Bullard and Mester were making the case for tightening policy rate beyond 5%, but the market easily glossed over their comments also given that in the Fed’s own survey, the Beige Book, contacts reported expectations of further moderating price growth. The focus is increasingly turning to the first Fed cuts, 50bp in total now discounted for the second half of the year. The 5Y sector is rallying faster than other maturities, indicating growing cut expectations Source: Refinitiv, ING The rally spills into EUR rates, but might receive more pushback today EUR rates rallied alongside US rates with the 10Y Bund yield dipping below 2% for the first time since mid-December. The EUR market obviously had its own dovish ECB sources story this week to underpin the rally, but that story has received pushback in ECB officials’ comments yesterday. With an eye on the keeping financing conditions sufficiently tight to rein in inflation, ECB officials possibly see their earlier efforts of decoupling its outlook from the Fed at risk.  Earlier efforts of the ECB to decouple itself from the Fed are at risk France’s Villeroy stated that the President’s guidance from the last meeting for a series of 50bp hikes was still valid. Similarly, Finland’s Rehn said “significant interest rate hikes in the near-term monetary policy meetings are justified”, arguing it was too early to speculate about the pace of hikes after March. Today we will hear from the ECB President herself when she speaks in Davos. Equally as impressive as the outright rally in EUR rates was the further tightening of intra government bond spreads. The key 10Y spread between Italian government bonds and the German peers briefly dipped below 170bp, the tightest since April last year. Back then the ECB already flagged its intention to wind down asset purchases, but it was still ahead of the rate hikes and any plans of quantitative tightening. 250bp of hikes later with another 125bp likely to come and balance sheet reduction well under way, that is an impressive feat. But keep in mind, even EUR markets are now pricing in the prospects of first ECB rate cuts for the second half of this year. Real swap rates haven't yet eased financial conditions but tighter sovereign spreads have Source: Refinitiv, ING Today's events and market view Rates markets are on a run. Events and data have given at least US rates good reason to do so, though we think that levels are becoming more stretched. Technical factors like the historically wide gap between the Fed funds rate – still set to rise near term – and the 10Y yield suggest building upward pressure. But there is also an underappreciation of inflationary risk coming from a re-opening China and we have also not seen the last chapter of the BoJ story. But it is especially in the eurozone we think the spilling over of rate cut expectations looks overdone. Today’s data calendar features housing data, initial jobless claims and the Philadelphia regional Fed index  in the US. There is little by way of data in the euro area, but we will get the accounts of the December ECB meeting in which the central bank delivered a ‘smaller’ 50bp hike than at the previous meeting, but with a hawkish twist. Quantitative tightening was kicked off and President Lagarde hinted at more 50bp hikes to come. This puts particular focus today on her scheduled appearance at the Davos Economic forum. With ECB's Klass Knot there is also another ECB hawk who could push back at the notion that the pace of hikes could be slowed in March. In primary markets we will see France and Spain with auctions today.    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  

Intense scrutiny of the US growth story means that the dollar remains vulnerable to data releases as markets keep scaling back Fed rate expectations. We see more downside risks for USD in the near term. Elsewhere, hawkish ECB minutes and remarks by Lagarde could support the euro, and we expect a 25bp hike by Norges Bank despite rising bets of a hold Source: Shutterstock USD: Data continues to haunt the dollar In yesterday’s FX Daily, we flagged the risk of fresh US data hitting the dollar given the recent scrutiny (and pessimistic narrative) by the market of the US growth story. That risk materialised as retail sales and industrial production came in softer than expected, triggering another round of dovish repricing in Federal Reserve rate expectations. The USD 2-year swap rate hit 4.35% yesterday, the lowest since early October, and the differential with the corresponding EUR rate is now very close to the -124bp December high. Our US economist now sees growing risks that the Fed may stop hiking after a 25bp move in February. The correlation between the 2-year swap rate differential and EUR/USD has not been very strong in the past year but is picking up again. Most importantly, the weakness in the correlation largely derived from the euro’s low sensitivity to European Central Bank policy, rather than to the Fed’s. The fact that the ongoing dovish repricing is not only a consequence of slowing inflation but also of a worsening economic outlook in the US has exacerbated the negative implications for the dollar, especially as a positive re-rating of growth expectations is happening in Europe and China. One could argue that the dollar is facing a rather uniquely-timed combination of negative factors, and that the sustainability of the optimistic growth re-rating in Europe and China may be challenged by fresh commodity price volatility and high infection numbers – respectively. We see value in such an argument, and a straight-lined dollar depreciation in the first quarter is far from assured. But global and US-specific dynamics continue to suggest a bearish bias on the dollar in the near term. DXY may re-test yesterday’s 101.55 lows by the end of the week. Today, markets will watch the size of the increase in initial jobs claims, as well as housing data and the Philadelphia Fed survey. The Fed’s Susan Collins, Lael Brainard and John Williams are scheduled to speak. Elsewhere, Asian G10 currencies are following diverging paths this morning. The yen is recovering across the board as markets seem to cautiously re-enter long positions after the Bank of Japan defied the hawkish speculation yesterday. We continue to see downside risks for USD/JPY despite a dovish BoJ. The Australian dollar has come under pressure after a surprise contraction in employment in December, which endorses the recent cautious stance by the Reserve Bank of Australia. Still, we’d need to see inflation come off more convincingly before making strong calls about the end of the RBA hiking cycle. We continue to favour AUD/USD on the back of positive external developments (China, risk sentiment). The New Zealand dollar is suffering from some spill-over effects from AUD, while the news that prime minister Jacinda Ardern is resigning at the end of her mandate hardly seems like a key driver considering that her party is trailing in the polls ahead of the October election. Francesco Pesole EUR: ECB pushes back against dovish speculation Yesterday, ECB Governing Council member Francois Villeroy explicitly pushed back against recent reports suggesting a switch to 25bp increases and said that President Christine Lagarde’s 50bp guidance remains valid. Lagarde herself will speak in Davos today, and there is a good chance she will reiterate the ECB’s hawkish stance despite lower energy prices. Dovish speculation should be further challenged by the release of the December 2022 ECB meeting minutes, as the details of the dissent to a “too conservative” 50bp hike should emerge, as well as guidance to “multiple” 50bp increases. We expect to see some consolidation/further upside in EUR/USD by the end of the week when the pair could trade around 1.0850/1.0900. Francesco Pesole GBP: Starmer to pledge Brexit fix The leader of the opposition Labour Party, Keir Starmer, is reported to deliver a rather conciliatory speech in Davos today about the future of EU-UK relationships. In an interview with the Financial Times, Starmer criticised the Brexit deal and said he aims to rebuild good trade relationships with the bloc. The Labour party is leading by a rather large margin in the latest opinion polls ahead of next year’s general elections and evidence of a softer stance on Brexit should benefit the pound in the long run. Today, there are no events or data releases in the UK. Some recovery in the EUR may still send EUR/GBP back to 0.8800+ by the end of this week. Francesco Pesole NOK: Norges Bank may deliver last hike today Norges Bank announces monetary policy this morning, and the consensus is split between a 25bp and a hold. The latest projections saw the Bank signal a 3.00% peak rate (now at 2.75%) in early 2023, and a combination of resilient underlying inflation, growth and employment suggests – in our view – this should be the right time to deliver the last hike of the cycle. Indeed, concerns about slowing economic activity, lower energy prices and housing market vulnerability are all important factors in the Norges Bank’s decision-making process, and we admit it’s a rather close call. There will be no new projections today, but only a brief statement, so the krone's reaction will primarily depend on the hike/no-hike decision. In line with our call, we see upside risks for NOK today. EUR/NOK could trade close to 10.60-10.65 again today, but idiosyncratic EUR strength suggests most NOK gains may be channelled against the dollar. Francesco Pesole Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more  

The minutes of the European Central Bank's December decision once again confirm the main messages heard during and after the meeting: the Bank is far from done with its rate hike cycle A keynote speech by ECB President Christine Lagarde will be in focus today   The key takeaways from the December minutes were that “the monetary policy stance had to be tightened decisively and that the current configuration of interest rates and expectations embodied in market pricing was not sufficiently restrictive to bring inflation back to target in a timely manner”. Several ECB members were in favour of a 75bp rate hike (instead of the decided 50bp) and also preferred a fast pace for the reduction of reinvestments under the Asset Purchase Programme. ECB is far from done with rate hikes Looking ahead to future ECB meetings, it is clear that the central bank is far from being done with rate hikes. Admittedly, the recent drop in eurozone inflation has nothing to do with the ECB’s rate increases so far. The surge in inflation was mainly a result of higher energy prices, and the recent drop has consequently been driven by lower energy prices. Therefore, when predicting what the ECB will do next, it doesn’t make sense to analyse what the ECB should do but rather, what the bank is saying it will do. Hawkishness is no longer a characteristic of just a few ECB members; it is now the mainstream view. Another 50bp rate hike at the February meeting in two weeks looks like a done deal and another 50bp rate hike at the March meeting even looks highly likely. As long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. To some extent, we are currently witnessing a mirror image of the ECB until 2019. Back then, the Bank had a clear easing bias and was chasing disinflation with all means possible, even though the root causes for disinflation lay outside of the ECB’s realm. Now, the ECB has a clear tightening bias and is chasing inflation which arguably also has its root cause in something the ECB cannot tackle. Still, it looks as though the current generation of ECB policymakers will only let go once they are fully convinced that inflation is no longer an issue. In this regard, the slight improvement of the eurozone’s growth prospects as well as abundant fiscal stimulus have given the Bank even more reason to continue with its hawkish mission. With all of this in mind, it is hard to see that the ECB would cut interest rates any time again. Current market expectations about ECB rate cuts in 2024 are premature. If anything, these expectations as reflected in dropping longer-term interest rates are an additional argument for the ECB to stay hawkish. Just remember that the ECB’s December hawkishness was also a result of the Bank's view that market pricing was too dovish. Today's comments by both Christine Lagarde and Klaas Knot illustrate once again the ECB's determination to go all the way. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB CPI 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 European Central Bank's pushback against market rates lower has had modest success so far, but we think more headwinds are brewing for EUR rates in particular. It is not just from the last dash of ECB communications ahead of the quiet period, but also from the direction of supply and data next week The ECB's pushback is becoming more explicit US markets remain focussed on the looming recession, though data not being quite as bad yesterday allowed for a modest bounce back in rates. But it was a  bigger bounce in Bund yields where we witnessed more pushback from the ECB against the notion that its rate hikes could be downsized to 25bp starting in March. Going into the session the ECB’s Klaas Knot put it very bluntly, saying that the ECB was planning on hiking by 50bp ‘multiple’ times. President Lagarde, who had originally given out a series of 50bp hikes as a guidance at the last meeting, was less explicit in her remarks. She did make it clear, though, that inflation remained way too high and that the ECB would stay the course. Knot: The ECB is planning on hiking by 50bp ‘multiple’ times The minutes of the December meeting which were released yesterday gives us more reason to believe that we have not seen the last of the ECB's efforts to steer market expectations higher again. In December the central bank assessed that the “configuration of interest rates and expectations embodied in market pricing was not sufficiently restrictive". After the temporary push higher in market rates over the year-end, these rates are now close to where they were just ahead of the last meeting. While the ECB has officially moved to a meeting-by-meeting approach, it implicitly still sees it as crucial to its goals to guide longer term rates. One should expect more micro management of market expectations in coming days. We expect the ECB to push back against the lower terminal rate and cuts in 2024 priced in by swaps Source: Refinitiv, ING More headwinds brewing next week, especially for EUR rates The distance Bunds have put between themselves and the 2% mark is yet small when benchmarked against the overall volatility we have witnessed, but we think it should grow further. For one we would be surprised if ECB officials were not to make good use of their final opportunities to steer expectations before the quiet period ahead of the February policy meeting kicks in next Thursday. Already scheduled to speak early next week are again Lagarde and Knot, but also Holzmann, on the hawkish end of the spectrum, and Panetta, who occupies the dovish end. Data and long end supply are other factors to watch On the data front we will get the flash PMI readings for which consensus is pencilling in a slight improvement. This would gel with the latest less downbeat data, but should also give the ECB additional room to tighten policies more aggressively than the market currently prices. Supply could provide a more technical headwind for rates markets with the EU slated to sell bonds via syndicated deals next week. The EU tends to be an issuer in longer tenors, although lately market expectations seem to have turned more towards a tap of an existing ultra-long bond as part of a dual tranche deal rather than a new 30Y issue. Scheduled supply from the euro area sovereigns themselves is relatively muted, though markets are still waiting for new issue deals from Spain and France anytime now.   Of course one always has to take into account what happens on the other side of the Atlantic. The Fed will stay quiet next week ahead of its policy meeting, but we may still get some spill-over from market reaction to US data. Most prominently we will get the advance GDP reading for the final quarter of 2022, giving an indication of economic momentum late last year. We will also have the personal income and spending data, which will be scrutinized in the wake of the latest weak retail data readings. And crucially, the Fed’s favoured inflation measure, the Personal Consumption Expenditures price index will also be released, where the consensus survey is pointing to a small uptick in the month-on-month core reading. Supply and profit-taking are key risks to the January bull run Source: Refinitiv, ING Today's events and market view Overall we have already suggested earlier that the current levels of market rates look stretched. The upcoming policy meetings may eventually put the rally to the test, but it is for EUR rates that we see the clearest signs of headwinds brewing already near term – not just from last dash ECB communications, but potentially also data and supply. We think the least we should see is an underperformance of EUR rates versus the US.   The Fed’s Harker and Waller are the last scheduled speakers before the quiet period ahead of the Fed meeting sets in tomorrow. In Europe we will hear from Lagarde again today, and given the limited impact of communications over the past days she would have good reason to be more explicit. 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  

Netflix added nearly 7.7 million new subscribers last quarter versus only around 4.5 mio expected by the market. The share popped almost 10% higher in the afterhours trading. Netflix The results have been a relief for Netflix, but it will hardly reverse the fading optimism, as the S&P500 traded lower for the third straight day, having failed to clear a very critical resistance zone, above 4000 level, where the 200-DMA, and the ceiling of the 2022 bearish trend prevented investors from extending the rally into a new, bullish era, with no major justification on the company, or macroeconomic level. P&G hasn’t been as lucky as Netflix.  In this sense, P&G hasn’t been as lucky as Netflix. Their sales fell 6% in Q4, after they raised prices 10%. Price increases for P&G products may have hit a critical point where customers are no longer willing to pay for them.Elsewhere, US jobless claims fell below 200’000 for the first time since last September, and the US reached its debt ceiling yesterday, and began using special measures to avoid a payments default. Forex In the FX, the US dollar index remains under pressure. The dollar-yen is better bid despite the data showing that inflation in Japan hit 4% in December, as expected. The EURUSD remains bid below the 1.08 level, while Cable continues flirting with the 1.24 mark. Oil, gold and Bitcoin Oil is stuck between 50 and 100-DMA, gold ticks higher despite overbought market conditions, while Bitcoin rally slows near $21.5K. Watch the full episode to find out more! 0:00 Intro 0:54 Netflix beats 2:59 P&G deceives 3:50 Early-year optimism fades 5:18 US hits debt ceiling 6:22 Where does Bailey finds so much optimism? 7:40 ECB and SNB hint at further rate hikes 8:23 Crude oil between 50, 100-dma 8:35 Gold pushes deeper into overbought market 8:54 Bitcoin rally stalls 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. #Netflix #P&G #earnings #us #debt #ceiling #Japan #inflation #English #Breakfast #index #USD #EUR #GBP #JPY #crude #oil #gold #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  

Summary:  Today we note that rebounding yields on hawkish ECB talk and another very strong weekly jobless claims report out of the US have the JPY weakening again, but not supporting the US dollar outside of USDJPY. Elsewhere, we look at stronger than expected results from Netflix and weaker than expected results from Procter and Gamble as volumes drop due to price hikes. A look at crude oil dynamics now that the EU is attempting its embargo on Russian crude, gold maintaining remarkable strength and avoiding notable consolidation, the macro calendar for the week ahead and more. Today's pod features Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: US jobless claims, hawkish ECB halt the slide in yields | Saxo Group (home.saxo)

After Christine Lagarde, president of the European Central Bank, warned yesterday that inflation in the eurozone is still too high and is the biggest problem, the euro increased somewhat. She also pledged that lawmakers will not back down from their attempts to get price growth back to normal levels. Lagarde stated on Thursday in Davos that "Inflation by any measure, no matter from which side you look at it, is too high. We'll continue raising rates and then shift to a trajectory that restricts spending for a sufficient amount of time to quickly bring inflation back to 2%." Core inflation is far from ideal Some eurozone politicians have previously suggested that it is already reasonable to discuss the viability of a less aggressive rate hike after price growth slows and the price of natural gas declines, but only after another step of 0.5 percentage points is predicted in February. Some, on the other hand, argue that core inflation is far from ideal and point out that it set a new record high in December. Christine Lagarde and those who want to keep moving forward with rate increases will benefit from this.  Francois Villeroy de Galhau and Klaas Knot Lagarde's words from last month regarding the necessity of raising the rate by half a point in the near future still hold today, according to members of the Governing Council Francois Villeroy de Galhau and Klaas Knot, who recently confirmed them in Davos. At least one additional rate rise of 50 basis points is anticipated at the following meeting based on the new data that is now available. However, if the rate of inflation increase does not aggressively go down, the regulator will likely continue to pursue a strong stance until the spring of this year. A report from the European Central Bank's monetary policy meeting A report from the European Central Bank's monetary policy meeting claims that several officials first predicted a rate increase of 75 basis points in December but afterward revised their prediction downward by 0.5%. The risks of underlying pricing pressure are discussed in the paper, along with worries about inflation being entrenched in the eurozone countries for a longer period. Lagarde's words Lagarde added that a little recession is now more probable than the start of one. "Over the past three weeks, the news has changed dramatically for the better. Despite not being a great year, it will be substantially better than we anticipated," said Lagarde.  EUR/USD  Given that the bullish trend has not yet been broken, the technical picture of EUR/USD indicates that demand for the euro could resume at any time. There is also a prospect for more expansion and setting new records for the year. Staying above 1.0820 will cause the trading instrument to surge to the 1.0870 region, which is what is needed to achieve this. You may reach 1.0930 with ease by climbing over this point. If the trading instrument falls, only a breakdown of support at 1.0820 will put more pressure on the pair and potentially cause it to fall as low as 1.0720. GBP/USD Regarding the technical picture of the GBP/USD, it failed to update the weekly maximum, severely limiting the pair's future upward potential. Buyers must continue to trade over 1.2330 to keep their advantage. The only thing that will increase the likelihood of a further recovery to the 1.2500 region, after which it will be feasible to discuss a more abrupt move of the pound up to the 1.2550 area, is the loss of resistance at 1.2430. After the bears seize control of 1.2330, it is feasible to discuss the pressure on the trading instrument. The GBP/USD will be forced back to 1.2250 and 1.2190 as a result, hitting the bulls' positions Relevance up to 09:00 2023-01-21 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/332859

The dollar traded around seven-month lows on Friday as a plethora of data worries investors that an economic slowdown may be inevitable. Today's day in the economic calendar is quite calm, apart from the events from the economic forum in Davos and statements of the Fed (Waller, Harker). Next week, however, we'll get our first look at the US GDP figures, which are crucial to the outcome of the "soft landing" the Fed hoped for as it continued to tighten financial conditions to bring down inflation. Markets expected a smaller tightening from the Fed after US retail sales revealed their lowest level of activity in the last 12 months. USD/JPY The Japanese yen fell today despite the December CPI data. Further selling pressure around the Japanese yen lifts USD/JPY Pair to fresh daily highs. On the daily chart, USD/JPY is in an uptrend and is approaching 130.00. The 10-year Japanese government bond (JGB) yield fell below 0.40% today, well below the Bank of Japan's 0.50% ceiling that remained unchanged at its meeting earlier this week. GBP/USD The pound fell on Friday after weak retail sales data reminded investors about the gloomy outlook for the British economy. The cable pair started the day close to 1.24, but reports caused a weakening and a change of direction. The pair is currently trading below 1.2360. UK CPI data showed yesterday that there was an increase in inflation in services and an acceleration in food/beverage prices, which will be a cause for concern for decision makers at the Bank of England. The poor economic outlook in the UK fuels speculation that the BoE may be less hawkish on policy than previously expected. Retail volumes are down 1% since November, pointing to a challenging environment for consumers as the cost of living continues to be reduced. EUR/USD EUR/USD holds slight gains while trading above 1.0800 in European trading. The US dollar is trying to rebound alongside US Treasury yields, despite an improved risk profile. Looking ahead, EUR/USD traders should pay attention to ECB President Lagarde's speech and recent speeches from Fed policy makers. ECB's Lagarde reiterates that the central bank will continue to raise rates. The recent gains of the major currency pair can be linked to the broad weakness of the US dollar, as well as the optimism surrounding the old continent, namely the Eurozone. Today, the major currency pair EUR/USD traded mostly in the range of 1.0830-1.0847. Currently, the EUR/USD pair is below this range at 1.0820. Read next: $1 Million In Sanctions Against Former President Donald Trump, Netflix Co-Founder Reed Hastings Has Stepped Down As CEO| FXMAG.COM AUD/USD AUD/USD is down sharply for the second day in a row, and the risk of continued decline has increased with the pair below 0.6930. The sentiment-linked Australian dollar has underperformed its major counterparts over the past 24 hours. The Australian was weighed down by local data on Thursday, which showed Australian employment unexpectedly fell in December, spurring a bond rally as markets priced in a lower interest rate peak from the Reserve Bank of Australia. The focus is now on the quarterly inflation report next Wednesday. Economists expect consumer prices to increase by 7.5% in the fourth quarter of last year compared to last year. Source: investing.com, finance.yahoo.com, dailyfx.com

The euro continues to have a very quiet week, as EUR/USD appears content to trade around the 1.08 line. Lagarde brings her message to Davos It’s difficult to think of ECB President Lagarde as a hawk, as she ignored rising inflation in the eurozone for a long period, insisting that it was transitory. The ECB was late to the global tightening party and found itself scrambling to curb inflation. The new Lagarde has become more hawkish and hasn’t shied away from making strong statements, such as warning the markets not to underestimate the ECB’s rate policy. Lagarde has brought her hawkish message to Davos this week, saying that inflation remains “way too high” and that the ECB would stay the course until inflation returns to 2%. With inflation currently at 9.2%, that promises to be a slow process. The ECB is widely expected to raise rates by 50 basis points in February, but what happens after that isn’t clear. The eurozone economy is holding up fairly well despite the Ukraine war and the feared energy crisis appears to have been averted, thanks to a warm winter and diversification efforts. The question going forward is whether the ECB will respond to the positive economic environment with a smaller hike of 25 bp or will it keep the pedal on 50-bp increases in order to ensure that inflation does not become entrenched. Lagarde said in December that the Bank would determine future rate moves based on data and that it was very possible that more 50-bp increases were coming after February. ECB members are divided on the issue, leaving the markets uncertain about what will happen at the March meeting. The Federal Reserve begins a two-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 limited. Fed member Brainard spoke on Thursday and echoed the Fed’s hawkish stance. Brainard said 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.   EUR/USD Technical 1.0780 is a weak support line. Below, there is support at 1.0691 1.0921 and 1.1010 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The German economy is showing some unexpected resilience, however it is a long way off displaying a strong economic recovery Olaf Scholz has served as German chancellor since December 2021   The German economy started the new year with positive news. Kind of. According to the first very tentative estimates by the statistical office, the economy avoided a contraction in the fourth quarter and ‘only’ stagnated. The positive effects of the post-lockdown rebound seem to have outweighed the negative impact of the war in Ukraine and surging energy and food prices. Even though this first estimate could still be subject to revisions, it definitely shows that the German economy has been more resilient despite a long series of crises in 2022, which threatened to push the economy into a deep recession. The reason for this resilience is not so much the structure of the economy but rather a simple policy recipe that the German government has successfully used over the last 15 years and perfected recently: fiscal stimulus. Contrary to common belief and what German governments have often preached to other European governments: in times of crisis, the government prefers outright fiscal stimulus. This was the case during the financial crisis, during the Covid-19 pandemic and now as a response to the war and the energy crisis. What German governments perfected during the pandemic and last year’s crisis is the use of big ballpark figures, hoping that eventually not all the money will have to be used. During the pandemic, outright fiscal stimulus amounted to more than 10% of GDP. Last year, after some months of hesitation, the government decided on several stimulus and price cap packages, amounting to a total of some 8% of GDP. The announcement effect and the actual money saved the economy from falling into recession, at least for now. Not falling off the cliff is one thing, staging a strong rebound, however, is a different matter. And there are very few signs pointing to a healthy recovery of the German economy any time soon. First of all, we shouldn’t forget that fiscal stimulus over the last three years stabilised but did not really boost the economy. Industrial production is still some 5% below its pre-pandemic level and GDP only returned to its pre-pandemic level in the third quarter of 2022. Industrial orders have also weakened since the start of 2022, consumer confidence, despite some recent improvements, is still close to historical lows, and the loss of purchasing power will continue in 2023. Finally, like every eurozone economy, the German economy still has to digest the full impact of the ECB rate hikes. Demand for mortgages has already started to drop and in previous hiking cycles it didn't take long before the demand for business loans also started to drop. While the German economy will still have to cope with the delayed impacts of last year’s crises, there are a few positive developments: the reopening of China could help the battered export sector, and the prospects of decreasing inflation rates could support private consumption. However, when it comes to inflation, do not forget that households will not benefit from lower gas wholesale prices but are only now confronted with the pass-through of the energy price surge of 2022. At the same time, wage growth of at least 5% year-on-year this year and another 3-4% next year as well as the pass-through of high energy prices to other sectors of the economy will leave core inflation stubbornly high. Germany’s economic outlook for this year looks complicated, to say the least, with an unprecedentedly high number of uncertainties and developments in opposing directions. And there is more. Let’s not forget that the German economy is still facing a series of structural challenges which are likely to weigh on growth this year and beyond: energy supply in the winter of 2023/24 and the broader energy transition towards renewables, changing global trade with more geopolitical risks and changes to supply chains, high investment needs for digitalisation and infrastructure, and an increasing lack of skilled workers. This long list embodies both risks and opportunities. If historical lessons from previous structural transitions are of any guidance, even if managed in the most optimal way, it will take a few years before the economy can actually thrive again. The German economy in a nutshell Thomson Reuters, all forecasts ING estimates TagsGermany GDP 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  

After a resilient 2022 in France, where economic activity grew by 2.6%, 2023 should be characterised by quasi-stagnation. Inflation is expected to rise further, before starting to fall in the summer of 2023 In this article 2022, a year of resilience Higher inflation in 2023 than in 2022 Near stagnation of activity in 2023 Difficult exit from "whatever it costs”   Shutterstock French Economy Minister Bruno Le Maire   2022, a year of resilience In France, the year 2022 was characterised by resilience in activity despite the negative impact of the war in Ukraine and global inflation. The end of the restrictive Covid measures led activity in services to rebound significantly, while very expansionary public policies and the strength of the labour market largely supported household purchasing power, leading French GDP to grow by around 2.6% over the year. As a result of the government's policy of limiting the increase in French energy bills, French inflation remained much lower than in other European countries in 2022, averaging 5.2% (5.9% for the harmonised index). Higher inflation in 2023 than in 2022 While most European countries have already passed the peak of inflation, inflation in France is expected to rise further in the first quarter of 2023. The revision of the “tariff shield” will lead to a 15% increase in household energy bills, compared to a 4% increase in 2022. Many companies are facing the first upward revision of their energy bills since 2021. Rising production costs are expected to continue to support inflation in food and manufactured goods. In addition, the four indexations of the minimum wage to inflation in 2022 will continue to lead to increases in all wages, which will push up inflation significantly, particularly in services, in 2023. Ultimately, average inflation in 2023 will probably be higher than in 2022 (we expect 5.5% for the year, and 6.3% for the harmonised index), with a peak above 6.5% in the first quarter, before gradually declining from the summer onwards. At the end of 2023, inflation will probably still hover above 4%, a level higher than the European average. The deceleration should continue in 2024, with inflation averaging 2.6% over the year (3.5% for the harmonised index).   Near stagnation of activity in 2023 2023 should be characterised by a quasi-stagnation of the French economy in all quarters of the year. Although nominal wages per capita are expected to rise by around 6% in 2023, real purchasing power per person will remain very weak, weighing on private consumption. Given the uncertainties, the expected (albeit small) rise in the unemployment rate and the low level of household confidence, the household savings rate will probably remain high and above its historical average. Household investment in housing is likely to stall, weighed down by higher commodity prices and rising interest rates. The manufacturing sector should continue to see supply difficulties ease but will face much weaker global demand and will still be at risk of a further significant rise in global energy prices. We expect growth of 0.2% for the full year 2023 and 1.1% for 2024. Difficult exit from "whatever it costs” While in several European countries trade unions and public opinion are mobilising to demand wage increases, in France the protests are focused on pension reform. The government wants to implement reform that will, among other things, raise the legal retirement age from 62 to 64 in order to maintain the budgetary sustainability of the system. Although the reformed system can still be characterised as generous in comparison with its European neighbours, the unions and the political left are strongly opposed to it. The scale of the mobilisation has yet to be confirmed on the streets. After years of "whatever it costs" where the government has largely subsidised activity (in 2022 alone, 50 billion euros have been spent to protect households and companies against inflation),  fiscal sustainability has disappeared from the political debate. As a result, fiscal policy is likely to remain quite accommodative in the coming years. The deficit is expected to remain above 5% of GDP until 2025 with debt above 112%. The French economy in a nutshell TagsPublic finances Inflation GDP France Eurozone Quarterly 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  

Despite solid employment resilience, consumption looks set to decelerate in 2023. Still, together with investment, it should keep growth in positive territory In this article Gradual inflation decline, with energy fall prevailing over core stickiness Resilient employment should help limit the damage Investment still growing Fiscal discipline: a valuable political capital for upcoming negotiations   Shutterstock Giancarlo Giorgetti, Italian Minister for Finance   The jury is still out as to whether the Italian economy contracted in the fourth quarter of 2022, and we currently expect to see a minor -0.1% quarter-on-quarter fall in GDP. This year will likely see a soft start, followed by a gradual recovery over the rest of the year. The growth profile will be hugely affected by developments on the inflation front and their impact on both disposable income and domestic demand. Gradual inflation decline, with energy fall prevailing over core stickiness The sharp decline in TTF natural gas prices seen over the past month (falling 60% to around 60€/MWh) should have a positive impact on the energy component of the inflation basket, creating room for positive base effects on headline inflation to unfold over the first months of 2023. The pass-through of energy price pressures is not over yet and will likely weigh on core inflation for some time. Signals from the business sector point to a decline in intentions to hike prices among manufacturers but not yet in services, suggesting that some form of reopening-induced consumption is still at work. Over the first half of the year, we expect the drop in energy inflation to outweigh the inertia in the core inflation component. This should induce a gradual decline in the headline index, which is expected to end the year above 2.5% year-on-year. Resilient employment should help limit the damage Stubborn inflation is weighing on disposable income, but the effect is less noticeable than we had expected. In the third quarter of last year, real disposable income increased by 0.3% quarter-on-quarter despite accelerating inflation, mainly thanks to surprisingly strong labour market data. In November, against a backdrop of an economic slowdown, employment confirmed its peak at pre-pandemic levels. The unemployment rate, admittedly a backwards-looking indicator, was stuck at a multi-year low of 7.8%. High gas storage levels, which were just below 80% full by mid-January and resulted from unusually mild weather, further reduced the chance of energy rationing this winter and limited the scope for short-term supply shocks. Still, with a modest deterioration in employment and shrinking room for substantial declines in the saving ratio (which fell to 7.1% in 3Q22, the lowest level since 4Q12 and below the pre-Covid average), we anticipate consumption will cool down over the 4Q22-1Q23 period. We then see it picking up at a moderate pace so long as inflation recedes. A short-lived and soft technical recession in the first quarter of 2023 remains our base case, but short-term upside risks are rising. Unusually high gas storage levels make energy rationing unlikely this winter AGSI+, ING Research Investment still growing Private investment should also, in principle, remain a positive growth driver in 2023. This will build on two factors: a residual drive of residential construction investment fuelled by tax incentives, and the flow of new investments linked to the implementation of the national recovery and resilience plan (RRP). Both are exposed to downside risks, though. If residential construction suffers from the impact of rising interest rates, risks to the RRP front could emerge as the balance between reforms and investments shifts towards the latter. Further adding to the issue could be involvement from local administrations, which are less equipped to manage complex projects. Fiscal discipline: a valuable political capital for upcoming negotiations The macro backdrop described above will fit into a prudent fiscal framework. The Meloni government crafted its 2023 budget with a piecemeal approach, in continuity with the Draghi government. Almost two-thirds of the €34bn budget is devoted to refinancing deficit measures designed to support (until 31 March 2023) households and businesses weathering the inflation shock. The rest is dispersed among other measures, ranging from refinancing the cut to the tax wedge (again, in continuity with the Draghi government) to extending a flat tax system for independent workers. The government aims at a 4.8% deficit/GDP target for 2023, which implies a 1.1% reduction in the structural deficit. Fiscal discipline will be a valuable political capital to be spent in upcoming negotiations on reforming the stability and growth pact. In our view, risks to this for 2023 lie on the side of a slightly higher deficit but not enough to jeopardise another decline in the debt/GDP ratio. For the second year in a row, the inflation effect (through the GDP deflator) is set to work its magic on the debt ratio.   The Italian economy in a nutshell (%YoY) Thomson Reuters, all forecasts ING estimates TagsItaly GDP 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  

Dutch GDP is forecast to grow by a mediocre 0.4% in 2023 and a close-to-normal 1.4% in 2024. A short and mild recession is forecast to last until the first quarter of 2023, with GDP moderately picking up during the rest of 2023. Inflation has peaked but remains high, as core inflation is still on the rise. Fiscal expansion is the main driver of growth In this article 2022 closed with another contraction, despite robust private consumption 2023 starts worse before it gets better on the back of public spending Inflation is past the peak, but remains high   Mark Rutte, prime minister of The Netherlands 2022 closed with another contraction, despite robust private consumption While inflation in the Netherlands was among the highest of its peer economies in the eurozone, Dutch domestic private consumption held up surprisingly well, even going into the fourth quarter of 2022. Although not buoyant, retail sales and domestic consumption volumes have been showing stability or even some growth. Large amounts of savings (accumulated during lockdowns, particularly in the upper half of the wealth distribution), the €190 payout households received via their energy bill in November and December, accelerating wage increases, continuing low unemployment, and the certainty provided by the energy price ceiling for 2023 seem to contribute to robustness in consumer spending at the end of 2022, despite an environment of higher core inflation and low measured consumer confidence. As such, household consumption is forecast to have continued to grow in the fourth quarter of last year. As the outlook for net trade and investment has worsened with tougher financing conditions and high input cost inflation throughout Europe, Dutch GDP is nevertheless likely to continue to contract in 4Q22. Despite contractions in the last two quarters of 2022, the annual growth figure of 4.3% for that year represents a strong expansion. This stems from the strong rebound out of lockdown in the first half of the year. 2023 starts worse before it gets better on the back of public spending Government spending will be the main driver of GDP growth in 2023, while net trade and investment will be a drag on the GDP development, and private consumption is set to only expand negligibly. Private consumption may start the year in the first quarter with a decline: as energy taxes and the VAT on energy were normalised, the €190 lump sum terminated, and the energy price ceiling was introduced as of 1 January 2023, energy costs net of taxes may de facto have risen for some households – depending on their energy consumption level and contract – and fallen for others. Still, consumer confidence is low. Falling house prices and a lower number of home sales will provide a lid on consumption growth and are a risk for weaker-than-expected consumption. As inflation will fall, private consumption is expected to expand (although sluggishly) for the year on average. It indirectly benefits – via the multiplier effect – from the increased execution of ambitious plans in the coalition agreement and is still directly supported via the energy crisis support measures and some structural policy changes. Companies are increasingly signalling a downward pressure on profitability. This, the recession in the eurozone, and the prospect of a weakened global business cycle, makes it less attractive to invest, for instance in machinery. Higher financing costs due to interest rate increases also put a brake on investment. The development of building permits, due to insufficient capacity in municipalities and due to the nature of protection policies, indicates a decline in investment in construction work in 2023. This concerns housing and commercial premises and mobility infrastructure. In 2023 there is a risk that investment in buildings will fall for the first time since 2013. Both exports and investment will benefit however from backlogs in transport equipment. Due to previous major issues in global supply chains and the resulting delays in production and delivery, there are still many orders from 2022 that will be fulfilled this year. This is particularly true for passenger cars and to a lesser extent for heavy vehicles such as trucks and busses. Without this shift in time, the outlook for exports and investment would have been worse for 2023. For vans, the prospects are somewhat weaker, while ordered vessels may not be delivered until 2024. Mild GDP decline continues into 1Q23 as private expenditures weaken, but pick up in 2023 due to government spending Expenditures* as index where 4Q2019 = 100 Macrobond, ING Research forecasts as of 4Q22*seasonally adjusted and in constant prices   Higher financing costs for businesses resulting from higher market interest rates, generally lower profit margins and the challenge of paying back deferred taxes (accumulated during the pandemic) will also contribute to more business dynamics in 2023. This will facilitate a quicker movement of labour and capital from unproductive sectors and firms towards those with more growth potential, which could be beneficial for labour productivity. The number of bankruptcies has indeed recently started to increase recently but is still far below normal rates. A normalisation should coincide with higher unemployment. Yet, we forecast only a mild uptick in joblessness. As ING research shows, when European economies enter a recession with much strain in the labour market, the subsequent increase in unemployment is more limited. This can be explained by labour hoarding: solvent firms are unwilling to let go of their skilled personnel even during a downturn, trying to avoid hiring and training costs and the loss of firm-specific knowledge. Furthermore, while the market sector may have moved in a lower gear, (semi)public sectors will take over some of the employment. Vast government spending means fiscal deficits. Inflation is keeping the debt burden limited, however. Although the budgetary process was messy lately, with the government not adhering to its own fiscal rules and seems to have more easily led to uncovered additional spending, the ability of the Dutch government to finance its debt is not a serious concern for now: the public debt-to-GDP ratio is still low by international standards. Inflation is past the peak, but remains high HICP headline inflation reached its peak in September 2022, but at a forecast of 4.5%, it's set to remain quite high in 2023. As gas prices have come down in wholesale markets and the energy price ceiling was introduced in early 2023, energy will contribute less (and in some months negatively) to inflation. Selling price expectations of non-financial businesses remain very high though. This suggests that core inflation might peak somewhere later in 2023. Earlier peaks in purchasing prices of inputs like raw materials, transportation, and energy will still be passed onto consumers, while higher labour costs will also continue to drive inflation up. The reversal of the following temporary policies will also contribute to rising prices for consumers in 2023: The energy tax (on gas and electricity) was temporarily lowered for 2022. This will be normalised in 2023. The VAT rate on energy was temporarily lowered from 21% to 9% for July-December 2022. This will be normalised in 2023. The excise duty on fuel (gasoline and diesel) was lowered temporarily to 21% for April-December 2022. This will be normalised in 2023. College tuition fees halved during the Covid-19 pandemic period and normalised in September 2022. This will drive 2023 inflation upward (+0.25% points).  Covid-inspired regulation kept a lid on the increase of rents in both the social housing sector and the liberalised sector, at least until policy changes as of 1 July 2022 and 1 January 2023. Normalisation and reforms of the policies might on average be more inflationary for 2023, although there are also some lower-income households for which the reform is beneficial (as more will be income tested).  The excise tax on a pack of cigarettes will be increased in two substantial steps, to €10. The first step in April 2023 is estimated to have a nonnegligible effect on the HICP inflation rate of +0.6% points in 2023. Inflation past peak but still high Change in harmonised index of consumer prices for the Netherlands year-on-year in % and contributions in %-points Macrobond, forecasts as of 2023 by ING Research   The expiration of the energy price cap at the start of 2024 will result in higher inflation that year. Combined with some remaining pressure in core inflation, headline inflation might still be close to 4% in 2024. The Dutch economy in a nutshell (%YoY) Macrobond, all forecasts ING Research estimates TagsNetherlands Inflation GDP Consumption 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  

We expect Spain's economy to grow by 0.9% this year, considerably less than in 2022, but better than most other eurozone countries. Headline inflation will fall further thanks to favourable energy effects but underlying inflationary pressures will remain high for some time In this article The strong reopening effect completely faded away in the second half of 2022 Spain likely to outperform other eurozone countries in 2023 Underlying inflationary pressures remain high Modest growth rate in 2023   Thanks to a relatively more service-oriented economy and a positive contribution from tourism, Spain is likely to outperform the eurozone average The strong reopening effect completely faded away in the second half of 2022 The Spanish economy cooled sharply in the second half of last year. Although the big drop in energy prices and cooling inflation have led to cautious optimism among companies and households, we expect the recovery to be very slow this year. Financial conditions will tighten further in 2023. The European Central Bank announced at the last policy meeting in December that interest rates still need to go significantly higher, and further 50bp rate hikes will follow. The ECB's deposit rate now sits at 2%, the level considered the neutral level where the economy is neither stimulated nor restricted. Thus, additional interest rate hikes will certainly dampen economic activity in 2023. Consumption will also remain under pressure as inflationary pressures will further erode purchasing power in 2023. Households are also very cautious about tapping into the savings accumulated during the Covid-19 pandemic to maintain consumption. The current energy crisis is just prompting more precautionary savings and, moreover, the value of these savings has already been eroded by the sharp price increases. In addition, rising mortgage rates will take an extra bite out of the budget of Spanish borrowers with variable interest rates, which are the majority in Spain. On the other hand, the tight labour market will support consumption. Spain likely to outperform other eurozone countries in 2023 We expect the Spanish economy to do slightly better than the eurozone average. Spain is less dependent on gas and the economy is relatively more reliant on the service sector. A further recovery in the tourism sector will also contribute positively to growth rates. In the first 11 months of 2022, the number of international visitors was still 15% lower than in the same period in 2019. We expect the number of international visitors to continue to rise gradually and exceed pre-crisis levels by summer. Finally, the roll-out of Next Generation EU (NGEU) funds will make a positive contribution to growth rates in 2023. In addition, the housing market is also much healthier than during the financial crisis. The high number of households with variable interest rates is a risk, but for now, there are no worrying signs that the number of households unable to repay their loans is rising sharply, helped by some government measures introduced last year. A scenario similar to what was seen during the financial crisis will not be repeated. The sharp rise in interest rates and the energy crisis will likely put an end to the sharp price increases of recent years, but we expect this to be very gradual. For this year, we expect house prices to grow by about 1%. Underlying inflationary pressures remain high Spanish inflation has cooled solidly since its peak. Harmonised inflation fell to 5.5% in December from 6.7% the month before, significantly below the eurozone average of 9.2%. The fall in Spanish inflation has started much earlier and more firmly than in other eurozone countries, thanks to a host of government measures and a greater cooling of energy inflation. Electricity inflation already turned negative in October and gas inflation is also falling sharply. In late December, Spain's Sanchez government announced a new €10bn package to address the cost-of-living crisis. The new package includes a VAT cut on essential food items and a six-month rent freeze, which will further reduce inflation in the coming months. Although lower energy prices and government measures have brought some temporary relief to headline inflation, the inflationary pressures in the rest of the economy are still very high. Core inflation, excluding the more volatile food and energy prices, reached a record high of 7% in December, a strong acceleration from 6.3% in November. As a result, core inflation is now above headline inflation for the first time since the start of 2021. For 2023, we project average inflation at 3.7%. Although the headline inflation will fall further thanks to these favourable base effects for energy, it will take somewhat longer for the pace of the food price increases to moderate and for underlying inflation to resume a downward trajectory. Food inflation reached a new record high of 15.7% year-on-year in December and the feed-through of higher labour and energy costs to final food prices is likely to continue in 2023. Moreover, fertiliser exports were severely disrupted last year, which might also affect global food production in 2023 and push food prices up. Moreover, fertiliser exports were severely disrupted last year by the war in Ukraine, which could also affect global food production in 2023 and cause higher food prices. Moreover, the Iberian gas price cap also expires at the end of May, meaning gas-fired power plants will have to pay more for their gas again. This will also put upward pressure on the inflation rate. Spanish core inflation above headline inflation for the first time INE Modest growth rate in 2023 Spain experienced a very strong reopening effect after the pandemic, but this effect faded away in the second half of 2022. Tightened financial conditions and an ongoing cost of living crisis will weigh on the growth outlook in 2023. Thanks to a relatively more service-oriented economy and a positive contribution from tourism, Spain is likely to outperform the eurozone average. For 2023, we expect growth of 0.9%. The Spanish economy in a nutshell (% YOY) TagsUnemployment rate Spain Inflation GDP 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    

There are two main drivers of Austria's economic activity: industry and tourism. While the current mild temperatures are benefiting industry, they are damaging ski tourism In this article Austria's economy is struggling Inflation high; consumer confidence low   Skiers in the Austrian state of Salzburgerland this month. Due to higher temperatures, there is less snow this year and the quality of the snow is worse Austria's economy is struggling In the third quarter of 2022, the Austrian economy recorded meagre growth of 0.2% quarter-on-quarter. The industrial sector in particular supported growth, while the hospitality and other services sectors had a negative impact on growth. Flash estimates for economic growth in the fourth quarter of 2022 will only be released at the end of January, but we do not expect that the Austrian economy managed to grow again – high inflation, uncertainty, and a strong dependence on exports in an environment where the global economy is slowing argue against this. Like almost every European country, Austria is feeling the economic impact of the war in Ukraine. High energy costs, high food prices and high uncertainty among companies and households are weighing on consumer and business sentiment in Austria, although leading indicators improved from low levels recently. However, the PMI for manufacturing stood at 47.3 most recently, which not only indicates a contraction of the sector but is also lower than the eurozone number. Weak business sentiment doesn’t come as a surprise, given the high dependence on Russian gas. Austria imports around 90% of its gas consumption. Prior to the war, 80% of gas imports came from Russia. In November 2022, however, the share of gas imported from Russia had dropped to roughly 40%. Inflation high; consumer confidence low Highly filled gas reserves and mild temperatures have avoided a gas supply crisis and seem to have boosted economic sentiment. Most recently, the gas storage facilities were filled at 88% capacity  a year ago, the level was about 40%. Even if the current winter seems to proceed without economic accidents, a requirement for more energy independence is a further acceleration of the green transition. The Austrian government is providing some €3bn and an additional €2.7bn will be made available for environmental funding, to promote Austria as a research and business location and for support with additional energy efficiency measures. In total, these measures correspond to 1.4% of 2021’s GDP. Consumer confidence, as measured by the European Commission’s consumer survey, was also lower in Austria than in many other eurozone countries in all three months of the fourth quarter of 2022. Inflation averaged 8.6% in Austria in 2022, and for the next 12 months, Austrians expect prices to continue to rise. We also assume that inflation will remain high in 2023, even if double-digit inflation rates should no longer appear in the statistics. Persistently high inflation is also affecting Austrian households’ propensity to save, which has increased recently, according to the OeNB's consumer survey. But it's not just Austrians who are saving more and spending less – the cost of living has also risen in neighbouring countries. As a result, many people are skipping ski vacations. According to a YouGov survey from October 2022, only 25% of Germans want to spend their skiing vacation as planned – the rest are shortening their travel time, cancelling their vacation altogether, or avoiding local gastronomy services. And what makes matters worse is that due to the mild weather and associated lack of snow, only around half of the slopes in Austria are open. After suffering from the pandemic in recent years, ski tourism is being hit by two factors this season: lower private consumption at home and abroad and the warm weather. On a more positive note, despite the difficult economic environment, we expect the Austrian labour market to remain relatively stable in 2023. Although unemployment rose to 5.6% in December 2022, we do not expect widespread waves of layoffs. This is mainly due to labour shortages, which are particularly prevalent in Austrian handcraft and hospitality companies and affect a total of 73% of Austrian businesses. Furthermore, companies and households are being supported by various government support measures. The latest example of such measures is the electricity price brake, which came into effect in December 2022. Due to those support measures, however, Austrian government debt increased recently. In the third quarter of 2022, government debt rose to €355.6bn from €333.1bn in the previous quarter. However, the debt ratio fell to 81.3%, driven by economic growth. In 2023, we expect the debt ratio to fall further, but government support coupled with only low growth from the second quarter of 2023 onwards comes at the price of a slower-than-expected decline in the debt ratio. In contrast to other eurozone countries, the warm temperatures of recent weeks do not only bring relief for Austria. They are a double-edged sword, also threatening the overly important tourism sector. In any case, 2023 will be another economically challenging year in which we expect the Austrian economy to contract slightly. The Austrian economy in a nutshell (%YoY) TagsEurozone Austria 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

Ireland's economy boomed in 2022 and the same is expected this year. The country has been relatively unscathed by the energy crisis, but high inflation will weigh on household consumption In this article Structural outperformance But 2023 will see moderation Healthy government finances continue   Leo Varadkar, Ireland's Taoiseach Structural outperformance The Irish economy continued to outperform the rest of the eurozone in 2022 and is likely to do the same in 2023. We’re currently expecting the Irish economy to have grown by just under 12% in 2022. It is well known that this is in part due to multinational accounting activity, which inflates the Irish GDP growth figure. This is causing volatility in the data, which has become worse in recent times. But this is not the only reason for Ireland’s strong performance. Modified domestic demand, the preferred measure for economic activity from the Irish statistical office, is expected to have grown in the double-digits last year as a sign of an economy that is booming beyond accounting statistics. The Irish economy is set up incredibly well to handle the aftermath of the Covid-19 pandemic and energy shock. Its main growth engines ahead of the crises were already the pharmaceutical and ICT sectors, which both profited from the pandemic and have been relatively unscathed by the energy crisis. Having comparatively few energy-intensive industries, Ireland has been able to maintain a dizzying growth pace. This has shown in the domestic labour market as unemployment has bottomed out at just above 4% at the moment and more people than ever are in work. But 2023 will see moderation For 2023, some correction can be expected as high inflation will continue to weigh on household consumption with reopening effects fading and real wages likely to remain negative for some time. Besides that, higher interest rates are set to cool off business investment, which has also been growing at a stellar pace. These factors should lead to a normalisation of economic activity after the abnormally strong 2022. Still, we expect the GDP growth rate to drop only to 3.8%, which is still far higher than the eurozone average. The housing market remains a key concern in the Irish economy. Housing supply continues to be a problem and even though interest rates rose dramatically over 2022, house prices have yet to show a peak while other European countries are cautiously experiencing a turning point for prices. With interest rates rising, housing affordability is reducing, adding to the problem. Still, some cooling in prices is not unimaginable as the ECB raises interest rates further in 2023. Healthy government finances continue From a government debt perspective, Ireland will go through an unexciting year. The government reshuffle has brought Leo Varadkar back into the position of Taoiseach but won’t see a landslide change in government spending as a result. Last year saw a huge increase in tax income, which – together with inflation – will boost government debt levels further into safe territory. For 2023 and 2024, Ireland is expected to run a budget surplus which further solidifies its already very stable fiscal position. Ireland in a nutshell TagsIreland 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

The end of re-opening effects will bring about softer demand as normalising fiscal policy takes away extra support. Upcoming elections will also add a pinch of political uncertainty to the mix In this article Greece's economic profile End of re-opening effect to be followed by more domestic demand uncertainty Normalising fiscal policy to help further declines in debt/GDP Elections also carry some uncertainty   Greece's prime minister Kyriakos Mitsotakis Greece's economic profile The Greek growth profile has recently reflected developments on the inflation front. The acceleration of inflation over the summer (culminating in September's 12.1% peak) took its toll on consumption, which saw a 0.1% quarter-on-quarter contraction in the third quarter of 2022 despite generous energy subsidies. Together with a net export drag, this caused a 0.5% contraction in GDP for the third quarter of 2022. We suspect a similar pattern will follow in the fourth quarter despite confirmed fiscal support and decelerating inflation. End of re-opening effect to be followed by more domestic demand uncertainty The outlook for 2023 remains uncertain. With GDP well above pre-Covid levels, re-opening effects should now be over. Tourism receipts also returned back to their historical peak in the summer of last year, making it unlikely that we'll see further substantial gains in 2023. The recovery seen in employment was a powerful driver of consumption over 1H22 but now appears to be losing steam. Changes to real disposable income will increasingly depend on inflation developments, with inevitable side effects on consumption. Investments should, in principle, remain relatively supported thanks to the inflow of European Recovery Funds but will not be immune to persistent uncertainty surrounding the cost of projects. Employment recovery is losing steam Refinitiv Datastream Normalising fiscal policy to help further declines in debt/GDP Fiscal policy, while possibly accommodating some extra temporary support in the case of continued energy price disruptions, will take a more disciplined turn. The Greek budget for 2023 targets a return to a primary surplus, which is consistent with the fiscal overperformance of 2022 and a more optimistic GDP projection. We're currently less upbeat on growth, and although the primary surplus could be slightly missed, we see a substantial fall in the debt/GDP ratio towards the 170% level materialising nonetheless. With an average debt maturity of more than 18 years, the ongoing sharp rise in interest rates can still be accommodated in the short run without raising debt sustainability concerns. The inflation tax effect, albeit less powerful than in 2022, will still be at work. Elections also carry some uncertainty 2023 will be an election year for Greece. Legislative elections are due to be held in July, but we can't exclude the possibility of prime minister Kyriakos Mitsotakis calling Greeks to the polls a few months early. The upcoming election will be held under a purely proportional system, a shift from the previous structure, which integrated the proportional element with a majority premium and has allowed New Democracy (ND) to rule the country in isolation since 2019. The new system will make it much more complicated for any participant to obtain a parliamentary majority. According to the latest available opinion polls, ND leads with 37% of the votes, followed by Syriza (28%) and Pasok (11.5%). With these numbers, ND would be far from reaching a majority under the new system if it does not align itself with others (Pasok). Setting up a reliable coalition may turn out to be a difficult task. Add to this a campaign which might touch upon delicate issues (such as Qatargate) along with wiretapping accusations, and you get a decent mix of potential sources for political uncertainty over the second quarter. The Greek economy in a nutshell (%YoY) Thomson Reuters, all forecasts ING estimates TagsGreece 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 Belgian economy coped well with the inflation shock in 2022. Even if 2023 looks more difficult, a strong labour market should limit the damage. But in the medium term, the economy will not be able to ignore the challenges of competitiveness and public finances In this article Resilience Household income holds up Slight recession Slow recovery… ... and inflation down, but still high Competitiveness and public finances, problems for tomorrow   Shutterstock Belgium's Prime Minister Alexander De Croo attends a panel at the World Economic Forum in Davos, Switzerland, Jan 2023 Resilience Torn between the post-Covid reopening of the economy and the negative effects of the war in Ukraine, the Belgian economy showed, like other eurozone economies, strong resilience to headwinds. For the year 2022 as a whole, GDP is expected to have grown by 3%, which puts last year's volume of activity around 3.5% above that of 2019, before the succession of negative shocks. It should be noted, however, that on the supply side of the economy, not all sectors have developed so positively: even though the figures for the fourth quarter are not yet available, it is highly likely that activity will have contracted (by around 0.3%) in the manufacturing sector in 2022. Growth is therefore essentially linked to services, and in particular to (retail) trade, which has benefited from the complete end of Covid restrictions. Household income holds up It may seem surprising that in the context of the war in Ukraine and the sharp rise in commodity and energy prices, the economy, and household consumption in particular, has shown such resilience. This is most likely linked to two factors: on the one hand, the labour market has put in one of its best performances in recent decades. Indeed, according to the latest available figures, some 100,000 jobs were created in 2022, which is exceptional for the Belgian economy. Even if these are not always fixed-term and full-time contracts, the volume of hours worked has increased (+2.7% year-on-year in the third quarter 2022). This has therefore contributed to an increase in household disposable income. On the other hand, the automatic indexation of income (wages, pensions, social benefits, etc.), itself linked to the evolution of prices, has pushed income upwards, which has enabled households to cope with the energy price shock, especially as many additional measures have been taken to mitigate its effects. These two elements combined have allowed household disposable income to rise by more than 7% in 2022, or by almost €25 billion. Consequently, despite the sharp rise in prices, households have not had to reduce their savings rate (this stood at 13.6% in the third quarter of 2022, whereas it did not exceed 12.0% on average over the three years prior to the start of the Covid), while increasing the total volume of consumption. Recent growth in compensation of employees (YoY) This has been driven by an increase in hours worked, but more by the nominal increase in hourly wages in 2022 Statbel, NBB, computation: ING Slight recession However, it is undeniable that the pace of growth slowed during the year. As mentioned above, activity even contracted in the manufacturing sector. Household and business confidence have recovered somewhat in recent months, but household confidence remains very low. On the labour market, there has also been some deterioration: although temporary unemployment (which can be used by companies that are suffering too much from the rise in energy prices) has returned to its normal level, there has been a deterioration in activity in the temporary employment sector (it has fallen by more than 11% YoY in November 2022). The number of job seekers is also up by 5% over the same period. As elsewhere, the slowdown in activity should be less pronounced than we anticipated a few months ago, thanks of course to the fall in energy prices. This is all the more true as the measures taken to combat the rise in energy bills for households will be maintained in the coming months. The manufacturing sector should also benefit from the fall in energy prices and make a positive contribution to growth. Slow recovery… Barring a sharp rise in energy prices similar to that seen in the summer of 2022, a slow recovery of the Belgian economy is likely to take shape in the course of the year. However, this will initially be hampered by more restrictive financing conditions for the economy, due to the rapid and significant increases in European Central Bank interest rates. This could weigh on construction activity in particular. Indeed, there is already a clear cooling of the housing market, with mortgage lending down by almost 25%. In addition, job creation is likely to slow down significantly this year, which will limit the growth of real household income, and therefore consumption. ... and inflation down, but still high In 2022, inflation reached almost 10%. This is quite exceptional. Of course, the direct impact of rising energy prices is largely responsible for this figure. But we should not forget that in December last year, more than 70% of the prices of goods and services included in the consumer price index had risen by at least 5% over the previous 12 months. The indirect effects of rising energy, commodity and labour costs have thus played an important role in the inflation dynamics. Thanks to the recent fall in energy prices, inflation has started to decline. It should continue to fall in the coming months, although this will probably be hampered by the desire of many companies to try to pass on the recent increases in labour costs to their sales prices. Indeed, around 500,000 workers will see their wages indexed by over 11% from this month. This is good for household income but represents a significant cost for the companies concerned. Competitiveness and public finances, problems for tomorrow In the end, therefore, despite the multiple shocks impacting the Belgian economy, it should get through the turbulent period without too much damage. This is at least the case at first sight. However, the shocks and the measures taken to deal with them will leave their mark. In other words, the legacy of multiple crises over recent years will continue to be felt.    On the one hand, it is known that the automatic indexation of wages is largely responsible for the increase in households' disposable income, and thus their ability to cope with the increase in energy bills. But it is also an equivalent cost for companies. Therefore, if wage growth (and therefore labour costs) does not reach an equivalent level in Belgium's trading partners, Belgium will lose competitiveness. As the inflation wave is huge, the wage cost differentials could be substantial. This may ultimately affect the economic recovery, in terms of jobs or income, if no measures were to be taken to correct the excessive wage handicap. On the other hand, it should be noted that the state has borne the brunt of past shocks. For example, between March 2020 and the end of 2022, more than €6 billion of additional temporary unemployment benefits were paid to counter the loss of activity linked to the shocks (mainly the Covid crisis). To this must be added aid to businesses, aid to households for energy bills (tax cuts, lump sum cheques, etc.), as well as indexation of civil servants' salaries and social benefits. In the end, the budget deficit has struggled to fall since 2020, and should still approach 5% of GDP in 2022 and 2023. It should also be added that the level of interest rates on the markets is now higher than the average financing rate of the existing debt, and the replacement of maturing debt will tend to increase the latter. No major corrective measures are currently being put in place, while the prospect of federal and regional elections in 2024 will make it increasingly difficult for the parties in the broad governing coalition to reach agreement. For the same reasons, the much-needed structural measures to reform the labour market and the pension system are also in jeopardy. The health of public finances is likely to be a drag on the economy sooner or later. Corrective measures will inevitably include tax increases or spending cuts. The question is when the pressure will be felt to take these corrective measures. This may come from the new European fiscal rules under discussion, or from a loss of creditor confidence in the financial markets. The former may still take some time to be decided, while the latter is unpredictable.  The Belgian economy in a nutshell (% YoY) Thomson Reuters, all forecasts ING estimates TagsInflation GDP growth Belgium 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

We outline four different paths for EUR/SEK in 2023 based on developments in four key areas: global risk sentiment, Europe’s economic performance/energy prices, Riksbank-ECB policy divergence and Sweden's domestic economy. Our baseline scenario is moderately bearish for EUR/SEK, and expect to see sub-10.50 levels by 3Q23 before a 4Q rebound   We recently revised our EUR/USD forecast higher on the back of a radically changed global macroeconomic picture. Slowing inflation and a deteriorating data-flow in the US have forced a dovish repricing in Fed rate expectations, while the European Central Bank looks determined to keep hiking at a sustained pace. Meanwhile, a positive re-rating of growth expectations occurred in both China (thanks to the easing of Covid rules) and Europe (thanks to lower energy prices). All this points – in our view – to dollar weakness and a more benign environment for high-beta currencies in 2023. In this article, we outline four potential patterns for EUR/SEK based on four key factors set to drive the pair over the short and medium term: global risk sentiment, Europe’s economic performance/energy crisis, Riksbank-ECB policy and Sweden’s economy. The range of outcomes is derived from the expected volatility priced in by the options market. Four scenarios for EUR/SEK Source: ING, Refinitiv External environment The first two factors in our scenario analysis are purely external to Sweden. Global risk sentiment remains – statistically – the single most important driver of EUR/SEK in the medium term. The Fed’s policy is a key driver in this sense. Our economics team has recently highlighted how the deterioration in forward-looking data (like the ISM Services), combined with the easing in inflationary pressures, are shedding doubts on whether the Fed will be able to deliver another 50bp of total tightening and take rates to 5.00%. We now expect a larger easing package (100bp) in the second half of 2023 compared to what markets are pricing in (60bp). While lower rates should be a straightforward positive factor for global equities and high-beta currencies such as SEK, there is a key caveat. Should the easing cycle be triggered primarily by a pronounced US economic underperformance rather than primarily by falling inflation, the net positives for high-beta currencies would be offset. SEK should benefit from the improvement in the eurozone's growth picture SEK presents one of the strongest sensitivity in G10 to eurozone’s growth sentiment, which at this historical juncture is very strictly a function of energy prices and geopolitical developments in Ukraine. ING’s views on the eurozone’s economy can be found in our economics team's “Eurozone Quarterly”: one key point is that the abatement in gas prices (largely thanks to mild weather) has allowed a recovery in the euro area's economic outlook, and a recession can now be averted. The improvement in the eurozone’s outlook should have – in theory – weighed on EUR/SEK, since SEK tends to have a higher beta than the euro to the eurozone’s growth. However, this has not been the case lately. There are two reasons for this: first, the hawkish surprise by the ECB triggered EUR-specific strength; second, risk sentiment was rather weak into year-end and only margianlly recovered at the start of 2023. We discuss in the next paragraph the relevance of ECB and Riksbank policy for EUR/SEK, but an important takeaway is that SEK has some room to catch up with the improved eurozone growth picture, although that can only occur in a stable or recovering risk environment. Sensitivity to rate differential rising The sensitivity of EUR/SEK to the EUR-SEK two-year swap rate differential (which tracks the ECB-Riksbank policy divergence) has started to pick up again recently. This happened largely thanks to: a) gas prices abating and no longer being the key driver of short-term moves in European currencies; and b) the ECB turning increasingly aggressive on tightening. For most of last year, the correlation between EUR/SEK and its short-term swap differential was rather muted – as shown below. The large hikes by the Riksbank were not translating into a stronger krona: the 100bp hike in September was a case in point. This was observed across many developed central banks. We think that a generalised improvement in the global risk picture can keep rebuilding the FX-rate differentials relationship in 2023, including for EUR/SEK. Accordingly, the ECB-Riksbank policy divergence should regain relevance for the pair. EUR/SEK and short-term swap rate differential Source: ING, Refinitiv ECB and Riksbank policy We expect the ECB to hike by 125bp by mid-2023, in line with the Governing Council’s recent rhetoric and the improved economic outlook in the eurozone. That would take the deposit rate to 3.25%, which is currently what markets are pricing in. Unlike the Fed, we expect rate cuts will only be a 2024-2025 story in the eurozone. We expect 75bp of hikes by the Riksbank, but 100bp are also on the table The Riksbank’s policy rate is currently at 2.50% and our baseline scenario sees 75bp of additional hikes in Sweden and a peak rate of 3.25% like the ECB deposit rate. This is in line with market expectations. We see, however, an elevated risk of 100bp being delivered. The reasoning behind this is that: a) inflation is still very elevated in Sweden (CPIF 10.2% year-on-year, core CPIF 8.4% YoY) and proved rather sticky in latest reads; b) there is a rather explicit interest by the Riksbank to support the krona (which would help fight inflation). On this second point, the most straightforward approach to support SEK is not to underdeliver compared to market expectations on monetary tightening, especially at a time when the ECB is hiking aggressively. In our baseline scenario, we see the EUR-SEK short-term rate differential being capped as ECB tightening is fully priced in and the Riksbank can still moderately surprise markets on the hawkish side. The Riksbank explictly wants a stronger krona The timing of rate cuts is another important point, especially for the EUR/SEK outlook in 2H23. In our view, for the same reasons mentioned above – and especially the Riksbank’s preference for a stronger SEK – the discussions about monetary easing will be delayed as much as possible. We currently pencil in the first rate cut by the Riksbank in 2024, and we expect it to come a few months before a similar move by the ECB. Another approach to support the krona could go through FX reserves. The Riksbank accelerated the build-up of its FX reserves in early 2022, which essentially implied selling SEK to purchase foreign currencies (mainly USD and EUR). This seemed counterintuitive given the desire for a strong currency, but the Riksbank highlighted how reserve management was not part of the monetary policy framework. Pace of FX purchases slowing Source: ING, Riksbank   FX reserve data shows that the pace of purchases has abated recently, and that reserves are now above the 2019 recent peak. This is already good news for SEK, but it does not look hihgly likely – for the moment – that the Riksbank will start actively selling FX to support the krona. It could become a more viable option later this year should SEK feel more depreciating pressure despite a hawkish monetary policy or should the bank be forced to halt hiking earlier than expected. Some uncertainty around the Riksbank’s policy is also tied to the recent change of governor. Erik Thedéen took the role at the start of the year, but we do not have enough information about his stance on monetary policy to conclude he will bring any substantial changes in the bank. Riksbank facing a housing dilemma There is one key downside risk to our 'hawkish' scenario for the Riksbank. Unlike the ECB, the Riksbank has to deal with a very vulnerable property market. Indeed, tight monetary policy is already weighing on the Swedish housing market. Rising costs for debt servicing and construction had drastically reduced consumer and investors’ appetite, resulting in prices falling substantially. The headline Valueguard HOX index shows a peak-to-trough fall of 15.2%, and the Riksbank forecasts a further decline until the third quarter of 2023.   Swedish housing market under pressure Source: ING, Riksbank, Valueguard   Looking at the Swedish mortgage market, only 10% of new loans have a fixation period of longer than five years, and over half of the total loans are on variable. Together with the Swedish household debt proportion to net disposable income rising steadily over the past two decades to 200 percent, there are some limits to how far the Riksbank can go with tightening before triggering a fully-fledged property crash. Mortgage markets breakdown by interest rate type, new loans (%) Source: ING, European Mortgage Federation   A black-swan scenario for SEK could materialise if ultra-sticky inflation forces the Fed, the ECB and the Riksbank to push rates considerably higher than what markets are currently expecting, triggering a crash in the housing market. That could also lead to big rate cuts in late 2023 to support the economy. In our baseline scenario, the 75-100bp of tightening by the Riksbank should keep fuelling the property market correction, but in a controlled manner and not excessively exceeding the Riksbank’s estimates. Our forecast for EUR/SEK After discussing the range of possible patterns for EUR/SEK in 2023, it’s time to sum up our view, which corresponds to the "Cautious optimism" scenario above. We are moderately bearish on EUR/SEK in 2023 given the projected improvement in the eurozone’s economic outlook and in risk sentiment. More in details, we expect EUR/SEK to trend lower and move sustainably below 11.00 by the end of the first quarter as the Riksbank hikes by 50bp and signals more tightening, while European sentiment improves. Then, we expect EUR/SEK to test the 10.00/10.50 trading range in the third quarter, when Fed rate cuts could give high-beta currencies like SEK an advantage over the EUR, and the beneficial effects for the krona of an improved European economic outlook emerge. However, SEK could experience some weakness towards the end of the year – i.e. EUR/SEK moving back above 10.50 – as colder weather could bring higher energy prices and a deterioration in risk sentiment. It's important to note that this profile embeds our view for a rather strong EUR in 2023. We expect to see larger SEK gains against the dollar. ING forecasts Source: ING 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

On Friday, the EUR/USD currency pair continued to move more sideways than upwards, but overall the rising trend is still in place, and the European currency soared with renewed force tonight and in the morning. The pair simply took a little break last week before a new "take-off," in theory. We are not the only ones puzzled by this; a sizable number of specialists are also questioning what is motivating the market, which keeps buying the euro currency. Nothing significant occurred on Monday night that could have caused the euro to increase significantly. As a result, the overall situation is unchanged: the pair frequently exhibits growth for no apparent reason. We've already mentioned that the euro may now be supported by one or two factors. The first is the highly likely narrowing of the ECB-Fed rate differential in the coming months. The second is a technical upward trend correction following a slump of approximately two years. However, it should also be acknowledged that the euro is expanding too quickly and in excess. The outcomes of the Fed and ECB meetings, which will be held in a week and a half, are in reality already known to the market. We think that these occurrences may cause the market's sentiment to shift. However, we must reiterate that the market will act regardless of the underlying and macroeconomic context if it chooses to purchase the euro and sell the dollar. Just that there are times when the macroeconomics and "foundation" don't correspond with the direction of movement. So, all you need to do is pay closer attention to technical analysis, which depicts market activity flawlessly. What will this week's trading bring? In terms of macroeconomics or "foundation," this week won't be the most interesting. There won't be many truly significant stories or happenings. We should begin by listening to a few more remarks from Christine Lagarde. Last Thursday and Friday, the ECB's president spoke, although she offered no essentially novel information. Monetary policy, it should be understood, is like the Titanic in the Atlantic. If Lagarde speaks five times in two weeks, she simply cannot surprise market participants every time because she shifts the direction of her movement extremely slowly. Therefore, just one performance out of five or ten can cause a market shift. But it's also impossible to dismiss the ECB president's statement as "unimportant." Lagarde will present this week on Monday, Tuesday, and Friday. Tomorrow will also see the release of business activity indices for the EU services and industrial sectors in addition to Lagarde's speeches. Serious changes in their values shouldn't be anticipated based on the forecasts. All three indicators are predicted by experts to remain below the "waterline" of 50.0, therefore a big response to these findings is not anticipated absent significant departures from expectations. All of the events scheduled for this week, following the European Union, are listed above. It turns out that traders can, in theory, focus only on the "method" for the next five days. And all that is saying at this point is that neither a sell signal nor a condition for the pair to decline exists. On the 4-hour TF, all indications are pointing upwards, and on the 24-hour TF, the price is above all of the Ichimoku indicator's lines. Such a movement might theoretically continue for as long as you like. Although we are not opposed to the euro's expansion, we think there should also be corrections. It should be remembered that nearly all of the Fed's monetary policy committee members indicated last week that they were prepared to continue tightening monetary policy. Although it appears to be a "hawkish" aspect, the dollar showed little sign of reaction. It is therefore far from certain that the dollar will appreciate, even if supportive elements for the US currency emerge this week. As of January 23, the euro/dollar currency pair's average volatility over the previous five trading days was 79 points, which is considered "normal." So, on Monday, we anticipate the pair to fluctuate between 1.0813 and 1.0971. The Heiken Ashi indicator's downward reversion will signal the beginning of a new phase of corrective activity. Nearest levels of support S1 – 1.0864 S2 – 1.0742 S3 – 1.0620 Nearest levels of resistance R1 – 1.0986 Trading Suggestions: The EUR/USD pair is attempting to move north once more. Until the Heiken Ashi indicator turns down, you can continue holding long positions with goals of 1.0971 and 1.0986. After putting the price below the moving average line and setting a target price of 1.0742, you may start opening short positions. 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/332947

After two weeks of strong gains, European markets gave back some of this year's early momentum with a modest pullback last week, with some suggesting that we may well have seen the peaks in the short term, in a manner similar to what we saw last year. US markets  US markets had an altogether more mixed week with the Dow seeing its worst week since early December while the Nasdaq 100 finished the week higher.   While there may be some logic in the argument that we may have seen the peaks in US markets, given how they have performed in the last few months, there is less of an argument when you look at markets in Europe, which look set to open higher later this morning..   Valuations in Europe are lower to begin with, and on an income/dividend basis much more compelling, compared to the US, with the FTSE100 and DAX both trading on forward dividend yields of 3.77% and 3.36% respectively.   Nonetheless financial markets appear to have a rising conviction that central banks are on the cusp of a significant pivot on monetary policy sometime later this year, a view that appears to be getting additional traction now that a number of Fed policymakers appear comfortable with the idea of another step down in the central banks rate hiking cycle to 25bps next week.   This view continues to be reflected in the US bond market, where yields continued to make fresh multi week lows, with the US 2 year closing lower for the third week in a row, as has the 10-year yield.   The performance of the US dollar was no less nuanced, posting a fresh 8-month low, as various European Central Bank officials continued to make more hawkish noises. The pound also held up well last week, closing higher for the 4th week in succession against the US dollar.   As we look ahead to a new week most of the attention is set to remain on the latest set of earnings reports, as investors look to decide whether the current strong run of gains can continue, and how much further central banks are prepared to go to get a handle on inflation.   Last week markets appeared to take some comfort from the fact that companies were focusing much more on maintaining their margins, and cutting costs, as well as jobs, amidst uncertainty over the global economic outlook.   This comfort appears to be predicated on an assumption that any economic slowdown will prompt a pause first and foremost in the central bank's rate hike plans, followed by some rapid rate cuts. Of course this assumes that these aforementioned central banks will be happy to start cutting rates when inflation is still well above target.   This seems highly unlikely, and while markets appear to have become conditioned to this sort of mindset since the financial crisis took rates sharply lower, it is by no means the given markets appear to think that it is.   Unemployment is still low, not only in US but in the UK and Europe as well, and having heard last week from the likes of Fed governor Lael Brainard, who is normally considered dovish, that inflation in her view still remains way too high, it is difficult to envisage a scenario where rate cuts this year are likely at this point.   ECB President Christine Lagarde was also at it, 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. While the ECB did step down to a 50bps hike in December, there were a number on the governing council who wanted another 75bps hike.   When the ECB met last month, 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 saw the euro push higher, but thus far has failed to see it follow through.   This would suggest that markets are unconvinced the ECB will be able to follow through on such guidance given the risks it might pose to the borrowing costs of the more highly indebted members of the euro area.   As we look ahead to a new week, the main focus will once again be on the US economy and this week's Q4 GDP numbers, as well as the December core PCE deflator inflation numbers, which are due on Thursday and Friday.     EUR/USD – still finding the air quite thin anywhere near to the 1.0900 area and support around the 1.0770/80 area. 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 just shy of the December peaks at 1.2440, last week, but closed near the highs of the week. Has managed to hold above the 1.2300 area for the last two days. Above 1.2450 could see a move towards 1.2600. We need to hold above the 1.2000 area for further gains to unfold or risk a return to 1.1830.   EUR/GBP – held above the 50- and 100-day SMA last week at the 0.8720 area, before squeezing back to the 0.8775/85 area. We need to see a move through 0.8800 to retarget the 3-month highs of earlier this month. The next support below 0.8720 targets 0.8680.   USD/JPY – last week's rebound from the 127.00 area has thus far struggled to maintain traction above the 130.20 area, although we did overshoot briefly to 131.60 after the BoJ decision. We need to see a move through the highs last week to open up 132.50. We currently have support at 128.30.     FTSE100 is expected to open 12 points higher at 7,782   DAX is expected to open 73 points higher at 15,106   CAC40 is expected to open 23 points higher at 7,019   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

The week started slowly in Asia, as many markets were closed due to the Chinese New Year holiday. But those that were open benefited from the positive vibes from the US markets last Friday.  US equities rally, led by tech stocks  The S&P500 rallied 1.89% and flirted with the 200-DMA again, and closed the week a stone's throw from the ceiling of the 2022-to-date bearish trend.   Nasdaq did even better. The index rallied 2.86%, boosted by a well-deserved 8.50% rally from Netflix - which not only announced better-than-expected results in the Q4, but also a mouth-watering beat on the subscription growth end, with 7.7 mio new subscribers – a number that we thought we would hear only during a pandemic!   Google, on the other hand, jumped 5.72%, but for a less glamorous reason. The company said it will fire 6% of its workforce, which is around 12'000 jobs globally. Investors heard 'yes, that will clearly improve the cloud profitability!'   In total, Amazon, Microsoft and Google will be cutting 40'000 jobs.   Fed's quiet period  The quiet period for Federal Reserve (Fed) officials will help us digest what has been said over the past weeks.   In summary, we know that the Fed will further slow the size of its rate hikes in the coming months. $  But the fact that the Fed will raise by only 25bp next meeting doesn't mean that it won't continue hiking the rates. The rates will likely go above 5% in the Q1.  Focus on earnings  Microsoft, Johnson&Johnson, General Electric,Texas Instruments, Intel, Tesla Mastercard, Visa, Chevron and American Express are among companies that will go to the earnings confessional this week.  Big Tech earnings projections are down by about 5% since October.   Yet, expectations went sufficiently low that there is plenty of room for a positive surprise, as has been the case with Netflix.   FX & energy  The dollar kicked off the week under pressure. The EURUSD already hit the 1.09 mark early in the session, for the first time since last April, and is just a couple of pips away from the major 50% retracement on 2021-2022 selloff.   PMI data due tomorrow could confirm that the European economies took a softer hit thanks to mild start to the winter, and cheaper energy prices as a result of it.   And sufficiently strong PMI data, combined to the negative pressure in the US dollar into the Fed meeting, could help the EURUSD take a chance on the 1.10 resistance in the coming sessions.   In energy, crude oil posted its second straight week of gains on Friday, as the Chinese reopening story and prospects of higher global demand, and around 1 mbpd gap between supply and demand outweighed the recession fears.   The latest rebound in European nat gas prices, and the fact that we now have cold and snow in Europe could also tilt the balance further to the upside.   The barrel of American crude spent last week above the 50-DMA, now around $78pb, but couldn't clear the 100-DMA, which stands around $82pb.   The next target for the oil bulls is a move above the $82pb, for a potential extension of gains toward the $87/88 range.  

The US dollar fell today on the possibility of less aggressiveness from the Fed. Poor trading conditions are likely to continue as many major hubs in Asia are closed for Lunar New Year celebrations. Two very important data will be published in the US this week: first look at US GDP in Q4 on Thursday followed by Core PCE on Friday. USD/JPY The Japanese yen fell towards 130 to the dollar, moving further back from multi-month highs as the Bank of Japan remains committed to its ultra-low interest rate policy despite rising inflation and increasing market pressure. Last week, the central bank countered speculation about another policy adjustment by keeping interest rates very low and leaving its yield control policy unchanged. Meanwhile, traders are eyeing the BOJ meeting in March for a potential move as well as April when a new BOJ governor will step in. The USD/JPY pair started the week below 129.50, but rose quickly and passed the 130.00 level. At the time of writing, USD/JPY is trading at 130.3640. EUR/USD The euro hit a nine-month peak against the dollar on Monday as comments on European interest rates signalling additional jumbo rate rises contrasted with market pricing for a less aggressive Federal Reserve. The euro is also being supported by an easing of recession fears amid a fall in natural gas prices. ECB Governing Council member Klaas Knot said on Sunday: "expect us to raise rates by 0.5% in February and March, and that we will not be done by then, and the next steps will be taken in May and June." His colleague Olli Rehn he noted that he saw grounds for significant interest rate hikes. The ECB's hawkish expectations coupled with increased bets on a slowdown in the pace of US Federal Reserve (Fed) tightening are helping to reduce the monetary policy divergence between the two central banks, which in turn favors the EUR/USD pair's rally. EUR/USD pair has lost its traction and pulled away from the multi-month it set above 1.0900 earlier in the day. Read next: British Pub Earnings Will Suffer Significantly| FXMAG.COM GBP/USD Economic affairs in the UK are somewhat calmer with attention being paid to the current round of industrial action hitting the UK and the perceived unfreezing of UK-EU relations. The British currency recently fell 0.32% to $1.2359 and lost more against the euro. The core CPI, which excludes energy, food, alcohol and tobacco and which some economists consider a better guide to inflation trends, remained unchanged at 6.3%. Market prices point to a 70% chance of a 50 basis point rate hike at the Bank of England's February meeting. Sterling pulled back from a seven-month high against the dollar on Monday, which hit during the Asian hours. GBP/USD turned and fell towards 1.2350 during the European trading hours on Monday. AUD/USD The RBA did not rule out another rate hike at its February meeting as mentioned in previous minutes and remains divided between no change and a 25 basis point increase, Wednesday's inflation printout could bring more clarity. On a positive note for the Australian dollar, commodity prices are projected to remain elevated throughout 2023, mainly based on China reopening and coal exports to European countries. AUD/USD is hovering around 0.6980-85, defending early week gains on a weak Monday morning in Europe. The pair of the Australian failed to stay above $0.70, but is trading close to this level, so a re-breakout cannot be ruled out. Source: investing.com, finance.yahoo.com

Central bank comments have helped draw a line under euro market rates. We think 2% is a decent bottom for 10Y Bund yields. The rally is also at risk of higher gas prices, or if today’s PMIs don’t confirm the market’s rosy price assumptions Robust vs gradual, 50bp hikes have the edge at the ECB European Central Bank (ECB) officials are making full use of the last days before their pre-meeting quiet period starts this Thursday. There appear to be little appetite to deviate from the guidance given in December that the February meeting will see another 50bp hike. Whether the same holds for the March meeting is less certain, but only a couple of national central bank governors came out in favour of a more gradual pace of increases going forward, understood to mean 25bp increments. We wouldn’t overplay the importance of ECB guidance more than one meeting ahead In a sense, we wouldn’t overplay the importance of ECB guidance more than one meeting ahead. The March meeting will feature a new set of staff economic forecast which will go a long way towards shaping policy decision. Our base case is that, out of consistency at least, President Christine Lagarde will repeat the March 50bp guidance at next week’s meeting, but we think market direction is more likely to be dictated by economic releases, for instance today’s PMIs, and especially the components related to inflation. 10Y Bund and swap rates have held the bottom of their ranges at 2% and 2.5% respectively Source: Refinitiv, ING Hawkish skew helps draw a line under EUR rates What happens after that is the object of less discussion but is of no less importance. The hawks are already positioning for hikes at the May and June meetings although few doubt that, by that point, more dovish members will have managed to push for a downshift to 25bp increments. Similarly, there has been comparatively fewer pot shots taken at market expectations of up to 100bp worth of rate cuts by end-2024. There is no doubt in our mind that pricing policy easing this far from the end of the tightening cycle is presumptuous, even if we assume that markets are right about the amount of Fed cuts to be delivered by that time. We suspect that short-term longs are likely to take profit before next week’s Fed and ECB meetings All these considerations have acted as a barrier to 10Y Bund yields crossing below 2%, and for 10Y EUR swaps approaching 2.5%. We identified both levels as the likely bottom of the range for EUR rates this year and we think ECB policy will be instrumental in enforcing it, at least before the midway point of 2023 is reached. Meanwhile, we suspect that short-term longs are likely to take profit before next week’s Fed and ECB meetings, and a rebound in natural gas prices has also pressured rates higher. ECB rate cut expectations have inverted the swap curve, this will take time to reverse Source: Refinitiv, ING Today's events and market view Today’s economic highlight is a first glimpse of January PMIs in Europe. Following the improvement in economic surprise indices as well as market economic sentiment, consensus is for a rebound in both services and manufacturing PMIs. Any comment on respondents’ price expectations will be particularly relevant in assessing the sustainability of the January bond market rally. We think it has run out of steam already. The same indices will be released for the UK and US later in the day. UK data also feature CBI orders and prices, whilst two regional Fed surveys will be the highlight in the US, from the Philadelphia and Richmond Feds. The Netherlands are scheduled to sell 30Y bonds for €2bn, and Germany to sell €1.5bn of a green bond maturing in just under three years’ time. The EU also mandated banks for a syndicated tap of a 30Y bond. Today’s roster of ECB speakers include Klaas Knot, Boris Vujcic, and Christine Lagarde. 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 week started with more news of layoffs, and further gains in the S&P500.   Spotify was the latest tech company to announce it will let go of 6% of its workforce – around 600 jobs. Shares gained 2%  Ford announced it will cut 3200 jobs, mostly in Germany. Shares jumped more than 3%.  Easy. Companies slash jobs, investors buy shares.   But job cuts and cost-saving measures may not be all positive; they could also be a sign of a slowing demand. Just saying.  Anyway, the persistent optimism from investors, and the urge to call the end of the bear market pushed the S&P500 above the 200-DMA, yet again. Earnings will decide whether the latest gains will be sustainable.  All eyes are on Microsoft  All eyes are on Microsoft – not only because it will release Q4 earnings after the bell, but also because it's been making a great buzz since the start of the year thanks to its bet on ChatGPT.  The company confirmed yesterday that is putting $10 billion into the now-very-famous ChatGPT.   And given the traction that ChatGPT has gained since the start of the year, Microsoft could be on a winning path with its AI-bet.   The company's CEO said last week in Davos that every Microsoft product will have a certain AI-capability. The bots will be able to analyze Excel spreadsheets, to create AI art to illustrate a PowerPoint presentation, or even draft a whole email in Outlook. This is good news for everyone.  As such, it could well secure Microsoft's position as exclusive cloud computing provider to one of the world's leading – or at least the most famous to date - AI start-ups; it is a boost to its Azure cloud business, and perhaps to its search engine Bing, as well, which has remained well under the shadow of Google since ever.   Let's see if Microsoft will be the one to push the S&P500 above the year-long down trending channel top – despite the looming recession chatter.   PMI  PMI data released this morning showed that the manufacturing activity in Japan didn't improve in January, and remained in the contraction zone, although the services PMI printed a better-than-expected expansion. The dollar-yen advanced past the 130 level on Monday, but finds sellers above that level, as traders continue betting against the Bank of Japan's (BoJ) dovish policy, which makes little sense in the actual market environment. Buying the yen against US dollar remains a popular trade.  In Australia, the manufacturing PMI slipped below 50, into the contraction zone for the first time in 32 months, but business confidence improved to a three-month high, on hopes that China's reopening will make sure that activity doesn't stay depressed for long. The Aussie-dollar broke above the 70 cents level, as predicted, and consolidated above that level despite the weak PMI read this morning. The pair should continue its journey north on the back of a globally softer US dollar, and prospects of a better Chinese demand that boost commodity prices, including iron ore – which matters for the Aussie.  In other currencies, the EURUSD couldn't consolidate gains above the 1.09 mark yesterday. But today's PMI data could help give another boost to the single currency.   And, if not, the message from the European Central Bank (ECB) is crystal clear: the rate hikes will continue and that's positive for the euro.  Fun fact: The ECB went from one of the most dovish central banks last year – except the Bank of Japan and the Turkish central bank – to one of the most hawkish central banks in just a year.   If the euro weakened to below parity last year because of the dovish ECB divergence, the hawkish rectification in the ECB's policy stance should help it to recover further. 

The jump in the composite PMI from 49.3 to 50.2 indicates that the economy is performing better than expected. Businesses are experiencing fewer cost pressures than before, but selling prices remain high. For the ECB, this should seal the deal for a 50 basis point hike next week The eurozone economy was boosted in December by the mild winter weather   Sometimes you just need a bit of luck. The eurozone economy has avoided dramatic scenarios for the winter thanks to an extremely mild December in which gas storages have been depleted much less than feared. Whether this is a recession or not is almost semantics at this point. The PMI jumped above the 50 level, which indicates growth in the business economy. While the difference between -0.1 and 0.1% growth is interesting for economists, the overall sense of stagnation will likely prevail for most. More important is that improvements in the PMI were broad-based as both the manufacturing and services PMIs ticked up. New orders are still falling, but at a slower pace than before and businesses have again seen hiring increase. The latter confirms our view that labour shortages are here to stay despite the sluggish economic performance. That brings upside risk to the wage growth outlook. For inflation, the survey continues to bring good news on supply-side pressures. Input costs are rising much less rapidly than before, but for now that mainly seems to benefit corporate profitability as selling price growth is expected to remain high, according to the survey. This means that while headline inflation is set to fade more substantially over the coming months, risks to core inflation staying high remain. For the ECB, this is once again a tricky report card. Falling inflationary pressures are good news, but stubbornly high selling prices and a strong labour market performance will cause alarm bells to ring in Frankfurt. For next week’s governing council meeting, this means that the ECB is likely to stay the course and hike by another 50 basis points. Read this article on THINK TagsInflation GDP Eurozone ECB 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

Today's PMI and business climate indices are the first sentiment data for French companies this year. They indicate that an economic slowdown is underway, but companies are saying it may only be short-lived. We are more cautious and believe that a near-stagnation of activity over the year as a whole is likely France's manufacturing sector is recovering but services remain a drag First glimpses of business sentiment in 2023 Since the beginning of the year, good weather and a drastic drop in global energy prices have led to widespread optimism and an upward revision of the growth outlook by consensus opinion. The question was, therefore, whether this renewed optimism was shared by the real economy and especially by companies. Today's publication of the PMI and business climate indices for January allows us to make an initial diagnosis. The manufacturing sector is recovering The composite PMI index fell slightly in January for the third consecutive month and stood at 49 compared to 49.1 in December. It is the services sector that is dragging the overall index down, given the context where the boom linked to the end of health restrictions is being brought to an end. The services PMI hit a 22-month low of 49.2 in January, down from 49.5 in December. At the same time, thanks in particular to the improvement in the global energy situation, the manufacturing sector is recovering and the index for the sector has risen above the 50 mark, reaching a 7-month high of 50.8. Overall, the PMI survey indicates a deterioration in the demand faced by French companies: new orders are falling and sales are decreasing. At the same time, companies are optimistic for the coming months. Their business and hiring prospects are improving. All in all, the PMI survey indicates that French companies are expecting an economic slowdown but that this is expected to be short-lived before we see an upturn. The surveys carried out by INSEE show a slightly more contrasted situation between the various sectors. The overall business climate remained stable at 102 in January for the fifth consecutive month, but the sectoral situation differs markedly. In wholesale trade, both the assessment of current and expected demand weakened. At the same time, industrial companies are revising upward their assessment of current demand and their outlook for the future is stable. Companies in the services sector are much more optimistic about current demand but are less positive about the overall outlook. Finally, the assessment of past and expected future sales is revised upwards by companies in the retail trade. All this data suggests the French economic outlook is uncertain but far from dramatic; it's not leaping into recession. Moreover, companies indicate that the employment outlook remains very positive in all sectors. Near stagnation of activity expected in 2023 We expect 2023 to be characterised by near-stagnation in the French economy in all quarters of the year. Given inflation, the evolution of real purchasing power will remain very weak, which will slow down the dynamism of private consumption. Given the uncertainties, the expected (albeit small) rise in the unemployment rate and the low level of household confidence, the household savings rate will remain high and above its historical average. Household investment in housing is likely to stall, weighed down by inflation, higher commodity prices and rising interest rates. In addition, industrial production should continue to see supply difficulties ease but would face much weaker global demand and would still be at risk of a further significant rise in global energy prices. We expect GDP growth to be 0.2% for the full year 2023. 2024 could see a little more dynamism thanks to a more pronounced fall in inflation, although this will remain moderate. We expect 1.1% growth in 2024. Inflation higher in 2023 than in 2022 While most European countries have already seen inflation peak, inflation in France is expected to rise further in the first quarter of 2023. The revision of the tariff shield will lead to a 15% increase in household energy bills, compared to a 4% increase in 2022. The PMI survey indicates in January that, while inflation in production costs is falling, inflation in invoiced prices is still rising. This is particularly the case for the services sector, where the prices forecast by the January INSEE survey are at their highest level since 1988, but also in retail trade. If we add to this the fact that many prices are only reviewed once a year at the beginning of the year, we can expect a clear rise in underlying inflation at the beginning of 2023. In addition, rising production costs should continue to support food and manufacturing inflation. Many companies are facing the first upward revision of their energy bills, which will push up costs. In addition, the four indexations of the minimum wage to inflation in 2022 will continue to lead to increases in all wages, which will push up inflation, particularly in services, significantly in 2023. Ultimately, average inflation in 2023 will probably be higher than in 2022 (we expect 5.5% for the year, and 6.3% for the harmonised index), but the annual profile will be fundamentally different, with a peak above 6.5% in the first quarter, then a gradual decline from the summer onwards. At the end of 2023, inflation will probably still be above 4%, a level higher than the European average. The deceleration of price developments should continue in 2024 but will still be slow, averaging 2.6% over the year (3.5% for the harmonised index).   Read this article on THINK TagsPMI Inflation GDP France Eurozone Business climate 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 dollar traded near a nine-month low against the euro and lost its recent gains against the yen on Tuesday as investors weighed the risk of a US recession with the Federal Reserve's monetary policy outlook. USD/JPY The Japanese yen gained slightly against the US dollar today after Jibun Bank's composite PMI was 50.8 in January from 49.7 previously. The manufacturing component was the same as last month's 48.9, but the services component was 52.4, above the previous reading of 51.1. These are diffusion ratios, and an index above 50 is seen as positive for the economy. The dollar fell to 127,215 yen last week, the weakest since May, before the Bank of Japan's policy review, as investors assumed the BoJ would begin to end its stimulus program. However, the BJ left the policy unchanged, giving the dollar some respite. Analysts believe BOJ change will come sooner rather than later as policy makers make tweaks to their yield curve control mechanism. USD/JPY drops towards 129.00 but rebounded and trades above 130.00 again. EUR/USD The eurozone showed resilience in late 2022 with plenty of positive data that so far seemed to carry over to 2023. The hawkish rhetoric of ECB policymakers continues to strengthen the euro while optimism about avoiding recession is growing. The euro, on the other hand, gained almost 0.8% last week, which was boosted by a wave of officials from the European Central Bank. ECB President Christine Lagarde also reiterated on Monday that the central bank will continue to raise interest rates rapidly to curb inflation, which is still more than five times higher than the 2% target rate. PMIs in the euro zone were higher than expected. Only Germany's Manufacturing PMI fell from 47.1 to 47.0. EUR/USD lost grip and fell towards 1.0850 after the release of mixed PMI data from Germany and the euro zone. Ahead of the US S&P Global PMI survey, the US dollar index has been stable above 102.00. The EUR/USD pair is trading close to 1.0870 at the time of writing. Source: investing.com GBP/USD The British pound was lower on Tuesday after data showed economic activity weakened further in January, underlining the risk that Britain could slip into a recession in 2023. After an impressive December services PMI report, markets were hoping for another encouraging reading in January given a slightly brighter outlook now that inflation seems to be headed in the right direction. This was not to be the case as the new year brought with it a sustained decline in private sector business activity in the UK. The flash UK PMI Composite was 47.8 (December: 49.0). lowest in 24 months. In contrast, the UK industrial production index was 46.6 (December: 44.4). The highest in 6 months. UK Services PMI Business Activity Index at 48.0 (December: 49.9). The Bank of England is still expected to raise its key interest rate for the tenth consecutive time on Feb. 2 after its next scheduled meeting. The cable pair also lost amid emerging reports. GBP/USD pair trades below 1.2400 again and is now at 1.2318 AUD/USD The Australian dollar was nearing a five-month high from last week at 0.7063 as the US dollar comes under increasing pressure. While the CPI is the main target of the RBA's mandate of targeting 2-3% over the business cycle, the Producer Price Index (PPI) may also play a role. The PPI will be released this Friday and if it accelerates in the fourth quarter, it could be a problem for CPI this quarter. Companies face higher costs. It's also worth noting that the Australian and New Zealand dollars hit multi-month highs on Tuesday as investors refocused on risky assets, easing recession fears and a less aggressive Federal Reserve. The pair of the Australian Dollar, despite not maintaining previous imports, remains above 0.70. The Aussie Pair is currently trading at 0.7023. Source: investing.com, fiance.yahoo.com, dailyfx.com

Natural gas prices opened with a 10% gain this week; however, recent trends have worried some members of the industry as prices fell 7.17% last week, extending the streak of weekly losses that began in mid-December last year. Some even speculate that prices could fall to $2 or lower. For the past four weeks, natural gas prices have fallen by a steep drop of around 50%, which is a significant amount and has prompted Chesapeake CEO Nick Dell'Osso to suggest a softer supply growth. In an interview with Bloomberg, Dell'Osso said there was no need for an increase in gas supply in the near term, supporting the previous statement of EQT CEO Toby Rice that an increase in output in the US may not happen this year. Indeed, demand for LNG in Europe boosted production last year, but now that storage in the region is full and the weather is mild, demand is declining. Inflation also continues to be a problem, especially in the growth aspect of production. The shortage of pipelines also hinders significant production growth.   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/333093

In her recent speech, ECB President Christine Lagarde said the bank will do whatever is necessary to bring inflation back to its target level. "We will stay the course to ensure the timely return of inflation to our target," she said. "It is vital that inflation rates above the ECB's 2% target do not become entrenched in the economy," she added. This more or less hints that interest rates will continue to increase in the coming meetings. Lagarde's comments add to the unfolding debate on whether a slowdown in the pace of rate hikes is appropriate as inflation falls from record highs. Last week, the ECB chief said that sticking to the course of the rate hike is her "political mantra", especially since attention has now shifted from headlines to record core inflation. Following this news, EUR/USD is up 13,000 pips since October last year. Hawkish officials, such as Dutch central bank chief Klaas Knot, want at least two more half-point rate hikes starting next week. Some, however, wants to be cautious as the increase may go too far. Yannis Stournaras, governor of the Bank of Greece, advocated a more gradual approach as economic growth in the eurozone wanes. Relevance up to 09:00 2023-01-25 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/333095

Christine Lagarde has spoken four times since the start of last week. Today, Lagarde delivered a speech at a gathering in Germany as part of the international conference in Davos. Her lectures undoubtedly captured the markets' interest, but did they also provide them with the knowledge they needed to continue working? I don't believe the markets have learned anything new for themselves as a result of the ECB president's numerous statements. But let's examine this in greater detail. The cost of gas has decreased by three times First of all, Christine Lagarde reaffirmed that interest rates would rise further. Rate increases of another 100 basis points are currently anticipated for the meetings in February and March, after which a further rise of 25 basis points is possible. As a result, the ECB rate might increase to 3.75% in four months. Such a rate level, in my opinion, cannot be described as "restrictive." In recent years, the Fed or the ECB has frequently used this phrase to describe a rate level at which economic growth is impractical and indicators of corporate activity, demand, and inflation are falling. But does the growth rate mean that inflation is now decreasing? Let me remind you that prices have come down considerably over the past few months in the major oil and gas hubs across the world. The cost of crude oil has decreased by $40 and that of some of its varieties by 60%. The cost of gas has decreased by three times. This is not a typo; in fact, it's very feasible in the present world. So, perhaps the terrible energy crisis that was expected to cause inflation in the Eurozone is not the reason why the ECB rate has been raised to 2.5% right now? In 2023 or 2024 gas prices will rise again Second, Christine Lagarde brought up China's decision to ditch its zero-tolerance COVID policy and fully open its economy. The volume of gas supply after the actual denial of supplies from Russia at many hubs is not very large, according to Lagarde, and such a decision will raise the demand for gas, which is necessary at many production facilities. A shortage of "blue fuel" and a rise in its price may result from China starting to increase output. Additionally, it appears as though the drop in gasoline costs is only a passing occurrence. It should be understood that although the European Union has located additional "blue fuel" providers, there is still a shortage. I think there's a good chance that in 2023 or 2024, gas prices will rise again, which would lead to another spike in inflation. Third, Christine Lagarde reaffirmed the ECB's commitment to taking all necessary steps to bring inflation back to the predetermined level. But nothing was revealed about the time of this return, the rate increase's speed, or the rate's ultimate level. Will the market's response to what is happening to be the same as it is now if the recovery of the consumer price index takes five years? I think the ECB is maintaining a "good face with a poor game" by not being willing to make any concessions to get inflation down to 2%. Demand for the euro will start to fall as soon as the market learns that controlling inflation in the EU may prove to be a challenging assignment for the regulator. I conclude that the upward trend section's building is about finished based on the analysis. As a result, given that the MACD is indicating a "down" trend, it is now viable to contemplate sales with targets close to the predicted 0.9994 level, or 323.6% per Fibonacci. The potential for complicating and extending the upward portion of the trend remains quite strong, as does the likelihood of this happening. The market will be ready to finish the wave e when a bid to break through the 1.0950 level fails. A downward trend section is still assumed  The building of a downward trend section is still assumed by the wave pattern of the pound/dollar instrument. According to the "down" reversals of the MACD indicator, it is possible to take into account sales with objectives around the level of 1.1508, which corresponds to 50.0% by Fibonacci. The upward portion 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 has a significant tendency to rise Relevance up to 16:00 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/333147

The EUR/USD currency pair is gradually increasing. On Tuesday, the European currency continued to "bask in the sun" above the moving average line while the British pound started another round of downward adjustment. The pair cannot even slightly drop below the moving average, let alone experience a correction or something more significant, as we have constantly highlighted. The technical picture and our findings are therefore unchanged from Tuesday. The market is still solely looking north, and there is currently essentially no correlation with the pound. And it doesn't happen very often. In the European Union, three business activity indices were released yesterday. And because there was no market response to them, we will not even consider them. We would have alerted traders to the fact that one or more indices had experienced a major increase or decrease. However, since the market has not given these statistics any consideration, we don't think it's worthwhile to concentrate on them. It should be highlighted that recent relationships between the euro and its macroeconomic and fundamental background are illogical. Many reports are disregarded, and many reports are just used as justification for opening new long positions. As a result, the "foundation" and macroeconomics lose their essential substance. If the market is just engaged in purchasing euros, what use is it to analyze this or that report? Any news, message, or report can be evaluated from various perspectives. One of the major drawbacks of basic analysis is that every occurrence can be regarded as having both a positive and negative meaning. We make an effort to avoid adjusting the news to the movement of the pair, therefore we blatantly admit that the market now gives reports, speeches, and other events very little consideration. It would be more accurate to state that there is currently only one betting factor in the market, which is honestly already beginning to annoy me. The ECB is expected to keep tightening monetary policy practically indefinitely, according to the market, but the Fed has run out of options. While the ECB rate is currently being increased by 1.25% for three meetings, the Fed rate is very readily capable of rising to 5.5%. There is just a 0.25% difference. Does this mean that the euro is expanding exponentially as a result of this 0.25%? ECB members' remarks simply serve to perplex traders. Even more unpleasant than the subject of trading is one more issue. These are the ECB representatives' remarks regarding the same rates. The chairman of the ECB delivered three speeches last week, and members of the monetary committee who are also the central bankers of their respective nations also delivered multiple speeches. Rates will increase at a noticeable rate going forward, and almost everyone agreed. This makes sense and is to be expected; otherwise, it cannot be. Recall that the ECB debated tightening in various ways for a very long time last year but was unable to make a decision. He is currently far behind the Fed as a result. No one will comprehend his refusal if he delays raising the rate for a moment. There is just no need to slow the rate of growth with off-scale inflation at this point because the European Union recession has not yet started. As a result, the ECB simply lacks formal justification for tightening monetary policy by 0.5%. We believe that even a single rise of 0.75% would not be harmful. Members of the ECB are aware of this. What do we ultimately have? All of the ECB officials keep repeating their mantra about high inflation and hiking interest rates, and the market "digests" all of this by giving us more long positions in the euro currency. Nevertheless, there is nothing new that we discover every day. The market appears to be simply buying more euros by taking advantage of all formally "bullish" factors. Why sell the euro if you can ride the rising trend? We appear to be witnessing an inertial increase. As of January 25, the euro/dollar currency pair's average volatility over the previous five trading days was 76 points, which is considered "normal." So, on Wednesday, we anticipate the pair to fluctuate between 1.0804 and 1.0956. The Heiken Ashi indicator's upward reversal will signal the restart of the upward momentum. Nearest levels of support S1 – 1.0864 S2 – 1.0742 S3 – 1.0620 Nearest levels of resistance R1 – 1.0986 Trading Suggestions: The EUR/USD pair is still moving upward. Now is a good moment to think about opening new long positions with goals of 1.0956 and 1.0986 following the Heiken Ashi indicator's upward turn or when the price is recovering from a move. With goals of 1.0804 and 1.0742, short trades can be opened after the price is fixed below the moving average line. 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) zones   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/333169

The bond market rally is returning with a vengeance. Lower implied volatility and inflation expectations justify the move but we think the macro underlying assumptions are questionable The 'everything rally' resumes... Government bond markets, and rate in general, continue to display a strong bias towards greater risk appetite. This is visible in the outperformance of longer dated bonds over their shorter counterparts, for instance the flattening of the 2s10s curve. This is also evident in the tightening of various credit spreads, not least of sovereign spreads. ECB officials, have called into question the macro assumptions that underpin this ‘everything rally’ We, and more importantly European Central Bank officials, have called into question the macro assumptions that underpin this ‘everything rally’, from risky stocks to safe government bonds. In short, the fall in energy prices and so better growth prospects reduce the downward impact that negative real wage growth should have on core inflation. In simple terms, either the economy converges to a higher growth, higher inflation regime that would be positive for some risk assets but not for core bonds, or growth disappoints and inflation converges lower but then risk assets are under threat and core bonds continue to rally. The current Goldilocks macro environment is more likely to be temporary state of affairs.  Flatter yield curves this year also reflects better appetite for duration Source: Refinitiv, ING ... despite our, and central bank, caution Along these lines, Gediminas Simkus shared his view yesterday that not all of the past energy price jump has yet fed through to core inflation. His prime concern, which we assume is shared by other hawks, is that more wage gains are in the pipeline, thus lengthening the time it will take for inflation to revert to the ECB’s 2% target. More wage gains are in the pipeline Looking at the PMIs released yesterday, his fears are justified. Respondents reported higher selling prices despite lower input costs, in part to reflect higher wages. Higher employment growth will do little to ease these concerns. This of course is only one data point, and responses to the more manufacturing-orientated Ifo survey to be released today will be informative. Note also that German Manufacturing PMIs yesterday surprised to the downside, unlike other sectors and other countries. Declining implied rates volatility and inflation expectations explain improving risk appetite in euro markets Source: Refinitiv, ING Back to first principles: inflation and volatility explain the rally We continue to think the everything rally is liable to reverse but there are very few signs of that yet. Going back to first principles, the regain in risk appetite seems to be justified by the lower forward-looking view on implied rates volatility (derived from options) and by lower market inflation expectations (derived from inflation swaps). The first explains why investors have no qualm buying assets with lower rates of return, ie lower yields, given the more benign environment expected. The latter also illustrates why markets are happy to challenge central banks’ hawkish tone. Investors have no qualm buying assets with lower rates of return None of this preclude a bond sell-off but at least it shows no obvious discrepancy within rates markets. It is easy to see when rates are falling too low compared to, for instance, our central bank call. It is more difficult (to us at least) to point to mispricing in riskier asset classes so our suspicion is that they may well outperform once rates have converged to the most dovish scenario and don’t have much further to drop. This in our view will only be a temporary state of play, however. Today's events and market views Today’s German Ifo should confirm the improvement in sentiment visible in Zew and PMI surveys, and in the ‘everything rally’ that characterised markets in January. Note however that German manufacturing has been one of the few areas where PMIs disappointed yesterday. Germany is scheduled to sell 15Y and 20Y debt in a week that has already seen plenty of long-end core supply (from the Netherlands and the EU yesterday). Spain mandated banks for the sale of a new 10Y benchmark via syndication. Other data releases include US mortgage applications. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

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

Germany’s most prominent indicator has improved for the fourth month in a row, but the renewed optimism is still based on very fragile fundamentals The outlook for the German economy still isn't clear. Pictured: skyscrapers in Frankfurt's business district 90.2 German Ifo index 88.6 in December   The inflow of optimistic data continues. After the PMI and the ZEW, it is now the latest Ifo index reading which points to an improving outlook for the German economy. In January, the Ifo index came in at 90.2, from 88.6 in December, and is back at levels last seen in the summer. While the drop in the current assessment component illustrates that the economy is definitely not out of the woods yet, expectations continued to improve. Lower wholesale gas prices and the reopening of the Chinese economy have boosted economic confidence. However, the fact that the German economy seems to have avoided the worst doesn’t automatically mean the outlook is rosy. More reslient than feared Hope has clearly returned to the German economy. The warmer winter weather, along with implemented and announced government fiscal stimulus packages, have prevented the economy from falling off a cliff. In fact, the German economy has been more resilient despite a long series of crises in 2022, which threatened to push it into a deep recession. The reason for this resilience is not so much the structure of the economy but rather a simple policy recipe that the German government has successfully used over the last 15 years and perfected recently: fiscal stimulus. Contrary to common belief and what German governments have often preached to other European governments: in times of crisis, the government prefers outright fiscal stimulus. This was the case during the financial crisis, during the Covid-19 pandemic and now as a response to the war and the energy crisis. What German governments perfected during the pandemic and last year’s crisis is the use of big ballpark figures, hoping that eventually, not all the money will have to be used. During the pandemic, outright fiscal stimulus amounted to more than 10% of GDP. Last year, after some months of hesitation, the government decided on several stimulus and price cap packages, amounting to a total of some 8% of GDP. The announcement effect and the actual money saved the economy from falling into recession, at least for now. Better is not good Not falling off the cliff is one thing, staging a strong rebound, however, is a different matter. And there are very few signs pointing to a healthy recovery of the German economy any time soon. First of all, we shouldn’t forget that fiscal stimulus over the last three years stabilised but did not really boost the economy. Industrial production is still some 5% below what it was before Covid, and GDP only returned to its pre-pandemic level in the third quarter of 2022. Industrial orders have also weakened since the start of 2022, consumer confidence, despite some recent improvements, is still close to historic lows, and the loss of purchasing power will continue in 2023. Finally, like every eurozone economy, the German economy still has to digest the full impact of the ECB rate hikes. Demand for mortgages has already started to drop and, as in previous hiking cycles, it didn't take long before the demand for business loans also started to drop. In short, the German economy will still be highly affected by last year’s crises throughout 2023. Germany’s economic outlook looks complicated, to say the least Germany’s economic outlook for this year looks complicated, to say the least, with an unprecedentedly high number of uncertainties and developments in opposing directions. And there is more. Let’s not forget that the German economy is still facing a series of structural challenges which are likely to weigh on growth this year and beyond: energy supply in the winter of 2023/24 and the broader energy transition towards renewables, changing global trade with more geopolitical risks and changes to supply chains, high investment needs for digitalisation and infrastructure, and an increasing lack of skilled workers. This long list embodies both risks and opportunities. If historical lessons from previous structural transitions are of any guidance, even if managed in the most optimal way, it will take a few years before the economy can actually thrive again. Read this article on THINK TagsIfo index Germany Eurozone ECB 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

Usually with US auctions this strong we're in the midst of a bond market rally with considerable room for more. But the downside moves have been tame in fact, despite the recession talk to boot. We think that's because the curve is so inverted that it does not leave glaring value in longer dates Solid US auctions show good demand, but it's heavy going on the downside test The strong demand at auction in Treasuries has continued this week. Previous weeks saw a good test of demand for duration as 10yr, 20yr and 30yr auctions were snapped up. This week we’ve had the 2yr and 5yr auctions so far, and today will see the 7yr auction. The dominant theme has been solid auction results. It’s not that the paper was well covered. It’s more that the indirect bid has been so consistently large and solid. The indirect bid will typically be bolstered by foreign demand, and in shorter dated auctions especially, will be populated by the demand from global central banks. On top of that, the primary dealer takedown has tended to be on the low side, primarily as their support has not been needed very much, which is a good thing from the context of the quality of the auction results. And finally, the pricing at all of the auctions has been solid. None of them have tailed. Downside to yields is supported by the growing evidence of recession and falling inflation. Despite all of that, we still see the 10yr at or about 3.4% to 3.5%. It seems this is an area of perceived fair value right now, or at the very least a point of equilibrium. Downside to yields is supported by the growing evidence of recession and falling inflation. But there is still upside risk coming from the pronounced inversion of the curve which sees the 10yr optically rich to the front end. This is why next week’s Federal Open Market Committee meeting is crucial. The market has convinced itself that a dovish 25bp hike is coming. If the Fed instead goes for a more hawkish hike, it stretches that 10yr valuation even more. There is a route to lower yields, but its far from straightforward should the Fed stick to the hawkish tilt. ECB struggles to push up rate expectations beyond the next few quarters upcoming Source: Refinitiv, ING ECB speakers' final hawkish push with fading impact out the curve European Central Bank officials have used the final day ahead of the quiet period to reiterate their hawkish message. With the job of reining in inflation not done yet, the ECB’s Vasle argued that 50bp hikes at the next two meetings were needed. Both the Bundesbank’s Nagel and Ireland’s Makhlouf would not exclude that rates will need to rise further after March. The longer end of the EUR curve is increasingly taking its cues from the US, not the ECB The market discount is broadly aligning with the ECB comments regarding the next couple of meetings with the forwards pricing rates 92bp higher with the March meeting and good chances for at least one 25bp hike in the following months. Thereafter if market pricing diverges from the ECB narrative that rates may have to be held in restrictive territory for some time for underlying is finally tackled. The longer end of the EUR curve is increasingly taking its cues from the US where the Fed is seen close to the end of its cycle and a recession angst taking over. Front-loaded issuance is sending steepening impulses Source: Refinitiv, ING In the euro area supply proves more of a headwind While yesterday’s last hawkish ECB comments seem to have helped turn the market during the session, halting a rally in Bunds that saw the 10Y dipping briefly below 2.10% again, we think this would overstate the ECB’s ability to influence the long end of the yield curve in current markets. Rather we think the ECB got another assist from long end core government bond supply. Not only were the results if the German 15Y and 20Y bond auctions yesterday on the softer side, but later in the day Finland also mandated a 3bn 15Y bond deal which some might have had in the cards only for early February. Overall this year's supply has been much more front loaded compared to the past years. Today's events and market view Central bankers have had their say ahead of the upcoming policy setting meetings. In the meantime, markets will have to turn to data and supply for cues, though we also see a risk of profit taking closer to next week’s meetings themselves. For today the market will have to digest US fourth quarter GDP data, which is expected to have expanded still in excess of an annualised 2%. That should not distract from expectations that the outlook for GDP is already decisively weaker for the next few quarters. The durable goods orders release today should paint a weak underlying picture once a one-off in aircraft orders is stripped out. We will also get the weekly initial jobless claims data. In supply the EUR rates could see steepening pressure from the 15Y deal out of Finland, which should be today’s business. We will see shorter dated bond auctions from Italy. In the US the focus is on the US$35bn 7Y auction, which caps off this week’s supply. It follows a streak of well received auctions that have underpinned market strength that has also spilled into EUR rates. 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

When the European Central Bank meets next week, all eyes and ears will once again be on the communication. A rate hike of 50bp looks like a done deal. How far and how fast the ECB will go from there, is still unclear   Recent economic data in the eurozone offers a taste of what will increasingly become a new challenge for the ECB: a somewhat more resilient than expected economy, improving sentiment indicators and dropping headline inflation. While the growth part argues in favour of more rate hikes, lower inflation could argue in favour of taking a step back given that the central bank's primary mandate is to reach price stability. For next week, however, both developments are too fresh and tentative for the ECB to change course. Instead, the ECB looks set to hike interest rates by another 50bp. There has not been a single ECB member on the record with a diverting view. Read next: Musk Intends To Cut Costs In Tesla On Everything| FXMAG.COM Risk of longer-lasting inflationary pressure The reason for a 50bp rate hike is clear: the ECB’s job is far from done as the Bank's own December projections pointed to inflation at 3.4% in 2024 and 2.3% in 2025. Inflation was only expected to return to 2% in the second half of 2025. These estimates have provided a clear license to hike for quite some time. The only problem with these forecasts is that they are highly conditional on the so-called technical assumptions for interest rates, energy prices and exchange rates. At the December press conference, the ECB stated its discontent with the market pricing of future rate hikes, hoping for higher pricing, which would mechanically lower the ECB’s inflation forecasts. With energy prices much lower than in December, the exchange rate stronger and interest rates higher, back-of-the-envelope estimates show that, if everything else remains the same as it was in December, the ECB’s headline inflation projections could easily be lowered by 0.3 to 0.5 percentage points for 2024 and 2025. Looking beyond next week’s meeting, as long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. The increasing probability that a recession will be avoided in the first half of the year also gives companies more pricing power, as reflected in January’s PMI, showing that selling price expectations remain elevated. The celebrated fiscal stimulus, which has eased recession fears, is an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation. These are two factors that could extend inflationary pressures, albeit at a lower level than currently, in the eurozone. More hikes to come but communication needs improvement More generally speaking, we are currently witnessing a mirror image of the ECB up until 2019. Back then, the Bank had a clear easing bias and was chasing disinflation with all means possible, even though the root causes for disinflation lay outside of the ECB’s realm. Now, the ECB has a clear tightening bias and is chasing inflation, which arguably also has its root cause in something the ECB cannot tackle. Still, it looks as though the current generation of ECB policymakers will only back down once they are fully convinced that inflation is no longer an issue. In this regard, the slight improvement of the eurozone’s growth prospects as well as abundant fiscal stimulus have given the Bank even more reason to continue with its hawkish mission. With all of the above in mind, it is hard to see the ECB cutting interest rates again any time soon. Current market expectations about ECB rate cuts in 2024 are premature. If anything, these expectations, as reflected in dropping longer-term interest rates, are an additional argument for the ECB to stay hawkish. However, sounding hawkish will not be enough. Recent weeks have once again illustrated that the ECB’s communication is suboptimal. Over the last 12 months, there has been forward guidance, meeting-by-meeting, focusing on actual inflation, inflation projections, core inflation, wages, financing conditions etc, etc, etc. But communication is always a two-way street. If ECB policymakers are not satisfied with how financial markets perceive their communication, they might need to ask themselves why this is happening and reflect on the messages they have been sending.  Still licensed to hike For next week, the ECB remains licensed to hike. We expect hawkish comments by ECB President Christine Lagarde in order to prevent another drop in market interest rates. In this regard, it would help if the ECB were to clarify its reaction function and send a message that has a longer shelf life than just a few days. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB 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 Bank of Canada's interest rate decision appears to have put sentiment risk back as markets hope other central banks will follow suit. The BoC announced a pause in interest rate hikes to assess the impact of the recent hikes on the Canadian economy. Given that the BoC was the first major central bank to raise interest rates, market participants seem to see yesterday's announcement as a sign that the Federal Reserve and the ECB may follow suit. The dollar fell to an eight-month low against its peers on Thursday as a dismal US corporate earnings season fueled recession fears ahead of many central bank meetings next week. The Fed's policy-setting committee will begin a two-day meeting next week and markets have priced in a 25 basis point (bp) rate hike, down from the central bank's 50bp and 75bp hikes recorded last year. USD/JPY The Japanese yen gained against the US dollar on Wednesday, taking advantage of the US dollar's significant weakness. Despite minor recent changes by the Bank of Japan towards policy normalization, the BoJ remains the most dovish developed central bank. USD/JPY is down for the third day in a row and touches a new weekly low around 129.00 during the Asian session on Thursday. Fresh speculation that high inflation could lead the Bank of Japan (BoJ) to be more hawkish later this year continues to support the JPY. Bets were lifted by data released last week that showed Japan's nationwide core inflation hit 4% in December - its highest annual print since December 1981. Although USD/JPY fell in the Asian session, in the European session the pair gained and traded close to 129.90. AUD/USD Trade was a bit weak as Australia was closed for the holidays. The Australian dollar's rally against the US dollar is gaining momentum on the back of rising optimism over China's reopening and rising commodity prices. AUD/USD has been trading nicely in an uptrend since October. Earlier this month, the pair rose above a key resistance. The Australian pair is doing quite well and trading above 0.7100 during the European trading session. EUR/USD EUR/USD continued its gains from yesterday, holding above 1.09 after opening in Europe. The euro gained strength against the dollar yesterday as the domino effects of the Bank of Canada's interest rate decision swept through the market. ECB Governing Council member Gabriel Makhlouf said on Wednesday: "We must continue to raise interest rates at our meeting next week - taking a similar step to our December decisions," and added that the same should happen at the next March meeting. EUR/USD remains stable at around 1.0900 during the European session. Traders refrain from placing new EUR/USD bets ahead of critical US GDP releases. Read next: Musk Intends To Cut Costs In Tesla On Everything| FXMAG.COM GBP/USD The Bank of England is set to raise interest rates by half a point to 4.0% to tackle double-digit inflation, while markets are split on how much further rates will rise beyond that. Britain's inflation rate moved further away from October's 41-year high. Meanwhile, the risk of the UK slipping into recession continued to weigh on sentiment after the latest PMI survey showed the UK business economic activity fell. GBP/USD is struggling to extend previous highs at around 1.2400 during European trading hours. The US dollar is licking its wounds with weaker US Treasury yields amid dovish Fed betting. Source: investing.com, finance.yahoo.com, dailyfx.com

Notable yesterday was the dollar selling off after the Bank of Canada said it was ready to pause/end its tightening cycle. Some in the market could be thinking the Fed is of a similar mindset. At the margin that suggests the dollar could go into next week's Fed meeting on the offered side. Today the focus is US 4Q GDP data and a rate decision in South Africa USD: Dollar can stay offered Trade-weighted measures of the dollar continue to edge lower. The catalyst for modest weakness over the last 24 hours has been the Bank of Canada's (BoC's) decision to pause and perhaps end its tightening cycle. The move saw US yields tick modestly lower and weigh on the dollar as investors considered whether the Federal Reserve was on the verge of adopting a similar position - perhaps at the 22 March FOMC meeting. Next week's Fed hike of 25bp looks locked in.  This all fits with the narrative of easing pricing pressures and a mild US recession, which could actually see the Fed easing and a weaker dollar stimulating Rest of World (RoW) growth. And the re-weighting of portfolios to RoW assets remains a key story for 2023.   For today, the data focus is on US 4Q GDP data. Our team forecasts a slightly below-consensus number and is mainly driven by lower imports and inventory building - not necessarily 'good' growth. We will also see the advanced goods trade balance for December which is expected to have widened again. Additionally, we will see the volatile durable goods orders for December and also the weekly initial jobless claims which so far are showing no signs of easing in labour market supply pressures. We are not sure that DXY is ready to break below support at 101.30 just yet. And we see next week's FOMC meeting as an upside risk to the dollar. But for the time being, expect DXY to stay offered in a 101.30-102.00 range. Chris Turner EUR: ECB blackout period finally arrives After a few wobbles, it looks like markets have finally got the message from the European Central Bank that it will be hiking by 50bp at both the February and March meetings. A further 40bp of tightening is then priced over the summer. We look for just one more 25bp hike in May which will take the deposit rate to 3.25%. The ECB now goes into a blackout period ahead of next Thursday's policy meeting - suggesting these tightening expectations may not move much further. With the market pricing a 50bp easing cycle by the Fed in the second half of the year, this combination leaves EUR/USD at the highs of the year above 1.09. As we mentioned on Monday, investors may struggle to push EUR/USD through the 1.0950/1000 area ahead of next week's FOMC/ECB risk events - though it looks like EUR/USD will stay bid.  One note of caution to the EUR/USD really, however, is that the EUR/USD risk reversal - the price investors pay for a euro call over a similar euro put option - is no longer shifting away from euro puts and in favour of euro calls. Perhaps this is a function of where the EUR/USD spot is. Yet this could suggest that investors and corporates see 1.10 as the top of a multi-month trading range. Chris Turner GBP: Peak rates? Sterling has been holding its own against the euro and the dollar. The biggest event risk for sterling over the coming months is when the Bank of England calls time on the tightening cycle. We are looking for a 50bp hike next week and then a 25bp hike in March to conclude the cycle at 4.25%. But presumably, at some point, the BoE will have to signal the top and we have already seen investors lose conviction over a peak in the cycle at 4.50%. The peak is now priced at around 4.37%. There is probably substantial short sterling positioning on the crosses in expectation of the turn in the BoE cycle. This makes for a bumpy ride. But overall we are happy with our end 1Q23 forecast for EUR/GBP at 0.89, which will probably leave cable trading towards the lower end of a 1.20-1.24 range. Look out for UK January CBI retail sales figures today - likely to confirm a downtrend on the back of weak consumer confidence and squeezed real incomes. Cable to trade well within a 1.2350-1.2450 range. Chris Turner ZAR: 50bp hike should help the rand Today sees the South African Reserve Bank meet to set interest rates. The majority of forecasters are looking for a 50bp hike to 7.50%, though a few are looking for a 25bp hike. Like many, the SARB is dealing with above-target inflation - now at just over 7% year-on-year versus the SARB's 3-6% target range. Markets price this hike as the last in the cycle and price the policy rate pretty flat at near 7% over the next three years.  Peak interest rates are music to the ears of bond investors and one of the best-performing asset classes this year is the EM local currency government bond index, currently up 4.2% year-to-date. South Africa still has a near 3% weighting in such an index, meaning that the rand should be a beneficiary should investors add to positions in EM local currency bonds. However, the rand has been underperforming this year and one would have expected the huge reversal in USD/CNY to be dragging USD/ZAR much below 17.00. That has not happened, perhaps because of the weak domestic demand outlook in South Africa amid ongoing challenges in energy supply. Yet a softer dollar environment and the China reopening story should remain a bullish cocktail for the rand and a hawkish SARB statement today could be enough to push USD/ZAR back to the 16.90 area. Medium-term, we are becoming a little more bullish on the rand. Chris Turner   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 a huge energy shock in the economy, production has held up well. There are no miracles here, though. Currently the post-pandemic catching up has simply outweighed the negative impact from higher energy prices. For now Industrial production in the eurozone has held up despite the energy crisis Industrial production has held up well in a challenging 2022 Despite substantial energy reduction efforts, eurozone industry has held up relatively well in terms of production. Most recent data show annual growth of 1.9% in industrial production in the eurozone, which almost sounds too good to be true. If an energy crisis of the magnitude just experienced is not resulting in production setbacks, do we need high levels of energy use to begin with? Looking under the hood of industry data, we see that indeed this conclusion is too good to be true. There are multiple shocks working against each other that have an important impact on different sectors and result in a relatively neutral impact so far. Let’s also not forget that industrial production in the eurozone is currently only just above its pre-pandemic level. In any case, if the energy crisis were to persist, the impact on production will likely become more broadly visible in 2023. Production has surprised on the upside as dramatic scenarios are avoided Source: Eurostat, ING Research The energy shock has weakened production in energy intensive sectors When we look at the performance of different industrial subsectors over the past year, we see that there are big differences. The weakest performing sectors are all among the most energy intensive within broader industry. It is therefore no surprise why they have seen contractions up to -14% for the chemicals industry. In chart 2 we see the relationship between energy inputs as a share of total output of the sector and production growth in the past year. The sectors that are very energy intensive are all showing negative output growth and there is quite a strong relationship in terms of energy intensity and production over the past year. The paper industry has seen a decline of -6%, basic metals -7% and coke and refined petroleum products -9%. So far, there are no miracles happening. Germany is so far the only country in which the statistical agency releases a time series for energy-intensive production, which was down by around 13% year-on-year in November. Energy intensity is strongly related to production performance over the past year Source: Eurostat, ING Research The aftermath of the pandemic shock now boosts production As the energy-intensive sector have clearly taken a hit, the question is why some of the other sectors are performing so strongly. There are two main reasons for such outperformance: pandemic winners and post-pandemic winners. The so-called pandemic winners are the sectors which benefitted from the pandemic like pharmaceuticals. Strong production growth still continues as we saw growth of almost 40% in production over the past year. We also see strong growth for another stronghold during the pandemic: computers, electronics and optical products. With shortages of semiconductors having faded, production continues to be strong for these products, resulting in above 20% growth. And then there are the post-pandemic winners, e.g. the sectors which were hit by the pandemic but are catching up and reducing backlogs as supply chain frictions fade. The main representative of this  group is the car industry. Production of motor vehicles, trailers and semi-trailers increased by 15% last year. All in all, production has held up well because two shocks are playing into one another at the moment. The aftermath of the pandemic shock to the economy is at this point quite favourable as supply chain problems fade which boosts industrial production for now. The energy shock on the other hand has the exact effect that you’d expect as the most energy intensive sectors are all seeing large declines in production. Also, the reduction is energy consumption in industry does often not refer to less energy consumption in production but rather in very ordinary reduction in heating. The pandemic winners lead the pack of sub-sectors in recent production growth Source: Eurostat, ING Research Outlook is getting less bleak as energy crisis moderates The question for 2023 is now whether industry can weather the energy shock without an overall dip in production. The good news is that post-pandemic effects should fade, but likely not immediately. Supply-chain problems continue to fade at the start of the year, which should benefit the more restrained sectors in terms of inputs. The auto sector for example is expected to continue recovery of production at the start of the year which is a large part of total industrial production. Besides that, current energy prices are a lot more favourable for production than prices seen in most of 2022. That means that the energy intensive sectors could rebound a bit on the back of lower input costs. Still, risks may have moderated but chances of the energy crisis flaring up again in the coming months are high. Also, it is not unreasonable to expect that the energy crisis will simmer for longer than post-pandemic catch-up effects as demand for goods has been decreasing over the course of last year with people spending more on services again now that economies have reopened. The Inflation Reduction Act is just an example how lower energy prices elsewhere combined with local subsidies could also further weaken industrial production in the eurozone. All in all, while industry has surprised by not contracting according to most recent data, we shouldn’t expect too much from industry over 2023 either and the risk of delayed contraction continues to hang over the sector. Read this article on THINK 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

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

Markets' concerns about the US growth picture seemed to have eased, paving the way for a modest recovery in the dollar. Next week could, however, see a larger upside USD correction as the FOMC appears to have more room to surprise on the hawkish side compared to the ECB. Elsewhere, SEK is benefitting from good eurozone data, but domestic figures have lagged A 50bp hike by the ECB next week looks like a done deal, and we expect President Christine Lagarde to maintain a hawkish tone USD: Gearing up for an upside correction? The year started quite poorly for the US growth story, but the past couple of weeks have – at least – not given reasons to be even more pessimistic. Yesterday, growth figures in the US were slightly above consensus, and durable goods orders came in strong. We recommend reading our US economist’s note on those releases though, as a deeper look tells a different story than what the headline figures suggest. The week ends with December data on personal income and spending, as well as the PCE deflator, which are all expected to have decelerated.  The dollar did find some support yesterday after markets read US data as encouraging, and should enter a week packed with less bearish momentum. There is probably more room for the FOMC to surprise on the hawkish side compared to the ECB next week, and we could see an upside correction in the dollar materialise. For today, we can expect some consolidation around 102.00 in DXY. Francesco Pesole EUR: Still counting on the 1.0850 floor We have highlighted over the past few days how levels around 1.0850 in EUR/USD seemed to have formed a buy-the-dip floor for the pair. Yesterday’s price action added evidence that this is indeed the case, and we may have to wait for some more sizeable downshifting in USD bearishness in the run-in or after the FOMC meeting next week to witness a decisive break to the downside in EUR/USD. There are no market-moving data releases in the eurozone today, and some focus may only be on Spanish growth numbers this morning. Our economics teams published the ECB preview yesterday. A 50bp hike next week looks like a done deal, and we expect President Christine Lagarde to maintain a hawkish tone and push back against rate cut speculation. The recent communication hiccups however suggest the impact on the euro may not be too pronounced. Francesco Pesole SEK: Dealing with softer domestic data Sweden’s jobs and retail sales were released this morning and came in on the weak side. Unemployment ticked higher to 7.5% and retail sales were down 8% year-on-year in January. Earlier this week, the Economic Tendency index had pointed to a deterioration in the growth picture at the start of the year (while surveys in the eurozone were quite upbeat), although consumer confidence rebounded. SEK has not experienced much weakness as the data flow seemed to deteriorate, even though markets are no longer fully pricing in a 50bp hike by the Riksbank at the 9 February meeting. The solid growth story in the eurozone is probably offsetting the repricing lower in rate expectations. We recently published a scenario analysis for EUR/SEK in 2023. Our core view is that a gradual descent towards 10.50 will materialise by the third quarter. Francesco Pesole HUF: Rating decision will determine the future path of the forint The calendar in the CEE region is empty for Friday and it will be more interesting after the end of trading today. In Hungary, S&P will publish a rating review that will have the market's attention more than usual. A week ago, Fitch – surprisingly for us – downgraded the rating outlook from stable to negative, which highlights the question of whether Hungary has made sufficient progress in negotiations with the European Union for rating agencies. It is the slower absorption of EU funds that seems to have been the main reason for Fitch's decision. S&P has already held a negative outlook since last August and it was the inflow of EU funds that was the main risk of the latest review. Moreover, we expect S&P's new forecast to be revised to the downside in both GDP growth and the fiscal outlook. While we see downgrade risks high, our base case is for an unchanged rating today. With Fitch's recent decision, we think today's review will attract a lot of market attention and will be key for the future development of the forint. Given the heavy long positioning, we can expect an asymmetric reaction in the 385-395 EUR/HUF range. Frantisek Taborsky Read this article on THINK TagsSEK HUF 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

Credit markets have been rather constructive over the past couple of months, but has it come too tight? Where does credit go from here? We tackle some of the main questions being asked, illustrate where we see spreads going, and identify where there is value in credit Sectors such as leisure and real estate have been among the best performing, and we see this as an opportunity to reduce exposure to these sectors What are some recent market considerations? A cry for yields and spreads started in early November – could it have been that the credit market read our 2023 outlook (23 calls for 2023: A kind of magic)? Since its publication in early November, we have seen a very positive and constructive credit market. EUR spreads have seen around 33bp tightening, alongside substantial fund inflows. After a year of mostly outflows, amounting to 7% year-to-date in October, there was a full retracement with flows ending the year marginally positive. Subsequently, the inflows have persisted to the tune of 2.9% over the past four weeks. Supply has been rather strong at the beginning of this year, with corporate supply totalling €34bn, financials a substantial €58bn, and covered bonds a significant €37bn. Despite the influx of supply, spreads saw no weakness from indigestion. In fact, new issues were absorbed well by the market, with decent demand, oversubscription and rather low new issue premiums.  Where do you see credit spreads going from here? Corporate spreads are now sitting at the very bottom of the trading range, while financials are slightly wider than the bottom end of the range, as illustrated in the charts below. We feel spreads are somewhat tight/expensive at these levels considering the significant risks (potential volatility) and negative factors still very much present in the market. Thus, we struggle to see spreads tightening much more from this point. The outperformance of cyclical/high beta sectors such as leisure, real estate, manufacturing and automotive proves the point that the market is being driven by yield and spread hunger rather than the all-important issuer or sub-sector selection. As such, we see room for widening but are wary of betting strongly against a positive market, particularly with such attractive yields and inflows. A move below the current trading range creates the ideal opportunity over the next few weeks to offload some of the outperforming segments mentioned above. Conversely, any widening will offer areas of more value within the credit space. EUR IG non-financial spread range Source: ING, ICE EUR IG financial spread range Source: ING, ICE Is there any value left in credit? In our outlook, we described the magic in credit markets to be valuations, valuations and valuations, while spreads are indeed tighter now we still do see some value in selective areas. The economic environment seems to show early signs of a less benign outlook and inflation in the US at least looks to be turning the corner, thus we remain constructive for credit markets in 2023, although it becomes more about carry than spread tightening. Value though is selective, the driver is on a company-by-company basis, mostly on the shorter end of the curve and selectively on subordinated instruments. What is a bigger risk for the coming weeks? Tightening or a correction? The bigger threat is certainly a squeeze as supply dries up going into full-year results-related black-out periods. Next week will also be a busy week for the central banks. Meantime mutual fund flow inflows continue and asset managers have been putting liquidity to work, and all that is accompanied by the current lack of availability of paper (ECB or CSPP holds about 25% of all non-financial outstanding). This squeeze is set to further reduce risk/returns and thus we would look to limit exposure to cyclical names and sectors. What effect will quantitative tightening have on credit? Amongst the list of risk factors and negative drivers is quantitative tightening. The ECB has already announced the tapering of CSPP (corporate sector purchase programme), with a €15bn reduction in APP (asset purchase programme) per month starting in March (with more details to follow at the February meeting). We foresee the following: The lower level of support could add to the turbulence and increase volatility, potentially reprice spreads wider, ultimately adding more value to credit. Should there be even faster tapering then it will change the positive technical further and lead to spread widening in the case of faster tapering come July or an abrupt stop. Active selling of holdings will clearly have much more negative implications on spreads. Forecasted CSPP reinvestments Source: ING, ECB What does tapering mean for the decarbonising of the ECB's portfolio? The tapering of CSPP sparks the debate regarding decarbonising of the ECB’s holdings. Of course with the reduction and eventual end of reinvestments of APP, the efficiency of decarbonising diminishes. As a result, last week the ECB’s Isabel Schnabel discussed the potential move from a flow-based to a stock-based tilting approach. This means the ECB may begin to sell bonds from corporates it considers as scoring low on its scoring system, in order to buy higher-scoring corporates and ESG (environmental, social, and governance) bonds. The ECB’s ESG scoring system is not public nor are its assigned scores per corporate, thus it remains too much of a black box, but the scoring is based on three parameters; past carbon emissions, future carbon emissions, and the openness and availability of information by the corporate. Therefore, it is hard to predict exactly which names/bonds the ECB may sell, and we will need more information, such as how to account for renewable strategies and transition initiatives. It is likely to be more talk than action but the talk could still create underperformance of any carbon-intensive names and sectors as a result, the CSPP portfolio is simply too sizeable.   Are certain sectors getting too expensive? We have seen some larger tightening in higher beta sectors in recent weeks, many of which we would still remain cautious of. Our sector selection has not changed; we dislike energy-intensive sectors, inflationary sensitive sectors, sectors that may see a drop in cash buffers, sectors that are more heavily reliant on CSPP and sectors with supply chain shortages. Some of these sectors such as leisure and real estate have been the best performing, we see this as an opportunity to reduce exposure to these sectors, particularly on the long end of the curve. What is the favoured segment of the liability structure? This view has not changed, we still see covered bonds as expensive and expect to underperform and widen a bit more in the first half of 2023, while we prefer senior debt, specifically bail-in senior, which has scope to tighten, particularly if the ECB’s rate-hiking cycle comes to an end and the prospects supporting future lower underlying yield levels become firmer. We also see value in callable T2 bonds but on a name-by-name basis, while we find bullet T2 expensive, trading close to Bail-in. Does the quick start in financial supply mean a lot more issuance to come in 2023? Looking into 2023 financials, bond supply is likely to face another strong year. For the banking sector, covered bonds remain the main funding alternative, with higher interest rates and as a substitute for collateralised central bank funding. We expect unsecured bank bond funding to edge up. In volatile market conditions, the funding split is likely to remain geared toward tighter spread funding alternatives including covered and preferred senior. Once market conditions improve, loss absorption eligible paper should see more activity. Is there still value left in corporate hybrids? We do believe there is selective value left in hybrids but it is far more limited now. We continue to like the frequent issuers with established curves and a proven track record in support of the product, such as Telefonica. Buying back the short-end under the 10% rule helps the attractiveness of that segment. We are, however, still worried about the infrequent hybrid issuers and real estate hybrids. Read this article on THINK TagsMonetary policy Markets Financials ECB Credit Corporates Bonds 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

Sharp declines in private sector borrowing in December show that the ECB's sharp interest rate rises are starting to have the desired effect. In an already weak economy, this is another dampening effect for 2023 growth, but don’t expect it to be enough to sway next week’s ECB decision on rates. We expect another 50 basis point hike Given the hawkish stance that the ECB has taken recently, this release must be encouraging as it shows that monetary transmission is at work   The decline in bank lending in December was seen across the board. Household borrowing growth had been trending down since early 2022 – when longer-term rates started to rise – but saw a particularly sharp monthly drop in December. The month-on-month growth was 0.1% down from 0.3% in November, indicating that household borrowing growth has now all but stagnated. This is especially important for the housing market as the majority of household borrowing is for mortgages. The decline in non-financial corporate sector borrowing has been even more pronounced. Month-on-month growth turned further negative in December, falling from -0.1% in November to -0.3% in December. Business borrowing growth had been very strong in 2022 and even accelerated despite higher interest rates. The bank lending survey already indicated that this was mostly for working capital reasons and not for investment plans, which was actually a sign of weakness rather than overheating. Now we see sharp declines in borrowing occurring, which is in fact more of a recessionary sign. Read next: Another Sector Announced Layoffs, Hasbro Reduced Its Workforce, IBM And SAP Have Joined Technology Companies That Are Reducing Employment| FXMAG.COM Given the hawkish stance that the ECB has taken recently, this release must be encouraging as it shows that monetary transmission is at work. At the same time, it comes at a time when a very weak eurozone economy is flirting heavily with recession. With a lot more rate hikes to come, the question is how well the economy can swallow substantially higher rates. We expect that the ECB hike cycle will have a significant dampening effect on the economy over the course of 2023. With supply-side problems that caused inflation diminishing, the question is whether doves will become more vocal in coming meetings as we start to see monetary transmission at work. For next week, we don’t expect much to change: another 50 basis point hike is in the making. Read this article on THINK TagsGDP Eurozone ECB 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 dollar strengthened on Friday, moving away from multi-month lows against the euro and sterling as investors began to focus on the many important central bank meetings next week. The US Federal Reserve, European Central Bank and Bank of England are due to make interest rate decisions next week as they assess what policy adjustments may be needed to fight rampant inflation in a challenging global economic environment. In today's expected audience session, the core US PCE data for December will be released. This is the Fed's preferred measure of inflation and price pressures are expected to ease further. USD/JPY Annual inflation in Japan's largest city, Tokyo, continues to climb, with the base rate hitting 4.3% in January, the highest level in more than four decades. The USD/JPY pair in the European session is trading close to 130.00, at 129.96. Earlier, the couple managed to break the level of 130.00 but failed to maintain it. The couple is waiting for the publication of the US PCE report. EUR/USD The US dollar draws support from the mostly upbeat US macro data released on Thursday, which in turn is seen as a key factor putting some pressure on EUR/USD. Expectations for a more hawkish nature of the European Central Bank (ECB) should additionally contribute to limiting deeper losses. It is worth recalling that several ECB officials supported additional interest rate hikes in the coming months to fight stubbornly high inflation. Today European Central Bank (ECB) President Christine Lagarde is set to speach. The frequency of Lagarde's speeches in recent times has almost reduced her impact on the financial markets and the euro, which leads me to believe that today's forecasts may not have a significant impact. However, the market's attention will remain focused on key risks related to the central bank's events next week. The Fed will announce its policy decision at the end of its two-day meeting on Wednesday. This will be followed by the ECB monetary policy meeting on Thursday, which in turn will play a key role in determining the next stage of the EUR/USD directional move. The EUR/USD pair broke above 1.09 in the morning but fell again. Currently, the EUR/USD pair is trading in the range of 1.0875-1.0880. Read next: Ukraine Is Calling For More Sanctions Against Russia| FXMAG.COM GBP/USD Given the volatility of the market, the GBP/USD pair may witness a further sideways move ahead of the US PCE price index for December. British Finance Minister Jeremy Hunt's willingness to accelerate growth is unimpressive to GBP/USD buyers as the Chancellor defends his position on a tax hike despite heavy criticism from other Conservatives. Alternatively, the growing calls for Brexit solutions, at least from Irish diplomats, appear to be helping the GBP/USD pair bearish. Investors expect the British economy's slowdown to end the Bank of England (BoE) tightening cycle soon. The Cable pair (GBP/USD) broke above 1.24 at the beginning of the day, but similarly to the EUR/USD pair, it failed to hold and fell. Currently, the GBP/USD pair is trading in the range of 1.2360-1.2370. AUD/USD The Australian dollar, tied to sentiment, rose cautiously on Thursday after US GDP data boosted Wall Street's risk appetite. In the fourth quarter of 2022, the US economy grew by 2.9% q/q. This is more than the consensus of 2.6%. The Australian dollar traded at around $0.71, hovering near its highest in almost eight months as rising inflation in the country fueled bets on further central bank policy tightening. Annual inflation in Australia rose 7.8% in December, the largest increase since 1990 and above market forecasts of 7.5%. The Aussie pair is holding above 0.7100 despite having dropped earlier. Source: investing.com, finance.yahoo.com, dailyfx.com

According to a survey of analysts, the European Central Bank's decision to raise interest rates by 50 basis points is already final, so the euro has a high probability of growing further this year. By May of this year, the cost of borrowing will likely have increased by another half-point due to the fight against ongoing inflation. Many respondents believe that the deposit rate will remain at 3.25% for the next year or until the economy starts to deteriorate, at which point it will be reduced by a quarter point. These modifications won't likely occur until June 2024. ECB policy meeting More than half of the analysts surveyed think that policymakers will continue to face the strongest pricing pressure in recent memory despite the 250 basis point rate hike, the ECB's most aggressive tightening of monetary policy. Next week's ECB policy meeting, which will be the first in 2023, is very probably going to result in a half-point rate increase. This was stated repeatedly by ECB President Christine Lagarde in January. Polls also indicate that although oil prices are down, eurozone inflation is steadily declining, and the Federal Reserve is considering a less aggressive rate hike in its cycle, regulators will still be inclined to tighten policy following the February meeting. Lagarde speech Lagarde will give another speech today, and she and her hawkish colleagues will undoubtedly hint that the interest rate will be raised by the same amount in March as it was in February. A more gradual approach is preferred by some of the 26 members of the Governing Council, but just four out of the 46 economists questioned think it is likely to happen. Signals for the March meeting will be the main topic of discussion in February. The possibility exists that even a small dovish reading by the markets, brought on by a softening of the phrasing, could induce a decline in the value of the euro. Read next: The Aussie Pair Is Holding Above 0.7100, The Major Currency Pairs Are Waiting For US PCE Report| FXMAG.COM Even while inflation may now be in the single digits, it is still higher than the ECB's target rate of 2% and closer to 10%. Numerous experts predict that the Governing Council's largest challenge will be to strike a balance between lowering overall inflation and the base, which is falling more slowly than expected because it ignores energy prices. Next week, the ECB is anticipated to provide additional information regarding its plans to shrink its bond portfolio by 5 trillion euros. The procedure will start with officials allowing partial debt payback and not reinvesting the revenues, as they currently do. 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 remain above 1.0860, which will cause it to move to the vicinity of 1.0930. You can easily get through this point to reach 1.0970 when an update to 1.1007 is imminent. Only the collapse of support at 1.0860 will put more pressure on the pair and drive EUR/USD to 1.0805, with the possibility of dropping to a minimum of 1.0770 if the trading instrument declines. GBP/USD Regarding the GBP/USD technical picture, the demand for the pound is declining. Buyers must sustain their advantage by remaining over 1.2350. The only way to increase the likelihood of a further recovery to the area of 1.2430 and, ultimately, a greater movement of the pound up to the region of 1.2490 and 1.2550, is for the resistance at 1.2440 to fail. After the bears seize control of 1.2350, it is feasible to discuss the pressure on the trading instrument returning. The GBP/USD will be pushed back to 1.2285 and 1.2170 as a result, hitting the bulls' positions   Relevance up to 09:00 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/333447

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  

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.

In Europe, the reporting week will start on Monday with the first estimates of German GDP for the last quarter. The latest national inflation statistics will be released on Tuesday, along with the eurozone-wide Q4 GDP printout. Monthly inflation data for the euro zone will be published on Wednesday. Of course, the main event will be Thursday's decision of the European Central Bank. Intrest rate The ECB, which has acted as the region's central bank since 1991, has historically been more dovish after years of dying inflation. But the energy crisis, severe supply chain issues and other bottlenecks have pushed prices up across the bloc and led to a new tone from the central bank. The ECB entered tightening mode last year with four interest rate hikes in an attempt to control high inflation in the eurozone. These decisions raised the main deposit rate from -0.5% to 2%. The warmer-than-usual weather has been a real blessing for the eurozone economy, and therefore for the euro itself, as it eased some of the fears of an energy-driven recession while helping to ease inflationary pressures. Despite all this, many ECB officials spoke of a great game. With inflation still "too high," as President Christine Lagarde said, the ECB will almost certainly raise the deposit rate by half a point next week to continue the most aggressive monetary tightening in its history. European Central Bank President Christine Lagarde has repeatedly used the phrase "stay the course" when referring to upcoming interest rate decisions, but some market watchers doubt the bank will maintain its hawkish stance for much longer. Hawkish officials emphasize that the so-called core measure showing underlying price pressures remains stubbornly elevated too. Markets have priced in a 50bps hike for the next two policy meetings, but there are questions as to whether the ECB will need to ease its hawkish stance afterwards. A Reuters poll released earlier this week showed markets expect the ECB to hold off on interest rate hikes in the second quarter when the deposit rate hits 3.25%. Looking at the region, economists predict that inflation in Germany and France has accelerated, while in Italy and Spain it will slow down. CPI In line with key data forecasts ahead of next week's interest rate decision, eurozone inflation is likely to have slowed slightly after the economy stalled or even contracted. The main growth rate of consumer prices fell for the third month in January to 9.1%. The return to single-digit levels surprised many and fueled the wave of optimism even more, even as core inflation, which excludes volatile energy and food prices, remains stubbornly elevated. Source: investing.com The data will inform policy makers at the European Central Bank, whose first meeting of 2023 will take place on Thursday, a day after the US Federal Reserve will do the same. Euro-zone officials normally use forecasts of future inflation and growth to guide their rate hiking. But several have also hinged recent decisions on the latest monthly outcomes for consumer prices, bringing greater significance to such releases. Positive news from the eurozone The flash reading of the Eurozone Purchasing Managers' Index, which tracks activity in the manufacturing and services sectors, rose to 50.2 in January from 49.3 in December, marking the first increase since June. A reading above 50 indicates an increase. The sudden shift in sentiment across the bloc is attributed to a series of positive developments that materialized around the turn of the year. The most important of them: the steady decline in gas prices. Falling energy prices and easing tensions in the supply chain helped support a return to moderate growth, helping to cushion rising production costs for manufacturers. An exceptionally warm start to the year, coupled with massive underground storage to meet additional demand and consistent shipments of liquefied natural gas (LNG) to European shores, appears to have instilled a degree of confidence in a previously explosive market. Source: investing.com

The US dollar was flat in trading this week. Next week's economic calendar is filled with high-impact events such as the Fed on Wednesday or the BoE and ECB on Thursday. And if the major central banks aren't enough, there will be an NFP report on Friday, and given the stance taken by the Fed on Wednesday, this jobs report could be even more important than usual as the FOMC monitors the data for signs of a slowdown from massive rate hikes from last year. USD/JPY USD/JPY started the trading week at 129.2700. Then it increased and exceeded the level of 130.00. On Tuesday, USD/JPY crossed the 131.00 level and recorded the highest trading level of the week at 131.0650. The level above 131.00 was not maintained and the pair fell below 130.00 again. Following this decline, USD/JPY hit a week-high trading low close to 129.00, 129.0400 to be exact. The pair then increased and broke above 130.00 again, but USD/JPY failed to hold above that level and ended the week at 129.8000. GBP/USD The Cable pair (GBP/USD) started the week trading quite high at 1.2399 and rose to a week high of 1.2446. The GBP/USD pair then declined and hit a trading low of 1.2274 on Tuesday. After that, the GBP/USD pair rose and traded above 1.2350. The cable pair ended the week just below 1.2400 at 1.2395. The British pound is gearing up for the week ahead which includes the Bank of England (BoE) and Federal Reserve interest rate decisions respectively. The BoE suggested another hike of 50 basis points, which is confirmed by prices in the money market. At the last meeting the majority voted for 50 bp, but taking into account new economic data, votes may be divided between 50 bp and 25 bp. The BoE is likely to remain unchanged - this would likely cause a bearish reaction on the pound. EUR/USD The major pair (EUR/USD) is holding above 1.08 and this week's trade was extremely favorable for the pair. The EUR/USD pair started the week trading at 1.0874. The EUR/USD pair then rose. Weekly trading was mostly above the 1.0860 level. EUR/USD peaked above 1.09 at 1.0930. The week's trading low for the pair was below 1.0850, while the EUR/USD record low was at 1.0841. EUR/USD ended the week at 1.0874. The market's attention will remain focused on the key risks related to the central bank's events. The Fed will announce its policy decision at the end of its two-day meeting on Wednesday. This will be followed by the ECB monetary policy meeting on Thursday, which in turn will play a key role in determining the next stage of the EUR/USD directional move. AUD/USD The Australian pair (AUD/USD) performed best on Wednesday in the major currency pairs. AUD/USD started the week trading at 0.6971. Then the Aussie pair rose and passed the 0.70 level, maintaining this level in the following trading days. On the first day of trading, AUD/USD traded below 0.70 and thus recorded the lowest trading level of the week at 0.6965. The highest trading level of the Australian pair was above 0.7100, at the level of 0.7138. The Aussie Pair finished the week just above 0.7100. Australia’s annual inflation jumped 7.8% in the December quarter, the biggest increase since 1990 and above market forecasts of 7.5%. The strong reading was more than twice the pace of wage growth and cemented expectations that the Reserve Bank of Australia will hike interest rates by 25 basis points in February. Source: investing.com, finance.yahoo.com

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)

A 50bp hike by the European Central Bank, and a repeat of its December guidance, are set in stone but a pushback against subsequent cut expectations will move 5Y euro rates higher Source: ING Front-end pricing talk but it's a red herring Much has been said and written about the next two ECB meetings’ rate hikes. The upshot is, as our colleagues highlight, the ECB still has a licence to hike, and a 50bp increase is pretty much set in stone this week. In all likelihood, guidance for a 50bp March hike will be repeated too but the March meeting will also feature a new set of forecasts that should heavily influence the ECB’s decision. As a result, markets will be tempted to rely more on their anticipation of how the ECB staff forecast will evolve at that meeting, rather than on president Christine Lagarde’s guidance. In all likelihood, guidance for a 50bp March hike will be repeated As our economics team noted in their preview, "If everything else remains the same as it was in December, the ECB’s headline [March] inflation projections could easily be lowered by 0.3 to 0.5 percentage points for 2024 and 2025". Cut-off for the FX, rates, and energy market prices is a little under one month away but, as things stand, this would imply 2025 inflation at 1.8%, under the ECB’s 2% target. Worse, this would be premised on a curve that implies 80bp of cuts between the mid-2023 rate peak and end-2024. To cut a long story short, we wouldn’t overstate the importance of the next two meetings for interest rates markets. We now have more hawkish ECB expectations than the market Source: Refinitiv, ING Eyes on the prize, the belly's where the battle really is The curve is pricing a rapid decline in rates after they reach their peak in 2023. For a central bank expected to hike at least three more times, this is problematic. Lagarde is sure to be asked about this anomaly. If recent history is any guide, she’ll likely take that opportunity to guide market rates higher. We doubt she’ll manage to completely dis-invert the curve, however. The shape of the euro term structure cannot be seen entirely in isolation and some remnant of easing is likely to persist as long as the Fed is expected to cut more than 200bp by end-2024. But, at least, she should manage to delay cut expectations. The part of the curve most likely to be affected is the 5Y point. We think hike expectations are correctly set for the next few meetings which imply that short-dated bonds and swaps, say up to 2Y, are also correctly priced. Longer tenors, on the other hand, depend on more structural factors such as where investors think the long-term interest rate equilibrium lies. This is not something the ECB will change at this meeting. This leaves the maturity in between, aptly called the belly of the curve, as the sector most at risk of a pushback against cut expectations. What happens to the slope of the curve, for instance 2s10s, depends in greater parts on the tone of the ECB from one meeting to the next. We have a view (it will be hawkish) but given its recent unpredictability, we have a greater conviction on our outright (higher rates) and curvature (5Y rates to rise faster than other maturities) calls.  5Y rates are most at risk if the ECB pushes back against rate cut expectations Source: Refinitiv, ING 'Detailed parameters' on quantitative tightening to come, but the market-moving information is already out The ECB has promised “detailed parameters” for the reduction of its asset purchase programme portfolio. With laying out the headline volumes already at the last meeting, the most market-moving aspects are already known. What we could expect is details about whether the reduction will be proportionate across the different asset classes. Within the public sector specifically, how the ECB will maintain alignment with the capital key distribution across countries. We do not anticipate the ECB to diverge from previous targets here, though we might get information on how special situations will be dealt with. For instance when overall redemptions in a month are below the targeted reduction volumes. A rebalancing towards supranational debt with their larger share of green bonds would make sense Keeping in mind the focus the ECB and Isabel Schnabel in her recent speeches have put on “greening” the central bank’s portfolios, there is a chance that this also translates into more concrete action in the public sector portfolio. A rebalancing towards supranational debt with their larger share of green bonds would make sense, and it would not impact the capital key alignment. It would also address the rising prominence of the European Union as an issuer. We doubt though that such tweaks by themselves will impact the market's currently benign take on sovereign spreads. This time they are more likely to take their cues from the overall tilt of the ECB’s communication. This isn't a litmus test for the euro rally While it’s undeniable that the ECB doubling down on its hawkish rhetoric has contributed to the strengthening of the euro since December, we don’t see this week’s policy meeting as a litmus test for the sustainability of the euro rally. The reasons are two-fold. First, EUR/USD may well return to being predominantly a dollar story this week. A Fed approaching peak rate and facing a worsening economic outlook has more room to surprise on the hawkish side, and we think it could offer a breather to the dollar. In contrast, as discussed above, we would not overstate the importance of the next two ECB meetings for rates. The ECB’s communication hiccups have likely eroded the market's trust in Lagarde’s guidance This leads us to the second reason: the ECB’s communication hiccups have likely eroded the market's trust in Lagarde’s guidance. Only a few hours after the December meeting, the news that many members had preferred 75bp was leaked. And if ECB members aligned behind the 50bp guidance in recent weeks, a probably more debated 50bp move in March may well cause sparse communication again after the February meeting. This – in our view – may lead markets to be more forward-looking than what Lagarde will wish them to be. Ultimately, data may remain a larger driver than Lagarde’s guidance for the euro. If gas prices stay capped and economic surveys keep pointing up, a correction in EUR/USD after a hawkish Fed should not last long. We expect EUR/USD to trade around 1.07-1.10 for most of February. Another big break higher may need to wait for an official pivot by the Fed: we see this materialising in the second quarter, where we forecast a move to 1.15.   Read this article on THINK TagsInterest Rates FX ECB 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 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

Spanish inflation rose again to 5.8% in January, from 5.7% in December. The further cooling in gas and electricity prices was completely offset by a further rise in core inflation to a new record of 7.5% from 7% last month Spanish inflation rebounds to 5.8% in January, due to a further acceleration of core inflation Spanish inflation rose slightly to 5.8% in January from 5.7% in December. On a monthly basis, inflation fell 0.3% compared to December. Harmonised inflation rose to 5.8% year-on-year in January from 5.5% the month before and fell 0.5% month-on-month. The increase in headline inflation was mainly because fuel prices rose more strongly, and clothing and footwear prices fell less than in January last year. A further cooling in energy inflation, on the other hand, put some downward pressure on headline inflation. The removal of the state subsidy on fuel retail prices will also have exerted some downward pressure. On the other hand, core inflation, excluding food and energy, rose further from 7% last month to 7.5% in January. Core inflation continues to rise worryingly strongly, showing that underlying price pressures in the economy are still very high. The current figures may also be biased because this month the weightings of the various components in the inflation basket were updated and several methodological changes were made. It will be necessary to wait for the final figures by component to estimate the impact of these changes. Lower energy prices drive core inflation higher The headline inflation rate is affected by two opposing drivers. On one side are lower energy prices exercising some downward pressure on headline inflation. Thanks to warm winter weather, gas stocks are still at very high levels despite reduced imports. As a result, there is growing optimism that we will get through next winter comfortably as well, allowing gas and electricity prices to ease. On the other hand, underlying price pressures in the rest of the economy remain very high. High core inflation shows that there are still very many pass-through effects at play. Food inflation also remains stubbornly high. The number of food producers planning to raise their prices further has barely fallen from its peak levels. Another factor is that the Spanish government has launched several support packages to help families in this energy crisis. One drawback of these measures is that they may prolong inflationary pressures. The sharp fall in energy prices brings some relief to headline inflation, but inflationary pressures in the rest of the economy remain worryingly high. Unless energy prices strongly rebound, falling energy prices will further cool headline inflation. The big question remains when core inflation will peak. Current figures do not yet point to a cooling. With the economy doing better than expected, it is also easier for companies to pass on new price increases than if we had fallen into a severe recession. We expect core inflation to remain stubbornly high for some time before it too begins its downward trajectory. This is likely to motivate the ECB to continue its tightening cycle. The ECB will not let its policy decisions depend on sharply fluctuating energy prices. We will probably also need to see a sign that core inflation is permanently falling before it will soften its tone. Read this article on THINK TagsSpain Inflation 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

So much for reliable statistics! The German economy contracted in the fourth quarter of 2022 after the first tentative statistics pointed to stagnation Germany's economy isn't just cooling, it's facing a winter recession   The German statistical office just released its first official estimate for fourth-quarter GDP growth, and recession fears are back. The economy shrank by 0.2% Quarter-on-Quarter, from + 0.5% QoQ in the third. GDP details will only be released in a few weeks, but private consumption was the main drag on growth according to the statistical office, As a result, annual GDP growth for 2022 was also revised downwards to 1.8%, from 1.9% YoY. Economic outlook anything but rosy Not falling off the cliff is one thing, staging a strong rebound, however, is a different matter. And there are very few signs pointing to a healthy recovery of the German economy any time soon. First of all, we shouldn’t forget that fiscal stimulus over the last three years stabilised but did not really boost the economy. Industrial production is still some 5% below what it was before Covid, and GDP only returned to its pre-pandemic level in the third quarter of 2022. Industrial orders have also weakened since the start of 2022, consumer confidence, despite some recent improvements, is still close to historic lows, and the loss of purchasing power will continue in 2023. Let's also not forget that, like every eurozone economy, the German economy still has to digest the full impact of the European Central Bank's rate hikes. Demand for mortgages has already started to drop and, as in previous hiking cycles, it didn't take long before the demand for business loans also started to drop. In short, the German economy will still be highly affected by last year’s crises throughout 2023. Germany’s economic outlook for this year looks complicated Germany’s economic outlook for this year looks complicated, to say the least, with an unprecedentedly high number of uncertainties and developments in opposing directions. And there is more; the German economy is still facing a series of structural challenges which are likely to weigh on growth this year and beyond: energy supply in the winter of 2023/24 and the broader energy transition towards renewables, changing global trade with more geopolitical risks and changes to supply chains, high investment needs for digitalisation and infrastructure, and an increasing lack of skilled workers. This long list embodies both risks and opportunities. If historical lessons from previous structural transitions are of any guidance, even if managed in the most optimal way, it will take a few years before the economy can actually thrive again. Winter recession remains base case for German economy Today’s GDP numbers once again show that caution, better than hope, is probably the best guidance for predicting German and European economic growth. The warmer winter weather, along with implemented and announced government fiscal stimulus packages, have prevented the economy from falling off a cliff, but a technical recession is still a likely outcome. We stick to our forecast of a winter recession in Germany and a very mild recession for the whole of 2023. Read this article on THINK TagsGermany GDP Eurozone

Economic sentiment in the eurozone increased to 99.9 in January, the third consecutive increase. Service sector businesses were particularly upbeat, resulting in stubbornly high selling price expectations. The latter will be taken as hawkish input for the ECB meeting Service sector businesses are particularly upbeat at the moment   Can we trust sentiment indicators? When consumer confidence was at its lowest last September, consumption continued to grow. Now that it’s recovering, we see signs of faltering household consumption. January’s economic sentiment indicator paints a picture of recovery while data released today show Germany’s economy contracted in the fourth quarter. While there is some doubt about how well these indicators track economic performance at the moment, we don’t want to ignore them either. Manufacturing businesses performed slightly weaker than before, but optimism about production in the months ahead is on the rise. Importantly, selling price expectations are down sharply as supply chain problems improve and demand for goods has fallen. Read next: Glovo Planned To Lay Off 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM The service sector saw improving economic activity at the start of the year and remains upbeat about the months ahead. Employment expectations are also rising again, which puts continued strain on the labour market despite a slowing economy. In turn, selling price expectations also remain at very elevated levels for services, which could keep core inflation high for longer. For the ECB, this will be the main concern from the survey as worries about the second-round effects of the energy crisis are front and centre of Thursday’s governing council meeting. Read this article on THINK TagsInflation GDP 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

The dollar weakened on Monday to near an eight-month low ahead of a series of central bank meetings this week. The US Federal Reserve is likely to continue to ease the pace of monetary policy tightening at its upcoming meetings and plans to raise interest rates by 25 basis points at its next two policy meetings. USD/JPY USD/JPY pair struggled to hold significant gains above the psychological 130.00 level. The strength of the yen was limited by dovish comments from the BoJ president. BoJ Governor Kuroda continues to maintain his lenient stance on monetary policy. This comes as investors grow optimistic that rising inflation will result in a hawkish move away from the BoJ. Any further hawkish change from the BoJ seems unlikely with Governor Kuroda at the helm and could happen when the governor steps down in April. Driven by the risk associated with key central bank events, investors seem reluctant to bet on an aggressive bear market around the USD/JPY pair. In addition, comments from BoJ chairman Kuroda Haruhiko that the central bank must continue its easing policy and keep the inflation target at 2% limit the gains for the JPY. USD/JPY Pair started the week at 129.8040 and then increased. Currently, the pair is holding above 130.00. EUR/USD Higher Spanish inflation data supported the euro. The euro surged above $1.09 in late January, hovering around its highest level since April last year as investors awaited multiple central bank meetings this week as they digested stronger than expected Spanish inflation figures. The European Central Bank is due to raise interest rates by 50 basis points on Thursday, bringing borrowing costs to their highest level since 2008, while investors will also be on the lookout for signs of slowing the pace of monetary policy tightening at its March meeting. Read next: Glovo Planned To Lay Off 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM EUR/USD pair gained traction and climbed above 1.0900 during the European session, but failed to hold and fell to 1.0893. GBP/USD The cable price (GBP/USD) was similar to the EUR/USD rate, i.e. it rose above 1.24 in the European session, but it did not hold and fell to 1.2384. The slight selling pressure around the US dollar ahead of key central bank policy announcements this week appears to be helping the pair push higher. GBP/USD traders can expect interest rate decisions from both sides of the pair this week, with the US Federal Reserve and Bank of England expected to make February moves on Wednesday and Thursday respectively. The Bank of England is to raise its base rates by half a percentage point. That would take them to 4%, the highest level since the 2008 financial crisis, with further increases expected. However, there have been some objections to the interest rate setting by the Monetary Policy Committee and it seems that a smaller hike is still on the table. AUD/USD AUD/USD prices have fallen to a three-day low of around 0.7075 in the last hour, although any significant drop still seems elusive. The Aussie pair has lost its momentum above 0.7100 but is not falling significantly and is trading at 0.7076. The Australian remains supported by expectations of further policy tightening from the Reserve Bank of Australia amid soaring inflation and China's swift reopening after Covid restrictions have boosted the global economic outlook. Australia's annual inflation rose 7.8% in December, the RBA has already raised the cash rate by a total of 300 basis points at eight consecutive meetings in 2022, bringing borrowing costs to a 10-year high of 3.1%. Source: investing.com, finance.yahoo.com, dailyfx.com

The euro is in positive territory on Monday. EUR/USD is trading at 1.0907 in the European session, up 0.36%. It was a quiet week for the euro, which continues to hug the 1.09 line. I expect to see stronger volatility this week, as the eurozone releases GDP and inflation data, followed by the ECB rate announcement on Thursday. German GDP declines in Q4 Germany’s economy posted a rare decline in the fourth quarter. GDP came in at -0.2% q/q, down from 0.4% in Q3 and shy of the forecast of zero. On an annualized basis, GDP slowed to 1.1%, down from the Q3 read of 1.3%, which was also the forecast. The markets are braced for more bad news out of the eurozone on Tuesday. German retail sales for November are expected to drop by 4.3% y/y, after a decline of 5.9% in November. Eurozone GDP is expected to slow to 1.8% y/y in Q4, compared to 2.3% in Q3. The ECB will be keeping a close eye on this week’s GDP and inflation data, ahead of a key rate decision on Thursday. The central bank has adopted a hawkish stance but is still playing catch-up with inflation, which is currently at 9.2%. The markets are expecting 50-basis points at the upcoming and March rate meetings, but there is uncertainty as to what happens after that. The ECB would love to ease up on rates, but the paramount consideration is curbing high inflation. The cash rate stands at 2.50%, and the markets are forecasting a terminal rate in the range of 3.25%-3.75%, meaning that there is plenty of life left in the current rate-tightening cycle.   EUR/USD Technical EUR/USD is testing support at 1.0907. Below, there is support at 1.0837 1.0958 and 1.1028 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

The EUR/USD currency pair began the week as uninteresting as possible. However, it is evident from the illustration above that the pair has been trading in this manner for several weeks. It is merely on the flat and close to the local maximum. There has emerged a paradoxical situation where traders are unable to make additional acquisitions and are unwilling to sell or fix profits on long positions. However, there should still be a solution to this problem. And this week is probably not the best time. This week will be filled with activities and macroeconomic reports. We don't want to say it again, as analysts and experts have only been discussing rates for the past two weeks. This matter is, in our opinion, already resolved. The ECB will increase its rate by 0.5%, while the Fed will do so by 0.25%. We allocate 2% of the chance to a "surprise" of some kind. It is hard to plan for every scenario, but an improbable turn of events should never be fully ruled out. So, we're getting ready for the most likely situation. Additionally, it asserts that the market has already completely factored in both the ECB rate increase and the Fed rate increase. It turns out that only Jerome Powell or Christine Lagarde can deliver unexpected news. However, Ms. Lagarde has talked five or six times recently, and Mr. Powell and his colleagues covered all of their ground two weeks ago. Simply put, none of these individuals had any new facts to modify their statements. One would anticipate that monetary policies would be modestly modified if new inflation reports had been published over the previous week. However, there were no noteworthy reports, so there is also no justification for changing the tone. A surprise from the ECB is still possible. 95% of what is mentioned above is accurate. There is one "but," though, and it cannot be entirely disregarded. The ECB meeting will take place on Thursday, while a new report on inflation in the European Union will be revealed on Wednesday. Thus, Lagarde's rhetoric could still vary slightly. There are some pretty clear-cut explanations for this. The truth is that news of Spain's accelerating inflation broke yesterday. Since they essentially have no impact on market mood, we typically do not take into account certain macroeconomic statistics of specific EU member states. However, the rising inflation in Spain raises the possibility that the rest of Europe may follow the lead. After all, forecasts for the Spanish CPI pointed to a new fall. And given that the ECB frequently increases rates and that oil and gas prices have decreased noticeably recently, a reduction was the most plausible scenario. However, the effect of declining energy prices has already been seen. Either the ECB rate is increasing too slowly, it is increasing slowly, or it is generally an accident. Whatever it was, there is a chance that European inflation may either slow down only slightly (0.1–0.2%) or not at all. And in this instance, we shall get the most crucial answer: by how much does the ECB have the option of raising the key rate? Keep in mind that everyone now believes that the next three meetings will increase by 1.25%. What will happen then? The ECB will have to propose tougher measures to restrain price growth if inflation stops decreasing. The euro currency could gain a new growth component if it achieves this. The euro may fall if the ECB does not tighten its rhetoric in response to Wednesday's poor data, as market players will realize that the European regulator cannot raise the rate as much as necessary. As of January 31, the euro/dollar currency pair's average volatility over the previous five trading days was 67 points, which is considered "normal." So, on Tuesday, we anticipate the pair to trade between 1.0819 and 1.0953. A new round of downward movement will be signaled by the Heiken Ashi indicator reversing downward. Nearest levels of support S1 – 1,0864 S2 – 1.0742 S3 – 1.0620 Nearest levels of resistance R1 – 1.0986 Trading Suggestions: The EUR/USD pair is still moving upward. In the case of a price recovery from the moving average or when the Heiken Ashi indicator reverses upwards at this time, long positions with targets of 1.0953 and 1.0986 might be taken into consideration. With targets of 1.0819 and 1.0742, short positions can be opened after the price is fixed below the moving average line. The flat is still going at this point, which is something to consider. Explanations for the illustrations: Channels for linear regression - allow us to identify the present trend. 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 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/333693

The wave analysis of the euro/dollar pair's 4-hour chart hasn't changed much recently and is still complex. Although its amplitude is more appropriate for the impulse section of the trend, the upward section of the trend has a strong corrective and is too extended. The wave pattern a-b-c-d-e that we were able to obtain features a wave e that is far more complex than the other waves. Since the peak of wave e is substantially higher than the peak of wave C, if the wave analysis is accurate, then this pattern's development may be nearly finished. I'm still expecting the pair to fall because we're expected to develop at least three waves in this scenario. The demand for the euro either increased or stayed consistently high throughout the first few weeks of 2023, and the pair was only able to deviate marginally from previously established levels during this time. Failure to surpass the 1.0953 level, which corresponds to the Fibonacci ratio of 161.8%, will be interpreted as a sign that the market is prepared to lower demand for the pair. Unfortunately, there is still a delay in developing the trend correction section. EUR/USD On Monday, the euro/dollar pair decreased by 20 basis points, and the amplitude was low in the morning. As I previously mentioned, the amplitude has decreased significantly recently. However, in my opinion, this is a typical market response to a background of zero news. In January, the market actively countered its forecasts. We may say that the US inflation report catalyzed a new decline in the US dollar, as the majority then decided to slow the Fed's rate of tightening policies once more. However, several weeks have gone by since then, and even in the context of a corrective slowdown, demand for the US dollar is not increasing. Since corrections are a natural component of any trend segment, I think the market's behavior is extremely peculiar. It must take place nonetheless. However, for this to happen, the dollar must be supported by the news. This is how the activity should go in an ideal situation. Without news, the market can boost demand for US dollars, but with news context, it will be simpler and easier. A recession is likely to occur in 2023 I am thus anticipating speeches from Christine Lagarde this week that is "dovish" and rhetoric from Jerome Powell that is "hawkish." Since analysts and economists now believe that the European economy is weak and that a recession is likely to occur in 2023, which may force the central bank to reduce the interest rate increase step again, it will undoubtedly be simpler to wait for the first one. Given that Christine Lagarde has repeatedly warned that the rate will rise due to high inflation, such a turn of events may come as a surprise to the market. This suggests that we won't likely wait for either the first or second possibility. The chance for the dollar, therefore, rests on Friday's labor market data and the European inflation report, from which you should take the lowest value. Conclusions in general I draw the conclusion that the upward trend section's development is about finished based on the analysis. As a result, given that the MACD is signaling "down," it is now possible to consider sales with targets close to the predicted mark of 1.0350, or 261.8% per Fibonacci. The potential for complicating and extending the upward section of the trend remains quite strong, as does the likelihood of this happening. The market will be ready to finish the wave e when a move to break through the 1.0950 level fails. The wave analysis of the downward trend section notably becomes more intricate and lengthens at the higher wave scale. The a-b-c-d-e pattern is most likely represented by the five upward waves we observed. After the development of this section is complete, work on a downward trend section can start.   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/333703

Central banks are increasingly perceived to be behind the curve and participants are forming their own view based on economic data. A dovish bias exposes bonds to more losses today. European inflation and lending are the highlights, followed by US employment indicators Expect volatile markets in the run up to central bank meetings The closer markets get to this week’s central bank events, the more unpredictable day-to-day price movements will get. That said, we stick to our view that the next couple of days are likely to be dominated by profit taking on longs and, in the case of euro markets, by the realisation that pricing rate cuts in 2024 is premature. However, 5Y swaps, the sector of the curve most at risk in case of a hawkish push back from the European Central Bank, has already moved 30bp higher since its mid-January low. We think higher euro rates and yields are the right macro move, but the scope for more movement before the ECB meeting is now reduced. Higher euro rates and yields are the right macro move One potential driver of short-term rate moves is today’s long list of economic releases (see events section below). A surprise jump in core Spanish inflation has proved a warning shot to investors too complacent in their view that inflation is on the decline. The magnitude of the sell-off means that it would take at least as large an upside surprise in the French inflation release today to push rates much higher. This is not excluded, however, and the eurozone-wide print tomorrow will feature an estimated German component as the national statistics office has delayed its own inflation report until the end of the month. 2s5s10s butterflies show curves geared towards rate cuts, prematurely in the case of the euro curve Source: Refinitiv, ING ECB tightening is working its way through but euro-dollar rates differentials should shrink So far, so hawkish for the European Central Bank, but investors might find solace in the fact that policy tightening already implemented is working its way through the economy. If the ECB lending survey confirms the picture painted by December credit growth numbers, it will at least reassure the governing council on that front. This is also an important piece of the jigsaw for central bankers and investors trying to anticipate the path for core inflation. Lower energy costs have shielded growth from the worst of the energy crisis, but also mean less of a drag on demand and non-energy inflation. One of the most notable trend this and next quarters should be the convergence between euro and dollar rates One has to acknowledge that for all the too optimistic inflation view priced by euro rates, this will most likely affect markets on a relative basis. Our US economics team thinks the Fed is winning its fight against inflation, a slowdown in today’s Employment Cost Index would be a further evidence of this, and the economy is heading into a recession. Although this will likely not be on a linear path, this means dollar rates are right to decline, and we think they should reach a trough of 3% later this year in the case of 10Y Treasuries. As result, one of the most notable trend this and next quarters should be the convergence between euro and dollar rates. 5Y EUR swaps are off their January lows but should climb further, especially relative to other currencies Source: Refinitiv, ING Today's events and market view In the run up to tomorrow’s eurozone-wide HICP (inflation) release, today brings France’s CPI print. Yesterday’s surprise surge in Spanish core inflation proved two things: that markets are leaning towards an inflation view that may be correct for the US but is too dovish for the eurozone. It also proved that releases can be volatile, especially around changes in the weighting of price indices. Away from inflation, German unemployment data will be closely scrutinised for signs of a turn in a still tight labour market, and the ECB lending survey will be a key indicator for the central bank to assess how quickly its tighter monetary stance is transmitting to the economy. Finally, we will get a first look at eurozone and Italy fourth quarter GDP after German and French growth surprised to the downside. Bond supply will consist in German 2Y and Italian 5Y and 10Y debt. US releases will be no less relevant for rates markets. The employment cost index for the fourth quarter isn’t a very timely indicator but it is a well-regarded gauge of underlying wage pressure. One day before the Fed meeting concludes, and at a time its focus is increasingly shifting to non-housing core services, this is an important data point. Consensus is for a slowdown to 1.1% quarterly from 1.2% previously. Other US release include house price index, Chicago PMI, and conference board consumer confidence. The latter is geared towards the labour market so any dip in the job-related sub-indices will be another clue about a potential turn in the labour market. 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

French GDP grew by 0.1% in the fourth quarter, allowing the French economy to narrowly escape recession, at least for the time being. There are however few signs that the French economy will recover strongly in the coming months There are few signs of a dynamic recovery of the French economy in the coming months No winter recession in France French GDP grew by 0.1% quarter-on-quarter in the fourth quarter, a weaker figure than in the third quarter (+0.2%) but one that allows the French economy to escape recession, at least for the moment. Over the quarter, household consumption fell sharply (-0.9% compared to +0.5% in the third quarter), mainly due to a drop in food and energy consumption. However, this decline was offset by gross capital formation, which is slowing down but remains dynamic (+0.8% compared to +2.3% in the third quarter), and by a positive contribution from foreign trade, with exports falling less quickly than imports. On average in 2022, GDP increased by 2.6% (after +6.8% in 2021 and -7.9% in 2020). A resilient year, then, despite the major shock due to the war in Ukraine. But it should be understood that the growth of 2022 is above all the consequence of the strong progression at the end of 2021, the so-called carry-over effect. Expected quasi-stagnation in activity in 2023 Looking ahead, the data suggest that the French economic outlook remains uncertain, but far from dramatic. It doesn’t seem on the verge of recession. Nevertheless, escaping the recession does not mean rebounding strongly. Far from it. In fact, there are few signs of a dynamic recovery of the French economy in the coming months. The PMI indices indicate a deterioration in demand: new orders are falling and sales are declining. Household confidence is still at a historically low level and the French view the outlook in a very negative light. Moreover, inflation is expected to rise further in the first half of 2023, which implies that the evolution of real purchasing power will remain very low, dampening the dynamism of private consumption. Within companies, while stocks of finished products are high, new orders are falling sharply, meaning that the clearing of inventories could weigh on activity. In particular, while industrial production should continue to see supply difficulties ease, it is facing much weaker global demand and is still at risk of a renewed rise in global energy prices. The impact of the ECB's tighter monetary policy will begin to be felt in earnest in 2023, with rising rates likely to depress household and business investment. Finally, fiscal policy is expected to be less expansionary, which will be less supportive of economic growth. Ultimately, 2023 should be characterised by a quasi-stagnation of the French economy over all quarters of the year. A slight contraction of GDP in the first quarter of 2023 cannot be excluded. We expect GDP growth of 0.4% for the year 2023 as a whole. 2024 could see slightly better growth, thanks to a more pronounced fall in inflation, although the expansion will probably remain moderate. We expect 1.2% growth for 2024. To see a significant improvement in the outlook for the French economy in 2023, the fall in the price of gas on international markets and the reopening of China will not be enough. There needs to be a clear improvement in household and business confidence. Without this, stagnation remains the most likely scenario for 2023. Read this article on THINK TagsOutlook GDP France 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

Summary:  U.S. equities retreated on profit-taking in a risk-off session ahead of central bank policy rate decisions and a heavy corporate earnings calendar. Ford Motor slashed prices of its EV model in response to the price cut from Tesla recently triggered fear of a price war. Chinese technology and internet stocks as well as U.S. semiconductor names dropped on worries of an escalation of the US-China tech war.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) declined in a risk-off session Markets see red on concern FAANG’s will bite into markets, while caution is around that markets mispriced the Fed will cut rates later this year, plus end-of-month rebalancing hits. The risk is the Fed says it has “more work to do”, which could send equities into a tailspin. Ahead of the Fed, ECB, and BOE meeting this week, for the first time in 2023, with the central banks potentially setting the course of interest rates for the year, risk management resulted in traders and investors booking profits, which dragged the S&P500 down 1.3% and the Nasdaq 100 2.1%.  Tesla (TSLA:xnas) dropped 6.3% after Ford Motor (F:xnys) cut prices of its electric vehicles in response to Tesla’s recent price cuts. Nvdia (NVDA:xnas) plunged 5.9% alongside with other chip makers on the risk of an escalation of the U.S.’ ban on exporting chips to China. We think there the short-term correction may last for a while though we are bullish equities in Q1 overall, so potentially consider taking profits and buying downside optionality (puts), and consider tight stops. Secondly, the worry is that major tech company earnings will continue to slump. This is probably why profit-taking in Meta, Apple, Amazon and Google parent Alphabet is occurring ahead of reporting results. Ultimately, we think their outlooks could set the tone for equities this year. Click here for more on US earnings. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) higher on Spanish inflation upside surprise U.S. Treasuries sold off in price with yields 3bps to 5bps higher across the curve following the rise in European bond yields triggered by an increase in Spain’s EU harmonized CPI to 5.8%, a full percentage point above market expectations. The Treasury Department announced a Q1 borrowing plan of USD 932 billion, larger than its previous estimate of USD 576 billion released in last October. The yield on the 2-year rose 4bps to 4.23% and that on the 10-year climbed 3bps to 3.54%. Hang Seng Index retreated; CSI300 pared opening gains Falling 2.7% on Monday, the Hang Seng Index gave back almost all its gain from last week. The Politico story on the Biden administration’s plan to ban U.S. investments from investing in certain high-tech areas in China, such as AI, quantum, cyber, 5G, and advanced semiconductors triggered profit-taking in mega-cap China internet stocks. Alibaba (09988:xhkg), tumbling 7.1% and Tencent (00700:xhkg) sliding 6.7% were among the biggest losers within the Hang Seng Index. Hang Seng TECH Index plunged 4.8%. The Bloomberg story that reported the Netherlands and Japan had agreed to join the U.S. to restrict exports of advanced chip-making machinery to China added to the woes, in particular shares of Semiconductor Manufacturing International Corp (SMIC, 00981:xhkg), down 5%, and Hua Hong Semiconductor (01347:xhkg) falling 5.1%. Home sales in the 40 major cities during the Lunar New Year holiday shrank 14% from last year. Leading Chinese developer Country Garden (02007:xhkg) plunging 8.3% was the top loser within the Hang Seng Index, followed by Alibaba (09988:xhkg) which tumbled 7.1. Macao casino stocks slid on disappointing traffic that reached just 38% of the pre-pandemic level. CSI300 gapped higher by over 2% at the open when the Chinese market returned from a week-long holiday but pared most of it to finish the first post-holiday trading day only 0.5%. Auto, defense, electric equipment, and electronics were among the outperformers in A shares. Australian shares hold steady, defying negative leads from Wall Street. Australian retail sales fall off a cliff, borrowing falls Australia’s share market, as measured by the ASX200(ASXSP200.I) opened 0.3% higher today at 7,501 defying the futures and US markets negative lead. Not only are Australia shares outperforming US shares this year, but also UK’s FTSE . However, given materials prices could be at risk of a shorter term pull-back as mentioned above, it’s worth pointing out the technical indicators suggest the ASX200’s uptrend is weakening. Our Technical Analyst suggests a possible short term correction down to 7,167 should be ruled out. However, over the longer term, we think upside in the ASX200 is intact with mining companies to report some of the strongest earnings on record, and guide for their strongest outlooks in several years amid China reopening. For stocks, ETFs and baskets to watch, click here.  In company news today, Gold Road Resources (GOR) reported a drop in production in the prior quarter and higher costs due to inflationary pressure, but guided for higher grades in 2023. This follows Oz Minerals (OZL) also guiding for higher costs, which paints a picture of what we can expect for full year earnings season next month. In economic news, retail sales fell 3.9% in December, shocking the market, which expected sales to only decline 0.3%. On top of that, borrowing data also missed expectations. Borrowing rose 0.3% in December, vs Bloomberg’s consensus expecting lending to rise 0.5%. Today’s data is telling as it shows interest rates have taken effect on the consumer, and supports the market thinking that the RBA could potentially pause and then cut rates later this year.  FX: Dollar recovers as risk sentiment deteriorates ahead of Fed The USD was broadly higher against the entire G10 pack on Monday as risk sentiment was hurt by higher-than-expected Spanish inflation fuelling concerns on global inflation remaining higher-for-longer. Lower commodity prices also fuelled some profit taking in AUDUSD which is now testing the support at 0.7050. NZDUSD was also marginally lower but AUDNZD remained above 1.09. EURUSD made another attempt at breaking above 1.09 as ECB rate hike bets picked up, but retreated back to 1.0840 at the US close. GBPUSD also slid to 1.2350. Higher yields saw USDJPY back above 130.50. In FX the US dollar picks up, pushing most currencies off course. The US dollar index has bounced up off it lower and risen 0.5% and pressured most currencies lower, with the Aussie dollar (AUDUSD) falling 0.8% from its high, with the Aussie buying 0.7061 US. The Aussie against the US has fallen under its 200-day moving average after commodity prices rolled over, while there is caution the Fed’s Wednesday’s decision could cause the US dollar to rise. Should we see the Fed only hike by 0.25% as excepted and guide for only one more hike, or if the Fed mentions it’s hikes have been effective, or that its sees interest rates having a lag effect, then the AUDUSD could potentially rally back up. Supporting longer term upside in the AUD is the rise of China’s economy and commodity buying picking up. From a technical perspective, the bull may like to hear the 50 day moving crossed above the 200, indicating the longer term rally could remain intact, despite the RSI indicating, there are currently more sellers right now, than buyers.  Commodity short term pull back risk – with prices already down from fresh peaks; oil down 5.6%, iron ore, copper and aluminium lose 2% ahead of the Fed On Monday oil dropped 2.4%, while most commodities lost almost 1%, with the markets awaiting further evidence China is picking up demand - just as BHP, Rio and FMG alluded to. It seems traders are torn between real demand physical materially rising, but awaiting the Fed’s decision this week, which could result in the US dollar spiking, that would ultimately pressure commodity prices down further. So these factors raise the risk of a short-term correction across the board. That said, resources prices have been really strong up 17-70% from their lows. In 2023 alone iron ore and copper are up 9%, Aluminium up 11%, spot gold up 5%. However, with the commodity prices falling - it also raises the alarm that Aussie dollar and the Aussie share market could be at risk of a short term correction or consolidation as well. The key is to watch the US dollar index. Also keep in mind, over the longer term, commodity prices appear underpinned by rising demand amid lower physical supply. For more on commodities, see Saxo’s Commitments of Traders report, that highlights broad buying slowed in recent weeks. Crude oil (CLG3 & LCOH3) prices slumped as dollar gathered steam Oil prices dropped to three-week lows as the new week kicked off, with another interest rate hike on the table by the Fed this week boosting the US dollar. Higher-than-expected Spanish inflation also served as a reminder that rate hikes can continue.. Meanwhile, China returned from a week-long Lunar New Year holiday and all the gains that were built up in anticipation are now being put to test. The market is also cautious ahead of this week’s OPEC+ meeting. President Putin and Prince Mohammed bin Salman discussed cooperation within the group to maintain the stability of the global market. Russia also formalised its ban on sales to nations adhering to the G7 price cap on its fuel. WTI futures fell below $78/barrel while Brent was down to $85.  Read next: Major Currency Pairs Are Waiting For Central Banks Decisions, USD/JPY Pair Rose Above 130.00, | FXMAG.COM What to consider? Spanish inflation fuels concerns on EU inflation surge Spain’s HICP rose 5.8% YoY for January from 5.5% YoY in December, and came in a whole 100bps above expectations of a softer print at 4.8% YoY. This casted concerns on the pace of slowdown in the Eurozone inflation, and marginally increased ECB rate hike bets as well through the middle of the year. There was a resulting sell-off in bonds and European equity futures in the morning hours, and the risk appetite remained weak in the rest of the session as big earnings data and events in the week were eyed. Meanwhile, German GDP contracted for the first time on a QoQ basis since December 2021, down 2% vs expectations of remaining unchanged. The Adani saga poses some key questions on India for foreign investors India’s corporate governance has come back in focus with the Adani rout, alarming foreign investors who had been looking at India as a potential long-term opportunity especially with a shift away from China. While the extent of collateral damage can be contained and Modi’s popularity will be protected by a lack of coherent opposition, the key concern is how deeply the investor confidence gets dented and whether markets start to question India’s premium valuation. Read our Market Strategist Charu Chanana’s full report here. Expecting pickups in China’s 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 this morning, 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. Japan Productivity Center panel hints at policy tweak Several comments from a panel at Japan Productivity Center hinted at making the inflation target of 2% a long-term goal, suggesting that flexibility around inflation targeting may be considered by the new Chief. USDJPY slid below 130 on the report, before recovering later in the session. The panel also suggested that BOJ and the Japanese government should make a new joint statement so as to make responsibilities of the government clearer. FinMin Suzuki responded to the panel this morning saying that it is too early for a joint statement to consider revising the inflation goal. But speculation of a policy tweak will likely continue as the bOJ leadership changes get closer.   For what is 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: – Profit-taking in a risk-off session, higher inflation in Spain, central bank decisions and corporate earnings ahead, US-China tech war - 31 January 2023 | Saxo Group (home.saxo)

Summary:  Markets suffered a jarring reversal in sentiment yesterday, as US stocks posted their worst session in weeks, with the Nasdaq 100 suddenly back below its 200-day moving average ahead of tomorrow’s FOMC meeting. It’s a busy three-day sprint to the end of this week, with a monthly calendar roll into tomorrow after a blistering performance for equities until yesterday, and a heavy US economic calendar and BoE and ECB meetings up Thursday.   What is our trading focus? Equities: Reversal of fortune Ugly session yesterday in equities with S&P 500 futures erasing the gains from the previous two sessions without any big change in interest rates or new macro releases. It was most likely a reversal of positions and the market repositioning itself ahead of crucial earnings and the FOMC rate decision on Thursday. The picture of equities almost priced for perfection remains the same with the downside risks being larger than the upside risks as leading indicators are suggesting a high probability of recession and earnings indicating significant margin compression. Today’s sentiment will be formed by earnings from UPS, Caterpillar, and Snap as the aggregate information from these earnings will provide a broad-based view of economic activity across many different sectors of the economy. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) extended decline Stocks in the Hong Kong and mainland bourses extended the decline from their recent highs on a risk-off day. After the strong gains in January on the positive development in the potential peaking of the exit wave of inflection in China, traders booked their profits ahead of the U.S. Fed’s rate decision as well as fear about the risk of escalation of tension between the U.S. and China on the technology front.  A recent Politico story on the Biden administration’s plan to ban U.S. investments from investing in certain high-tech areas in China, such as AI, quantum, cyber, 5G, and advanced semiconductors triggered profit-taking in mega-cap China internet stocks heightens such concerns. The Hang Seng Index fell by 1.6% and CSI 300 Index declined by 1% as of writing. FX: Dollar recovers as risk sentiment deteriorates ahead of Fed The USD was broadly higher against the entire G10 pack on Monday as risk sentiment was hurt by higher-than-expected Spanish inflation fuelling concerns on global inflation remaining higher-for-longer. Mid-2024 Fed rate expectations are up some 37 basis points from less than two weeks ago, for example. Lower commodity prices and weak AU Retail Sales also fuelled some profit taking in AUDUSD which is now testing the support at 0.7050. EURUSD made another attempt at breaking above 1.0900 yesterday as ECB rate hike bets picked up further after the hot Spanish CPI release, but retreated below 1.0850. GBPUSD also slid to 1.2350 as the UK is the only G7 economy the IMF forecasts will suffer a recession this year. Higher yields saw USDJPY back above 130.50 at one point overnight. Crude oil (CLH3 & LCOH3) slumps as speculators cut positions Crude oil prices tumbled further on Monday with Chinese demand, tomorrow’s Fed meeting and the stronger dollar in focus.  On balance the outlook for crude oil demand looks supportive as China recover while the supply outlook remains uncertain with the upcoming threat to supply from the next round of sanctions against Russian sales of fuel products. However, having failed to break resistance in the $89 to $90 area in Brent last week, speculators have started to sell some of the 127 million barrels they bought during a two-week period to January 24. The trigger has been the stronger dollar ahead of Wednesday’s FOMC meeting. An OPEC+ monitoring meeting on Wednesday as well is expected to recommend no change in production. Brent is testing support at $83.90, the 21-day moving average, with a break signalling further loss of momentum and long liquidation. Gold (XAUUSD) strength being tested Gold trades lower for a fourth day as the dollar strengthens ahead Wednesday’s FOMC meeting which is expected to deliver a 25-basis point hike accompanied by hawkish comments in order to send home a message that cuts are not on the table anytime soon. In addition, US bond yields rose across the curve after Spanish inflation rose 5.8% instead of an expected drop to 5%, highlighting difficulties in getting the inflation genie back in bottle. Gold has rallied by more than 300 dollars since early November, thereby attracting fresh demand from traders, not least from hedge funds who held 107k lots (10.7m oz), a nine-month high, in the week to January 24. Key support remains at $1900 where the trendline from the November low and the 21-day moving average meet. Below, the market may focus on the 38.2% retracement level at $1822.  Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) yielding few clues amidst tight ranges U.S. yields are coiling within tight ranges, wary of a Fed that may express disapproval at tomorrow’s FOMC meeting of the drastically easing financial conditions over especially the last several weeks, now the easiest according to the Chicago Fed’s measure since March of last year. The FOMC meeting tomorrow and US macro data through Friday’s Jan. ISM Service survey and Jan. Job data will likely have a bearing on yields at the front and longer end of the curve. For the 10-year yield, the 200-day moving average is creeping into the picture from below, now coinciding almost exactly with the cycle low of 3.32% from mid-Jan. Read next: Glovo Is Planning To Layoff 250 Workers Worldwide, The Middle East Is Already Suffering From A Water Shortage| FXMAG.COM What is going on? China’s PMI data bounced back to the expansionary territory China’s manufacturing PMI bounced back to 50.1 in January from 47.0 in December as economic activities have picked up as expected. Non-manufacturing PMI rose more strongly than expected to 54.4 in January from 41.6 in December. The services sub-index jumped to 54.0 driven by the release of strong pent-up demand for in-person services, particularly dining, tourism, and entertainment. The construction sub-index improved to 56.4 from 54.4. The headline new orders index surged to 52.2 from 39.1, while the business activities expectation index rose to 64.9, a decade high IMF expects China to grow at 5.2% in 2023 and 4.5% in 2024 In its World Economic Outlook Update released today, the IMF expects China’s real GDP growth to be at 5.2% in 2023 and then to fall to 4.5% in 2024. The medium-term growth rate in China is expected to settle at below 4% due to “declining business dynamism and slow progress on structural reform”. Spanish CPI for January prints far higher than expected It is perhaps too early for the European Central Bank (ECB) to pause. In January, Spain’s Consumer Price Index (CPI) rose 5.8 % year-on-year. This is higher than in December (5.7%). This is also the first increase since July – something which might worry the ECB a bit. Core inflation (which strips out volatile elements) is not improving as hopes either. It was out at 7.5 % year-on-year in January versus the prior 7.0 % in December. Remember that history is littered with central banks who declared victory over inflation too soon. The ECB does not want to make a similar mistake. Samsung and NXP Semiconductors earnings recap NXP Semiconductors reported earnings last night after the US market close with Q4 revenue and earnings in line with estimates while Q1 revenue outlook of $2.9-3.1bn misses estimates of $3.2bn pushing down the shares down by 3% in the extended trading. Samsung Q4 earnings release show significant margin pressure with Q4 operating profit at KRW 4.3trn vs est. KRW 5.8trn due to pricing pressures across some businesses including the memory chip business. Samsung expects demand for chips to fall in the first half of the year in its foundry business, but then sees a recovery in the second half. Mixed messages for Australian dollar: Coal cargoes head to China, but retail sales slump and borrowing disappoints With commodity prices falling across the board from their highs, and the DXY rising, the Australian dollar continued its 3-day pullback, falling below the 200-day moving average. Adding to the negative short-term picture, weaker than expected Australian retail trade for December (with sales down 3.9% MoM), along with weaker than expected borrowing added to the woes. The weak data is pushing RBA expectations for another rate hike next week lower. More Aussie supportive was the news of two cargos of Australian metallurgical coal making their way to China’s steel production centre, officially ending China’s two-year Australian coal ban. BHP struck the deal with China Baowu Steel earlier this month. The other major miners see China picking up iron ore demand through 2023. What are we watching next? Market conditions finally blink ahead of tomorrow’s FOMC meeting The FOMC meeting tomorrow was meant to confirm the Fed’s further downshift in the pace of its rate hikes with a 25-basis point rate hike and offer few surprises. The anticipation of the Fed reaching peak rates after a presumed additional 25 basis point hike at the March or May FOMC meeting has seen the an at times aggressive back-up in risk sentiment, with a powerful easing of financial conditions The Fed continues to object to the market’s expectation of an eventual rate cutting campaign set to begin by later this year, and it may attempt to surprise somehow on the hawkish side after especially the latter part of the “higher for longer” message from the Fed has been ignored. What does that look like? Difficult to say: a 50 basis point move would be bold but would come as a profound shock to markets. Perhaps the most hawkish message the Fed can deliver on rates would be a refusal to guide for an end of the rate-hike cycle just yet, somehow noting that financial conditions are too easy for it to consider that its policy is sufficiently tight. Yesterday’s chunky back-down in sentiment, the monthly calendar roll and a busy economic US data calendar are other important factors in the mix through this Friday. The Adani saga poses some key questions on India for foreign investors India’s corporate governance has come back in focus with the Adani rout, alarming foreign investors who had been looking at India as a potential long-term opportunity especially with a shift away from China. While the extent of collateral damage can be contained and Modi’s popularity will be protected by a lack of coherent opposition, the key concern is how deeply the investor confidence gets dented and whether markets start to question India’s premium valuation. Read our Market Strategist Charu Chanana’s full report here. Earnings to watch Key earnings day coming up today with our focus on earnings from UPS, Caterpillar, and Snap as these companies typically move markets due to their cyclicality; read our earnings preview from yesterday here. Other key earnings to watch today are from ExxonMobil, McDonald’s and Marathon Petroleum which will provide insights into the global energy sector and especially the market for refined products and availability. We are especially curious about whether energy companies are accelerating their capital expenditures. Today: Canadian Pacific Railway, Daiichi Sankyo, Fujitsu, UBS Group, ExxonMobil, Pfizer, McDonald’s, UPS, Caterpillar, Amgen, AMD, Mondelez, Marathon Petroleum, Electronic Arts, Spotify, Snap Wednesday: Novo Nordisk, Orsted, Keyence, Hitachi, GSK, BBVA, Novartis, Meta, Thermo Fisher Scientific, Southern Copper Thursday: DSV, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Deutsche Bank, Sony, Takeda Pharmaceutical, Shell, ING Groep, Banco Santander, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Apple, Alphabet, Amazon, Eli Lilly, ConocoPhillips, Qualcomm, Honeywell, Starbucks, Gilead Sciences, JD.com, Ford Motor, Ferrari Friday: Coloplast, Sanofi, Intesa Sanpaolo, Denso, CaixaBank, Naturgy Energy, Assa Abloy, Regeneron Pharmaceuticals Economic calendar highlights for today (times GMT) 0855 – Germany Jan. Unemployment Change / Rate 0930 – UK Dec. Consumer Credit / Mortgage Approvals 1000 – Eurozone Q4 GDP estimate 1330 – Canada Nov. GDP 1400 – US Nov. S&P CoreLogic Home Price Index 1445 – US Jan. Chicago PMI 1500 – US Jan. Consumer Confidence 2130 – API's Weekly Crude and Fuel Stock Report 2145 – New Zealand Q4 Employment and Earnings data 0145 – China Jan. Caixin Manufacturing PMI   Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher   Source: Financial Markets Today: Quick Take – January 31, 2023 | Saxo Group (home.saxo)

The bank lending survey shows tightening credit standards and lower demand for borrowing from both households and businesses. This confirms our view of a sluggish economy for most of 2023 and is a clear sign to the ECB that rate hikes are having a substantial impact already European Central Bank building in Frankfurt, Germany   The quarterly bank lending survey released last October indicated weak borrowing ahead and today's January release is flashing red. For the ECB, it shows that the most important channels for monetary transmission are working (it also raises the question of whether the ECB is not doing enough given the usual delay in monetary transmission to the economy). The survey indicates that both credit standards from banks are tightening and demand for loans is declining. Both of these moves indicate weaker borrowing ahead and therefore investment. Banks indicated that investment plans are having a negative impact on demand for business borrowing at the moment, while working capital needs still contribute positively as supply chain problems fade. For households, the ECB reported the sharpest decline in mortgage demand on record. The survey suggests that this is mainly because of higher interest rates, low confidence in the economy, and weakening housing market expectations. This confirms our view that the steady decline in house prices is set to continue at the start of the year. For the ECB, the decline in bank lending for December and the bank lending survey for January together indicate that we see transmission at work now, months ahead of its expected peak in the policy rate. For the doves on the governing council, this will be a key argument to keep further rate hikes limited from here on, while hawks will focus on stubbornly high core inflation. For Thursday we expect a 50 basis point hike. Read this article on THINK TagsInflation GDP Eurozone ECB 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

While most European countries are starting to see inflation fall, the inflation peak has not yet been reached in France. In January, inflation rose again, increasing to 6% from 5.9% in December. While the economy is escaping recession for now, peak inflation is yet to come Demonstration of French bakers against inflation and sharp increase in energy prices. Paris, France Inflation is on the rise again Inflation in France rose again in January, increasing to 6% from 5.9% in December. The harmonised index, which is important for the ECB, stands at 7% compared to 6.7% the previous month. Over one month, consumer prices increased by 0.4% (compared to -0.1% in December) due to the rise in food prices (+13.2% over one year) and the rebound in energy inflation. The end of the fuel rebate at the pump and the revision of the tariff shield, which has led to a 15% increase in household gas bills (compared to a 4% increase in 2022), are pushing up energy inflation, at a time when it is falling in other countries. While government measures on energy prices brought down inflation in France by 3 percentage points in 2022, French households and companies are finally facing higher energy bills, well after their European neighbours. Electricity bills will also increase by 15% in February. On the other hand, inflation in manufactured goods is stable at 4.6% thanks to the winter sales. The good news is that services price inflation remains surprisingly low, even falling to 2.6% in January from 2.9% in December. For the time being, services prices seem to be little affected by cost increases, including minimum wage indexations. Inflation in France will soon be above the European average Headline and core inflation could continue to rise in France in February. Indeed, the 15% rise in electricity bills will push up energy inflation further, and hence overall inflation. At the same time, energy will start contributing negatively to inflation in most other European countries. As a result, French inflation will soon be higher than in neighbouring countries. Beyond the developments in energy inflation, core inflation should continue to rise as well. January PMI surveys indicate that, while production cost inflation is finally starting to fall, businesses’ pricing intentions are still on the rise. This is particularly the case in the services sector – where forecast prices, according to the January INSEE survey, are at their highest level since 1988 – and in retail trade. Many companies are facing the first upward revision of their energy bills, which will continue to push costs upwards. In addition, the four indexations of the minimum wage to inflation in 2022 will continue to lead to increases in all wages. As the French economy is doing better than expected and escaping recession for the moment, it is easier for companies to pass on past cost increases to customers. Add to this the fact that a series of annual price reviews (notably in transport) are due to take place in February, and we can expect core inflation to rise further in the coming months. This should encourage the ECB to continue its tightening cycle. The ECB will probably want to see clear signs of a permanent decline in core inflation before it softens its tone and stops raising rates. Ultimately, average inflation in 2023 in France will probably be higher than in 2022 (we expect 5.5% for the year, and 6.3% for the harmonised index), but the annual profile will be fundamentally different, with a peak that could reach 6.5% in the first quarter, and then a gradual decline from the summer onwards. At the end of 2023, inflation will probably still be above 4%, a level higher than the European average. The deceleration of price developments should continue in 2024, but will still be slow, averaging 2.6% over the year (3.5% for the harmonised index). Read this article on THINK TagsInflation France 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

Only a small increase in unemployment in January shows that the labour market remains an important source of resilience in the economy Almost four million people in Germany work in the metal and electronics industry   German unemployment increased by 162,100 in January, increasing the number of unemployed to 2.616 million. The seasonally-adjusted unemployment rate, however, dropped to 5.3%, from 5.5% in December. Don’t be fooled by the increase in unemployment. This was still the second-best January performance of the German labour market since reunification, with a small caveat that the number of people working in furlough schemes has increased significantly over the last few months. Source of resilience The strong labour market was an important driver of the economy’s resilience last year. A combination of fiscal stimulus, furlough schemes and demographic change seems to have made the German labour market almost invincible. It, therefore, doesn’t come as a surprise that wage pressure has picked up. We expect wage growth of around 5% this year and 3% in 2024. Not included in these numbers are one-off payments that have become more popular in wage bargaining since the government announced it would exempt one-off payments of up to 3000 euros from taxes and social contributions to help alleviate the impact of rising inflation. Earlier this morning, however, the sharp drop in retail sales (-5.3% month-on-month in December) showed that even the solid labour market cannot prevent high inflation and uncertainty from denting private consumption. Read next: Samsung Demand For Semiconductors And Smartphones Remains Weak| FXMAG.COM Looking ahead, the lack of skilled workers remains a huge burden for the German economy. This has been driven not only by the end of lockdowns but also by structural trends like demographic change and it is a problem that is more likely to worsen than improve over the coming years. As a result, Germany will either witness additional wage pressure or a shrinking of the supply side as companies have to scale down production. The labour market has been an important driver of the economy's resilience over the last few years. In the coming years, the labour market will be another symbol of the structural transition that the entire economy will have to undergo. Read this article on THINK TagsLabour market Germany 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

In 2023, many EU sectors will see diminishing growth due to a weak economy. Manufacturing, staffing and construction are likely to face a small decline though not all sectors will shrink. While the Technology, Media & Telecom (TMT) and transport sectors should see lower growth than last year, the outlook remains positive Robotic arms operate in a welding hall of the Suzuki manufacturing plant in Hungary Sluggish developments in many industries Development production (volume value added) EU sectors (Index 2018=100) Source: Eurostat, ING Research (2022 Estimate & 2023 Forecast) Energy prices still a drag but gas and power markets have eased Given the circumstances, European companies could not have hoped for a better situation during the first half of the heating season. Demand destruction, milder-than-usual weather and continued LNG supply have ensured that storage levels are still at record-high levels. Day-ahead TTF gas prices have fallen as much as 83% from the peak in August 2022 and APX power prices by 75%. This leaves Europe in a better-than-expected position for the remainder of this winter and the same is true for the 2023 filling season of gas storages. However, it is still vital that the region is cautious through the remainder of this winter, as Europe needs to try to end the current heating season with storage as high as possible as gas flows from Russia could still be reduced further, both in terms of pipeline flows and LNG shipments. Futures markets currently expect TTF gas prices to trade between 55 and 65 euro/MWh throughout 2023 and carbon prices to remain within their trading band of 75 to 100 euro per ton CO2. Hence, markets currently expect APX baseload power prices to trade between 140 and 175 euro/MWh throughout 2023. That is a lot lower compared to the future prices before the start of the winter, but still three to four times higher than pre-crisis levels. Hence, energy prices will continue to weigh on European sectors in 2023. European gas storage levels are at record high levels EU gas storage levels Source: ING Research based on Refinitiv and Gas Infrastructure Europe Manufacturing: Still cloudy, but gradually clearing up In recent months, the outlook for European industry has improved somewhat thanks to a mild winter and governments bolstering producer confidence by dampening the extreme energy prices. Given the fact that the sector has encountered a growing number of persistent problems, production held up well in 2022. Average growth was around 2%, but sectoral differences were large, ranging from sharp contractions in energy-sensitive basic materials such as chemicals (-5.5%) and base metals (-3.5%), to strong growth in consumer goods such as pharmaceuticals (+14%) and clothing (+5%). Production interruptions have been greatly reduced, but like the high energy prices, are not yet a thing of the past. In addition, a post-Covid consumption shift from products to services and stagnation in the US will most likely continue to weigh on demand in the first half of 2023. The reopening of the economy in China provides some counterweight on the demand side. Manufacturers’ expectations for the near future have become less pessimistic. In addition, automakers clearly continue to benefit from the more reliable supply of semiconductors and other electronic components, which is enabling them to eliminate the large production backlogs. In that respect, it is also encouraging that the Ifo index, Germany's most prominent indicator, rose for the fourth time in a row in January. Still, don’t expect a full-blown industrial upswing in 2023. The more bearish factors dominate for now, and some renewed but subdued growth in the second half of 2023 seems the most realistic scenario. Food manufacturing: Slight decline after two years of strong growth Growth in production volumes in food manufacturing has been particularly strong over the last two years, partially because of a Covid rebound. Over the past 20 years, there are three periods in which production volumes decreased in line with a general economic downturn, namely 2008-‘09, 2012-‘13 and 2020. We believe 2023 could mark a decline in the range of 0.5% to 1% for food makers as the general economy balances between contraction and stagnation. While the inflation peak seems to have passed, there are still many food manufacturers that plan to raise sales prices in the months ahead. However, since December, this group is no longer in the majority. Food inflation came in at 12.2% in 2022 which has likely caused shifts in consumer demand as more households look to save money when shopping for groceries or eating out. For food producers, this could mean that companies that primarily focus on making private-label products and supplying discounters fare a bit better in terms of sales volumes compared to branded food makers. Still, the latter have more pricing power in general and are in a better position to defend margins. Construction: Order books still well-filled In November 2022, EU construction production decreased a bit (-0.4%) compared to October but was still above the volume of a year earlier. Higher interest rates and a weaker economy are making home buyers and firms more reluctant to invest in new residential and non-residential buildings. In addition, higher building material costs have made new investments more expensive although some building materials prices have decreased in the last few months. That said, EU construction firm order books are still well filled with 9.0 months of ensured works at the beginning of 2023. The EU construction confidence indicator declined in the first half of 2022, but since then, has hovered around neutral. So, the developments are certainly not bad in every subsector. High energy prices are creating additional demand for energy-saving construction works in the installation and maintenance market. All in all, we expect only a very slight decrease (-0.5%) in total EU construction volumes in 2023. Increase in sentiment indicator retail and manufacturing sector in January 2023 European Union Sentiment indicators Source: Eurostat, ING Research Retail: Weak start to the year but some recovery expected 2023 is likely to be another interesting year for retail. Last year saw people spend more money than ever at the store and online, although volumes have been on a declining trend since late 2021. This is a clear sign that consumers are suffering from high prices. We also note that pre-pandemic preferences are now returning with consumers once again spending more on services and less on goods. Slowing volumes and easing supply chain problems have led to fast growth in inventories, which could prove problematic early in the year given that consumers are becoming more cautious about spending on goods. The big question mark is how purchasing power will recover over the course of the year as inflation is expected to drop. Wage growth is set to increase, but not to the extent that purchasing power will improve in the first half of the year. Still, with unemployment expected to remain low, there seems to be potential for recovery in sales volumes in the second half of the year. TMT: Growth will slow but remain strong We estimate that growth in the information and communication sector was 5.8% in 2022 and we forecast 3.5% growth for 2023. This is a composite figure that reflects growth above 3.5% in the sub-sector “Computer programming, consultancy, and information service activities”, while growth should be more subdued in the telecom sub-sector. Our expected growth for the information and communication sector is below the historic average, in line with the expected economic slowdown. The sector has been growing much faster than the overall economy over the years. According to European Commission survey data, managers of the largest subsectors of the information and communication sector have a neutral view about the near-term business prospects. They do not think that there are specific factors which will restrain growth, although some managers report it is a challenge to find personnel. Interestingly, the sector is experiencing a lot of price pressure, which is favourable for customers. Nominal growth will therefore be more subdued than volume growth in 2023. Read next: Samsung Demand For Semiconductors And Smartphones Remains Weak| FXMAG.COM Transport & Logistics: Rebound of passenger travel outweighs headwinds for freight The European transport and logistics sector is entering a new phase of reality after the unprecedented impact from the pandemic and the Russian invasion of Ukraine. Unlike 2022, this year starts with (nearly) all travel restrictions removed. With European interest in (leisure) travel continuing to resume, the aviation sector is set to proceed on a low double-digit recovery track. Public transport networks are also expected to see higher occupancy rates. On the dominant freight side, the outlook is bleaker, with consumers spending more on services and demand for goods faltering amidst economic weakness and sanctions. German road transport traffic on motorways – a relevant indicator - ended last year in slight negative territory. But freight logistics could pick up over the course of the year as the European manufacturing sector shows signs of improvement, and China’s Covid policy U-turn could benefit airlines as well as trade (and the ports- and shipping sector). On balance, we expect the transport and logistics sector to grow by 1.5% in 2023. Staffing: Hiring freezes seen due to EU recession fears After two years of buoyant market growth, the outlook for the European staffing sector is darkening for 2023. With economic activity in most European economies expected to slow down, market volumes in the European Union are likely to decline by 1% in 2023. A combination of lower economic growth forecasts and rising costs will likely soften demand for temporary agency workers, especially in certain energy-intensive and/or consumer-oriented industries. Although unemployment will rise slightly, the labour market remains tight in most European economies. Hence, clients are more likely to turn to temp agencies since they are better equipped to find candidates than the clients themselves. However, at the same time, the tight labour market will limit the growth potential of temporary employment agencies, as it becomes more difficult for them to recruit new employees. Read this article on THINK TagsTransport TMT Manufacturing Forecasts Food EU Construction 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

A resilient eurozone economy managed to grow by 0.1% in the fourth quarter, but this likely masks a contraction in household spending. The worst scenarios for this winter have been avoided, but the economy remains sluggish   Despite the energy - and subsequent inflation - crisis, the eurozone economy once again defied recession in the fourth quarter, showing incredible resilience. But it was a narrow escape. Most economies are currently stagnating with near-zero growth. Germany and Italy, as big industrial economies, have seen slight contractions as they suffer more from the energy crisis while France and Spain have managed to eke out small growth rates. Ireland grew by a whopping 3.5% - the recent swings in Irish GDP are to a large degree driven by multinational accounting activity – which has added substantially to the small growth in eurozone GDP. In fact, eurozone growth would have fallen back to 0% if Ireland wasn’t included. While underlying data has not yet been published for eurozone GDP, data from the individual countries paints a picture of contracting domestic demand. The German statistical office mentioned this specifically, and France and Spain saw sharp contractions in household consumption. Imports have fallen significantly while exports held up pretty well, which means that net exports seem to have contributed positively to economic growth in the fourth quarter. When this is due to falling imports, it’s hardly a sign of strength. Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM We’ve argued before that the discussion about a recession has become semantics at this point. Growth has slowed to the point of stagnation. The worst scenarios have been avoided due to longer than expected pandemic reopening effects, extraordinarily warm weather which has eased the energy crisis substantially and more government support. Still, contracting domestic demand does show that after a period of strong post-pandemic spending, consumers are now adjusting their spending to the purchasing power loss they have incurred in 2022. Doubts about continued strong net export growth are also justified in a weak global environment, and investment is set to come under pressure from higher interest rates as borrowing data suggests. This means that an economy performing sluggishly, at best, is expected for early 2023 and a dip below zero cannot be ruled out for the first quarter. Read this article on THINK TagsGDP Eurozone

European markets struggled for direction yesterday, after German Q4 GDP showed a surprise contraction of -0.2% and core CPI in Spain rose to a record high of 7.5%, pushing yields across the bloc sharply higher. With the ECB due to meet later this week and expected to raise rates by 50bps, yesterday's weakness appears to have been driven by concern that the EU economy might not be as strong as thought, and inflation a lot stickier.   US markets also continued their own Jekyll and Hyde behaviour with the Nasdaq 100 posting its biggest one-day loss this year, as the strong rally of last week gave rise to a more tempered approach as the Federal Reserve gets set to kick off its two-day meeting later today.   Yesterday's surprise increase in Spanish core inflation for January to record highs also appears to have raised concerns that high prices might not come down as quickly as thought, and growth a lot slower, despite the recent sharp falls in energy prices. With Asia markets also sliding back this morning, markets here in Europe look set to open lower as we come to the end of what has been a strong month.   Later today we should get a better idea of whether the contraction in the German economy in Q4 was a localised issue, or symptomatic of more widespread economic weakness across the EU.   The French economy is expected to slow in Q4, down from 0.2% in Q3, to 0%, while the Italian economy is expected to contract by -0.2% in Q4. This is expected to translate into a similar weak performance for EU Q4 GDP which is forecast to show a contraction of -0.1%.   The UK economy is also expected to experience a weak quarter, however we won't know the actual numbers on that until next week, but recent lending data has already shown that consumers have already started to rein back on their spending, although we did see a bit of a pickup in November.   Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM   Net consumer credit in November more than doubled from 700k in October, to £1.5bn. This may well have been driven by a surge of holiday bookings judging by the recent November GDP numbers, which showed a strong performance from the travel sector. This resilience may well extend into December with an expectation of £1.1bn.   Mortgage approvals on the other hand, have slowed sharply since the summer months, and are expected to remain subdued in December, with expectations of a fall from 46.1k to 45k.   In the US the latest consumer confidence numbers for January are expected to see another gain to 109, after a surprise surge in December saw this indicator rise sharply to 108.3 from 101.40. This rise in consumer confidence is a little puzzling given that retail sales in the US for both November and December showed sharp declines.   One indicator that is likely to be of particular interest to the Federal Reserve as they convene their latest meeting today is the employment cost index for Q4 which is expected to slow from 1.1% from 1.2% in Q3. This is another key indicator for the Federal Reserve after last week saw core PCE fall to its lowest levels in over a year.  An upside miss on the ECI would be bad news for any sort of dovish expectations from tomorrow's decision.   EUR/USD – we saw another failed attempt to push above the 1.0900 area 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 – has continued to struggle above the 1.2400 area after last week's failure to move through the 1.2450 resistance area. We need to see a move through the 1.2450 area to target further gains towards 1.2600. A move below 1.2250 could see a move towards 1.2170.    EUR/GBP – the failure to make progress through the 0.8850 area last week has seen the euro slip back. Key support remains at the 50- and 100-day SMA which we earlier this month at the 0.8720/30 area. Below 0.8720 targets 0.8680.   USD/JPY – needs to break through the 131.00 area to target a move back towards 132.60. While below 131.00 the risk is for further declines towards the lows at 127.20. We have trend line support at the 129.00 area initially.   FTSE100 is expected to open 18 points lower at 7,767   DAX is expected to open 50 points lower at 15,076   CAC40 is expected to open 22 points lower at 7,060     Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

The US dollar was on an upward trend against its major trading partners early Tuesday ahead of a busy schedule of data releases for markets. The Fed is coming soon. The US central bank is expected to raise interest rates again to fight inflation. However, fears seem to be growing that the price of victory here may be a recession. USD/JPY The Japanese yen (JPY) continues to be supported by fresh speculation that high inflation could lead the Bank of Japan to adopt a more hawkish stance later this year. Also, the overall weaker tone around stock markets further reinforces the safe haven for the JPY. This, along with the underlying bearish sentiment around the US dollar, puts some downward pressure on USD/JPY. The pair lost in the earlier trading hours but is trading above 130.10 again. EUR/USD The euro fell to USD 1.08 in the last session of January, but remains close to nine-month highs. Investors await the ECB's monetary policy decision on Thursday, with the central bank expected to raise interest rates by 50 basis points, bringing borrowing costs to their highest level since 2008. At the same time, data indicating an unexpected growth in the euro area in Q4 2022 by 0.1%, beating market forecasts of a decrease of 0.1%, and fresh CPI data for France and Spain, showing an increase in inflation in January, gave hope that The ECB will soon end its tightening cycle. On the negative side, retail sales in Germany fell by 5.3%MoM in December, much worse than expected. The EUR/USD pair has been falling since the morning, even significantly in the European session, but remains above 1.08 and trades at 1.0850. Read next: The Government Pension Fund Global Suffers Losses| FXMAG.COM GBP/USD The cable continued its decline in the early hours of the Asian session, falling below the 1.2350 level. GBP/USD saw a slight rebound to trade just above the 1.2350 level heading into the European open where the dollar bull returned pushing GBP/USD towards the 1.23000 handle. The GBP/USD pair remains under bearish pressure and is currently trading at 1.2321. The rally on the GBP/USD pair appears to have lost momentum, however, given the key risk events, the move could be due to market participants repositioning ahead of the storm. With the focus on central banks, there is still a real possibility of a policy divergence between the FED and the BoE, which should benefit the cable in some way. The Fed is expected to raise interest rates by 25 basis points while the Bank of England by 50 basis points as it fights persistent inflation. ING strategists said they expected BoE's decision to have a broadly neutral impact on the pound against the dollar. AUD/USD AUD/USD remains under strong selling pressure for the second day in a row on Tuesday and drops to more than a week low ahead of the North American session. The Australian dollar fell towards $0.70, retreating further from recent highs after data showed the country's retail sales fell much more than expected in December as heightened inflationary pressures and higher interest rates dampened consumer spending. Still, Australians are supported by expectations that the Reserve Bank of Australia will continue to fight inflation, expectations for a 25 basis point rate hike in February and China's swift reopening after Covid restrictions have boosted the global economic outlook. Source: investing.com, finance.yahoo.com, dailyfx.com

The EUR/USD currency pair began the week as uninteresting as possible. The trading on Monday and Tuesday was essentially the same. Volatility has long lagged behind expectations, and recent movements can only be defined as flat. As a result, there is nothing noteworthy happening right now on the market. Furthermore, figuring out this "nothing intriguing" is quite challenging. What should you do with a pair that is stuck in one spot? If you can still open intraday trades on a lower time frame to earn 10–20 points, what should you do on a 4-hour time frame? Simply observe and wait. By the way, it doesn't take long to wait. The Fed will already make the meeting's first results public tonight. Since reports regarding another slowdown in the rate of a key rate increase have been constantly exaggerated for more than a month, one could claim the market is already familiar with them. It should be noted that Fed officials do not use rumors or expectations as a guide for action. In other words, although inflation has decreased to 6.5%, the target level is still being missed. How can inflation expectations be calculated using the rate? This week, the Spain consumer price index stopped falling. Many other nations around the world may see a stop to the decline. What if the Fed now reduces its rate to 0.25% and it turns out that inflation is no longer decreasing because the cost of gas and oil has started to rise once more? Will the Fed be protected from such a situation, or will it choose to "go with the flow"? After all, nothing prevents raising the rate for a longer period than initially anticipated. Therefore, it is likely that the rate will increase by 0.25% after all, and the market has long "determined" this outcome "in advance." However, this does not mean that the market will disregard this event. There are two ways to use the euro currency: logically and illogically. Let's return to the technique once more. Since November 3, the euro has increased by 1200 points in value. This means in less than three months. We experienced one correction of 250 points during these three months. Do you think it's excessive? The euro currency is significantly overbought, in our opinion. Although it may have outstanding long-term potential and increase over the next one to two years, its current growth rate and regression pattern are, to put it mildly, odd. As a result, we only advocate for the necessity of adapting at this time. And how does this fit into the fundamental background? It's very easy. If the euro has been increasing by significant amounts in recent weeks, the Fed's rate hike will be slowed down for a reason that has already been determined. The 0.5% ECB rate increase has the same factor. As a result, the market has no motivation to purchase euros once more. This means that rather than a lack of response, we may witness a backlash in the form of a decline in the euro/dollar pair. The ECB's monetary policy will be significant until the euro currency shows at least some correction (we are anticipating a 300–400 point drop). The most widely accepted scenario at present is that the European regulator will raise rates by 1.25% for three sessions, but nobody knows what will happen after that. Lagarde claims that the ECB will continue to raise rates "to the bitter end," but no one is certain of the condition of the European economy in three to four months. The GDP data released yesterday for the fourth quarter of 2017 showed negligible growth of 0.1% q/q. If you compare it to the expectations from a few months ago, this is simply an excellent value. However, the European economy is still slowing down and may soon enter a slight recession. Therefore, in our opinion, the ECB won't suddenly raise rates. It can settle for inflation of 3% to 4% while establishing a more secure, longer-term target to bring it down over the next few years. In this scenario, one of the key reasons for supporting the euro will be gone. As of February 1, the euro/dollar currency pair's average volatility over the previous five trading days was 70 points, which is considered "normal." So, on Wednesday, we anticipate the pair to move between 1.0789 and 1.0929. A new round of downward movement will be signaled by the Heiken Ashi indicator reversing downward. Nearest levels of support S1 – 1.0742 S2 – 10620 S3 – 10498 Nearest levels of resistance R1 – 1.0864 R2 – 1.0986 Trading Suggestions: The EUR/USD pair has finally consolidated below the moving average. Until the price is fixed above the moving average, you can maintain short positions with targets of 1.0789 and 1.0742. After the price has secured above the moving average line, you can start trading long with targets of 1.0929 and 1.0986. The flat is still going at this point, which is something to consider. 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 2023-02-02 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/333832

A lot of data releases and looming central bank meetings means markets will remain choppy without much direction. These releases will shape the way markets react to central banks' tone, starting with the Fed tonight. We suspect investors are biased to buying dollar bonds on dips We expect the Federal Reserve to raise rates by 75 basis points The Fed could over and/or under-hike other rates for technical reasons, but likely won't Apart from the headline funds rate range of 4.25% to 4.50%, which will be adjusted higher by 25bp today, the Fed will also adjust higher the rate on the reverse repo facility and on excess reserves. These are currently at 4.3% and 4.4% respectively, and are often seen as the tighter corridor within which the effective Fed funds rate sits (currently 4.33%). There is constant speculation on the likelihood for the Fed deciding to under-hike the rate on the reverse repo facility There is constant speculation on the likelihood for the Fed deciding to under-hike the rate on the reverse repo facility, to bring it to flat to the Fed funds floor (it’s currently 5bp over). The logic would be to encourage less use of this facility, which routinely takes in US$2trn in excess liquidity on a rolling daily basis. However, in all probability, repo would simply trade down to the same area, without a material effect volumes. There is a similar argument to instead over-hike the rate on excess reserves, say by 30bp (instead of 25bp). The idea here would be to encourage a downsize in use of the reverse repo facility in place of an upside in bank reserves (higher relative renumeration). This would allow the Fed to better manage bank reserves, ensuring that they don’t fall too fast, as they gradually ratchet their balance sheet lower through the ongoing soft quantitative tightening programme (as they allow US$95bn of bonds per month to roll off the front end). There is a similar argument to instead over-hike the rate on excess reserves In all probability they won’t do this either. There is already a 10bp spread between the reverse repo window and the excess reserves one, and widening that to 15bp might not make a material difference. That said, a spread of 20bp just might, and is something the Fed could consider down the line, ie, under-hiking the reverse repo rate and over-hiking the rate on excess reserves. On this occasion, there would be quite a surprise if they did anything along these lines, at least not at this juncture. Widening the RRF-IOER spread would slow the fall in bank reserves Source: Saint Louis Fed, ING The Fed could also upsize the quantitative tightening agenda, but likely won't either The Fed has also been quite silent on the balance sheet roll-off programme. It seems that’s the way they like it – churning away quietly in the background, and not causing too many market ripples. The big question in this space is whether the Fed could consider outright selling of some bonds off its books, and to thereby engage in a harder version of quantitative tightening. It would be huge if they did. There is certainly appetite for bonds in the market, if the recent Treasury are auctions are anything to go by. The big question is whether the Fed could consider outright selling of some bonds off its books However, such selling of bonds outright would likely be a step too far at thus juncture, as it would likely generate a tantrum. But its always there should the Fed start to feel the fall in longer dated market rates is acting contrary to their hiking efforts on the front end. Even a mention that they are looking at this down the line would have a material effect. Not expected, but these are potential market movers that we need to cross off as the meeting outcome unfolds. Importantly, any mention of potential upsizing the bond roll-off in the future or on considering any bond selling (eg, of the longer dated mortgage portfolio) would signal they were uncomfortable with where longer-dated market rates are at. Today's data will frame how markets react to central bank policy We started the week by saying that investors are increasingly relying on their own analysis of economic data, rather than on central bank guidance, to form their opinion about the direction of monetary policy. This is still true. Even in the run up to tonight’s Federal Open Market Committee (FOMC), and tomorrow’s European Central Bank, meetings, data should play a greater role in shaping policy expectation, and the direction of interest rates. Central banks are purposefully behind the curve One of the reasons is that central banks are purposefully behind the curve. Their past mistake in anticipating the inflation surge means they’re unlikely to acknowledge it is going back to target until they have a much higher degree of confidence than now. The other reason is that markets are correctly priced for the next few meetings. We anticipate 50bp more hikes from the Fed, the curve is pricing 58bp, and 125bp from the ECB, the market is pricing 150bp. Swap curves are pricing rate cuts in 2024. The ECB should be more successful in pushing back than the Fed Source: Refinitiv, ING More labour data from the US, and inflation numbers from Europe Where the debate gets more interesting, from the point of view of rates markets, is when one forecasts what will happen next. For the Fed, today’s employment indicators (job openings and ADP) will determine how much credence the market gives its ‘higher for longer’ stance. So far, Fed communication isn’t a success: the curve is pricing almost 200bp of cuts by end-2024. This is despite one having to look very closely at data to see the cracks forming in the labour market. Any change in this state of play could have the curve price even more cuts. Fed communication isn’t a success: the curve is pricing almost 200bp of cuts by end-2024 As things stand, we expect the ECB to be more successful than the Fed in pushing back against rate cut expectations, but they may well be given an assist by today’s eurozone inflation print. This month’s release is proving even more difficult than usual to forecast due to the annual re-weighting of components, and due to Germany delaying its own release until later in February. Spain’s inflation surprised to the upside, France’s didn’t, so markets are none the wiser about today’s release. These releases point to choppy trading without much direction into the key central bank meetings, but they may well shape the way markets react to their tone. Our hunch so far is that investors would be minded to fade any jump in rates on a hawkish FOMC, while a hawkish ECB would be more credible and push euro rates higher, especially at the 5Y point. Today's events and market view The run up to tonight’s FOMC meeting will not be a boring one, for those into economic numbers at least. The main release is eurozone and Italian CPI, with the added uncertainty that the German component will be a temporary estimate. As usual core inflation will be the most important data point for markets trying to anticipate the ECB’s next move. Consensus is for core to slow down from 5.2% to 5.1% on an annualised basis but we suspect market expectations are skewed higher. Other European data publications, manufacturing PMIs, will be less market moving, barring significant revisions from the flash prints. The deluge of economic releases will be interrupted by a 10Y debt sale from Germany. US releases will feature PMI and ISM manufacturing. A fall in the ISMs below 50 last month was instrumental in shifting investor expectations towards our call for a US recession this year, and for rate cuts. If this wasn’t enough, there will also be the ADP employment report, and JOLTS job opening to look out for, all instrumental in assessing when the labour market will allow the Fed to contemplate rate cuts. This busy day will culminate in the evening with the FOMC meeting and Chair Jerome Powell’s press conference. Read this article on THINK

  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)

Weak economic data ran to the rescue of the equity bulls on Tuesday. The S&P500 rallied almost 1.50%, while Nasdaq jumped more than 1.50%. The Federal Reserve (Fed) President Jerome Powell will be thrown to the spotlight today, to potentially shoot a couple of doves down to the ground. But there is always a hope that the falling price and wages inflation will get the Fed to the pivot point. US  The US dollar failed to consolidate and extend gains as the weaker economic data keeps strengthening the Fed doves’ hands. EUR/USD The EURUSD eased as low as 1.08 yesterday, but the pair found buyers on the back of a strong looking GDP data from the Eurozone. China Elsewhere, today’s PMI data from China, released by Caixin, were not as rosy as the one compiled by China Federation and released yesterday. Crude Oil And the barrel of American crude tipped a toe below the 50-DMA yesterday, as the API data revealed another big build in US inventories last week. The more official EIA data is due today, and the expectation is a 1 mio barrel decline, leaving room for further weakness in oil prices. Watch the full episode to find out more! 0:00 Intro 0:36 Equities extend gains on weak US data 2:01 GM, Spotify, Exxon Mobil & Snap posted mixed earnings 5:05 What does Powell think of weak data?! 8:04 Euro rebounds on stronger GDP read, but how strong was the read? 9:25 US crude tips a toe below 50-DMA on large inventory build 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 #meeting #Spotify #Snap #GM #Exxon #earnings #China #PMI #EUR #GDP #ECB #crude #oil #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Recently, there has been a lot of talk about the impact of the Hindenburg Research report on India's Adani group. It seems that the company will cope with the current problems. Another positive is the report on inflation in the euro zone, CPI fell again. In this article: Headline-topping news India's Adani group may have passed a key test The 9th International Conference on Financial Markets EU CPI drop The European Union, 20-country region underwent a major price surge in 2022 after the Russian invasion of Ukraine pushed energy and food costs up across the bloc. However, the latest data provide further evidence that inflation has started to ease. Inflation in the euro zone fell for the third month in a row in January due to a significant drop in energy costs. According to preliminary data published on Wednesday, headline inflation in the euro zone amounted to 8.5% in January. In December this indicator amounted to 9.2%. Energy remained the biggest cost driver in January, but fell once again from previous levels. Now investors of the EUR/USD pair will counter at the Fed meeting and will await tomorrow's decision of the ECB. Euro zone inflation dips for a third straight month as energy prices continue to fall https://t.co/Fy81jgxCKf — CNBC (@CNBC) February 1, 2023 India's Adani group may have passed a key test The world's third richest man completed a $2.4 billion stock sale in a Hindenburg short sale attack. India's Adani group may have passed a key test by raising $2.5 billion in the face of a short-selling attack, but its response to the allegations and results of regulatory probes will shape its outlook, analysts and investors say. Most of the conglomerate's shares fell Wednesday, bringing losses to $84 billion after last week's Hindenburg Research report. Moreover, looking at India, the country is set to be the world's fastest-growing major economy in the year to March 2024 as the post-pandemic retail boom and recent bank balance sheet repairs attract new investment, fueling demand for everything. From @Breakingviews: Gautam Adani completed a $2.4 billion share sale amid Hindenburg’s short-seller attack. His group now faces refinancing challenges. Local lenders may step up, but funding will be pricier with more strings attached, says @ShritamaBose https://t.co/WMdi9lLFf9 — Reuters Business (@ReutersBiz) February 1, 2023 Read next: Intel's Cost Reduction Also Includes Executive Compensation | FXMAG.COM The 9th International Conference on Financial Markets In 2020, the world was stopped by the COVID-19 pandemic, which highlighted the importance of cooperation, flexibility and readiness for unforeseen challenges both in everyday life and in the economy. The year 2022 brought new trials. The war in Ukraine started by Russia has led to turbulence in various sectors, from energy to financial. The 9th International Conference on Financial Markets "Strengthening Recovery, Developing Resilience", co-organized by the Ministry of Finance of the Republic of Lithuania and the Lithuanian Banking Association, brings together high-level decision makers and business practitioners for leadership and ideas exchange on topical topics related to financial markets and more. The forum will discuss the needs of the EU and Baltic capital markets and the actions required. In addition, the further development of capital markets for the Baltic States and an overview of the implementation of digitization and innovation in the sector will be discussed. The Director of the IMF European Department, Alfred Kammer, will participate in a panel discussion at the International Financial Markets conference, focused on capital markets in the Baltics, their challenges and the need for action. Registration: https://t.co/KkDPKQTRM3 pic.twitter.com/F4w5t7Px01 — IMF (@IMFNews) February 1, 2023

Headline inflation continues its fast decline and dropped to 8.5% in January, while core inflation remains stubbornly high at 5.2%. Lacking German inputs, these numbers are tricky to interpret, but for the ECB high core inflation will be enough to hike by another 50bp tomorrow January's eurozone inflation data does not include Germany's numbers   Tread carefully with these January inflation figures. A day ahead of a crucial ECB rate decision, January inflation data have been released but are hard to interpret as German inputs have been postponed. A model has been used to infer German data, making it more prone to revision than in other months. Besides that, we have the annual item weights revision influencing the data, already making it a difficult month to interpret. It's also a month the ECB has put a lot of emphasis on as President Christine Lagarde mentioned in the Q&A of the December press conference that she expected January to have higher inflation as it is a traditional month for passthrough of energy to reach retail prices. If we take the data at face value – and we’ll see on 23 February when final data are released if we were right to do so – we see that core inflation did not show the feared increase. The core inflation rate was flat at 5.2%, but monthly seasonally-adjusted data show another cautious decline to 0.4% growth compared to December. While this is still far too high – annualised this makes 5.3% core inflation – it does mark the fourth month of consecutive declines. While it’s all about core from here on, we do of course see an encouraging trend in headline inflation. The drop from 9.2% to 8.5% is faster than expected. Food inflation remains stubbornly at 14.1%, but energy drives the rate down at the start of the year. A decline from 25.5% to 17.2% reflects lower market prices and significant negative base effects. Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM In recent days, both the Brent oil price in euros and natural gas market prices have declined year-on-year, which will put more downward pressure on consumer prices in the coming months. Price ceilings for energy also have their effect of course, which does work both ways in January. From here on, energy contributions are set to decline substantially given the relatively low market prices we are currently seeing. All in all, the data looks decent as a jump in core inflation has been avoided but uncertainty remains without final German figures. For the ECB, the muddied picture of inflation is annoying, but don’t expect it to throw it off course for tomorrow. The jump in core inflation in some key countries will be enough for the central bank to confirm its current hawkish stance and add another 50 basis points to policy rates. Read this article on THINK TagsInflation 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  

It has been a quiet week for EUR/USD which continues to say close to the 1.09 line. The lack of activity could change in a hurry in the North American session, with the Fed rate announcement. Eurozone inflation slides in January Eurozone inflation is expected to be 8.5% in January, down from 9.2% in December and below the consensus of 9.0%. The key driver behind the decline was energy prices, which rose 17.2% in January, compared to 25.5% in December. Core CPI remained at 5.2%, a notch above the consensus of 5.1%. On a month-by-month basis, Core CPI fell by 0.8%, compared to a 0.6% gain in November and below the forecast of -0.2%. Today’s inflation report is the final key event ahead of the ECB rate decision on Thursday. It’s practically a given that the central bank will raise rates by 50 basis points, bringing the cash rate to 3.0%. After that, the pace of monetary tightening will depend largely on the strength of the eurozone economy and inflation levels. The ECB will be pleased with the drop in headline inflation but concerned that the core rate has been stickier. Germany, the locomotive of the bloc, released dismal numbers this week. Retail sales crashed, with a decline of 5.3% while GDP came in at -0.2%. If German numbers remain weak, the ECB will have to consider easing up on rates with modest hikes of 25 basis points rather than 50-bp moves. The markets are forecasting a terminal rate in the range of 3.25%-3.75%. All eyes are on the Federal Reserve, which is widely expected to raise rates by 25 basis points. This would bring the benchmark rate to 4.75%. Inflation in the US fell to 6.5% in December, marking six straight months of de-acceleration. It appears that inflation has peaked, although the Fed won’t be using the “P” word for fear of an excessive reaction from the markets. The Fed has been more hawkish about rate levels than what the markets have priced in, and if Jerome Powell reiterates this hawkish stance, the markets could be in for a cold shower which would be bullish for the US dollar. Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM EUR/USD Technical EUR/USD is testing support at 1.0878. Below, there is support at 1.0826 1.0921 and 1.1034 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

As investors price the Fed nearing the end of its rate hike cycle, the dollar index is far from its 20-year high of 114.78. Investors said Fed Chairman Jerome Powell's words would be watched closely. Aside from the main event of the Fed meeting, investors will also focus on the ISM manufacturing and job vacancies data due for release on Wednesday for further guidance on the state of the US economy and labor market. Moreover, the ECB and the Bank of England are expected to raise interest rates by 50 basis points (bps) on Thursday. USD/JPY USD/JPY has struggled to gain any significant traction and has fluctuated between small gains and small losses throughout the early part of Wednesday's European session. Spot prices remain below mid 130.00 as investors appear reluctant and eagerly await outcome of two-day FOMC meeting. USD/JPY pair trades below 130.00, at 129.7970. Driven by the risk associated with key central bank events, investors seem reluctant to bet on an aggressive bear market around the USD/JPY pair. In addition, comments from BoJ chairman Kuroda Haruhiko that the central bank must continue its easing policy and keep the inflation target at 2% limit the gains for the JPY. EUR/USD On Tuesday, flash readings of gross domestic product (GDP) in the euro zone in the fourth quarter (Q4) increased by 0.1% q/q against 0.0% expected and 0.3% earlier. The year-over-year printouts also showed a rosy picture for the block as it surged above the 1.8% market consensus to 1.9%, down from 2.3% previously. However, retail sales in Germany fell by 5.3%MoM in December, much worse than expected. According to data from the European Union's statistical office, Eurostat, headline inflation in the euro area fell sharply in January, while the core index remained unchanged from the previous month. Investors said that data on inflation in the euro zone are unlikely to influence Thursday's monetary decision of the European Central Bank (ECB). On Thursday, the bloc's central bank will raise interest rates by 50 bps as traders look to see if officials signal they are likely to maintain a similar pace of hikes at the March meeting, or suggest a slowdown in policy tightening. EUR/USD was little changed after the release, with the pair finding and now stuck below 1.0900. Source: investing.com Read next: India's Adani Group May Have Passed A Key Test, Positive EU CPI Report| FXMAG.COM GBP/USD Fed policy makers emphasized the need to keep interest rates at a higher level for a longer period of time in order to lower inflation. This, in turn, suggests that the Fed will continue to sound hawkish, which in turn provides some support for the US dollar and acts as wind in the sails for the GBP/USD pair. As such, investors will look to the accompanying monetary policy statement and remarks by Fed Chairman Jerome Powell at the post-meeting press conference for clues on the path ahead of interest rate hikes. This will play a key role in influencing USD price dynamics and provide a significant boost to the GBP/USD pair. Then focus will shift to Thursday's Bank of England (BoE) meeting. The cable pair was trading close to 1.2300 during the morning trading hours. It then rose above 1.2330 before falling back and trading at 1.2325. AUD/USD The Aussie pair was rising today and traded above 0.7070 in the European session. The next upward move is likely to remain limited ahead of the key US central bank risk. Overall, the Australian dollar remains generally up. Source: finance.yahoo.com, investing.com

M5 chart of EUR/USD EUR/USD continued to grow quietly during the whole third trading day of the week. Naturally, late in the evening, when the results of the US central bank meeting were announced and Federal Reserve Chairman Jerome Powell's speech took place, volatility increased. The euro grew even more. We don't want to talk about the logic of the movement. Yesterday, the euro rose after the market found out that EU inflation fell and also due to Powell's hawkish rhetoric. Once again we are facing the same situation when the fundamental or macroeconomic background does not matter for the traders. They just use any excuse to open long positions. Yesterday, according to all canons of technical and fundamental analysis, the euro was supposed to start a powerful fall. And that seems to be the reason why it didn't. EUR demonstrated some growth even despite Powell's words about the necessity to keep raising rates and refusing to pause on aggressive monetary policy. What else is there to talk about? The results of the Fed meeting may not be analyzed at all. But traders got lucky with yesterday's trading signals. At the very beginning of the European session, there was a buy signal at 1.0865-1.0868, and the pair managed to rise 40 points till the Fed meeting, which traders could get on a single deal. It was also possible to place the Stop Loss at breakeven before the results of the meeting were announced, hoping for higher profit. In this case, traders could earn about 100 pips. Anyway, the day turned out to be successful in terms of trading. COT report The COT reports for the euro in the last few months have been fully consistent with what is happening in the market. You can clearly see on the chart that the net position of big players (the second indicator) has been growing since early September. Around the same time, the euro started to grow. At this time, the net position of the non-commercial traders has been bullish and strengthens almost every week, but it is a rather high value that allows us to assume that the uptrend will end soon. Notably, the green and red lines of the first indicator have moved far apart from each other, which often precedes the end of the trend. During the given period, the number of long positions held by non-commercial traders decreased by 9,500, whereas the number of short positions fell by 2,000. Thus, the net positions decreased by 7,500. Now the number of long positions is higher than the number of short positions opened by non-commercial traders by 134,000. So now the question is: how long will the big players increase their longs? From a technical perspective, a bearish correction should have started a long time ago. In my opinion, this process can not continue for another 2 or 3 months. Even the net position indicator shows that we need to "unload" a bit, that is, to correct. The overall number of short orders exceeds the number of long orders by 52,000 (732,000 vs. 680,000). H1 chart of EUR/USD On the one-hour chart, EUR/USD left the sideways channel, in which it was for three weeks. At least something positive from yesterday. The euro may rise further, as I don't expect the dovish results of the ECB meeting. But ironically, the euro might fall today. When no one is expecting it anymore. Anyway, be careful, because there is no logic in the pair's movements now. On Thursday, the pair may trade at the following levels: 1.0806, 1.0868, 1.0938, 1.1036, 1.1137, 1.1185, 1.1234, and also Senkou Span B lines (1.0847) and Kijun Sen (1.0917). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On February 2, the results of the European Central Bank meeting will be announced today and there will be as many as two speeches from ECB President Christine Lagarde. Judging from yesterday's events, the euro will rise in any case, but there is no logic in the pair's movements, so we can see absolutely any movement. What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group.   Relevance up to 05:00 2023-02-03 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/333962

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

In our latest update, we reassess our Hungarian economic and market forecasts, as we are waiting proof of a technical recession. Inflation and EU funds remain the key topics in the coming months, but we now see the light at the end of the tunnel in several aspects Hungary's parliament building in Budapest Hungary: At a glance As some hard and soft data suggest more resiliency in external demand, we see better prospects ahead for the Hungarian economy as well. The peak in inflation is still ahead of us and while the start of the new year could bring some ugly surprises, we see some signs of easing pipeline price pressures. The central bank has just turned up the volume regarding its hawkish tone and we see the dovish pivot only in the second quarter. The significantly reduced energy consumption of the country combined with lowering global commodity prices will bring an improvement in the external balance. We see the 3.9% deficit-to-GDP target as roughly realistic, where the key risk remains securing the planned 2.9% of GDP transfers from the European Union. Despite a rough start to 2023 in sovereign rating reviews, we think that agencies are a bit behind the curve, and we are hopeful for a quick turnaround. The forint became the star of the region in the first few weeks of this year and as the market is shrugging off the negative rating actions, we remain bullish on HUF. We expect the steepening bias to continue in local rates, while liquidity conditions remain an obstacle to having a strong view here. Quarterly forecasts Source: National sources, ING estimates First leg of technical recession is already in Even though we haven’t seen the fourth quarter GDP data, the 0.4% quarterly drop in the previous quarter confirms our view that Hungary slid into a technical recession in late 2022. A deteriorating industrial performance, along with weakening retail sales in the fourth quarter do not point to a rebound in activity, thus we forecast the economy to shrink by -1.2% quarter-on-quarter (QoQ). As financial conditions are tightening and households’ purchasing power is deteriorating, we do not expect a rebound in the first quarter of 2023. We expect the Hungarian economy to recover only in the second half of 2023, resulting in a 0.7% GDP growth for the whole year. Nevertheless, an improving global growth outlook poses an upside risk to our forecast, limited by a possible next wave of energy price shock. Hungarian GDP falls in the third quarter, confirming the deteriorating outlook Real GDP (% YoY) and contributions (ppt) Source: HCSO, ING Car manufacturing performance is not enough to save industry Industrial production in November jumped by 0.8% year-on-year (YoY), adjusted for working days. At first glance, it might seem like industry is holding up against the backdrop of high energy prices, but the -0.7% performance on a monthly basis further increases the odds of a technical recession. Even though car manufacturing expanded significantly, the drop in food industry and electronics were much of a drag. The more conscious energy usage has impacted the energy production subsector, further worsening the overall performance. After months of PMI readings above 55+ and consequent negative industry performances, soft and hard data seems to be decoupling. The main reason could be the high level of stock of orders, coupled with capacity enhancing investments, which bode well for the longer-term outlook. Hungarian industry runs into trouble again Industrial production (IP) and Purchasing Manager Index (PMI) Source: HALPIM, HCSO, ING Retail sales are weakening as real wage growth deteriorates Retail sales rose by a mere 0.6% YoY in November, as the 0.15% monthly increase was just enough to put the performance above water for the time being. As food prices were increasing by more than 40% on a yearly basis, consumers are adapting to the new reality by cutting back on the volume of food purchases. What’s even more, only fuel retailing could expand on a monthly basis, by posting a 2.9% growth, since consumers reduced demand for goods from non-food retailers likewise. As the government scrapped the fuel price cap on 7 December, we expect fuel consumption to fall significantly, dragging overall retail sales volume to negative territory going forward. Weakening overall consumption in all three sub-sectors will leave its mark on fourth quarter GDP, thus further increasing the chances of a technical recession. Mediocre Hungarian retail sales continue to drag on growth Retail sales (RS) and consumer confidence Source: Eurostat, HCSO, ING Inflation peak is still ahead of us Even though December’s 24.5% YoY headline inflation surprised to the downside, the peak is still ahead of us. The lifting of fuel price caps pushed the headline reading higher by 2.1ppt in December, while underlying inflation strengthened too. Besides fuel, food and energy remains the main contributor to the extreme inflation. In January-February, we see further acceleration to above 25% as start-of-the-year repricing could be stronger than usual, especially in food and services. This might be the peak however, as pipeline price pressure has started to abate (see producer prices), global commodity prices have been dropping and more retailers are complaining about fading repricing power. The slow and gradual retreat of price pressure will translate into an 18.5% average CPI in 2023, but we see a single digit print by the year-end. Risks tilted to the upside are mainly due to the presence of the price-wage spiral, in our view. Hungary’s inflation accelerates, but less than expected Inflation and policy rate Source: NBH, ING Monetary policy continues its tightening The National Bank of Hungary (NBH) has left the interest rate complex unchanged since mid-October, leaving the base rate at 13.0% and the one-day quick tender as the effective marginal rate at 18%. However, by doubling the required reserve ratio (RRR) – effective from April – at the January meeting, the NBH continues the tightening cycle via liquidity-related measures. Draining excess forint liquidity via targeted and temporary tools, along with stricter RRR will help the central bank achieve price and market stability. As the NBH patiently waits for a material and permanent improvement in the general risk sentiment, we think the first signs of any potential pivot might come only at the March rate setting meeting. But after the January hawkish surprise, we are now skewed a bit more towards the idea that the central bank’s hawkishness will reach well into the second quarter. National Bank of Hungary review: Good things come to those who wait Real rates (%) Source: ECB, NBH, ING Trade balance will improve as energy prices moderate The HUF1,415bn trade balance deficit in goods in November was the second highest on record. The main culprit was the energy import bill, which ballooned as energy prices stayed elevated throughout September. As energy import prices in Hungary follow the Dutch TTF gas prices by a two-month lag, the September 200 EUR/MWh average price put serious pressure on the overall trade balance. With gas prices falling off a cliff from the autumn highs we expect a significant improvement going forward, as October’s average price for TTF was 81 EUR/MWh. For 2023, improvement in the global growth outlook could help the export side, along with a positive outlook for the export-driven industry. In the meantime, gas demand destruction and lower energy prices could help alleviate the pressure on the import side along with the retreating domestic demand. Trade balance (3-month moving average) Source: HCSO, ING Budget shows significant tightening compared to previous years The Hungarian budget posted a HUF1,287bn deficit in December, thus having a HUF4,753bn cash flow-based deficit for the year of 2022, totaling to a Maastricht-based 4.9% of GDP deficit (6.1% with extraordinary gas stockpiling). High energy prices put serious pressure on the overhead reduction scheme embedded in the budget’s expenditure side, which was attempted to be counterbalanced by new windfall taxes and austerity measures. This year, the government is calculating with a deficit totaling to 3.9% of GDP, with the Overheads Protection Fund (HUF2,610bn) and debt servicing (HUF2,074bn) being one of the costliest components. On the revenue side, EU transfers are planned at 2.9% of GDP, signaling confidence in a deal with the EU, however the planned 1.5% GDP growth is higher than our current 0.7% estimate, which poses some negative risk. Budget performance (year-to-date, HUFbn) Source: Ministry of Finance, ING The fate of EU funds is the most important rating driver After dodging an outright downgrade last year, this time S&P changed Hungary’s credit rating from “BBB” to “BBB-“ with a stable outlook in early 2023. Markets do not seem to be bothered by either S&P’s downgrade, or Fitch’s change in outlook from stable to negative in January, suggesting the markets’ take that rating agencies look too much into the rear-view mirror. The factors that have the highest weight in rating decisions remained the same: the fate of the EU deal and economic policies. Regarding the former, we remain optimistic about a final deal being struck between the EU and the government, but in the coming months we see continued uncertainty in headline news. So, we expect Moody’s to follow Fitch in changing Hungary’s outlook from stable to negative at its March review. However, peaking CPI, a rebound in growth and improving external balances alongside EU funds flow might lead to a pivot in rating reviews. CDS and sovereign credit rating (S&P) Source: S&P Global Ratings, ING Forint starts 2023 with impressive outperformance The forint has been the top currency in the EMEA region since the beginning of 2023 and number three in the EM space. Going forward, we believe that the forint still has a lot to offer and see it continuing on its current path. The NBH confirmed the hawkish intent, and we expect to see further progress in the EU story. Moreover, FX-implied yields are by far the highest in the region and the central bank has announced further steps to keep liquidity tight in the market. In addition, we also see favourable conditions for the forint at the global level. While EUR/USD is climbing higher, gas prices still have room to fall in the first quarter in our view, and it is the forint that may benefit the most within CEE. On the other hand, the biggest risk at the moment is the positioning, which is heavily tilted to the long side. Thus, we think further gains in the forint will be slower than what we have seen in the last two months, and moreover, the forint will be sensitive to the global story, with geopolitical escalation impacting gas prices or the EU story. FX performance vs EUR (1 February 2022 = 100%) Source: NBH, ING Short end of the curve to remain volatile in coming months The NBH's decision in January has certainly calmed market speculation of an early central bank rate cut for a while. Also, higher inflation prints should keep the short end at higher levels until at least mid-March. On the other hand, we expect the market to start betting on early rate cuts again near the NBH meeting dates. So, the coming months at the short end of the IRS curve could be pretty volatile, bouncing around in a certain range. The long end of the curve on the other hand has dropped significantly in recent weeks and is not that far from CEE peers. We also don't expect it to have that much room to go lower yet. Overall, we maintain our view for the IRS curve to move lower and steeper. However, NBH and CPI pivoting may be volatile in the coming weeks, which continues to be supported by low liquidity, where we have seen only little improvement so far. Hungarian sovereign yield curve Source: GDMA, ING   On the bond side, Hungary's AKK, like CEE peers, took advantage of favourable market conditions and heavily frontloaded the issuance. According to our calculations, AKK issued 18.2% of its planned Hungarian government bonds (HGBs) and 86.7% of FX bonds. This, together with the cash buffer, gives AKK a very comfortable situation and the ability to stop the issuance if global conditions deteriorate in the coming months. This should limit the scope for a potential sell-off, however we see HGBs still bearing more risks compared to Czech or Romania government bonds and the recent rating and downgrade outlook from S&P and Fitch does not help much. Read this article on THINK TagsQuarterly forecasts Outlook Monitoring Hungary HUF 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

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

'It is gratifying to see the disinflationary process now getting underway' said the Federal Reserve (Fed) President Jerome Powell at his press conference yesterday.  'Disinflation process is getting underway'.   That was the major - and the only take - of his speech yesterday, and sent the markets rallying. The US yields fell, the S&P500 reversed course and rallied more than 1% higher, while Nasdaq jumped more than 2%. The dollar index slumped.   But besides the 'disinflationary process', things went quite according to the plan at yesterday's FOMC meeting. The Fed increased the interest rates by 25bp, as expected. Powell said that they are happy with the falling inflation, but warned that the US jobs market remains tight, and wages growth is still too strong.   Powell didn't call the end of the rate hikes, just yet. On the contrary, the US policymakers signaled that there might be two more rate hikes before a pause, and that the tightness in the jobs market is a risk on inflation.   But all that fell on deaf ears after investors heard that 'disinflationary process started'.   Maybe the surprisingly low ADP report – that revealed that the US economy added a little more than 100'000 jobs last month, suggested that the labour conditions in the US might be easing just before Powell announced the latest FOMC decision? But the weakness in ADP report was mostly due to harsh winter conditions, and the job openings jumped past 11 mio.   Anyway, the Fed meeting was a boon for risk investors.   Note that, at the wake of the meeting, activity on Fed funds futures gives around 83% chance for the next FOMC meeting to deliver another 25bp hike, which would take the rates to 5% mark, as promised by Fed members.   But for equities, there is no reason to think that the bullish sentiment would reverse anytime soon. The S&P500 will certainly make an attempt on its 100-week moving average which stands a couple of points above the 4200 mark, and the 20% rally in Meta shares in the afterhours trading could keep the rally going today.  Apple, Amazon, Google, Ford and Qualcomm are due to announce their earnings today.  

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 and new orders fell to 48.0 (prev. 48.6) and 42.5 (prev. 45.1), respectively. Employment was also softer but still remained above the 50-mark at 50.6 from 50.8 previously. JOLTS job openings in December ramped back up to 11.012mln from the prior 10.44mln, surprising expectations for a fall to 10.25mln and now at their highest level since July. Overall, inflation risks are not going away yet, while growth concerns seems to be settling as well. Eurozone inflation softens marginally January headline inflation data in the Eurozone came in softer at 8.5% YoY from 9.2% YoY mostly underpinned by softer energy inflation, which still remains high at 17.2% YoY (vs. 25.5% YoY in December). While the trend seems encouraging, inflation still remains elevated and unlikely to deter the ECB from being any less hawkish at their announcement due today. German inflation print due next week also remains on watch. Caixin China Manufacturing PMI remained in the contraction territory Caixin China Manufacturing PMI came in weaker than expected at 49.2 in January (vs consensus: 49.8; Dec: 49.0), the sixth month in the contraction territory. According to the chief economist at Caixin, optimism has improved in the manufacturing sector but both domestic and external demand, and logistics were yet to fully recover. The Caixin reading was weaker that the official National Bureau of Statistics Manufacturing PMI, which bounced back to the expansion territory. The softer Caixin survey may be a result of its larger representation of small and medium-sized private enterprises in the coastal regions, as opposed to the NBS Manufacturing PMI’s higher weight in large state-owned enterprises as well as the difference in the timing of the survey. The Caixin survey was conducted in mid-January, about a week earlier than the NBS survey conducted between January 20 to 25, and therefore the former was likely to be more severely affected by the initial “exit wave” of infection. President Xi called for moving faster to establish the new development pattern In the second study session of the Chinese Communist Party’s new Politburo, China’s President Xi called for the country to move faster toward establishing a new development pattern, a concept that he first introduced in April 2020. He emphasized the importance of boosting domestic demand and deepening supply-side structural reform. President Xi also pledged to bring forward the construction of more new infrastructure projects and focus on the real economy and new industrialization. He also called for strengthening the measures against monopoly and unfair competition, as well as guiding and supervising the healthy development of private capital according to the law. The readout from the Politburo meeting mentioned neither “preventing disorderly expansion of private capital” nor “common prosperity”. Hong Kong Q4 GDP shrank 4.2% from a year ago The decline of 4.2% in Hong Kong’s Q4 GDP improved on the downward revised -4.6% in Q3 but was much softer than the -2.9% forecasted by economists surveyed by Bloomberg. On a sequential and seasonally adjusted basis, Hong Kong’s GDP growth bounced to flat Q/Q in Q3 from a 2.6% decline in Q3. The growth in goods export plunged to -24.8% Y/Y while goods import slid to 22.8% Y/Y. Gross domestic fixed capital registered a smaller 11.2% Y/Y in Q4, against 14.4% in Q3. Private consumption picked up to +1.7% Y/Y. Earnings from Apple, Alphabet, and Amazon eyed   The most-watched U.S. corporate earnings this week are from Amazon (AMZN:xnas), Alphabet (GOOGL:xnas), and Apple (AAPL:xnas) which are scheduled to be released today. Amazon has been hard hit by its overinvestment during the pandemic. Things improved in Q3 with accelerating revenue growth but analysts remain skeptical for Q4 expecting only 6% revenue growth Y/Y and adjusted EPS of $0.53 up 10% Y/Y. With the weak outlooks from Intel and Microsoft, there is nervousness in the air ahead of these giant earnings releases. Analysts expect Apple to report the first negative revenue growth rate in three years down 2% Y/Y and a 7% decline Y/Y in EPS. The indications from memory chip manufacturers all indicate a significant slowdown in consumer electronics and it would be weird if Apple could escape those headwinds. Analysts expect Alphabet to report its second straight quarter of negative earnings growth with EPS at $1.32 down 6% Y/Y. Alphabet is the talk of the town due to Microsoft’s $10bn investment in OpenAI and its ChatGPT technology and many are saying is a threat to Google’s search business; in an equity note here, Saxo’s Head of Equity Strategy, Peter Garnry, dives into this discussion and provides our views on the matter. ECB and Bank of England meetings on the horizon After the Fed’s tone being interpreted as dovish by the markets, focus turns to ECB and BOE meetings today. 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. The Bank of England will likely be the trickiest given the indecisive market pricing as well as the scope for a split vote. Read our full preview here.     For what is 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: Stocks rallied and bond yields dropped after Powell declared the disinflationary process had started – 2 February 2023 | Saxo Group (home.saxo)

Summary:  Traders felt that the FOMC failed to push back sufficiently against market expectations for the Fed to reach peak rates soon and begin cutting rates by year end, which drove a fresh rally in equities and took the US dollar to new cycle lows almost across the board. Let’s see if the key US data up on Friday further encourages the USD bears. In the meantime, the Bank of England and ECB are on tap today. What is our trading focus? Equities: Momentum continues on Powell declaring part victory over inflation While the Fed is still cautious and wants to send hawkish signals including a goal of moving the policy rate to 5% or slightly more, Powell’s comments about inflation is beginning to ease was extrapolated in the equity market. S&P 500 futures rallied another 1% in yesterday’s session and this morning they have opened just below the 4,150 level suggesting traders are eyeing the 4,200 level which was the approximate air pocket area last time S&P 500 futures visited this area back in August of last year. The truth is that Powell did say anything new but as long as the message was not too hawkish the equity market had the excuse it needed for continuing higher. Adding to positive sentiment was Meta’s better than expected outlook announced after the US cash equity market closed. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) little changed in lackluster trading The Hang Seng Index advanced modestly on the back of a strong rally in U.S. equities overnight and less upward pressure on domestic interest rates. Baidu (09888:xhkg), rising 7.3%, extended its strong recent gains on the ChatGPT concept and following BlackRock raised its stake to 6.6% from 5.4% in the Chinese search engine giant. Baidu was the best-performing stock on the Hang Seng Index for the second day in a row. Li Auto (02015:xhkg) climbed 2.4% after reporting delivery of 15,141 units of EV in January,  up 23% Y/Y. On the other hand, NIO (09866:xhkg) slid 4.3% following a 12% Y/Y decline in delivery to 9,652 units in January and on reports that the Chinese EV maker is cutting prices. Chinese mobile gaming stocks traded in the Hong Kong bourse soared with Forgame (00484:xhkg) leading the charge and jumping over 80%.  CSI 300 traded sideways and was flat to yesterday’s close as of writing. ChatGPT concept, eCommerce, Chinese white liquor, machinery, and semiconductor stocks outperformed. FX: USD bears back in action after dovish read of FOMC 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 session. The ECB may need to match market pricing for further hawkishness today to sustain this level. An interesting test for EURGBP as it trades into the upper reaches of its range near 0.8900, by the way, on possible relative surprises from the ECB and Bank of England meetings today. USDJPY slumped back below 128.50 with focus turning to BOJ Governor nominees to replace Kuroda, who leaves in early April. AUDUSD rose to 0.7150 but USDCAD was choppier as lower oil prices weighed on the loonie. Crude oil (CLH3 & LCOJ3) starting February on the backfoot Crude oil started February by sliding more than 2.5% on Wednesday after US data showed a further inventory built. Crude stocks rose 4.1 million barrels, its sixth consecutive weekly build, to the highest since June 2021. OPEC+ meanwhile reaffirmed their commitment to current output quotas after meeting on Wednesday. It is monitoring the impact of China’s reopening on demand. On February 5, the EU will ban almost all seaborne imports of Russian refined products, and just like Russian crude, diesel is already selling at a heavy discount of more than 25 dollars a barrel. Oil staged a partial, but weak post-FOMC rebound as the dollar weakened. The Brent prompt spread remains in a bullish backwardation structure which points to some underlying strength. Gold (XAUUSD) breaks higher on dovish Fed Gold reached a fresh cycle high after the Fed announced a 25bp hike and Chairman Powell said the committee had concluded the disinflationary process had started, and despite using the phrase “ongoing increases” he failed to push back enough on easing financial conditions. As a result, the market concluded the end of the rate hike cycle is near, and this focus helped weaken the dollar to a fresh cycle low while supporting a rally in gold to $1957, its highest since mid-April 2022. 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. Minor support at $1935, $1920 ahead of $1912. Silver (XAGUSD) meanwhile managed, for a change, to keep up with gold resulting in the XAUXAG ratio declining to 81 from above 82.5. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) dropped as hopes for rate cuts in H2 heightened See more on last night’s FOMC dovish meeting below, but the general read is that Fed Chair Powell failed to push back against sufficiently hard against market expectations that the policy rate will soon peak and economic developments will see the Fed in easing mode in the second half of this year.  AFter a soft ISM Manufacturing data point and weak ADP payrolls growth, he yield on the 2-year and the 10-year tumbled 9bps each to 4.11% and 3.42% respectively. A stronger JOLTS job openings data (note: for December) failed to garner much attention. What is going on? Market reads FOMC monetary policy statement and presser as dovish. 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 statement 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 50 bps of rate cuts in the 2nd half of 2023, following another 25bp increase in March. The SOFR futures curve implies further 143 bps of rate cuts in 2024. These implied rates bring the Fed Fund target to 4.25%-4.50% by Dec 2023 versus the Fed’s December dot plot of 5%-5.25%, and to 2.75%-3.00% by December 2024, that is 125bps below the Fed’s projection of 4%-4.25% Meta earnings: greed triumph idealism Mark Zuckerberg did listen to investors after all acknowledging that the idealism of the Metaverse and the huge capital expenditures it requires were too much given the environment. Meta announced a lower-than-expected operating expense and capital expenditures level for FY23 and that was exactly what the market wanted to hear. The shares rallied 20% in extended trading on this aggressive cut in expected expenses. In Q4, the company lost another $4.3bn on its Reality Labs segment (Metaverse bet), but revenue was higher in this segment and overall, in the entire advertising business. On the Q1 outlook revenue guidance was $26-28.5bn vs est. $27.3bn indicating a slightly better performance than Snap indicated yesterday for Q1. Meta also authorized the share buyback programme to be increased to $40bn. US ISM manufacturing was weaker than expected, but Prices Paid above expectations. 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 and new orders fell to 48.0 (prev. 48.6) and 42.5 (prev. 45.1), respectively. Employment was also softer but still remained above the 50-mark at 50.6 from 50.8 previously. JOLTS job openings in December ramped back up to 11.012mln from the prior 10.44mln, surprising expectations for a fall to 10.25mln and now at their highest level since July. Overall, inflation risks are not going away yet, while growth concerns seems to be settling as well. Eurozone headline inflation softens more than expected, but core inflation fails to drop. January headline inflation data in the Eurozone came in softer at –0.4% MoM and 8.5% YoY from 9.2% YoY mostly underpinned by softer energy inflation, which remains high at 17.2% YoY (vs. 25.5% YoY in December). While the trend seems encouraging, inflation remains elevated at the core at +5.2% YoY versus the small drop to 5.1% expected. This data is unlikely to deter the ECB from staying on course with further tightening. A delayed German inflation print for January is due next week. Read next: USD/JPY Pair Drop Below 130.00, GBP/USD Is Trading Below 1.2330, The Australian Dollar Remains Generally Up| FXMAG.COM China’s President Xi called for moving faster to establish the new development pattern In the second study session of the Chinese Communist Party’s new Politburo, China’s President Xi called for the country to move faster toward establishing a new development pattern, a concept that he first introduced in April 2020. He emphasized the importance of boosting domestic demand and deepening supply-side structural reform. President Xi also pledged to bring forward the construction of more new infrastructure projects and focus on the real economy and new industrialization. He also called for strengthening the measures against monopoly and unfair competition, as well as guiding and supervising the healthy development of private capital according to the law. The readout from the Politburo meeting mentioned neither “preventing disorderly expansion of private capital” nor “common prosperity”. Shell beats on Q4 earnings One of Europe’s largest oil and gas majors reported Q4 adjusted profit of $9.8bn vs est. $8.3bn driven by higher-than-expected oil and gas output for the quarter. Q4 dividends are lifted to $0.2875 per share vs est. $0.285. What are we watching next? ECB and Bank of England up today. The market read on the Fed was dovish after fearing that Powell might be on the warpath against market expectations. Expectations for today’s ECB meeting are rather different as hotter core CPI reads in Europe have the market fearing considerable further ECB tightening – but can the ECB deliver beyond market expectations, with more than 100 basis points after today’s 50 bps hike expected at coming meetings?. After last night’s reaction to the FOMC meeting, the 2-year yield in 2-year's time for the EU and US is virtually at parity coming into today’s ECB meeting. The Bank of England meeting today is less certain, as the BoE may try to sneak in more cautious guidance, given the weak outlook for the UK economy, even if that outlook has improved. Besides today’s expected 50 basis points hike, watch for a potential downshift in guidance to less pre-commitment to further tightening, backed up by possible adjustments to inflation forecasts that are also due for a refresh today. The EURGBP in an interesting pair to watch today for relative central bank surprises as it pushes towards the top of its range into 0.8900. Earnings to watch Today is the week’s big earnings day with key earnings from Apple, Alphabet, and Amazon all being released after the US market close. With the animal spirits unleashed this year and helped by Powell’s comments yesterday better than expected results from these three technology giants could unleash a rally into the weekend. Today: DSV, Dassault Systemes, Siemens Healthineers, Infineon Technologies, Deutsche Bank, Sony, Takeda Pharmaceutical, Shell, ING Groep, Banco Santander, Siemens Gamesa Renewable Energy, Nordea, Roche, ABB, Apple, Alphabet, Amazon, Eli Lilly, ConocoPhillips, Qualcomm, Honeywell, Starbucks, Gilead Sciences, JD.com, Ford Motor, Ferrari Friday: Coloplast, Sanofi, Intesa Sanpaolo, Denso, CaixaBank, Naturgy Energy, Assa Abloy, Regeneron Pharmaceuticals Economic calendar highlights for today (times GMT) 1200 – UK Bank of England Rate Announcement1230 – UK Bank of England Governor Bailey press conference1230 – US Jan. Challenger Job Cuts1315 – ECB Rate Announcement1330 – Q4 Unit Labor Costs / Nonfarm Productivity1330 – Czech National Bank Rate Announcement1330 – US Weekly Initial Jobless Claims1345 – ECB President Lagarde Press Conference1500 – US Dec. Factory Orders1530 – EIA's Weekly Natural Gas Storage Change1730 – Swiss National Bank’s Thomas Jordan to speak Follow SaxoStrats on the daily Saxo Markets Call on your favorite podcast app: Apple  Spotify PodBean Sticher Source: Financial Markets Today: Quick Take – February 2, 2023 | Saxo Group (home.saxo)

It is gratifying to see the disinflationary process now getting underway’ said the Federal Reserve (Fed) President Jerome Powell at his press conference yesterday. ‘Disinflation process is getting underway’. Stock market That was the major - and the only take - of his speech yesterday, and sent the markets rallying. The US yields fell, the S&P500 reversed course and rallied more than 1% higher, while Nasdaq jumped more than 2%. The dollar index slumped. Fed At the wake of the meeting, activity on Fed funds futures gives around 83% chance for the next FOMC meeting to deliver another 25bp hike, which would take the rates to 5% mark, as promised by Fed members. And for equities, there is no reason to think that the bullish sentiment would reverse anytime soon. What else? Apple, Amazon, Google, Ford and Qualcomm are due to announce their earnings today. The European Central Bank (ECB) and the Bank of England (BoE) are both expected to raise the interest rates by 50bp today But it won’t be the same 50bp hike. Watch the full episode to find out more! 0:00 Intro 0:31 One phrase: ‘disinflationary process is underway’ 4:31 Facebook’s Meta pops 20% after earnings 6:33 ECB to hike by 50bp 8:17 BoE to hike by 50bp, as well, but… 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. #ECB #BoE #Fed #FOMC #meeting #Powell #disinflation #Meta #Apple #Google #Amazon #Ford #Qualcomm #earnings #USD #EUR #GBP #FTSE #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

Equity markets are off to a strong start on Thursday, buoyed it seems by the Fed’s latest decision and Meta earnings. While Powell was determined not to overplay the shift in the Fed’s views on inflation and interest rates, certain comments were well received by the markets. The acceptance that the disinflation process has begun, being one obvious comment, but this was also paired with him stressing that they need substantially more evidence and to hike a couple more times before monetary policy is appropriately restrictive. All things considered, I think there was enough there to conclude we’re almost at an end on tightening and market expectations of one more 25 basis point hike and maybe a couple of cuts later in the year look reasonable. Of course, there’s plenty of data to come before the next meeting in March so a lot could change in that time. What will the ECB and BoE deliver? Now it’s over to the ECB and BoE to deliver their decisions, both of which are expected to be 50 basis point hikes. But what comes next is the key question in both cases. The BoE is hiking the UK economy into recession but inflation remains stubbornly very high. The ECB meanwhile was very late to the party and has some catching up to do, while the economic backdrop looks a little better than it did in December. The BoE decision is also accompanied by a press conference with Governor Andrew Bailey and his colleagues, as well as the latest monetary policy report and new projections. That should make this event very interesting, indeed, as we’ll get a better insight into how effective the MPC believes past hikes have been, when we’ll see the results and how much more they think are necessary. Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend ,The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM Can big tech follow in Meta’s footsteps? Earnings season has been tough so far this quarter but Meta managed to put a smile on investors’ faces, announcing slightly better revenues than expected, a plan to reduce costs and make the company more efficient this year, and a $40 billion share buyback. That has seen the share price rise almost 20% in premarkets, and Nasdaq futures to rise more than 1%. The question now is can Apple, Amazon, Alphabet and others deliver similar results today. Oil drifts lower Oil prices drifted lower again on Wednesday on the back of weaker manufacturing activity data from the US and a strong build in the EIA inventory data. Prices have been on the decline over the last week or so as investors have become less confident in the strength of the outlook, something we could see change repeatedly in this first quarter due to the lack of visibility on interest rate and China’s Covid transition. Gold liked what Powell had to say Gold was clearly buoyed by what the Fed and its Chairman had to say, with the price rallying back above $1,950 and out of its recent range. It’s now trading around $1,955, the one concern being the weak momentum backing it. That could change of course but it likely faces strong resistance on approach to $2,000, with $1,975 being an interesting test last time around. Major resistance ahead Bitcoin has done very well in a much improved risk environment so far this year and it has taken another step in the right direction over the last 24 hours, hitting a new 6-month high in the process. It now faces significant resistance around $24,500-$25,500, a break of which could give it a massive psychological lift. 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 European Central Bank will increase interest rates by 0.5 percent once more today, but investors will be more focused on any indications of how the cost of borrowing will change following this week's meeting. Figures from Tuesday may change the officials' minds The Federal Reserve System's decision to slow down the rate of interest rate hikes yesterday had a beneficial effect on the positions of the European currencies. If investors do not learn about the ECB's more aggressive strategy in the spring of this year, the bull market could easily change today. Without a new supply of the euro, it will be challenging to maintain current highs, as the second consecutive increase in interest rates by 50 basis points has already been factored into current prices. The pricing figures from Tuesday may change the officials' minds, despite their frequent warnings about high inflation during January and their insistence on continuing the previous pace of rate increases. Since, as I mentioned above, inflation is declining, but at the same time other indicators suggest that additional actions from the ECB may be necessary to suppress the strongest price jump in the eurozone in the last generation, the issue of whether there will be a third 0.5% increase in March or the ECB will still follow the Federal Reserve System is currently the subject of intense debate. The president of the European Central Bank will undoubtedly argue at today's meeting that core inflation is still high. The speeches ahead  In Frankfurt, the ECB will deliver its announcement at 14:15. President Christine Lagarde will speak right away, half an hour after pledging that she and her colleagues will "keep the course" in the fight against inflation. Joachim Nagel, the president of the Bundesbank, and Francois Villeroy de Galhau, the representative of France, have already endorsed two additional measures to raise the rate by half a percentage point beginning with today's meeting. In other words, there is still at least one more meeting in March where the hawks can also get a 0.5% rate increase. The emphasis is now on the language of the ECB statement and Lagarde's statements, which will be studied for signals as other council members argue for a more gradual approach. By May of this year, the ECB deposit rate is anticipated to reach a peak of 3.25%. A further 50 basis point increase is anticipated by economists for next month, followed by a pause in aggressive policy in May. The economic outlook The economic outlook has improved, but it is still uncertain because demand is still declining as a result of the increasing cost of living. Households are probably not significantly impacted by a large decline in natural gas costs at the wholesale level. This won't result in immediate economic growth; it will only help the ECB get inflation back to normal more quickly. Regarding the ECB's effort to reduce its balance sheet, the regulator decided in December to gradually begin selling off its about 5 trillion euro worth of bonds. The total balance is anticipated to decline by 15 billion euros per month from March through the end of June, and the future rates will be adjusted as appropriate. EUR/USD  Regarding the EUR/USD technical picture, the demand for the euro has grown and might continue. To do this, the trading instrument must maintain a price above 1.1000, which will cause it to break through near 1.1050. Above this point, you can quickly reach 1.1090 and have the potential to update to 1.1125. Only if the 1.1000 support fails will the pressure on the pair rise, pushing the EUR/USD to 1.0960 with a possible drop to a minimum of 1.0920 in the case of a decline in the trading instrument. GBP/USD Regarding the technical picture of the GBP/USD, trading continues within the channel. Buyers need to return over 1.2420 to restore their advantage. The only way to increase the likelihood of a further recovery to the area of 1.2470 and, ultimately, a stronger movement of the pound up to the area of 1.2540, is for this resistance to break. After the bears seize control of 1.2350, it is feasible to discuss the pressure on the trading instrument. The GBP/USD will be forced back to 1.2290 and 1.2230 as a result, hitting the bulls' positions.   Relevance up to 08:00 2023-02-03 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/334000

Jerome Powell had a lot to say during the press conference after yesterday's FOMC decision to raise the Federal Funds rate by 25 basis points. He stressed that the inflation risk persisted despite favorable disinflation observed in most sectors. The European Central Bank (ECB) and Bank of England (BoE) will meet later today and both banks are expected to raise their interest rates by 50bps. USD/JPY The dollar slide against the Japanese yen, dropping to as low as 128.07, its lowest in two weeks. Prior to the FOMC event, USD/JPY rose, approaching the falling resistance of the trendline, and then fell. USD/JPY rebounded after finding an intermediate cushion around 128.20 in the Asian session. Considering the risk sentiment in the market, the downtrend is intact. Now the USD/JPY pair is holding above 128.35. As the Bank of Japan keeps the 10-year Treasury yield at 0.5%, the falling US equivalent continues to narrow the interest rate differential, indicating continued declines in the USD/JPY pair. EUR/USD EUR/USD hit a 10-month high at 1.1033 today. EUR/USD pulled back slightly after reaching its highest level since early April at 1.1033 during the Asian trading hours on Thursday. The pair's technical outlook points to overbought conditions in the short term, but market participants may bet on further strengthening of the euro if the European Central Bank (ECB) repeats its hawkish message. The ECB will raise the main interest rate by 50 bp. The decision itself is largely priced in and is unlikely to receive a significant backlash. Some ECB policymakers have advocated a further 50 basis point hike at the next meeting, and the euro could gain strength if a policy statement or ECB President Christine Lagarde confirms such an action. Additionally, EUR/USD could maintain its bullish momentum if the ECB refrains from being optimistic about the inflation outlook. The EUR/USD pair fell below the 1.1000 level but slightly and is trading at 1.0991. GBP/USD GBP/USD drops towards 1.2300 during European trading hours. Sterling remains under slight downward pressure as investors wait for the BOE decision on interest rates. Despite strong selling pressure around the US dollar late Wednesday, GBP/USD's gains remain contained, especially against EUR/USD. On Thursday, the BOE is expected to raise its key rate by 50bps to 4% from 3.5%, but the GBP/USD pair could extend the decline nonetheless. At this point, a BOE rate hike of 25 basis points would be a dovish surprise and weigh heavily on sterling. Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend ,The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM AUD/USD The Australian dollar appreciated past $0.71 to its strongest levels in nearly eight months, as the US Federal Reserve reduced the size of its rate hike and said it has made progress in the fight against inflation. The aussie also remains supported by expectations that the Reserve Bank of Australia will press on with its fight against inflation and by China’s rapid reopening from Covid curbs. From a technical point of view, the daily chart of AUD/USD suggests that the pair will continue to rise. Source: investing.com, finance.yahoo.com

The European Central Bank has hiked interest rates by 50bp and made a quasi-announcement of a further 50bp hike in March, opening the door to either a pause or a slower pace in its hiking cycle   And they did it again. The ECB hiked interest rates by 50bp, bringing the deposit rate to 2.5% and the refinancing rate to 3%. But there was more, the ECB quasi pre-announced another rate hike next month by 50bp as well, opening the door to either a pause or a slower rate hike pace beyond March. The ECB also confirmed the December decision that the Asset Purchase Programme (APP) portfolio will decline by €15bn per month on average from the beginning of March until the end of June 2023. Not done, yet It took the ECB a while, but it seems to have got the hang of it: hiking interest rates. And as long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. The increasing probability that a recession will be avoided in the first half of the year also gives companies more pricing power, showing that selling price expectations remain elevated. The celebrated fiscal stimulus, which has eased recession fears, is an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation. These are two factors that could extend inflationary pressures in the eurozone, albeit at a lower level than we see at the moment. As a consequence, we expect the ECB not only to continue hiking into late spring but also to keep interest rates high for longer than markets have currently pencilled in. Whether the ECB agrees with this view or not might become clearer at the press conference, starting at 2.45pm CET. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB 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 European Central Bank increased the interest rate by 50 points at this year's first meeting, while announcing a 50-point hike at the next meeting in March. Despite such hawkish results of the February meeting, the euro came under pressure. The single currency retreated from a multi-month price peak (1.1034) and returned to the area of the 9th figure. Anomalous, at the first glance, market reaction is due to several factors. Spring is near If you assess the February meetings of the Federal Reserve, Bank of England and ECB, you can take note of one general characteristic. On the one hand, central banks declared the continuation of a hawkish course, but on the other hand, they made it clear that aggressive monetary policies are coming to an end. That's why the dollar was under attack at the end of the Fed meeting, the pound was under pressure by the end of the BoE meeting, and the euro was losing ground by the results of the ECB meeting. At the same time, traders actually ignored the fact that the central banks announced further steps to monetary tightening. For example, ECB President Christine Lagarde without any vague wording, which is considered "straightforward", announced that the ECB intends to raise interest rates by another 50 basis points during the next meeting in March. According to her, the disinflationary process hadn't begun, despite the slowdown in the overall consumer price index (core inflation continues to show an uptrend). It would seem that such straightforward hawkish verbal signals should have served as a springboard for the euro. But instead of growth to the resistance level of 1.1090 (the upper line of the Bollinger Bands indicator on the weekly chart), the price turned 180 degrees and was marked in the area of the 8th figure, followed by the retreat to the area of the 9th price level. Why did this happen? First of all, Lagarde, while announcing monetary tightening in March, questioned the further growth of interest rates. According to her, after the March decision "the ECB will evaluate the subsequent path of monetary policy." At the same time, market expectations (in particular, currency strategists at Danske Bank and a number of other large conglomerates) are more hawkish. The assumed scenario includes a 50-point hike in March and a 25-point increase at the next meeting (by 50 points according to some other analysts). Therefore, Lagarde's "wrap-up" sentiment was negatively received by EUR/USD bulls. The single currency was under pressure as traders took the ECB's message as a sign that the central bank nears the end of its rate hike cycle. In my opinion, the market adequately assessed the situation and correctly perceived the signals of the ECB. Secondly, the ECB head emphasized her stance on problematic aspects - in particular, she said that economic activity in the European region has slowed down noticeably. At the same time, "high inflation and tighter financing conditions, these headwinds dampen spending and production,". Such comments put pressure on the euro. Nevertheless, despite the euro's negative response, the EUR/USD pair did not collapse into the area of 7-6 figures, but only retreated from the multi-month price high to the base of the 9th price level. The underlying reason for such stress tolerance is that Lagarde tried to maintain a balance in her rhetoric. On the one hand, she announced a "guaranteed" 50-point hike in March, on the other hand, she questioned further steps towards tightening. On the one hand, Lagarde complained about the slowdown in economic activity; but then she also admitted that the European economy has been more resilient than expected. Moreover, according to forecasts, the economy will show signs of recovery in the coming quarters. At the same time, the ECB head pointed to the optimism of entrepreneurs (obviously referring to the PMI and ifo indices), stable gas supplies to Europe and reduced interruptions. Conclusions Figuratively speaking, the scales are back in equilibrium again: The Fed put pressure on the dollar, and the ECB put almost as much pressure on the greenback. The bulls couldn't conquer the 10th figure, the bears couldn't pull the price down to the 7th figure (and even failed to get a foothold at the 8th price level). Now everything will depend on the values of the key macroeconomic indicators, first of all, in regards to inflation. If core inflation in the European region persistently climbs up, the ECB may raise the rate not only in March but also at the next meeting. The US faces a similar situation: the Fed chief has declared a hawkish course, "tying" the scope of monetary tightening to the dynamics of key inflation indicators. Each inflation report and each inflation component (both in the US and Europe) will be viewed through the prism of further central bank actions. Following the Fed and ECB meetings, the pair remained in the 1.0850-1.0970 range within which it has been trading for several weeks. In my opinion, in the mid-term perspective, the pair will fluctuate in the given price range, alternately pushing back from its limits, reacting to the current information flow.   Relevance up to 01:00 2023-02-04 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/334072

M5 chart of EUR/USD EUR/USD did nothing but fall on Thursday. We have been waiting a long time for the euro to collapse and I said that the market had already worked out the rate hike in February and March. So, if the pair did not rise the day before, we would say that everything progressed logically. However, don't forget that the euro rose on Wednesday evening due to Federal Reserve Chairman Jerome Powell's hawkish speech. If you only look at the results of the meetings and the market's reaction, it is very difficult to understand traders. Essentially, traders were getting rid of the currency whose central bank signaled its willingness to keep raising rates. I believe that the euro can and should enter the long-awaited bearish correction. If it continues to rise after the events of the last two days, it makes no sense to speak about the logic of the market movements at all. Yesterday's movement was very good, but too impulsive. The market ignored the technical benchmarks because it was too focused on the important fundamental background. Therefore, the pair failed to reach 1.1036, and there was no sell signal. Thus, we failed to catch the beginning of the fall yesterday, and the first signals were formed in the US trading session after the outcome of the European Central Bank meeting. I believe that traders should not have entered the market during this period of time since there was a high probability of sharp and frequent reversals and high volatility. COT report The COT reports for the euro in the last few months have been fully consistent with what is happening in the market. You can clearly see on the chart that the net position of big players (the second indicator) has been growing since early September. Around the same time, the euro started to grow. At this time, the net position of the non-commercial traders has been bullish and strengthens almost every week, but it is a rather high value that allows us to assume that the uptrend will end soon. Notably, the green and red lines of the first indicator have moved far apart from each other, which often precedes the end of the trend. During the given period, the number of long positions held by non-commercial traders decreased by 9,500, whereas the number of short positions fell by 2,000. Thus, the net positions decreased by 7,500. Now the number of long positions is higher than the number of short positions opened by non-commercial traders by 134,000. So now the question is: how long will the big players increase their longs? From a technical perspective, a bearish correction should have started a long time ago. In my opinion, this process can not continue for another 2 or 3 months. Even the net position indicator shows that we need to "unload" a bit, that is, to correct. The overall number of short orders exceeds the number of long orders by 52,000 (732,000 vs. 680,000). H1 chart of EUR/USD On the one-hour chart, EUR/USD left the sideways channel and managed to show two powerful turns of movement. First, it rose, then fell. As of Friday morning, the price is between the lines of the Ichimoku indicator, but today won't be a peaceful day. The US will release important macro data, which can trigger a new "storm" in the currency market. On Friday, the pair may trade at the following levels: 1.0736, 1.0806, 1.0868, 1.0938, 1.1036, 1.1137, 1.1185, 1.1234, as well as Senkou Span B (1.0847) and Kijun Sen (1.0917). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On February 3, the EU will only release its services PMI. In the US, we can look forward to the NonFarm Payrolls, unemployment and the ISM non-manufacturing index. Volatility may remain high today. What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group   Relevance up to 05:00 2023-02-04 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/334088

During the Q&A session, European Central Bank president Christine Lagarde confirmed the ECB's hawkish stance, while probably also confusing some market participants ECB President Christine Lagarde at today's press conference   The facts are straight: the ECB hikes interest rates by 50bp today, gave a quasi pre-commitment to hike again by 50bp in March and kept the door open for further rate hikes beyond the March meeting. A very clear message if the ECB had limited its communication to the 1:15pm CET press release but it didn’t. More and not less confusion We know that it is easy to criticize politicians and policymakers if you are just an observer and not in the driver’s seat but if anything today’s ECB press conference created more and not less confusion about the ECB’s reaction function and the path beyond the March meeting. With phrases like “continuity in a steady state”, it is doubtful that market participants really understand the ECB’s plans. And the logic behind a “data dependent” and “meeting by meeting” approach combined with a pre-commitment to hike by 50bp in March is not comprehensive to everyone. Just trying to look through the fog of most parts of the press conference, what remains are remarks like a “disinflationary process is not already at play” and “we know that we have ground to cover”. Probably the best hints that the ECB will not stop after the March meeting but will rather slow down the size and pace of rate hikes. At the same time, ECB president Christine Lagarde made clear that staying the course implied keeping interest rates in restrictive territory for a sufficiently long period. Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend, The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM Not done, yet It took the ECB a while, but it seems to have got the hang of it: hiking interest rates. And as long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. The increasing probability that a recession will be avoided in the first half of the year also gives companies more pricing power as illustrated by still high selling price expectations remain elevated. More generally speaking, we are currently witnessing a mirror image of the ECB up until 2019. Back then, the Bank had a clear easing bias and was chasing disinflation with all means possible, even though the root causes for disinflation lay outside of the ECB’s realm. Now, the ECB has a clear tightening bias and is chasing inflation, which arguably also has its root cause in something the ECB cannot tackle. This is why the ECB is obviously shiftinng its focus on core instead of headline inflation. More generally speaking, it looks as the current generation of ECB policymakers will only back down once they are fully convinced that inflation is no longer an issue. In this regard, the slight improvement of the eurozone’s growth prospects as well as abundant fiscal stimulus have given the Bank even more reason to continue with its hawkish mission. The celebrated fiscal stimulus, which has eased recession fears, is indeed an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation. These are two factors that could extend inflationary pressures in the eurozone, albeit at a lower level than we see at the moment. As a consequence, we expect the ECB not only to continue hiking into late spring but also to keep interest rates high for longer than markets have currently pencilled in. Even after today's exciting press conference. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB 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

Further spread tightening today as the significant inflow-induced squeeze in credit continues. We see room for widening and volatility, especially tapering, but overall remain constructive on credit overall for 2023. Further returns in the sector will be a function of yield and carry. We look at what's new for the Corporate Sector Purchase Programme  European Central Bank building and the Frankfurt skyline Further squeeze in spreads – but room for widening The strong rally in credit markets continues after a couple of slow days ahead of the central banks meetings. After a rather hawkish ECB, credit spreads tightened around 5bp on average. The value we saw in credit three months ago has evaporated and spreads are looking rather tight, (now trading 10bp below the bottom of the previous recession trading range). Thus we feel there is plenty of room for widening and still expect volatility on the horizon. In saying that, we still remain constructive about credit and still expect spreads to end the year even marginally tighter than current levels. Further returns in the sector will be a function of yield and carry, rather than spread tightening. EUR IG non-financial spread range Source: ING, ICE Tapering of reinvestments will add turbulence and increase volatility Amongst the list of risk factors and negative drivers for credit is quantitative tightening. Some additional details were released on the tapering of the asset purchase programmes starting in March. What is new for CSPP? The reduction of the holdings by €15bn per month via lower reinvestments is confirmed. They will not continue with primary market purchases via CSPP in order to focus on the secondary market. However, issuers with a better climate performance and green bonds will continue to be purchased in the primary market, as the ECB vows to tilt in a stronger manner towards better climate performing issuers. The statement “The remaining reinvestment amounts will be allocated proportionally to the share of redemptions across each constituent programme of the APP”, means that we can compute the CSPP reinvestments for the coming months. The following table assumes the pace of €15bn reduction remains consistent, however it is also possible the reduction pace increases or they stop reinvesting completely come July. The lower level of support could add to the turbulence and increase volatility, potentially reprice spreads wider, ultimately adding more value to credit. Should there be even faster tapering then it will change the positive technical further and lead to spread widening in the case of faster tapering come July or an abrupt stop. Active selling of holdings will clearly have much more negative implications on spreads.    Expected CSPP reinvestments Source: ING, ECB Read this article on THINK TagsMonetary policy Markets ECB Cspp Credit 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

EUR/USD is trading close to 1.0900 after the Fed and ECB meetings, as markets showed little faith in the (modest) attempts by Powell and (fierce) attempts by Lagarde to stay hawkish. Markets’ doubts on ECB guidance may be a larger short-term driver, and delay another big EUR/USD rally to 2Q, when rate differentials may swing meaningfully in favour of the EUR Markets are doubting today's hawkish lines by Christine Lagarde today (pictured) and the ECB on Wednesday Why markets are doubting hawkish communication EUR/USD is trading close to 1.0900 at the time of writing, the same levels observed before Wednesday’s FOMC announcement. Remember, the pair touched a 1.1033 10-month high before the ECB meeting triggered a correction. The recurrent theme of these two days of central bank activity has been the diffidence by markets around the reiteration of hawkish rhetoric. Take the Fed: the message that “ongoing rate increases remain appropriate” was out-shadowed by: Mentions that the disinflation process has started A lack of an explicit pushback against dovish rate expectations An open-ended approach to the direction of Dot Plot adjustments in 2023 Those details, which emerged during Chair Powell’s press conference, triggered a dovish-surprise market reaction, with risk assets climbing and the dollar falling. On paper, the European Central Bank went the extra mile to cement its hawkish message, saying it intends to hike by another 50bp in March following today’s 50bp move. However, the market reaction also went in the opposite direction, with European bonds rallying (bunds -22bp, BTPs -39bp) and the euro falling. This reaction boils down to Lagarde essentially failing to convincingly justify the ECB’s tightening plans,as: The ECB also stated that the inflation outlook is no longer facing upside risk but is now more balanced The reiteration of a meeting-by-meeting approach seemed to clash with a commitment to another 50bp hike in March Lagarde refrained from providing direction on the size or pace of increases after March, offering a breeding ground for speculation on the dovish side Dovish bets on the Fed look more appropriate than on the ECB We think that markets' ongoing dovish repricing of the Fed’s rate expectations has more solid foundations compared to those of the ECB. First, because yesterday’s comments by Powell signalled no urgency to push back against the loosening of financial conditions, while Lagarde explicitly warned markets against not trusting the ECB hawkish guidance. Second, because the Fed’s higher policy rates inevitably leave more room for a readjustment lower by the end of the year, especially given the deteriorating growth outlook and ongoing decline in inflation. We currently estimate 125bp of tightening by the ECB and no cuts in 2023, while we expect only one more 25bp hike by the Fed and 100bp worth of cuts in 2H23. EUR/USD and short-term rate differential Source: ING, Refinitiv EUR/USD: Patience before another big rally All those considerations lead us to reiterate our core view that the EUR-USD rate differential is still more likely to swing in favour of the euro (largely on the back of falling USD short-term rates) this year. However, another big rate-driven EUR/USD rally may not be a story for this quarter, as the March meetings may see the Fed push back against rate cut speculation and the ECB still struggles to sell its tightening plans to the market.   The second quarter of this year is when the ECB-Fed divergence may emerge more distinctly, as we expect the ECB to deliver another 25bp and strongly signal rates won’t be cut for some time, while an acceleration of the slowdown in the US economy and inflation will heavily challenge any pledge by the Fed to keep rates at 5.0% for long. We target 1.15 in EUR/USD in 2Q23, and 1.12 in 4Q23.   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

Either markets are not listening closely enough, or they are, and see only one way for long end rates. We get that. Weak data should result in a nudge lower in market rates. But here, US long end rates in particular look stretched to the downside versus the funds rate. Next cue from payrolls The rally makes sense at the front-end, less so at the long end Front ends are clearly positioning for a change in the rates cycle. The implication here is central banks are practically done, and the follow on is next big moves, beyond final hikes, are down, especially for the US. That’s fine. Typically 2’s will average out the path of the official rate in the coming couple of years, and should broadly breakeven against that profile. If you look at the futures profile for the Fed funds rate it gets to 3% in the next 18 months. If that’s realized, the straight average over the coming two years is 4.05%, pretty close to the current 2yr yield. We have a lower bottom for the funds rate at 2.5%, so in fact that can go lower, below 4% and towards 3.75%. falls in long rates will continue to loosen financial conditions. That’s a problem for the Fed The bigger issue is the 10yr. It’s now at around 3.4%, and at 175bp through 6mth Libor. It has never been stretched further than this over the past four decades. Based off that there should not be huge room to the downside for the 10yr yield. That can change when the Fed stops hiking. But the Fed is still hiking, and even as they hike, financial conditions continue to loosen. The Bloomberg measure suggests that financial conditions are loose in absolute terms. And while Chair Powell brushed this off at the press conference on Tuesday, the reality is falls in long rates will continue to loosen financial conditions. That’s a problem for the Fed, or it should be. So, the rally on the front end is fine, as even as the Fed hikes more, that can also mean bigger subsequent cuts. The back end makes less sense, apart from the simple logic that data confirming easing inflation pressures needs to be rewarded by another nudge lower in yields. We woudn't be doing our jobs if we did not point out that long end rates are stretched like a spring that could easily snap back. The same can be said of credit spreads, and wider risk assets though, which further complicates direction for market rates. Can everything sell off at a certain point? It's happened before. Long end dollar rates are sinking deeper below the front end Source: Refinitiv, ING US jobs data key to validating the rally This week has also pitted central bankers against the data. And it appears that markets are taking their cues more from the latter, seeing the central bank meetings as a final hurdle that a broader market rally in rates had to overcome. And, after all, central banks see themselves as increasingly data dependent these days?   By itself 190k should be still too high for the Fed, but likely low enough for markets This narrative culminates in the US jobs data release today. Employment creation remains strong for now. Jobs openings data this week pointed to another increase, contradicting the increasingly frequent anecdotal stories of job layoffs, and the jobless claims data looked equally robust this week. But it seems only a matter of time before the job market will start to show first cracks. The ADP payrolls estimate pointing to 106k fits the narrative, though it hasn’t nudged the consensus for today’s number below 190K. By itself 190k should be still too high for the Fed, but likely low enough for markets. It is too high to give an all clear on inflationarly pressures and justifies a Fed stance where more hikes are still to come. But with the markets inherently forward looking and in extrapolating mode it would take a notable upside surprise in today’s jobs data to turn around market momentum. The ECB undid one year of struggle to keep real rates positive in one day yesterday Source: Refinitiv, ING The ECB's feeble pushback fails to impress The European Central Bank hiked by 50bp and committed to another 50bp increase in March. By ECB standards that is already hawkish. But as the ECB said it will “then evaluate the subsequent path”, that firmer commitment does not stretch beyond the next meeting. This would have been necessary to counter a market that is increasingly pricing in rate cuts for late 2023 to 2024, bringing along the easing of financial conditions that is counterproductive to the ECB’s main goal of bringing down inflation. The market rally yesterday was mainly a drop in real yields The market rally yesterday was mainly a drop in real yields. It had taken a concerted communications effort ahead of the meeting to lift the 5Y real ESTR OIS rate to 40bp. It has now dropped back to 20bp. While still well above pre-December levels of -40bp we doubt that the this sits well with the majority of the ECB’s Council and we may well see post-meeting attempts to straighten the hawkish record. Reuters reported after the decision that policymakers are seeing "at least two more hikes", but the caveat is again that the Council is a diverse group and “differences remained about their pace and final destination”. Against this backdrop the ECB may struggle to decouple longer EUR rates from a broader rally led by the USD and GBP, where central banks are closer to their cycle peaks. But we think a relative underperformance/rise of EUR rates is still probable. And remember, ECB policy rates are still some 200bp below the Fed's and 150bp below the Bank of England's. Risk assets are large beneficiaries of the ECB lacking hawkish teeth Risk assets are large beneficiaries of the ECB lacking hawkish teeth. The 10Y BTP/Bund spread tightened by 19bp and is approaching the 180bp mark again. The ECB’s detailed parameters for reducing its asset portfolio yielded little surprises with a proportionate approach to reinvestments being taken. But there had been some speculation that the ECB would rebalance the PSPP portfolio towards Supranationals in the context of "greening" the portfolio. Some contemplated even that the ECB might already hint at increased amounts for later in the year. In hindsight, perhaps a sensible option given the weak perception of rates guidance. At the margin, both would have been detrimental to government bonds and sovereign spreads.  Read next: USD/JPY Pair Is Trading At 128.48 The Aussie Pair Is Above 0.71$| FXMAG.COM We expect a further convergence of 5Y swap rates Source: Refinitiv, ING Today's events and market view After the three central banks hiked rates this week and added that the fight against inflation was not over, longer market rates are still net lower on the week, significantly so. The Fed was reluctant to push back against easing financial conditions, the BoE displayed a dovish tilt and the ECB fumbled its attempt at being hawkish. That said valuations are looking stretched, not just because central banks are still not done hiking. In the US we have an eye on the curve, in the Eurozone 10Y Bund yields are again coming close to the 2% threshold. This is also why the US jobs data will be key in validating the rally, though we do think it would take a larger upside surprise to halt the current momentum. Other data to watch is the ISM services which is expected to nudge back above the 50 mark after last month's downside surprise. The to-be-expected ECB post-meeting communication and any attempts to salvage the hawkish message will probably have a more relative impact in this environment than being able to bring about a turnaround in outright levels on their own. Read this article on THINK   TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  The US equity markets extended their gains, underpinned by 23% surge in Meta as it announced a leaner and more decisive vision; while German and UK yields slumped after dovish tilts from ECB and the Bank of England. The NFP jobs report in focus as the next test of the US labor market strength. USD was back in gains while commodities reversed the post-FOMC rally as clear signals on China’s reopening demand are also awaited. The tech rally may start to get some jitters with Apple, Amazon and Alphabet missing their earnings forecasts in post-market.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) surged on Thursday, paring gains in Asia Friday morning following Apple, Google, and Amazon misses S&P500 closed at a new five-month high on Thursday, rising 1.5%, taking its move up to 19% from its October low and its 50-day moving average above the 200-day moving average, in what is usually referred as a “golden cross” in technical analysis. The Nasdaq 100 gained 3.6% after Meta shares jumped 23% on cost-cutting which paves the road for a return to profitability. Refer to Peter Garnry’s  article here for more on Meta. On the back of the dovish comments from Fed’s Powell on the previous day about disinflation having started and the optimism boosted by the surge in Meta’s share prices, Alphabet (GOOGL:xnas) and Amazon (AMZN:xnas) jumped more than 7% in the regular session and Apple (AAPL:xnas) climbed more than 3%, driving the benchmark indices higher before they reversed in the extended hour trading following reporting results missing expectations. Post results, Apple and Alphabet fell more than 3% and Amazon plunged more than 4% in after-hours trading, bringing Nasdaq 100 futures by around 1.3% lower in early Asian hours from its Thursday close. Apple, Amazon, Google, and Ford paint a bumpy picture ahead for equities Apple's profit and revenue missed, but it guided for a pickup in revenue from its iPhone this quarter, as well as its services revenues. Amazon's 4th quarter sales beat, but its outlook was on the weaker side. Google-owner Alphabet’s sales were lighter, suggesting lower demand for its core search advertising which is coming under threat. The US Department of Justice called for a breakup of the search giant’s ad-technology business over alleged illegal monopolization of the market. The company’s flagship search business, which drives most of its ad revenue, may also be under attack from new entrants, with Google declaring “code red” last year after in response to Open AI’s popular chatbot, entering the market. Ford guided for the potential of higher earnings in 2023, but missed fourth quarter earnings expectations. That said, its automotive revenue was higher than expected and it will pay a supplemental dividend of $0.65 per share reflecting the cashflow from taking a stake in Rivian. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) edged down, Bund and Gilt yields tumbled on dovish hikes from the ECB and BOE The yield on the 10-year Treasury dropped as much as 9bps following the massive declines in yields on German Bunds and UK Gilts before paring most of the gain (in prices, fall in yields) in the New York afternoon to finish 2bps richer at 3.39%.  Relative to European and UK bonds, the movements in the U.S. Treasuries were relatively muted ahead of the U.S. employment report today. Yields on the 10-year German Bunds dropped 21bps to 2.07%. The ECB raised policy rates by 50bps as expected and signaled another 50bps in March but indicated that the path of interest rate increases would become data-dependent afterward. Likewise, the Bank of England raised its policy rate by 50bps but commented that it had “seen a turning of the corner” and signaled that future rate hikes would be data-dependent. Yields on the 10-year Gilts tumbled a staggering 30bps to 3.01%. U.S. non-farm production improved to 3% (vs consensus 2.4%) in Q4 from 0.8% in Q3 and unit labor costs growth decelerated to 1.1% in Q4 (vs consensus 1.5%) from 2.4% in Q3. Both were good news to the Fed’s disinflation narrative. Interest rate futures are pricing in 60 bps of rate cuts by the Fed in the second half of 2023 after a 25bp hike in March. The Australian share market rallies to its highest level since April last year Australia’s tech sector is starting to pick up momentum, and the technical indicators are looking interesting, suggesting upside on the weekly and monthly charts. Today the market hit new cycle highs, and its highest leveis also reacting to PMIs rising, a sign Australia’s economy is beginning to strengthen. Next week we will receive financial results from one of Australia’s top 10 banks, Suncorp, as well as real estate tech business, REA. In the following week (the third week of February) earnings season ramps up with CBA and Fortescue reporting Feb 15, BHP on Feb 21, followed by Rio the next day, followed by Qantas. Hong Kong’s Hang Seng (HIG3) and China’s CSI300 (03188:xhkg) were mixed The Hang Seng Index pared early gains to finish the Thursday session 0.5% lower on the back of a strong rally in U.S. equities overnight and less upward pressure on domestic interest rates and currencies spilled over from higher U.S. interest rates down the road. Baidu (09888:xhkg), rising 5%, extended its strong recent gains on the ChatGPT concept and following BlackRock raised its stake to 6.6% from 5.4% in the Chinese search engine giant. Baidu was the best-performing stock on the Hang Seng Index for the second day in a row. Li Auto (02015:xhkg) climbed 1.9% after reporting delivery of 15,141 units of EV in January,  up 23% Y/Y. On the other hand, NIO (09866:xhkg) slid 5.3% following a 12% Y/Y decline in delivery to 9,652 units in January and on reports that the Chinese EV maker is cutting prices. Geely (00175:xhkg) dropped 3.3% after its high-end Zeekr brand delivered 12% fewer EVs from the year-ago period. Chinese mobile gaming stocks traded in the Hong Kong bourse soared with Forgame (00484:xhkg) leading the charge and jumping over 75%.  CSI 300 slid 0.4%. Pharmaceuticals, biotech, retailing, beverage, and coal mining advanced while defense, electric equipment, household appliances, and non-bank financials retreated. FX: USD returns to strength as global yields plunge The 30bps plunge in UK yields after the Bank of England kind of hinting at a pause saw GBPUSD back off from 1.24 to 1.2222. ECB also surprised dovish despite some very hawkish expectations being priced in by the markets, taking EURUSD back from 1.10+ to the 1.09 handle. EURGBP however still above 0.89 with ECB still guiding for another 50bps rate hike in March. Australian bonds also joined the global rally, and AUDUSD reversed back below 0.71. JPY was the clear outlier, ignoring the global bond yields plunge, and USDJPY continued to trade steady around 128.50. Crude oil (CLG3 & LCOH3) prices soften Oil prices saw a modest decline as jitters about Chinese demand and Russian sanction continued to underpin. OPEC output also saw a decline of 60kb/d amid reductions in Saudi Arabia and Libya. Meanwhile, a stronger dollar after the dovish tilts from the ECB and Bank of England weighed on the commodity complex in general. The US jobs report becomes the next test for the markets today, and for the US dollar, after Chair Powell’s comments were paid little heed. WTI futures were below $76/barrel while Brent was below $83. Gold (XAUUSD) reversed from $1960 barrier; Largest global gold ETFs sees strong fund flows Gold broke higher to fresh cycle highs in the post-FOMC euphoria, breaking past $1950, but a stronger dollar returned after ECB and BOE also took dovish turns resulting in steep drops in global bond yields. This made the yellow metal lose some of its shine, and it reversed before the test of the 76.4% retracement of the 2022 correction at $1963 to near-1910 levels. Immediate support at $1900, and the US NFP data along with the ISM surveys will continue to be the next key market movers to watch. Meanwhile also consider, the largest gold ETF fund globally GLD, has seen over $2 billion in inflows since the start of the year, suggesting retail buying is starting to ramp up.  Read next: Santander Bank Polska Shareholders Can Expect A Solid Dividend, The ETH Liquid Staking Narrative Is Already Going Strong| FXMAG.COM What to consider? Bank of England hikes 50bps, but further rate hikes see a high bar As expected, the Bank of England raised rates by 50bps to 4%, with a vote of 7-2 as two of the usual doves opted to keep the rates unchanged. The Bank eased up on its forward guidance, saying that further policy tightening “would be required”, but only “if there were to be evidence of more persistent [inflationary] pressures” and preceding all of that language touting “considerable uncertainties” in the outlook. The previous language was more direct on the need to continue hiking. The latest message with the pre-conditions set for another rate hike suggested that the bank may pause. Accordingly, market pricing moved in a more dovish manner with odds of a 25bps March falling to around 60% from 80% pre-announcement with the chance of a May 25bps move around 12% vs. around 50% pre-announcement. Inflation and growth forecasts also hinted at a dovish turn. The accompanying MPR saw a downgrade to the 2023 inflation forecast to 4.0% from 5.25% with inflation of just 1.5% next year. BoE was less pessimistic on the economy, as peak unemployment was revised down to 5.3% from 6.0% and the peak to trough GDP dip was revised up to -1% from -2.9%. UK 10-year yields saw a massive 30bps drop and the 2-year was also down ~25bps. Dovish ECB despite confirming another 50bps rate hike; German 10-year yields plunge 30bps With very hawkish expectations set in, the ECB had a high bar to surprise hawkish. And it failed to do so. While the European Central Bank raised rates by 50bps to 2.50% and committed to another 50bps rate hike in March; but the statement said that at the March meeting, the ECB will evaluate the subsequent path of its monetary policy. This sent out a message that the most hawkish G10 central bank currently may also be looking at stepping down its pace of rate hikes. Lagarde attempted to stress the longevity of reaching terminal by stating that when the level is reached, rates will need to stay there. However, there was a clear scaling back of hawkish market pricing for 2023 with around 25bps of tightening taken out. Reuters sources later noted that ECB policymakers see at least two more rate hikes, with an increase of 25bps or 50bps in May, which may thrash hopes of a May pause for now. German 10-year yields slumped by 30bps, posting its biggest decline since 2011. Today’s NFP data to be the next big test for US labor market The weekly jobless claims nudged lower again to 183k from 186k for the week ending 28 January, a surprise against the expected rise to 200k. This suggest that the labor market is still tight, as the focus shifts to nonfarm payrolls release later today. Bloomberg consensus expects a modest cooling in the headline NFP gains to 189k from 223k in December. The unemployment rate is also expected to come in a notch higher at 3.6% from 3.5% previously while wage gains may soften slightly to 4.3% YoY from 4.6% YoY previously. A larger-than-expected softness in labor market can further send dovish signals to the market that is still dealing with the post-Powell and ECB/BOE dovishness. Challenges for India’s Adani Group continue to mount The market loss for the Adani Group mounted over $100bn, once again sending concerns of a possible contagion skyrocketing. Challenges for the group continue to mount since the Hindenburg report, with a shock withdrawal of share sales, some banks refusing to take Adani securities as collaterals and then the Reserve Bank of India asking Indian banks for details of the exposure to Adani Group. Furthermore, S&P Dow Jones Indices said that it will remove Adani Enterprises from its sustainability indices effective February 7, which would make shares less appealing to sustainability-focused mutual funds as well and cause foreign outflows. Contagion concerns are widening, but still limited to the banking sector. Focus remains on further risks of index exclusions, while a coherent response on the fraud allegations from the Adani Group is still awaited. Shell beats on Q4 earnings One of Europe’s largest oil and gas majors reported Q4 adjusted profit of $9.8bn vs est. $8.3bn driven by higher-than-expected oil and gas output for the quarter. Q4 dividends are lifted to $0.2875 per share vs est. $0.285.     For what is 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: Dovish tilts from ECB and BOE and Meta gains push equities higher; Post-market earnings miss from Apple, Alphabet and Amazon – 3 February 2023 | Saxo Group (home.saxo)

Yesterday was, again, a fantastic day of trading for equities, as the less hawkish than expected tone from the European Central Bank (ECB) and the Bank of England (BoE) meetings joined the optimistic vibes from the Federal Reserve (Fed) Chair Jerome Powell’s ‘disinflationary process’ mention a day before, and all that combined with Facebook’s best rally in almost a decade painted the market in the green. S&P500 The S&P500 gained around 1.50%. Nasdaq 100 jumped more than 3.5% and entered bull market as Meta jumped more than 23%. Earnings But today will probably not be as fantastic as yesterday, as Apple, Amazon and Google announced earnings after the bell yesterday, and they all disappointed. US jobs data Maybe, the again-important US jobs data could temper the earnings-triggered weakness – if of course the NFP number, and more importantly the wages growth are sufficiently soft to keep the Fed doves in charge of the market. Rates Elsewhere, the European Central Bank (ECB) and the Bank of England (BoE) raised their rates by 50bp yesterday, but Lagarde sounded much less aggressive than the December meeting. Read next: USD/JPY Pair Is Trading At 128.48 The Aussie Pair Is Above 0.71$| FXMAG.COM Euro The EURUSD sold off. But I believe that the euro’s recovery hasn’t ended just yet, as we see the end of the tunnel for the Fed – as the Fed rates approach the 5% mark, while we don’t yet see the end of the tightening tunnel for the ECB. Watch the full episode to find out more and find the link to our latest blog article : www.swissquote.com/blog 0:00 Intro 0:50 Stocks rally on dovish central bank expectations, and Facebook… 2:10 … but Apple, Amazon and Google dampen the mood. 5:38 What kind of US jobs data could cheer up investors? 6:42 BoE’s tightening cycle may end soon 8:21 ECB’s Lagarde sounded less aggressive than last December, but euro should do fine… 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 #wages #jobs #data #ECB #BoE #Fed #FOMC #meeting #Powell #disinflation #Meta #Apple #Google #Amazon #earnings #USD #EUR #GBP #Bailey #Lagarde #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      

Markets questioned the hawkish message by both the Fed and the ECB this week, but we think Powell gave more reasons to reasonably fuel dovish expectations. Still, the ECB communication hiccups mean that EUR/USD may struggle to break higher before the end of the first quarter. Today, eyes on payrolls and ISM services: the dollar likely faces downside risks ECB President Christine Lagarde and Fed Chair Jerome Powell USD: Downside risks from data today The dollar has essentially erased all the post-FOMC losses after markets questioned the hawkish rhetoric by the ECB and European rates went on a huge rally yesterday. We analyse what the last two days of central bank meetings have meant for EUR/USD in this note.   It’s been quite clear that markets have doubted both Fed Chair Jerome Powell’s and ECB President Christine Lagarde’s attempts to hang on to hawkish communication, although dovish bets on the Fed appear more strongly founded at this stage. This is both because Powell seemed more relaxed about the easing in financial conditions and did not convey urgency in pushing back against rate cuts, and because the Fed has taken rates into a much more restrictive territory which inevitably leaves a larger room for easing in 2023. What is clear is that markets will continue to focus heavily on data. With volatility abating after the key Fed and ECB announcements and some of those defensive trades (due to the imminence of key risk events) being unwound, today’s non-farm payrolls release in the US brings mostly downside risks for the dollar, in our view. After all, a tight jobs market has already been factored in by the Fed (Powell even admitted inflation might fall without hurting employment), but it’s really the declining inflation story that is suggesting a peak in Fed funds rates is imminent. Accordingly, markets may focus more on the wage growth figures rather than the headline employment print. Any evidence that wage growth is losing pace and/or that hiring is slowing down materially would likely fuel rate cut expectations further, and hit the dollar. US 2-year rates are currently trading 10bp above the psychological 4.00% mark: a break below may exacerbate a dollar slump. Should such dollar weakness materialise, we think that high-beta currencies may emerge as key winners thanks to the positive impact on risk assets. ISM service numbers will also be closely watched after the latest release was a key driver of the negative re-rating in US growth. Francesco Pesole Read next: Starbucks Revenues Are High Despite High Costs| FXMAG.COM ECB: Dealing with unclear communication Should today’s payrolls trigger a dollar contraction, the euro may emerge as a laggard in the G10 space. Markets are strongly questioning the ability of the ECB to keep hiking at a “stable” pace (as the ECB said in its statement) beyond the March meeting. Here are the review notes from our economics team of yesterday’s statement and press conference. As our ECB watcher puts it, Lagarde’s press conference brought more fog than clarity. And we think it is indeed the communication hiccups in Frankfurt that is driving EUR/USD weakness. We remain of the view that at least 75bp of extra tightening will be delivered by the ECB, which still puts EUR/USD in a position for a big rally in the second quarter – when US short-term rates may come off more steadily. The ECB communication troubles may cap EUR/USD before then. Today, the balance of risks is still tilted to the upside for EUR/USD as US jobs data will be the key driver. The question is how comfortable markets are with re-testing 1.1000: we suspect a break above that level is a bit premature unless US figures come in very weak. Francesco Pesole GBP: BoE close to the peak The Bank of England hiked rates by 50bp yesterday, but offered a number of signals that it is indeed close to the peak. As discussed in our economics team’s reaction piece, a key hint that the MPC is laying the groundwork for the end of its tightening cycle is that it has dropped its pledge to raise rates “forcefully” (i.e. by 50bp). Incidentally, the BoE’s two-year inflation projection – a key driver of policy decisions – is now well below target. We still doubt this was the last hike of the cycle, and expect another 25bp move at the next meeting in March. Markets are torn around a move in either March or May, but are still fully pricing in an additional 25bp of tightening. The pound was slightly weaker after an initially positive reaction to the BoE statement. In practice, it appears that the BoE is not diverging much from market expectations, which means that it may be up to data in the UK to drive any large swings in the pound rather than surprises from the BoE. With markets doubting the ECB's hawkishness, EUR/GBP may manage to stay below 0.9000 for now, although a break higher seems highly likely over the coming months. Francesco Pesole CZK: CNB continues to support FX but is not a decisive factor The Czech National Bank (CNB) left rates and the FX intervention regime unchanged yesterday, in line with expectations. However, there was still room for a hawkish surprise. During the press conference, the Governor said that the record-strong koruna is not a problem for the economy and on the contrary, it is a welcome inflation-fighter. He thus implicitly confirmed that the intervention regime will be with us for a long time despite the fact that the CNB last intervened in September last year. Moreover, he told reporters that current expectations of significant rate cuts this year are wrong and rates will remain at higher levels for longer. However, the main driver at the moment, in our view, are global factors – falling gas prices and a higher EUR/USD – and the CNB is more of a complementary factor for the positive koruna. Moreover, the koruna still offers decent and stable carry. Thus, the main enemy at the moment is the market positioning, which was already the longest in the CEE before the CNB meeting in our view. Thus, the koruna may test 23.70 levels in the short term but the EUR/CZK move lower is limited in our view and the koruna will be rather stable compared to CEE peers. Frantisek Taborsky Read this article on THINK TagsFX EURUSD 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

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

The euro is catching its breath on Friday after some sharp swings over the past two days. EUR/USD is trading quietly at the 1.09 line. Fed, ECB send euro on a wild ride This week’s central bank rate announcements sent the euro on a roller-coaster ride. The Fed’s 25-basis point hike pushed the euro higher by 1.16%, while the ECB hike of 50-bp sent the euro down by 0.76%. The end result is that the euro is back to where it started the week, just below the 1.09 line. The Fed rate decision sent the US dollar broadly lower, as investors were heartened by Jerome Powell saying that the disinflation process had begun and that he expected another couple of rate hikes before the current rate-hike cycle wrapped up. The markets are expecting inflation to fall faster than the Fed is thinking and are counting on some rate cuts this year, even though Powell said yesterday that he does not expect to cut rates this year. The markets were looking for a dovish bend to Powell’s remarks and once they found it, stocks went up and the US dollar went down. The ECB meeting came a day after the Fed decision, and the rate hike of 50-bp was expected. Still, the euro fell sharply, perhaps due to a confusing message from the ECB. On the one hand, in its policy statement, the central bank signalled another 50 bp hike in March and kept the door open for additional hikes after March. At the same time, ECB President Lagarde said in a press conference that rate moves would be determined on a “meeting by meeting” basis seemed to veer away from the message in the policy statement. The ECB continues to have trouble communicating with the markets, which will only add to market volatility as investors try to figure out the central bank’s plans. The week wraps up with the US employment report. The Fed has said that the strength of the labour market is a key factor in its rate policy, so today’s release could have a strong impact on the movement of the US dollar. Nonfarm payrolls fell from 256,000 to 223,000 in December and the downturn is expected to continue, with an estimate of 190,000 for January. The ADP payroll report showed a decline in December, but unemployment claims and JOLT job openings both moved higher, making it difficult to predict what we’ll get from nonfarm payrolls. The markets will also be keeping a close look at hourly earnings and the unemployment rate.  Read next: Japanese Startup Aerwins Technologies Will Be On NASDAQ| FXMAG.COM EUR/USD Technical 1.0921 is a weak resistance line, followed by 1.1034 There is support at 1.0878 and 1.0826 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.  

In this podcast, ING's James Knightley, Carsten Brzeski and James Smith discuss whether interest rates in the US and Europe are close to a peak, what this could mean for the global economy, and whether rate cuts could be in the offing this year   Read next: Today's ECB Policymakers Comments Seem To Help The EUR/USD Pair, The Australian Dollar Fall Against Strong US Dollar| FXMAG.COM After one of the most aggressive tightening cycles in decades, the Federal Reserve and Bank of England signalled this week that their work is mostly complete. In contrast, the European Central Bank is still playing catch-up, warning that significant rate hikes lie ahead. In this podcast, ING's Rebecca Byrne asks economists James Knightley, Carsten Brzeski and James Smith what impact these decisions will have on the global economy in the year ahead. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The dollar rose slightly on Friday, maintaining some momentum after jumps in the previous session after a series of decisions by central banks in Europe. The rise in the USD can be attributed to some shift in trading position ahead of the closely watched US monthly employment report. Trading was relatively limited as markets awaited the latest US employment data later in the day, which could change US Federal Reserve policy. Weekly initial jobless claims in the US released on Thursday indicated strength in the labor market and boosted expectations for strong non-farm payrolls (NFP). USD/JPY The US dollar gained on the last day of the week and looks set to continue its bounce from the nine-month low recorded on Thursday, which is seen as a tailwind for USD/JPY. The Japanese yen, on the other hand, continues to benefit from expectations that high inflation could result in a more hawkish stance from the Bank of Japan (BoJ) later this year. Bets were lifted by Japan's nationwide core inflation, which hit its highest annualized level since December 1981. This is seen as another factor keeping USD/JPY in check, at least for now. The USD/JPY pair traded high around 128.80 at the beginning of the day, but fell in the following hours. Currently, the USD/JPY pair is trading below 128.40. EUR/USD Yesterday, the European Central Bank raised interest rates by half a percentage point on Thursday, but the euro fell below 1.0900 after ECB comments. During the ECB press conference, President Christine Lagarde acknowledged that the outlook for the eurozone has become less worrying for growth and inflation.  The ECB noted the likelihood of another similar rate hike next month, the meeting and its aftermath were in line with market expectations. Early Friday, ECB policymaker Gediminas Simkus said an interest rate cut this year was not likely. With a similarly hawkish accent, policymaker Peter Kazimierz noted that he did not see the March interest rate hike as the last one. These comments seem to help EUR/USD contain losses for now. The euro posted slight gains against the US dollar on Friday, thanks in part to news that the eurozone economy saw some gains last month. The EUR/USD pair in the European session is trading above 1.09 again at around 1.0940. Read next: Japanese Startup Aerwins Technologies Will Be On NASDAQ| FXMAG.COM GBP/USD The Bank of England raised interest rates for the tenth time but hinted that its tightening cycle may be coming to an end, while Federal Reserve Chairman Jerome Powell said in a press conference following the Fed's 25 bp rate hike that the process of "disinflation" in the United States seemed to be in progress. Moreover, BoE President Andrew Bailey said that inflation will continue to fall this year and faster in the second half of 2023. In fact, the central bank forecast that the annual CPI inflation in the UK will fall from the current 10.5% to around 4% in 2020. toward the end of the year. This, in turn, has fueled speculation that the current cycle of rate hikes may be coming to an end and weakening the pound sterling. GBP/USD gained momentum during the European trading hours and went positive above 1.2250 during the day. Currently, the GBP/USD pair is on the border of the level. AUD/USD The Australian dollar falls below $0.71, pulling back slightly from nearly eight-month highs on overall dollar strength. Despite this, Australians continue to be supported by expectations that the Reserve Bank of Australia will continue to tighten its policy. Currently, Aussie Pair is trading at around 0.7060. Source: investing.com, finance.yahoo.com

Give us a minute, and our economists will give you some answers to the global economy's biggest questions, notably around energy and China's reopening. And take a look at our three scenarios for the world as February begins In this article How far could gas prices rise from here, and what would be the major cause? Is Europe still heading for recession? If gas prices rise, have governments done enough to shield consumers/businesses in Europe? Is the end of zero-Covid in China a gamechanger? Is inflation really falling, and have markets been too quick to price in cuts? Can the US economy avoid recession? Can the recovery in risk assets continue?   Three scenarios for the global economy ING   ING   ING How far could gas prices rise from here, and what would be the major cause? We currently expect that European gas prices will average EUR 70/MWh over 2023, peaking in the fourth quarter with an average of EUR 80/MWh. However, clearly there are significant upside risks to this view. If remaining Russian gas flows to the EU were to come to a halt and if we were to see stronger than expected LNG demand from China this year, this would tighten up the European market significantly. Under this scenario, we would need to see stronger-than-expected demand destruction to keep the market in balance. As a result, prices would need to trade higher, potentially up towards EUR 150/MWh going into the '23/24 winter. The European Commission’s price cap of EUR180/MWh for TTF should provide a ceiling to the market, at least for exchange prices within the EU. Is Europe still heading for recession? Lower energy prices and high levels of national gas reserves as a result of the warm weather and lower energy consumption have helped the eurozone economy to avoid an energy crisis this winter. Fiscal stimulus has also supported the economy and prevented the eurozone from falling into a severe recession. However, the eurozone economy is not out of the woods yet. Industrial orders have weakened and once the post-pandemic boost is behind us, growth in the services sector could soften. With (core) inflation remaining stubbornly high and the full impact of ECB rate hikes still materialising (with activity in the construction sector particularly vulnerable), the eurozone is facing a longer quasi-stagnation. The worst-case scenario has been avoided for now but this doesn’t automatically lead to a strong recovery. If gas prices rise, have governments done enough to shield consumers/businesses in Europe? It took a while but at the end of last year, fiscal support measures in most eurozone countries had reached levels seen during the pandemic. For the eurozone as a whole, the announced fiscal stimulus amounts to around 5% of GDP. The stimulus packages are largely aimed at supporting household purchasing power but also at keeping companies’ energy costs at bay. However, if energy prices remain at current levels, the full amount reserved for energy price caps will not have to be used up. While these packages offer significant relief in the short run, they will not be able to shield consumers and businesses against structurally higher energy costs. Government expenditures in the eurozone already amount to around 50% of GDP and with the weighted eurozone government budget at 4.5% of GDP, any room to scale up deficit-financed stimulus, which is exclusively aimed at supporting consumption, looks limited. Is the end of zero-Covid in China a gamechanger? The surprise reopening of the Chinese economy will certainly boost demand, and we have revised up our GDP forecasts accordingly. What is still unclear is how much and when the reopening will boost domestic spending within China, especially on services. Household balances are swollen after prolonged inactivity, so some "revenge" spending seems plausible. How important these balance sheet effects are for spending within China is still being debated, with unemployment still high and wage growth still subdued. Of greater global relevance will be how strongly industry recovers, as this will dictate the strength of the recovery in demand for commodities, including energy. Our current thinking is that manufacturing recovers more slowly than domestic spending on services, and this should not result in a substantial boost to global commodities prices, though some upward price pressure is probable. With the economy just emerging from the Lunar New Year, and data clarity very low right now, this "goldilocks" view is offered with fairly low conviction. Is inflation really falling, and have markets been too quick to price in cuts? Headline inflation rates across the developed world should fall this year as the sharp rises in food, fuel and goods prices of late 2021-mid 2022 are unlikely to be repeated. Admittedly, of these three categories, food prices have probably the biggest potential to rise again significantly this year. With commodity prices – including food indices – having fallen in many cases, there is a case for a sharp reduction in goods-related inflation this year, and in some categories, outright price falls. This story is likely to be more aggressive in the US, where month-on-month increases in core CPI and PCE deflator readings have slowed from 0.5-0.6% in the middle of last year, to 0.2-0.3% more recently. That's still above the 0.17% MoM average required to take the year-on-year rate to 2%, but we're getting close. Rents are topping out, vehicle prices are falling and there is growing evidence that corporate pricing power is waning with businesses thinking more defensively as recession fears mount. We continue to forecast core inflation measures getting down to 2% by the end of 2023. In Europe, the story is likely to be more gradual. Core inflation is yet to peak, and the lagged impact of higher energy prices is continuing to put pressure on services pricing. The strong prevalence of collective bargaining in many European countries also suggests wage pressures will continue to feed through, too, and ongoing fiscal stimulus and government intervention could lengthen the inflationary pressure. The fear is that supply-side inflation could morph into demand-side inflation. The divergence between the EU and the US in terms of inflation suggests that markets are right to be pricing rate cuts from the Federal Reserve later this year, while the easing priced in from the ECB in 2024 looks premature. Can the US economy avoid recession? Possibly, but we need something to turn around quickly. We have a housing market correction coupled with six consecutive monthly falls in residential construction, three month-on-month drops in industrial production and two consecutive 1%+MoM falls in retail sales, which hint at a broadening slowdown. Meanwhile, the labour market is showing tentative signs of cooling after five consecutive months of decline in temporary help, which typically leads to broader labour market trends. With CEO confidence at the lowest level since the global financial crisis, implying a growing proportion of businesses adopting a more defensive stance, the risks are mounting that there will be a recession. However, strong household balance sheets and a robust-looking jobs market suggest it will be relatively short and shallow, assuming inflation falls as we expect and the Fed is able to offer stimulus later this year. Can the recovery in risk assets continue? It has been a strong start to the year for risk assets, underpinned by robust inflows. Equity markets are up as much as 9% in Europe and dedicated bond funds are up anywhere between 2-4%. But risk assets will struggle to post further near-term gains should our view for some tactical upward pressure on market rates bear fruit. It’s a non-consensus call though, and even if market rates were to fall it’s more likely that the market reads this as a measure of underlying angst, which can cause issues for risk assets, via an elevation in perceived default risk ahead. The strong rally in credit markets has lasted for over three months before which credit was pricing in a significant recession. The value that was evident then has evaporated. Nonetheless, with persistent inflows to the sector remaining a dominant theme, we remain constructive in the longer term and further returns in the sector will be a function of yield and carry, rather than spread tightening. In FX, growing headwinds to risk assets would provide some temporary support to the dollar and help cement a 1.05-1.10 EUR/USD trading range for the rest of the quarter. Later in the year, however, 1.15 levels are possible as the conviction builds over a Fed easing cycle. TagsEconomy 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 Fed and Bank of England are closing in on the end of their respective tightening cycles, while the ECB still has more work to do. Greater potential for an inflation pullback in the US suggests the Fed will be much earlier to cut rates than its European counterparts. Bank of Japan tightening is likely to be a gradual process In this article Federal Reserve European Central Bank Bank of England Bank of Japan   ECB President, Christine Lagarde with Croatia's Economy Minister at the World Economic Forum last month Federal Reserve After the most aggressive series of policy rate increases seen in more than 40 years, unsurprisingly, the US economy is now experiencing slower growth. Markets are now pricing recession, but Federal Reserve officials are concerned that lower Treasury yields and a softer dollar have loosened financial conditions, thereby undermining the Fed’s policy stance. They continue to warn that “unacceptably high” inflation means the economy needs to experience a “sustained period of below trend growth” for them to be confident price pressures will fade. Hence the latest 25bp hike with a further 25bp expected in March. However, job loss announcements are becoming more prevalent, and weakening price intentions, falling car prices and a clear topping out in housing rents offer encouragement that inflation will fall sharply. This should open the door to significant interest rate cuts from late in the third quarter of this year, with the Fed funds target rate potentially falling back to 2.5% next year. European Central Bank It took the ECB a while, but it seems to have got the hang of it: hiking interest rates. And as long as core inflation remains stubbornly high and core inflation forecasts remain above 2%, the ECB will continue hiking rates. The increasing probability that a recession will be avoided in the first half of the year also gives companies more pricing power, showing that selling price expectations remain elevated. The celebrated fiscal stimulus, which has eased recession fears, is an additional concern for the ECB as it could transform a supply-side inflation issue into demand-side inflation. These are two factors that could extend inflationary pressures in the eurozone, albeit at a lower level than we see at the moment. As a consequence, we expect the ECB not only to continue hiking into late spring but also to keep interest rates high for longer than markets have currently pencilled in. Bank of England The Bank of England has given its strongest hint yet that the tightening cycle is nearing an end - and perhaps even that February's 50bp hike was the last. In practice we're probably not quite there yet. UK headline CPI may have peaked, but the same can’t yet be said for wage growth or service-sector inflation. We therefore expect the BoE to pivot back to a 25bp rate hike in March but that's likely to be it. However unlike the Fed, it’s unlikely that the BoE will begin cutting rates later this year. The Bank's Chief Economist, Huw Pill, recently noted that the UK has the worst bits of the US inflation story (structural labour shortages) and the eurozone (energy crisis), arguing that core inflation could stay stickier as a result. That’s a line we’re likely to hear a lot of over the coming months and suggests a rate cut is unlikely for at least a year. Bank of Japan The Bank of Japan attracted the attention of market participants around the world after it surprised with an unexpected adjustment in the yield curve control policy in December. Governor Kuroda reiterated at the January meeting that the economy still needs easy monetary policy, and the BoJ’s sustainable inflation target of 2% has yet to be achieved. We think that it is highly unlikely that Kuroda will make another move in March, just before his retirement in early April. Indeed, markets are paying more attention to who will be the next governor, hoping the new leader may change the BoJ’s policy stance. We agree, but “Shunto”, the spring wage negotiations, will be key to watch. If wage growth is not strong enough to offset recent inflation, it will take longer than expected to normalise policy. We predict that the BoJ will keep its negative policy rate and yield curve control policy until the end of 2023 for now. TagsCentral banks 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 significant fall in natural gas prices has probably sheltered the eurozone from a winter recession, though there are still some headwinds that will keep growth subdued in 2023. Sticky core inflation is likely to keep the European Central Bank in tightening mode in the first half of the year In this article Sentiment is improving Not all headwinds have disappeared, however Inflation problems not over yet More monetary tightening to come   Warmer weather in Europe has helped offset big energy price rises. Pictured: an art installation on the Champs-Élysées in Paris Sentiment is improving Looking at recent economic sentiment indicators and the stock market rally in Europe, it looks as if the projected winter recession is not happening after all. Eurozone GDP surprisingly grew by 0.1% in the fourth quarter of 2022. Meanwhile, the composite PMI has been creeping up since November to reach 50.2 in January, a level that can no longer be associated with an economic contraction. At the same time, consumer confidence rose for the fourth consecutive month after having reached a historic low in September. Much of the improvement in sentiment is, of course, attributable to the significant fall in natural gas prices. With inventories still close to record highs on the back of the relatively mild winter, natural gas prices have nose-dived and are back at pre-war levels. While we don’t believe that they will remain so low, they probably won’t return to the growth-choking levels that we saw in the autumn of 2022. Another tailwind is the opening up of the Chinese economy, which is likely to support eurozone exports in the coming quarters, although this might be partially compensated by a weaker US economy. Not all headwinds have disappeared, however So, no worries then? Not so fast. While consumption is less depressed, it is far from strong. Because of weak demand, there is an inventory overhang in many sectors that might weigh on production in the short run. The ongoing ECB tightening cycle is wreaking havoc on the real estate market, and construction is also likely to feel the pain. The signs are already apparent in the weak credit growth figures in December and the downbeat bank lending survey, while house prices have started to fall in a number of member states. While the current growth deceleration may lead to barely any weakening in the (tight) labour market, the corollary is that the subsequent upturn will not benefit from rapidly growing employment. We also think that fiscal policy will become tighter in the wake of the still-high budget deficits. The bottom line is that we are revising our growth forecast upwards to 0.6% for this year, but for 2024 we are sticking to the 1.1% growth projection. Read next: Difficult Decision Ahead Of The RBA, The Market Expects A 25bp Rate Hike| FXMAG.COM Higher interest rates will weigh on the housing market and construction sector Refinitiv Datastream Inflation problems not over yet HICP headline inflation fell in January to 8.5% on the back of the lower energy prices. However, core inflation remained stuck at 5.2%. Looking at the business surveys, intentions to raise prices in the coming months remain high. You might even say that less adverse economic circumstances contribute positively to businesses' pricing power, especially in the services sector. We now expect average headline inflation of 5.7% in 2023, while core inflation is projected to average 4.6% over the year. A return to the ECB’s 2% inflation objective will probably have to wait until the fourth quarter of 2024. Selling price expectations remain high Refinitiv Datastream More monetary tightening to come A 50 basis point rate hike both in February and March now looks like a done deal. The question is how much more tightening the ECB will add after that. While we anticipated a final 25bp rate hike in May, we must admit that the probability of an additional 25bp tightening is increasing by the day. At the same time the bank might also decide to increase the amount of maturing bonds that will no longer be reinvested in the second half of the year. As for a first rate cut, we probably will have to wait until the end of 2024 at the earliest. TagsInflation GDP Eurozone ECB 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 EUR/USD pair started the trading week rather quietly, without any gap, almost at the level of Friday's closing. This suggests that Friday's trading fuse has come to naught: the bears managed to pull the price under 1.0800, but further prospects for the downward movement were questionable. However, the quiet start of the trading week does not indicate that the pair will continue to move in the horizontal channel. On the contrary, we've got plenty of volatility ahead of us: bears will try to build on their success (or at least hold their positions within the frame of the 7th figure), while the bulls will be trying to take revenge to win back their lost positions. Every fundamental event will be used by traders to their advantage. Let's look at the main news of the week. Monday On Monday, February 6, markets will focus on European Central Bank President Christine Lagarde's speech. She will take part in a meeting with the president of the European Council, the head of the European Commission and the president of the Eurogroup. There are rarely any specific messages or intentions at this level of meetings, but given Lagarde's previous stance, she may repeat the hawkish signals indicating a willingness to raise rates at the March meeting by 50 points. This message won't have any impact on the euro (as it was mentioned at the ECB's February meeting). However, if the ECB head hints at further rate hikes, that's when the bulls will get a strong reason to launch a counterattack. Tuesday If Lagarde is the main newsmaker on the first trading day, then on Tuesday, February 7, traders will focus on her colleague Federal Reserve Chairman Jerome Powell. He will participate in a discussion hosted by the chairman of the Economic Club of Washington. The event is quite narrowly focused, so Powell is sure to comment on the latest Nonfarm. Let me remind you that the U.S. labor market data, released last Friday, turned out to be a pleasant surprise: the unemployment rate fell to a 53-year low (3.4%), and the indicator of employment growth jumped by 517,000(!). While the wage indicator (in annual terms) continued to show a downtrend. The latest figures allow Powell to be more confident not only about the March 25-point hike, but also about the longer term prospects. As of today, there is a 66% chance of a 25-point rate hike in May (according to the CME FedWatch Tool). But if Powell sounds indecisive in the face of strong Nonfarm (e.g. calling for inflationary growth), the dollar bulls will get a major blow and their position will shake considerably, even in the EUR/USD pair. Wednesday The economic calendar is not very eventful on Wednesday, February 8. The tone of the trades will be set by the Fed members, who will speak during the US trading session. You should pay attention to the stance of John Williams, head of the New York Fed. He has a permanent right to vote in the Committee and is considered one of the most influential members of the Fed. Ahead of the February meeting, Williams said that slowing rate hikes "makes sense" as "the Fed is nearing the end of its policy tightening cycle". If he reiterates that the end is near, the dollar will be under pressure. Actually, that was the reason why the greenback fell across the entire market after the Fed's February meeting: Powell made it clear that the central bank does not intend to exceed the previously declared target (5.25%), and possible calibration of the final point is only possible in the downward direction. If Williams voiced a similar position, the dollar will be under pressure. Also on Wednesday, the other Fed officials, Michael Barr (centrist) and Christopher Waller (predominantly hawkish), will speak. Read next: Elon Musk Was Found Not Guilty In The Tweets Case| FXMAG.COM Thursday Thursday's main report is Germany's inflation data. According to preliminary forecasts, the consumer price index will show an uptrend in January. The CPI may move up after two months of decline and post a reading of 8.9% (y/y). The harmonized consumer price index should similarly reflect an uptrend, coming in at 10.0% (after falling to 9.6%). If the real numbers match the forecasts (not to mention the greenback), the euro will receive substantial support. Let me remind you that last week's report on the growth of pan-European inflation turned out to be very contradictory: amid slowing overall inflation, the core index remained at a record high of 5.2%. The German figures may either reinforce concerns about price pressures in the European region or weaken the ECB hawks' position (the latter looks unlikely). Friday At the end of the trading week, two Fed members, Christopher Waller and Patrick Harker, will speak during Friday's U.S. session. They are considered as representatives of the "hawkish wing" of the Fed, so their comments may provide additional support to the greenback. There is also an important report on the Consumer Sentiment Index from the University of Michigan. It is a very important leading indicator of future consumer spending. According to preliminary projections, the index is expected to rise again (for the third month in a row), rising to 65.0 points (the highest since last April). Conclusions The forthcoming week is not full of important macroeconomic events. The key point is the ECB and Fed representatives (especially Lagarde and Powell) who are likely to assess the latest reports through the prism of future prospects. In addition, the German inflation report may lead to increased volatility in the EUR/USD pair. In general, at the moment, there are no signals that would indicate which position we should prioritize. Obviously, the "Nonfarm factor" has already played itself out for the most part, hence it is risky to enter selling. At the same time, Powell's more hawkish mood might encourage a bearish momentum: in that case, the pair might test the support at 1.0720 (the bottom line of the BB on the daily chart). But the alternative scenario in which the Fed chief (and his colleagues) remain cautious in spite of the strong Nonfarm is not excluded. In that scenario, bulls might seize the initiative (especially if Lagarde sounds hawkish and German inflation exceeds expectations). In this case, the price is likely to return to the range of 1.0850-1.0950. Relevance up to 02:00 2023-02-07 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/334201

Most macro indicators argue for more downward pressure on market rates. However, we think things are more nuanced than that. Belated ECB and Bank of Japan tightening, and remarkably low US market rates versus the Fed’s ambitions, present reasons for market rates to back up a bit from here In this article Eurozone and Japanese rates primed to provide independent upside pressure In the US, it's a story of a remarkably stretched full curve inversion Never before (since the 1990s at least) has the 10yr been so rich at this stage of the cycle   Eurozone and Japanese rates primed to provide independent upside pressure One key element ahead is the probability that the ECB will hike by more than the Fed does in 2023. This is a factor that can push global market rates higher, as it implies a narrowing in the spread between Treasury and Bund yields, driven by independent upward pressure on Bund yields. A second related element is the upward pressure being brought to bear on Japanese government bond (JGB) yields. The 50bp cap on the 10yr JGB yield is yet again being tested by the market. This is another independent pressure that will act to narrow spreads to Treasuries, adding an upside excuse for core global yields generally. In the US, it's a story of a remarkably stretched full curve inversion In the US, the spread between the 10yr yield and front-end rates is remarkably stretched, as can be gleaned from the deep inversion of the curve. While an inverted curve is perfectly normal as we approach the end of a rate hiking cycle, it’s the degree of inversion that’s startling. There are many ways to measure this. The graph below is one. It shows the 10yr yield currently at 1.7% below the 6mth Libor rate (we use the 6mth tenor to incorporate future hikes). This has never been so stretched (on data going back to the 1980s). 6mth Libor is a staggering 1.7% above the US 10yr Basis points Macrobond, Federal Reserve, ING estimates Never before (since the 1990s at least) has the 10yr been so rich at this stage of the cycle There is another important element to consider – timing. It is not at all unusual for the 10yr to trade below money market rates as the Fed approaches the peak in the cycle. In fact, it’s like that in practically every cycle. But the extreme, where the 10yr trades most through money market rates, tends to be just before the Fed is about to execute a first cut (having held rates at a peak for a number of months). Here, however, we have similar extremes while the Fed is still hiking. This is unprecedented. To put some numbers on this, past cycles have typically seen the 10yr trade some 75bp below the Funds rate on the eve of a rate cut. The most extreme version was during the dot com bust when the 10yr was some 150bp through the Fed funds rate just before the first cut. Fast forward to today, and the 10yr yield is already 83bp below the Funds rate. If the 10yr yield remains here (at around 3.5%) that stretches to 108bp after the expected hike on 1 February, and if we get a March hike it stretches it further to 133bp. That’s against a backdrop where the Fed is nowhere near an actual rate cut. Bottom line, we identify the US 10yr as being exceptionally rich to the money market rates, and we see independent pressure for upside to market yields from the eurozone and Japan. That’s an important counter to weak macro data that’s been driving market yields lower since late 2022. TagsRates Monthly Economic Update 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

As predicted yesterday, the EUR/USD currency pair continued to decline on Monday, albeit with less volatility. Given that neither the US nor the EU released any significant macroeconomic information or basic background yesterday, the movement on Monday best satisfies the definition of "inertial." Thus, the euro's value continued to decline entirely as a result of last week's events, notably the outcomes of the Fed and ECB meetings and the American media's publications on Friday. This movement could finish today and an upward correction could start because we predicted it would last for another one or two days. We continue to anticipate that the European currency will continue to decline. A downward trend is the most likely course of action given the pair's recent extreme overbought condition. Additionally, sales signs are also beginning to emerge. The pair was fixed below the moving average line on the 4-hour TF, which is noteworthy. Today, the price can already pass the crucial threshold on the 24-hour TF. When these two signals are merged, the pair can fall by hundreds of points. Additionally, we must keep in mind that there won't be much in the way of macroeconomic and fundamental background this week. There won't be any significant reports, and Christine Lagarde's address didn't reveal any new information. What additional information could there possibly be given that practically all ECB officials have recently stated the necessity of continuing to tighten monetary policy? Since the regulator would have already started a modest slowdown if it wanted to stop its tightening, there is now no question that the rate will increase by at least 0.75%. There will be at least two more increases of 0.5% and 0.25% if it does not slow down at the February meeting. The ECB's planned tightening of monetary policy, however, is a "double-edged sword." Since the market is already prepared for such an event, quotes can already reflect it. Therefore, rhetoric with a longer-term view is needed from Christine Lagarde, Luis de Guindos, or Isabelle Schnabel. If they give any indication or make it clear that they intend to raise the rate in the second half of 2023, this might lead to a new round of buying of the euro since the Fed rate will have undoubtedly risen by then. Read next: USD/JPY Pair Is Trading Above 132.00, The Aussie Pair Is Near 0.6900| FXMAG.COM Can the inflation rate rise again? Another option is to approach the issue differently. Both in the United States and the European Union, inflation has been slowly declining over the past few months. A lot of individuals, who have grown accustomed to this phenomenon, think that the consumer price index will now decline (at some rate or another) until it reaches 2% or such. A year is implied. The fact that inflation has been falling in recent months as a result of lower energy transport prices is not surprising. The impact of this occurrence will eventually stop having an impact on prices, and inflation may then stop accelerating. In a few months, this will likely occur. It is also important to keep in mind that the effects of a rapid rate increase by the ECB and the Fed may eventually "fade into the background." If the rate has increased to 4.75% (in the US), it does not follow that inflation will continue to decline indefinitely. The Fed will need to decrease the key rate quickly to stop inflation. In general, we think that the monetary policies of the Central Bank may be changed more than once in 2023. As a result, making long-term predictions is useless. To make them, too many aspects must be taken into account. By the way, the armed confrontation in Ukraine is still going on and has not ended. Everyone is aware of the terrible effects it had on the pound and the euro last year. This year, history might repeat itself. As of February 7, the euro/dollar currency pair's average volatility over the previous five trading days was 121 points, which is considered "high." So, on Tuesday, we anticipate the pair to move between 1.0614 and 1.0856. The Heiken Ashi indicator's upward reversal will signal a round of corrective movement. Nearest levels of support S1 – 1.0742 S2 – 1.0620 S3 – 1.0498 Nearest levels of resistance R1 – 1.0864 R2 – 1.0986 R3 – 1.1047 Trading Advice: The EUR/USD pair is still moving lower. Until the Heiken Ashi indicator turns up, you can maintain short positions with a target price of 1.0620. After the price is fixed back above the moving average line, long positions can be initiated with a target of 1.0986. Explanations for the illustrations: Channels for linear regression - allow us to identify the present trend. 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 2023-02-08 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/334321

M5 chart of EUR/USD. On Monday, the EUR/USD pair was bearish. In spite of the empty macroeconomic calendar, traders found a reason to sell the instrument. Yet, a couple of weeks ago, there was the opposite situation. Nevertheless, the eurozone saw the release of several macro reports. Thus, its services PMI rose to 46.1 in January, and retail sales dropped by 2.7% in December. However, the market showed no reaction to the results. The decline in EUR/USD came in the North American session. No macro releases were scheduled for the day in the United States. ECB President Lagarde's speech did not contain any new information or hints. No trading signals were generated on Monday. Technically, there were two signals made. The first one was produced at the close of the market on Friday. The second one was formed on Monday night. Neither of them should have been priced. So, no positions were opened. Unfortunately, a good price movement on Monday was missed. COT report: The COT reports on EUR/USD have been in line with expectations in recent months. The net non-commercial position has been on the rise since September. The bullish non-commercial position rises with each new week. Taking into account this fact, we may assume that the uptrend will soon come to an end. The red and green lines of the first indicator are far apart, which is usually a sign of the end of a trend. In the reporting week, non-commercial traders opened 9,500 long positions and 2,000 short ones. The net non-commercial position grew by 7,500. The number of long positions exceeds that of short ones by 134,000. It now remains to be seen how long large traders will be bullish. From the technical point of view, a bearish correction should have already occurred. Traders will unlikely stay bullish for another 2 or 3 months. Even the net non-commercial position shows that it is time for a correction. In total, there are 52,000 more long positions now among all groups of traders (732,000 vs 680,000). Read next: USD/JPY Pair Is Trading Above 132.00, The Aussie Pair Is Near 0.6900| FXMAG.COM H1 chart of EUR/USD. According to the H1 time frame, the pair is in a downtrend without any correction. On Monday, volatility somewhat decreased. The pair may tumble by 200-300 pips today. The tightening factor was priced by the market in December and January. On Tuesday, important levels are seen at 1.0485, 1.0581, 1.0658-1.0679, 1.0736, 1.0806, 1.0868, and 1.0938 as well as Senkou Span B (1.0856) and Kijun-sen (1.0871). Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels. They could be made when the price either breaks or rebounds from these extreme levels. Don't forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses. On February 7, the ECB's Isabel Schnabel and the Fed's Jerome Powell will deliver speeches. However, both policymakers are unlikely to share some new information since both central banks held their board meetings only last week. Therefore, the market will pay little attention to the officials' speeches. Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.   Relevance up to 06:00 2023-02-08 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/334325

Expect hawkish rhetoric from central bankers today but euro and dollar rate markets are already pricing in that outcome. Supply resumes this week, with a detrimental effect on duration, front-loaded to the start of the week Hawkish central banks well anticipated by markets Rates markets will be looking to public appearances from European Central Bank board member Isabel Schnabel and Fed Chair Jerome Powell. Despite some notable differences in communication style and in economic fundamentals, markets have taken a uniform view that domestic inflation will soon be back under control, and that their respective tightening cycles will soon come to an end.  What both central banks have in common is that the drop in rates, tightening in credit spreads, and rally in other risk assets make their task of bringing inflation back to target more difficult. Schnabel and Powell face an uphill struggle to move yields up much further Many would object that in the current disinflationary trend, central bankers will not care if the yield curve prices rate cuts before the end of the year. We think this is more true of the Fed than of the ECB but, when it comes to it, we expect both officials to strike a hawkish tone. The main difference is that there is much less confidence about the downward trajectory of European inflation. This will make Schnabel’s push back against market pricing more potent than Powell’s. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM Helped by a bumper jobs report in the US, and hawkish post-meeting ECB comments, we would argue that both Schnabel and Powell face an uphill struggle to move yields up much further. 10Y Bund yields for instance are 25bp off their post-ECB meeting trough already, to a level we would call low but not strikingly so. The same goes for 10Y Treasury yields, around 3.6%, they are much lower than Fed funds but already 30bp above last week’s lows. Bond yields have bounced convincingly off last week's lows Source: Refinitiv, ING Primary market activity picks up this week Bond issuance resumes in earnest after a week-long hiatus. Euro syndicated deals last week fell to €13bn from €47bn the week before. In the best of times, it is difficult to distinguish the impact of supply on rates direction. The effect tends to be transient, and localised. In addition, it was nearly impossible to make out its effect last week given the cascade of events and economic releases. Euro deals have probably already seen most of their market impact on rates direction This week should prove easier. First of all, we expect some degree of catch up after a quiet week in primary markets. Secondly, some of the deals already announced reinforce that view, and speak to a skew towards longer-dated deals, at least today (see events section below). Thirdly, the fact that many European financials are still reporting this week should reduce the number of swapped deals, making the rest of issuance more market-moving, and also reducing its swap spread tightening impact. As usual, the main challenge is timing. Looking to the US, long-dated 10Y/30Y auctions later this week are well flagged, and the long-dated France and Poland euro deals have probably already seen most of their market impact on rates direction. We would stop short of ascribing the bond sell-off on Friday and Monday to supply pressure, but we think it helped. Bond issuance needs to catch up after a quiet week Source: Refinitiv, ING Today's events and market view The main event today is an opportunity for central bankers to set the record straight after dramatic market reaction to last week’s policy meetings, and rightly so. The focus is on Powell’s interview, but don’t underestimate the potential for Schnabel to move euro markets. The Netherlands (new 10Y), Austria (10Y/17Y), and Germany (inflation linkers) will carry out euro-denominated sovereign bond auctions, adding to France’s newly mandated 30Y syndicated deal which should also occur today. Poland should also come to primary markets with a dual tranche 10Y/20Y deal. The US Treasury will kick off this week’s auction slate with a $40bn 3Y T-note sale. The only economic release to note in this session is US trade. Read this article on THINK

Summary:  While the economic situation in Europe may not be as bad as feared, there's still a plethora of things to fix. A resilient economy We were too pessimistic about the euro area. Softer energy prices, the lack of black-out (resulting both from energy supply diversification and better weather conditions) and resilient hard data (notably in Germany) are pushing forecasters to review their 2023 recession calls. The eurozone 2023 consensus GDP is up from minus 0.1 percent to 0.0 percent. This is a small but significant move and it doesn’t appear to be the end. We still believe the consensus is too low. In mid-January, Goldman Sachs was the first international bank to completely reverse its call for the eurozone, moving its GDP growth forecast from minus 0.1 percent to 0.6 percent. We are not that bullish at Saxo Bank but we confidently believe that the eurozone could avoid a recession this year with a GDP growth target close to 0.3 to 0.4 percent. Remember that a few months ago, more than 90 percent of the forecasters predicted that a recession is the baseline for this year.  What has changed? The economy is actually stronger than expected. The Citi Economic Surprise Index (below chart) now stands at a one-year high. This means that economic data are better than economists’ projections. This is especially true for Germany. While gas consumption has collapsed by double digits, industry output has remained largely flat. Not only that this could be considered as a remarkable achievement, based on the latest November data on industrial production, it looks like there will be no recession in German industry in Q4. The first estimate of German 2022 GDP is also significantly higher than forecasted, at 1.9 percent – this represents 0.5 points above the government’s target. Everything indicates that the economy will remain at a resilient pace in the short term, with all the nowcasting models pointing to an economic recovery this quarter. Hence, the probability of a recession is now declining quite fast. We also believe there will be no extreme macro and market events in 2023 – which could be positive from a growth perspective. If the economy performs much better, this will however give ECB policymakers more confidence in hiking rates as laid out in December by Christine Lagarde. Economic surprises are improving significantly in the euro area. The consensus, 0.0 percent GDP growth in 2023, seems slightly conservative and is bound to be revised up. But risks are looming However, this does not mean that the year 2023 will not be challenging: Credit stress is on the rise – this is the first time in a decade we start the year with European IG credit yield above the 4 percent level. Expect many companies to face difficulties getting access to new sources of funding. Many small and medium caps will probably have no other choice but to resort to ultra-dilutive financing, such as convertible bonds. Retail investors should stay away from these listed companies. The market will need to absorb about €700bn of liquidity due to the ECB quantitative tightening. This is a complicated exercise which will result in tighter financial conditions and perhaps higher volatility in equity. The energy crisis will be back on the agenda again. This is not politically correct, but climate change has certainly helped avoid an energy crisis in Europe so far. However, when it will be time to refill depleted stockpiles in the spring, expect that prices will move up again. We are confident that the EU will be able to find energy suppliers (for instance, natural liquified gas from the United States, Australia or even Mozambique), but at a high cost. This will ultimately fuel inflation higher in the second semester, along with higher oil prices resulting from higher Chinese demand (we estimate that China’s reopening will boost oil demand by 4m bpd around spring – this is about three times more than the growth in demand forecasted by the market). Prices on the wholesale electricity market increased tenfold during the peak of the 2022 crisis in several EU countries. This was partially explained by rising gas prices due to the war in Ukraine and problems with nuclear generation in France. Now, prices are receding. But the market does not expect a return to the pre-Covid situation (where prices were below EUR60 per MWh). What about the risk of a wage-price spiral? The labour market remains tight in the eurozone. The last data show that the eurozone unemployment was at 6.5 percent in November 2022 and at 6.0 percent in the European Union. Within the EU, Spain scores the highest official unemployment rate (12.4 percent) and Germany and Poland the lowest one (3.0 percent). In a working paper published in mid-January, ECB economists pointed out the risk of high wage growth in the coming quarters – way above historical patterns: “This reflects robust labour markets that so far have not been substantially affected by the slowing of the economy, increases in national minimum wages and some catch-up between wages and high rates of inflation.” We tend to disagree with this assessment. Wage growth is of course fuelling inflation in the CEE area, but this is clearly not the case in Western Europe. The likelihood that wages will increase significantly, thus becoming an issue in regards to the fight against inflation, is rather low in our view. Actually, in several countries, wage increases are dramatically lagging behind inflation. In Spain, the average real wage is now below what it was 15 years ago! It is hard to think there will be a wage-price spiral. However, if the ECB believes this is a material risk, they could decide to tighten too much – thus increasing credit stress. Overall, we believe the consensus was and is still too pessimistic about the eurozone 2023 GDP growth. There is a high probability that a recession will be avoided. That being said, Europe is still broken. The energy crisis remains a major risk for the next winter – with the EU being still reluctant to embrace nuclear energy and being unable to move fast on the project of a reform of the electricity market. While the ECB expects wages to increase substantially, we see that workers are in fact becoming poorer in most countries. Several companies which have benefited from the abnormal negative interest rate periods will now face a moment of truth – many of them will probably go bankrupt. Politically, we are not optimistic. EU presidencies offer little ambition – Sweden, which heads the Council of EU unsurprisingly focuses on the Ukraine war while the Spanish presidency in the second half of 2023 will be dominated by elections in the country. There is not much positive to expect from politics this year.     Source: Broken Europe | Saxo Group (home.saxo)

Summary:  2023 could be a tough year for currencies but EUR and JPY may have some upside. Q4 saw a massive retreat in the US dollar as the market ignored the Fed’s pounding on the table on the need to keep the policy rate ‘higher for longer’, profoundly inverting the US yield curve. Meanwhile, the ECB played catch-up with its tightening cycle, the JPY bounced back with a vengeance on the Bank of Japan arriving to the tightening party just before central banks elsewhere are trying to shut it down, and the Chinese renminbi came back from the brink as well on a disorienting policy about-face. 2023 is likely to prove a rough ride for currencies if the USD bear market fails to continue in a straight line, but EUR and JPY may outperform. As 2023 gets under way we see the market expressing increasing confidence in a disinflationary outcome for the US. Despite the Fed’s persistent ‘higher for longer’ narrative and the FOMC having placed the median dot plot Fed Funds rate forecast above 5 percent for this year at its December 2022 meeting, the market is happy to continue to mark Fed expectations lower by the end of this year. In the early weeks of this year, the market has priced in accelerating rate cuts for 2024 after recent data points have shown significantly weaker ‘soft’ data, including a weak ISM Services survey for December, but also as several inflation data points have come in softer than expected. Emboldening traders to price an easier Fed beyond the hump of perhaps two more 25 basis point hikes over the next couple of quarters is that annualised inflation from the last several months, minus the notoriously lagging and heaviest component of the official CPI data series, the owner’s equivalent rent, is practically back within the Fed’s target range of 2 per cent. As our The Models are Broken theme for this outlook argues, however, we find it highly unlikely that the disinflationary backdrop can persist for long in an under-invested world that is scrambling to transform itself away from fragile, globalised supply chains, to upgrade and green its energy system, and to arm itself for new national security imperatives. Thus, any nominal growth slowdown will prove shallow and growth will re-accelerate on the bounce-back in demand for commodities as China comes back online. In the meantime, the USD may occasionally rally hard if the market has to second guess its expected path for the Fed next year, and if that adjustment sees new bear market lows in risky assets, particularly US stocks. The ingredients for a sustained USD sell-off would include the Fed providing liquidity and a global rebound in risk sentiment, with the latter as important as the former. In the past two cycles, the big USD sell-offs have come only on the Fed providing massive liquidity after some sort of global crunch. But this Fed is still tightening! So how has the USD weakened in Q4 and into early Q1? That has largely been down to falling yields as the market prices the Fed to roll over but easily as importantly, also due to other factors that have helped offset the Fed’s tightening, including a US Treasury that continues to aggressively draw down its account at the Fed, adding liquidity to the system, and banks shifting of reserves and the drawdown in usage of the Fed’s reverse repo facility that can act as a king of ‘stored QE’. The latter is unpredictable, but the US Treasury contribution to liquidity will rapidly run dry in coming months and will then actually drive a liquidity headwind when it rebuilds its account, sooner or later, after the latest ridiculous spectacle of Congress clearing the debt-ceiling issue sometime in Q1.  In the meantime, a slowdown in corporate profits and recession fears could bring a comeback in the USD as a safe haven at times in the first half of this year, even if it falls short of the cycle peak. Further out the curve, far beyond the purview of Q1, when inflation reaccelerates beyond a possible short-term growth scare and the current misleading comedown in inflation, the USD may finally turn significantly lower on the Fed having to provide liquidity to ensure an orderly treasury market, even without significantly cutting rates or cutting them at all. Think QE with no ZIRP – a new paradigm that breaks the old model. Rounding out the G3: win-win for the JPY. EUR steady. The JPY looks the win-win setup for Q1 and possibly into early Q2, even after its significant repricing higher versus the USD from the incredible extension higher in USDJPY to above 150 late last year. December saw a surprise tweak in Bank of Japan (BoJ) policy after Japan drew down a significant chunk of its reserve to defend its yield-curve-control band. While Governor Kuroda failed to follow this up with a further shift in January, the overall sense that Japan is set to exit its extreme monetary policy experiment of the last 10 years continues, with Kuroda set. The ‘win-win’ setup is that the JPY can rise on the anticipation that the BoJ is set to normalise policy at a time when other central banks are easing off the pedal and even if it entirely fails to shift, yield spreads could continue to come crashing down on uglier-than-expected outcomes for the global economy earlier this year, the traditional source of JPY strength. The ideal ingredients near term for further JPY strength are both tepid to lower yields this quarter and a growth scare that further aggravates risk sentiment. A vicious rally in energy prices sooner rather than somewhere in late Q2 or later would challenge the recent JPY rally, unless the BoJ front-loads its shift away from the Kuroda era. Source: Bloomberg and Saxo Graphic: A recap of the chart of G3 currencies (USD, EUR & JPY) from the Q4 outlook. Then, we noted that for the USD and JPY "the jaws are widening perilously!". Well since then, they widened even more before finally beginning to snap back the other way, if somewhat tentatively. Note how modest the JPY comeback has been so far. For the rest of 2023, we would look for the two currencies to continue converging, with the EUR a bit more sedate middle ground, if still firm relative to the US dollar and elsewhere.   For the EUR, we have an ECB that found the rate-tightening religion late in the game at its December meeting and is signalling further strong tightening from here, emboldened by a collapse in natural gas and energy prices on a mild winter (even if these prices are above historic ranges). The fiscal outlook is more robust for Europe than almost anywhere else, and the anticipation of a return of Chinese demand could keep downturn risks very shallow. Long term energy and power issues are a concern for the long term, but supplies concerns are not an issue through this winter. Solidly positive bond yields in Europe, even if real yields remain quite negative, could help to keep a domestic investor focus. The EUR may prove a relatively steady ship in rough seas this year. Sterling would benefit most, meanwhile, from a very soft landing elsewhere and steady global markets. Not sure that is what we will get, and sterling risks getting painted with the same balance sheet challenges noted for the ‘G10 smalls’ below, although it is tricky to understand sterling risks when the currency is already heavily discounted, even after the Truss trauma of last fall. Read next: Adani Group Company's Crisis Is Gaining Momentum, Finland Is The Happiest Country| FXMAG.COM The G10 smalls: balance sheet recessions offsetting eventual commodity strength. The G10 smalls are all small open economies, where housing markets largely got a free ride, or only suffered a bad blip, during the 2008-09 global financial crisis. The G10 smalls suffered horrendous volatility back then, some from over-exuberant carry trading (AUD, NZD and NOK) while others enjoyed pro-cyclical strength on the commodity angle (CAD and SEK), or both, with the exception of SEK. Forced to gut interest rates in a competitive devaluation move post-GFC, housing markets were set on fire in these economies and were super-charged yet again during the pandemic response of 2020-21. Now, with a steep rise in longer lending rates like these economies haven’t seen in decades, housing markets are set for a further massive correction, one that is already under way. Real estate is a notoriously illiquid asset and absorbing the impact of the rate rises in the back will take time. But there will be rolling and tremendous impact on both construction sector activity as well as private balance sheets and likely on consumer sentiment more broadly in these economies, especially for those housing markets highly vulnerable to floating rate mortgages, including Australia, Sweden and Canada. While our longer term commodity outlook is very constructive to say the least and will provide some offsetting strength in the next growth cycle for the commodity have-alls like Australia and Canada, the bloated leverage in the private sectors in all of these smaller economies could significantly offset their upside potential. The risks in Sweden could get downright systemic and require significant intervention. This could already be behind the SEK’s notable weakness in late Q4 and into early Q1.  China and EM: Much has already been priced for the CNY after its powerful comeback from the brink on the huge policy pivot described in Redmond’s outlook for China in Q1. The coming quarter may prove less remarkable in fx terms as investors have already front-run a good deal and China will want to prevent excessive CNY strength on wanting to keep its exports competitive, even as it moves up the value chain. The rest of the EM may be in for a bumpier ride early this year on the global growth scare after very strong performance since late last year as the market pummelled the USD and rates fell, offering strong performance for EM bonds in local currency terms. But value shopping for commodity-leveraged FX in the coming quarter is worth consideration (BRL, IDR, ZAR and others). Source: Latecomers to tightening party, EUR and JPY, may prove safest harbours in the first half. | Saxo Group (home.saxo)

The EUR/USD pair suddenly fell, having tested the 6th figure. Although traders failed to hold steady in this price area, market participants are showing growing interest in the U.S. currency. The greenback was not only supported by Friday's strong Nonfarm Payrolls report, but also by Federal Reserve Chairman Jerome Powell, who sounded some rather hawkish signals on Tuesday. The Fed chief spoke at the Economic Club in Washington, D.C., where he commented on the latest economic data and also spoke on inflation. Powell's ambivalent message The pair initially surged by nearly 100 points amid the general weakening of the U.S. dollar. It reacted this way because Powell mentioned that the disinflationary process has begun in America. He did however clarify that the process, in particular, is observed in goods but hasn't kicked in the service sector yet. The market interpreted these words against the greenback, as Powell's rhetoric was "final" in the context of a possible hawkish rate hike. Such assumptions were reinforced after the Fed chief reacted rather calmly to January's Nonfarm payrolls, making it clear that Friday's jobs report would not change the central bank's approach to future interest rate hikes. In the backdrop of such conclusions, the EUR/USD jumped from 1.0690 to the target of 1.0770 within an hour. But Powell's follow-up rhetoric allowed the bears to test the 6th figure again. Long, long way to go After acknowledging the fact that the U.S. began the disinflationary process, Powell noted that it may take a long time for the consumer price growth rate to slow down. As part of his speech, he highlighted that getting inflation down to 2% will take a "significant period of time." In this context, he used phrases that were different in form (but identical in meaning) - that the Fed would take "a considerable period of time" and that it was "still early in the process" in general. But in the end, Powell was very specific about the timing, which is uncharacteristic of him, stating that inflation in the U.S. won't slow down until 2024. He said the following verbatim: "My guess is it will take certainly into not just this year, but next year to get down close to 2%." Powell expanded on this point by making two other important points. First, he said that interest rates will continue to rise. Since rates have not yet reached an acceptable level for fighting inflation (without specifying what level of the rate is "acceptable"). Secondly, he reassured the markets that the Fed would have to hold policy at a restrictive level for "some time". Again, Powell also did not specify how long the Fed intends to keep the rate at the peak level. However, despite the wording (except for the reference to 2024), Powell made it clear that the U.S. central bank is not going to curtail its hawkish strategy in the foreseeable future. In practice, that means the Fed will increase the rate by 25 points not only in March, but probably at the next two meetings as well. Investors now place a 71% probability of a 25-point rate hike at the Fed's May meeting, according to the CME's FedWatch tool. The likelihood of another round of hikes at the June meeting is estimated at 35% (which is not insignificant given the slowdown in U.S. inflation). Conclusions Despite the fact that bears failed to settle in the area of the 6th figure, bearish sentiment still dominates the pair. As a matter of fact, Powell ruled out the end of the current tightening cycle (thereby, denying the rumors) and announced further steps in the direction of the range of 5.25-5.50%. At the same time, the European Central Bank did not ally itself with the euro at the end of its February meeting. ECB President Christine Lagarde, while announcing the realization of the 50-point scenario in March, simultaneously cast doubt on further rate hikes. According to her, after the March decision "we will then evaluate the subsequent path of our monetary policy,". Euro-area headline inflation has decelerated for the third straight month, and at a fairly brisk pace (it came in at 8.5% in January against a forecast of 9.0%). If the core CPI in February-March repeats the trajectory of the headline inflation, a "post-March" rate hike will be highly questionable. From a technical point of view, the pair is between the middle and bottom lines of the Bollinger Bands indicator, as well as under the Tenkan-sen lines. According to Tuesday's results, the bears were unable to push through the support level of 1.0700 (bottom line of the Bollinger Bands on the D1). If the bears overcome this barrier, the next target will be 1.0600, which corresponds to the upper limit of the Kumo cloud on the same chart.   Relevance up to 00:00 2023-02-09 UTC+1 Company does not offer investment advice and the analysis performed does not guarantee results. The market analysis posted here is meant to increase your awareness, but not to give instructions to make a trade. Read more: https://www.instaforex.eu/forex_analysis/334448

Through the recent gyrations, markets seem to lack the conviction needed to push new lows in rates. The resulting range-trading environment brings lower rates volatility and better risk appetite. We think rates differentials should narrow when rates finally converge lower Not enough conviction to call time on inflation, and still divergent policies The China reopening hype seems to have faded, judging by commodity prices running out of steam already. This is at least one less source of inflation for markets to fear but it is fair to say that coordinated central bank tightening, as was the case in 2022, doesn't rank very high on the market's list of worries. Instead we may well be witnessing a market where better-than-expected growth is causing investors to shun long-dated bonds when yields fall too fast. This theory is only valid up to a point. Recent hard German data, for instance industrial production, is showing an economy unlikely to reach escape velocity any time soon. And yet, European bonds have pulled back just as hard as their US counterparts. Better-than-expected growth is causing investors to shun long-dated bonds when yields fall too fast The net result is a curve is no hurry to print new lows in yields due to better opportunities in other markets, and with not enough information to push rate cuts expectations lower. Similarly, revisiting the 2022 highs seems out of the question, even accounting for the fact that yield curves, especially in the US, are deeply inverted. Combine this with still divergent policies with the Fed near the end of its hiking cycle, and the European Central Bank unsure where its own cycle will end, and we have a powerful force pulling yields away from the extremes of the recent range. Lower inflation expectations and the resulting decline in volatility are boosting risk appetite Source: Refinitiv, ING Lower rates volatility is good for risk, and rates differentials should narrow There are two themes emerging from this state of play. Firstly, rate implied volatility in the option market is right to decline from last year's highs – even taking into account last and this week's gyrations. This is an environment, as we've seen, conducive of greater risk appetite, and also a reason why investors would shun the safety of government bonds, except perhaps for the shorter ones. This is an environment, as we've seen, conducive of greater risk appetite  The other theme is that this market is less likely to see large directional moves, even though we think the trend in rates is still lower. Instead, the most remarkable moves are likely to be in cross country spreads. Notwithstanding a solid US job market, we continue to think US rates have further to fall than their European counterparts. Last week has shown that this sort of view is not immune to setbacks, but we think it is the one most consistent with rates taking their time to converge lower, and happy to pause for a while, within existing ranges. Short-end swap spreads should tighten further on reduced collateral scarcity fears Source: Refinitiv, ING The ECB has chosen to nip any re-emergence of collateral scarcity fears in the bud The ECB has announced the post-April remuneration arrangements for government deposits held at the ECB last evening. These deposits will no longer be remunerated at ESTR, but at 20bp below – very generous compared to the prospect of a 0% cap kicking in again. Fears of €350bn in government cash suddenly pushing into the tight collateral market now give way to an outlook of a more gradual adjustment, which will be easier to absorb for the market. The move shows the ECB’s sensitivity to market concerns in this area and removes a major obstacle to the further structural tightening of Bund asset swap spreads. Today's events and market view What we lack in data today is compensated by a busy slate of central banks speakers and brisk supply action. From the Fed we will hear from a wide range of officials including Williams, Cook and Kashkari, though it should appear that with Fed Chair Powell's comments yesterday the central bank's main take on the data should be clear – no need to ratchet up the hawkishness on one data print. Over in Europe ECB’s Isabel Schnabel stated yesterday that the ECB’s unprecedented tightening had little impact so far on inflation, signalling that rates would have to remain in restrictive territory until there is robust evidence that underlying inflation is coming down. Klaas Knot, another outspoken hawk, is scheduled to speak on the economic outlook today. Recall that in January he had called for rate hikes also in May and June. After Powell failed to dial up the Fed's hawkish message, we expect risk sentiment to continue improving in the short term. As we discussed above, we're increasingly in a market where this means bond markets fall out of favour with investors, and yields drift higher. 10Y Treasuries are within touching distance of 3.75% but this may take a little while longer to get there if volatility dies down as we expect. The hawkish ECB push should help at the margin although we think the message has already been clearly delivered in recent days, despite a few doves' dissent. In supply the focus will shift to the US longer end with the US$35bn sale of a new 10Y note, followed by the 30Y tomorrow. In EUR goverment bond markets Germany reopens a 7Y bond and Portugal a 10Y. The UK sells a 17y Gilt.  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

EUR/GBP is hovering around the 0.89 support. However, economists at ING doubt that the pair is to sustain more losses.  Don’t read too much into a weaker EUR/GBP “EUR/GBP is pressing through the 0.8900 support, but we doubt this is the start of a longer downtrend in the pair.” “The Bank of England’s pushback against dovish rate speculation is happening in tandem with the ECB and we don’t see a key catalyst for the two currencies to dramatically diverge in the current environment.”  

The dollar fell as Powell spoke. The dollar fell Wednesday after Federal Reserve Chairman Jerome Powell refused to significantly tighten his tone on inflation in a closely watched speech, despite last week's strong employment data. USD/JPY The yen tumbled earlier this week as robust US jobs data suggested the Fed had more room for interest rate hikes. Recently, Japan's central bank countered speculation about another policy adjustment by keeping interest rates very low and leaving its yield control policy unchanged. As things stand, it seems that the market is having a hard time assessing the way forward as strong US data brings constant warnings of more hikes, which usually support USD valuations. At the same time, Japan is considering nominations for the top BoJ position for April, as the likelihood of policy normalization at the ultra-dovish Bank of Japan by the new incumbent cannot be ruled out. In the morning, the USD/JPY pair started rising towards 131.30. USD/JPY traded above 131.00 for the following hours of trading but fell below in the European session and is now trading at 130.6910. EUR/USD EUR/USD rebounded towards 1.0750 on Wednesday after falling below 1.0700 late Tuesday but struggled to gain further momentum. In the absence of high-impact data releases, investors will pay close attention to comments from Fed officials. Currently, the EUR/USD pair has fallen below this level, but slightly to the level of 1.0740. On Tuesday, mixed comments from European Central Bank (ECB) officials made it difficult for the euro to gain an advantage over its rivals. ECB politician Francois Villeroy de Galhau said they are not very far from the peak of inflation. On a hawkish note, policymaker Joachim Nagel reiterated that further significant interest rate hikes would be needed, adding that ECB rates were not restrictive yet. Finally, Isabel Schnabel, member of the Executive Board of the ECB, took a neutral tone. Federal Reserve Chairman Jerome Powell said US interest rates may need to be raised while the process of "disinflation" appears to be underway. Read next: Douyin Wants To Enter The Food Delivery Industry| FXMAG.COM GBP/USD At the end of Tuesday, FOMC Chairman Jerome Powell also confirmed good labor market data and reiterated that they will probably have to make further rate hikes. On an optimistic note, Powell said he expected 2023 to be "a year of significant decline in inflation." This remark made it harder for the US Dollar Index to maintain its upward momentum and helped GBP/USD recover some of its losses this week. From the UK's perspective, the strike action remains a concern for the government and civil servants are planning to carry out another strike on March 15. Chancellor of the Exchequer Jeremy Hunt will present his fiscal plan on the same day and will be under additional pressure to possibly reassess inquiries about the pay settlement. Overall, it is bearish for the pound as strike action disrupts the UK economy and challenges UK leadership. GBP/USD pair gained momentum and climbed to around 1.2100 on Wednesday. Currently, the GBP/USD pair is trading above 1.2090$. AUD/USD The Aussie pair is defending support at 0.6950 with the US Dollar generally subdued so far. The Aussie pair surged above 0.6990 today but failed to maintain momentum and is currently trading above 0.6980. Yesterday the RBA raised rates by 25 bp. Source: finance.yahoo.com, investing.com

Following an eventful week and post-meeting communications fine-tuning by officials, the dust has finally settled. Circumstances have clearly made it easier for the Fed to land its message while the European Central Bank has had limited success so far in extending the reach of its hawkish intentions beyond the next few months ECB President Christine Lagarde and Fed Chair Jerome Powell The Fed unlikely to be fussed by the market The past days have given policymakers plenty of opportunity to refine their policy stance after the previous week had seen outsized market gyrations in the wake of the central bank meetings and then the US jobs data. With regards to the Fed, Chair Powell had largely confirmed the message he had previously conveyed at the press conference. The latest speakers have added only a somewhat more hawkish tone stressing that rates could remain higher for longer. And as the Fed’s Waller added, if financial conditions were to loosen, the response could be faster policy tightening than the 25bp currently envisioned. US markets have shifted their rates expectations higher by about 20bp compared to before the Fed meeting Taking into consideration all of the above, US markets have shifted their rates expectations higher by about 20bp compared to before the Fed meeting, placing the terminal rate at about 5.10%. However, the amount of cuts expected through the end of 2024 was little changed at close to 200bp despite the officials’ emphasis that rates may have to stay higher for longer. Indeed, judging by the smaller increase of medium to longer term OIS real rates by 5bp to 8bp versus the beginning of last week, financial conditions have tightened only moderately since the Fed meeting. But importantly they have not dropped and are roughly aligned with their average over the past two months. Broader financial conditions have eased but real USD rates have barely budged Source: Refinitiv, ING ECB: Salvaging the last meeting's hawkish intent was only modestly successful Arguably the ECB’s press conference probably required a bit more fine-tuning to the initial market reaction of dropping rates. The latest bits of communication in this regards have come from an outspoken hawk, Klaas Knot, warning that the current pace of 50bp hikes may have to be maintained into May. Vice President de Guindos, who reflects a more centrist position within the Council, cautioned markets may be too optimistic about the inflation trends and he would not rule out hikes after March. the ECB’s press conference probably required a bit more fine-tuning to the initial market reaction of dropping rates Comparing latest money market curves to where they were at the beginning of last week just ahead of the policy meeting does not suggest that ECB officials have been able to increase the reach of its hawkish message. The 1m ESTR OIS forwards for the next few months have risen by more than 10bp since then, but beyond that forwards are little changed, if not even a tad lower. The terminal rate itself has nudged only 4bp higher to 3.44% whilst the amount of policy easing expected through 2024 thereafter has slightly increased to a cumulative 93bp.   With markets shorter to medium-term inflation expectations as measured by inflation swaps having risen to a greater extent, the OIS real rates out to 10y have actually dropped by 10 to 4 basis points, signalling slight net loosening of financial conditions. Not a desirable outcome for policymakers who consider their job far from being done, but also not catastrophic with real rates still above the recent average. The ECB's hawkish pushback has kept real EUR rates positive Source: Refinitiv, ING One measure to judge them all Of course the one benchmark against which all central banks will eventually be measured is the decline in inflation. With regards to the US we will get the University of Michigan’s survey of consumer inflation expectations tomorrow and of course the next set of CPI data next week. While the former is anticipated to show a slight uptick on the one year measure, the CPI itself is seen continuing on its downward  trend. The ECB can be seen stuck in the catch up phase being confronted with stubbornly high underlying inflation pressures That puts the Fed in a more comfortable position, in the eyes of the market more of a fine-tuning stage of its policy stance, whereas the ECB can be seen stuck in the catch up phase being confronted with stubbornly high underlying inflation pressures. That increases the risk that hawkish rhetoric as well as action will eventually have to ratched up further.  Today's events and market view In the eurozone, Germany’s inflation data was probably the most anticipated release of the week with little else on the data calendar of note. At 9.2% the EU-harmonised measure is lower than the 10% median estimate but much higher than the 8.6% used by Eurostat in their HICP estimate last week.  Main focus now is on the US initial jobless claims as markets will try to get a better grip on the state of the labour market. There are more ECB speakers scheduled today though only after the end of the European trading session. With Bundesbank’s Nagel we will see another more prominent hawk, but also more dovish to moderate members with de Cos and again VP de Guindos. Main highlight on the central bank front today is the BoE, where Governor Bailer and MPC members Pill, Tenreyo and Haskel appear before teh Treasury committee. At the last meeting the Bank shifted its rhetoric and signalled it was near end of its hiking cycle. In supply last night’s US 10y note auction was another display of strong demand with bid cover of 2.66 even topping January auction. Notable was the record-high allocation to indirect bidders, a proxy for foreign investor demand in the auction. Tonight the Treasury will auction its 30y bond.    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 national inflation measure increased in January, while the European measure dropped. This shows that inflation numbers will be surrounded by lots of noise this year as government measures and statistical changes continue to affect inflation numbers. Not an easy task for the European Central Bank German inflation data in January was surrounded by statistical noise   Some say that haste makes waste. Others say that there are fewer challenging jobs than being a German statistician these days. In any case, the long-awaited first estimate of German inflation in January confirmed the very gradual retreat of inflation, without giving any reason for relief. Headline inflation came in at 8.7% year-on-year, from 8.6% YoY in December. The monthly change of 1.0% illustrates that inflationary pressure is far from being over. The HICP measure came in at 9.2% YoY, from 9.6% in December. The fact that German headline inflation can increase and drop at the same time has to do with a rebasing of the national time series and changes in the weights. Expect more noise in inflation data According to the German statistical office, it did not send any German numbers to Eurostat last week. How Eurostat dealt with this missing piece of information when preparing its first eurozone inflation estimate might become clearer in the coming weeks. In any case, with today’s German inflation data, chances are high that the initial eurozone number of 8.5% YoY will be slightly revised upwards, probably by 0.1 percentage point. Turning back to German inflation, January data will not have been the last inflation print surrounded by statistical noise. In fact, according to Bundesbank estimates, energy price caps and cheap public transportation tickets will lower average German inflation by 1.5 percentage points this year. The energy price cap will come into effect as of 1 March but will be paid retroactively. It is unclear how the statistical office has taken this effect into account. And there is more. Negative base effects from last year’s energy relief package for the summer months should automatically push up headline inflation between June and August. Long and complicated path towards lower inflation More generally speaking, headline inflation in Germany seems to have reached its peak and, unless there is another large surge in energy prices again, double-digit inflation numbers should be behind us. However, the path towards substantially lower inflation rates won’t be easy. For the time being, it is lower energy prices and hence base effects, as well as government interventions that are pushing down headline inflation, not a broader-based disinflationary process. In fact, the German and European inflation outlook is highly affected by two opposing drivers. Lower-than-expected energy prices due to the warm winter weather could, if they remain at current levels, push down headline inflation faster than recent forecasts suggest. On the other hand, there is still significant pipeline pressure stemming from energy and commodity inflation pass-through. For example, many households will only face the sharp gas and electricity price increases this month. Also, despite some recent weakening, companies’ selling price expectations are still high, suggesting that the pass-through of higher production costs is not over, yet. Also, the ongoing war and new price negotiations in the agricultural sector are likely to keep food price inflation high. Finally, the downside of government support schemes is that they could extend inflationary pressures, though at a lower level. The risk is high that what started as supply-driven inflation could morph into demand-driven inflation. And not only in Germany. All of this means that it is a safe bet to claim that German headline inflation has seen the peak and double-digit inflation rates are over, but the pace and size of the inflation retreat over the course of the new year remain highly uncertain. For now, we expect German inflation to come in at around 5.5% for the entire year 2023 but unfortunately, the lessons of the last two years have taught us that new revisions could be in the offing. ECB to focus on core inflation For the ECB, today’s drop in German headline inflation shows how slow and gradual the disinflationary process in the eurozone will be. It also shows that headline inflation is currently not the best inflation tracker. Therefore, even if last week’s Q&A session left more questions than answers, the ECB’s intention is clear: focus on core inflation and core inflation projections. As long as core inflation remains stubbornly high, the ECB will continue hiking rates and will not for a single second consider future rate cuts. A 50bp rate hike at the March meeting has been pre-announced and looks like a done deal. Beyond the March meeting, the ECB seems to enter a new game in which further rate hikes will not necessarily get the same support from the Governing Council as hiking deep into restrictive territory increases the risk of adverse effects on the economy. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. In the former case, the ECB could consider a pause in its rate hike cycle and hike again at the June meeting. The latter would see continuous meeting-by-meeting hikes, possibly at a smaller size of 25bp. Read this article on THINK TagsMonetary policy Inflation Germany Eurozone ECB 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

Policymakers are trying to stem currency weakness but a housing market correction and weaker economic activity suggest there are limits to the number of future rate hikes. The positive reaction by the krona is encouraging, but it will now be up to data to support a further SEK recovery. Short-term turmoil is still a possibility Source: Shutterstock   Sweden’s Riksbank has hiked its policy rate by another 50 basis points, and has made it abundantly clear that it’s worried about the ongoing weakness in the krona. Yet the reality is the Riksbank will need to tread more carefully on rate hikes from now on. That’s clear from its new interest rate projection which points to another 25bp hike in April, and implies there’s a chance it could do the same in July, but that this is likely to be it. The impact of past policy tightening is becoming increasingly evident, in particular in the housing market. Prices are down 15%, and we know Sweden has a comparatively high proportion of households that have a mortgage, and on top of that, the majority are on variable rates. Growth is suffering too, and we’re likely to see a wider impact of the housing problems in consumption and construction as the year goes on. Sweden is likely to be an economic underperformer within Europe. For now, policymakers have half an eye on wage negotiations, which are likely to settle on a higher settlement than in the past. And the near-term policy outlook undoubtedly hinges on the krona, as well as what the European Central Bank decides to do beyond its March meeting. For now, we’re pencilling in one final 25bp hike in March, but wouldn’t totally rule out another over the summer. Read next: Disney Plans To Cut Costs And Jobs, Google Is Now Rolling Out AI Chatbot| FXMAG.COM Riksbank interest rate projections over time Source: Riksbank SEK reaction is encouraging We argued in recent commentaries how a hawkish hike was a necessary step by the Riksbank to help restore confidence in SEK-denominated assets and halt the slump in the krona. The initial market reaction seems to be rewarding today’s rate decision, as EUR/SEK dropped nearly 1% to the 11.25 mark. If those levels hold, we’d be looking at a 40+ big-figure cushion to those March 2009 record highs, which would probably mark a fully-fledged currency crisis in Sweden. Now, the data needs to play its part. We have reasons to believe inflation will start easing in the coming months, although the outcome of wage negotiations could see the jobs market working against a deflationary path. This, and the soft patch of growth data, argues against a straight-line recovery in SEK and short-term turmoil for the krona is still a possibility. We think the Riksbank can be satisfied with EUR/SEK staying around 11.20-11.40 for now.   A sustainable reappreciation of SEK beyond the 11.00 mark against the euro remains the base case for this year, although the path for the Riksbank to fight inflation without triggering an uncontrolled property and economic slump has got narrower, and downside risks remain meaningful. Read this article on THINK Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

The euro has posted strong gains on Thursday. EUR/USD is trading at 1.0749, up 0.57%. German CPI ticks higher German inflation came in at 8.7% y/y in January, up from 8.6% in December. On a monthly basis, CPI rose 1.0%, following a -0.8% reading in December. The report shows that German inflation remains high and it’s still too early to talk of a peak. The good news is that nasty double-digit inflation seems behind us, thanks in large part to lower energy prices due to a warm winter in Europe. The ECB raised rates by 50 basis points last week, bringing the cash rate to 3.0%. The cash rate remains well below that of all other major central banks – the Fed’s rate, for example, is at 4.75%. ECB policy makers have noted that core inflation, which is a more reliable gauge than headline inflation, remains stickier than expected. The central bank meets next on Mar. 16 and the markets have priced in a 50-bp hike. What happens after March is uncertain. The ECB could take a pause in order to assess the impact of its tightening cycle or it could continue hiking, perhaps in modest increments of 25 bp, until there is a clear indication that core inflation is coming down. ECB rate policy is primarily focused on taming inflation, but it must also keep an eye on the strength of the German economy, the largest in the eurozone. Recent data has been weak, which will make it harder for the ECB to deliver oversize rate hikes. German Industrial Production came in at -3.2% in December, GDP in Q4 contracted by 0.2%, retail sales for December slumped by 5.3% and Manufacturing PMI remains mired in contraction territory. The Fed paraded four policy makers on Wednesday, each of whom drummed the message that the fall in inflation was welcome but the fight was not yet over. Fed member Williams said that a restrictive policy stance could last for a few years until inflation dropped to the target of 2%. The markets may be listening more closely to the Fed since the blowout employment report on Friday, but continue to underestimate the Fed’s end game. The markets have priced in a terminal rate of 4.6%, while the Fed has projected a terminal rate of 5.1%. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM EUR/USD Technical EUR/USD is testing resistance at 1.0758. Above, there is resistance at 1.0873 1.0714 and 1.0633 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.  

The US dollar hovered near the middle of recent ranges compared to majors on Thursday as investors scrutinized comments from many Federal Reserve officials. Overnight, four Fed speakers continue to send their hawkish message to the market. The consistent message is that further interest rate hikes are announced and that the interest rate will have to stay high for a long time. The employment data initially raised expectations that the Fed might return to aggressive monetary policy, but Powell did not lean in that direction in his speech. Investors will be keeping a close eye on the consumer price inflation data that comes out on Tuesday for additional guidance on the policy outlook. USD/JPY During the morning trading hours, USD/JPY held above 131.40 but failed to sustain momentum. USD/JPY has returned to levels below 131.00. EUR/USD EUR/USD maintained its upward momentum and extended its daily gain towards 1.0800 on Thursday. Earlier in the day, data from Germany revealed that the Harmonized Index of Consumer Prices (HICP) fell to 9.2% on an annualized basis in January from 9.6% in December. This reading was much lower than market expectations of 10%, but the negative impact of these data on the euro remained short-lived. With the major European stock indices opening much higher on Thursday, the EUR/USD rate began to rise. At the time of publication, the German DAX 30 and Euro Stoxx 50 indices were up over 1% during the day. Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM GBP/USD The Bank of England is concerned that UK inflation will remain stubbornly high. This suggests that the BoE has growing uncertainty about whether further policy tightening is warranted and that the current cycle of rate hikes may be coming to an end. The BoE has hiked interest rates 10 times since December 2021, the last being a week ago, as it battles to bring down sky-high inflation without causing a deep recession. Bank of England Governor Andrew Bailey is joined today by MPC members Huw Pill, Professor Silvana Tenreyro and Professor Jonathan Haskel in the Treasury Committee (TSC). So far, they have been asked whether the central bank is lagging behind in the fight against inflation. So far, the statements of BoE representatives suggest that the MPC is still worried about persistently high inflation and that the British economy may face a prolonged period of weakness. GBP/USD continued to move higher and hit a new six-day high above 1.2150 on Thursday. Cautious comments from BOE policymakers on the outlook for inflation and a risk-prone market environment help the pair keep their balance. On Friday, the UK's Office for National Statistics will publish estimate GDP figures for December 2022. AUD/USD The risk-sensitive Australian dollar gained against gains from US equity futures and the more hawkish Reserve Bank. AUD/USD rebounded strongly from 0.6920 in the Asian session. The New Zealand dollar also appreciated. Australians were rather dissatisfied after the last RBA meeting, which may point to further rate hikes in the future due to inflationary pressure. A slightly weaker dollar this morning is supporting the Australian bulls, including the rise of some key Australian commodities. The Australian pair is currently trading close to the $0.7000 level. Source: finance.yahoo.com, investing.com

The US disinflation narrative will have to pass a crucial test over the coming days, starting with today's University of Michigan inflation expectations release. However, key will be next Tuesday's CPI data. In the eurozone the European Central Bank balance sheet is featuring in officials' communication again of late, but for now with limited effect   Key data points ahead to validate the disinflation narrative One striking market development over the course of yesterday’s session was the further inversion of the US Treasury curve, which hit another record low at -87bp. The Fed’s latest messaging is working as intended in combination with the stronger data We are inclined to read this as the Fed’s latest messaging working as intended in combination with the stronger data. This means that in the context of fine-tuning the policy stance, some more tightening may be possible near term, but for the longer-term outlook the market especially picked up on Powell signalling that disinflationary dynamics are already at play. Starting today with the University of Michigan Consumer confidence survey and its survey inflation expectation and culminating in Tuesday’s CPI release, markets will be receiving key data points to corroborate their view of price dynamics having turned the corner for good. Yet, today’s survey is actually anticipated to show a small uptick on the 1Y inflation expectations horizon. And next week, while the consensus is that headline inflation will further drop from 6.5% to 6.2% year-on-year and core to 5.5% from 5.7%, the month-on-month core reading is actually seen at a higher 0.4% – and keep in mind it is the month-on-month that usually gives a better picture of current price developments.   The most noticeable effect of more hawkish central banks and stronger data is deeper yield curve inversion Source: Refinitiv, ING  Read next: Credit Suisse Reported Its Biggest Annual Loss Since The 2008, Ukrainian President Is Asking For Help And More Weapons In Brussels| FXMAG.COM Looking at the historically deep inversion of the US curve one should be forgiven to call out valuations as stretched as we have done for a while. But with so much of the benign outlook now riding on the disinflation narrative, it might just appear that the risk of a disappointment in the inflation data next week could have the larger market impact. Note that we will also be getting activity data, which will likely have benefitted from mild January weather. In hindsight some market unease about what lies ahead in coming days combined with how far relative valuations had evolved can explain the soft 30Y auction result that triggered a correction in rates last night, lifting yields temporarily by 8bp from the lows of the day.    ECB officials take renewed stabs at the balance sheet In the eurozone the German inflation data came as a delayed reminder that the ECB is facing a longer fight against inflation. We had highlighted the limited success so far of the latest ECB meeting and subsequent communication to get the hawkish message across to markets. Perhaps that is the reason why we have seen some of the hawkish ECB members of late resorting to communication on the balance sheet again after some pause on this topic. Klaas Knot had kicked this off on Wednesday stating that stopping the reinvestments of the asset purchase programme portfolio should be the ultimate goal. Yesterday, the Bundesbank’s Nagel stepped up the game and called for a more ambitious roll off of the portfolio, arguing that the reductions would need to pick up speed.     We have seen some of the hawkish ECB members of late resorting to communication on the balance sheet again While on the face of it such comments are certainly hawkish, the market is already discounting the end of reinvestments starting in the second half of this year to a large extent. As much can be gleaned from the ECB’s own survey of analysts conducted ahead of each meeting. That, and also given it has been few voices only, should explain why government bond spreads are largely unfazed for now. But it also poses the question what is the next step up in hawkishness if the ECB want to “show its teeth” again as Austria’s Holzmann put it at the start of the week.     Credit and sovereign spreads tighten but ECB hawks want to accelerate QT Source: Refinitiv, ING Today's events and market views In the days ahead markets will receive some crucial data points to put their disinflation narrative for the US to the test. Without anything else on the data calendars of note that puts a focus on today’s University of Michigan Consumer Sentiment release. Sentiment itself is seen nudging only marginally higher, but markets may heed more attention to the surveyed inflation expectations. A slight pick-up as currently envisaged in the 1Y measure would be a first break in the downtrend in five months. Treasury markets, which until now in 2023 have been treated to stellar auction results, had to stomach a first below average result in yesterday’s 30Y sale. The subsequent sell-off in rates should be a cautionary sign for current valuations. 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

Industry may have been less of a drag on fourth-quarter GDP growth than expected. Positive signals from confidence data in January warrant some optimism, but do not clear the way for a substantial short-term acceleration, given the uncertain external environment Source: Shutterstock Production rebounds, not in energy-intensive sectors In December, industrial production rebounded an unexpectedly strong 1.6% in seasonally-adjusted terms, after three consecutive monthly declines. Production expanded on the month in all of the large aggregate categories, but more markedly in capital goods and energy. The sector breakdown shows that the ongoing improvements in the functioning of supply chains had a positive effect on transport equipment. However, energy-intensive producers of chemicals, plastics and tiles, paper, and metals and metal products continued to suffer, signalling that the impact of the energy shock was still weighing on supply by the turn of the year.   The consequences of the energy crisis weighed heavily on industry in 2022 During 2022 as a whole, industrial production posted a 0.5% increase, driven by consumer and capital goods. Almost inevitably, the consequences of the war in Ukraine on energy prices weighed heavily on the manufacturing sector over the year. The measures put in place by the government provided only partial compensation and manufacturing acted as a drag on economic growth. This put the onus on services to fuel growth. Confidence improvement encouraging, but short-term acceleration unlikely With the December release now in the bag, we now know that the statistical carryover for 2023's industrial production is a modest 0.3%. Business confidence data published after the turn of the year was positive but did not dispel uncertainty. While the PMI entered expansion territory, orders remained soft and the stock of finished goods is relatively high, suggesting that a substantial acceleration in production is unlikely, at least in the short run. To be sure, the consolidation of wholesale gas prices at current levels could help to support businesses, particularly in energy-intensive sectors.  Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM Today’s release does not change the picture for GDP growth in 2023. We are currently forecasting average GDP growth at 0.7% in Italy, with a minor 0.1% quarterly contraction in the first quarter. Should early positive signals be confirmed, a flat or mildly positive first quarter could easily materialise. 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

During the American session, the University of Michigan will publish a preliminary consumer sentiment survey for February. The main consumer confidence index is expected to rise to 65 from 64.9 in January. Market participants will keep a close eye on the component of the survey on inflation expectations for the next year, which fell to 4% in January from 4.4% in December. An unexpected increase in this reading could strengthen the US dollar. USD/JPY The yen strengthened on Friday before recovering slightly after Kazuo Ueda, who was reportedly tapped as the next governor of the Bank of Japan (BOJ), said the central bank's monetary policy was the right one. The government is also nominating Ryozo Himino, the former head of Japan's banking regulator, and BOJ director Shinichi Uchida as deputy governors, the Nikkei said. BOJ deputy governor Masayoshi Amamiya was the frontrunner for the role of governor, but the Nikkei reported that he turned down the job. The government is expected to present candidates to parliament on February 14. The BOJ shocked markets in December when it raised the 10-year yield cap to 0.5% from 0.25%, doubling the allowable range above or below zero. USD/JPY managed to rebound towards 131.00 after falling below 130.00 earlier in the day. EUR/USD EUR/USD picked up momentum and climbed to around 1.0800 at the end of Thursday, but lost much of its daily gains and closed below 1.0750. EUR/USD came under slight downward pressure and fell towards 1.0700 during Friday's European session. The US dollar gained strength thanks to rising US Treasury yields. The euro hit a 10-month high against the dollar earlier this month. The prospect of a milder recession thanks to falling energy prices and plentiful natural gas supplies, coupled with China's exit from three years of severe COVID-related restrictions, has generally ignited investors' appetite for European assets. However, this enthusiasm has made the euro look vulnerable, at least in the short term. The Euro is set for a second consecutive week of declines and at the time of writing EUR/USD is trading below 1.07 at 1.6998. Read next: Tesla Will Increase Output For 2023, Deliveroo Are Planning To Cut Jobs| FXMAG.COM GBP/USD The pound weakened on Friday after data showed the UK economy stalled in the final three months of 2022, avoiding a technical recession but recording zero growth. The UK Office for National Statistics said on Friday that the UK economy contracted by 0.5% on a monthly basis in December and came to a standstill in the fourth quarter. On the positive side, industrial production rose 0.3% in December, beating market expectations for a 0.2% decline. The Bank of England forecast last week that the UK would enter a shallow but lengthy recession starting in the first quarter of this year and lasting five quarters. Moreover, Money Markets shows that investors believe that UK interest rates will peak below 4.40% by late summer, from the current 4%. UK consumer inflation data will be released next week and may have a bigger impact on these expectations. The GBP/USD pair previously surged to levels above 1.2130 but lost momentum and is now trading just above 1.2100 and below 1.2110. AUD/USD The Australian dollar held below $0.695, pressured by hawkish signals from Federal Reserve officials who reiterated their commitment to bring down inflation with more rate increases. The Australian Dollar remains supported by expectations that the Reserve Bank of Australia will tighten policy further. The RBA’s latest monetary policy statement showed that the central bank revised its inflation forecasts higher for this year, saying price pressures were spreading into services and wages. AUD/USD is headed towards 0.6900 amid disappointing Chinese CPI and PPI data. The Australian pair is not benefiting from the RBA's hawkish monetary policy statement, currently the Aussie pair holds above 0.6920. Source: finance.yahoo.com, investing.com

The European Central Bank hiked rates 50 basis points. Curious about what that means for investors? David Zahn, Head of European Fixed Income shares his thoughts. Hello, this is David Zahn with your European fixed income update. So, the ECB [European Central Bank] has hiked rates by 50 basis points and they are saying they will hike another 50 in March. I think this is the right thing to do. They need to continue to focus on getting inflation down. But that will probably be the end. They'll probably do 25 or 50 in March because inflation was coming down quite quickly in Europe. However, the bond markets seem to take it much more, that this is it they're done, and that yields should start declining quite significantly. We think this will probably be seen as inappropriate when we look back on this and that we will see yields retrace over the next couple of weeks back to levels more of what we had before the ECB rate hike. Because they are going to continue to probably jawbone the market, talk about why rates should be higher, and they don't really want an easing happening after they are announcing rate hikes. But with that in mind, we do think that any back up in yields is probably an opportunity for investors to buy duration and really start to extend. And I think that the ECB will probably be looking at next year thinking about have they hiked too much, should they actually be thinking about cutting rates? But that'll probably be later in the year more toward the end. WHAT ARE THE RISKS? All investments involve risks, including possible loss of principal. The value of investments can go down as well as up, and investors may not get back the full amount invested. Bond prices generally move in the opposite direction of interest rates. Thus, as prices of bonds in an investment portfolio adjust to a rise in interest rates, the value of the portfolio may decline. Investments in lower-rated bonds include higher risk of default and loss of principal. Changes in the credit rating of a bond, or in the credit rating or financial strength of a bond’s issuer, insurer or guarantor, may affect the bond’s value.  Investments in foreign securities involve special risks including currency fluctuations, economic instability and political developments. Investments in developing markets involve heightened risks related to the same factors, in addition to those associated with their relatively small size and lesser liquidity.   Source: ECB hikes rates—one more to come? | Franklin Templeton

What flavor of recession? It seems like the United States is headed toward the most-anticipated recession maybe ever, and that sort of crowd or herd mentality worries me a bit. Gene, what are your thoughts? Gene: The United States is not currently in a recession, so let’s start there. Recent indicators from the Federal Reserve (Fed) point to near-trend growth for the last quarter, with drivers including healthy consumer spending, inventory building and some investment. But—and it’s a big but— some sectors of the economy are looking like they are in recession. While there is still a possibility of a soft landing, our team believes the United States will enter a recession this year, likely in the second half, and put that probability at around 65%. Our research shows that recessions typically last around 10 months on average, although no two recessions are exactly alike, so take that with a grain of salt. We forecast several distinct economic scenarios: • A soft landing would avoid recession and be the best outcome–we think there is about a 35% chance of this occurring; • We place a “normal” recession at 50% odds. This would feature sticky inflation in housing, wages and services; a broader cyclical downturn; and higher unemployment coupled with a Fed that is slow to ease rates given inflation volatility; • We think a “deep” recession is less likely and see a 10% probability of this happening. Significant demand destruction, Fed overtightening, and a slow fiscal policy response would likely cause this scenario; and • Finally, we see a stagflationary recession as the least likely outcome, with just 5% odds. Sticky inflation in housing, commodities and wages with slow (or zero) economic growth would characterize this type of recession. Sonal, what recession odds do you see? Sonal: My odds are lower—one in four. I’m not anticipating a US recession. I think we are going to get stagnant growth in the third quarter of this year, and in the fourth quarter, probably a negative number on an annualized basis, and maybe a small negative number in the first quarter of 2024. But I don’t see a recession in terms of a very broad-based decline in economic activity. The reason is the US consumer. US consumers are alive and doing very, very well. As inflation comes down, which I expect, those nominal wage gains workers have seen will translate into real wage gains. Despite being a fixed income person, I would note what major airlines have been reporting—strong corporate profits amid a rebound in travel over the past quarter. “ I’m not anticipating a US recession. I think we are going to get stagnant growth in the third quarter of this year, and in the fourth quarter, probably a negative number on an annualized basis, and maybe a small negative number in the first quarter of 2024. But I don’t see a recession in terms of a very broadbased decline in economic activity.” Sonal Desai Read next: EUR/USD Pair Is Belowe $1.07, USD/JPY Pair Is Back To 131 And GBP/USD Pair Is Slightly Above $1.21| FXMAG.COM US consumers are one of the strongest forces of growth across not only the United States, but across the world as well. China is also coming back online, which has positive implications for growth. I put these things together and I don’t find evidence to back up this assumption that globally we’re going into recession. Even Europe is unlikely to fall into recession because of a warmer-than-expected winter. The energy crisis that was anticipated and feared a few months ago hasn’t happened so far. So, my view on recession is perhaps a bit contrarian. There is a lot of negative sentiment out there, but it’s not translating into actual behavior. That’s my take, but I would probably wait until we see the February economic numbers to know whether the consumer is actually in any kind of pain. In terms of Fed policy, I do think we will likely see three 25 basis-point (bps)1 rate hikes ahead.

Are markets correctly pricing inflation? Sonal, it looks like the consensus view is for US inflation at about 3% year-over-year in 2023. Do you agree? What’s your view on inflation and interest rates? Sonal: I think 3% is optimistic. A few points. First, macro policies are still pretty loose, which might sound strange when we’re looking at a US central bank that’s been raising interest rates. But the United States is looking at a fiscal deficit this year, which is probably going to be around 5% of gross domestic product (GDP). Social Security checks have gone up close to 9% this year, and those go out to about 70 million Americans—that’s about a third of the adult population.3 And, keep in mind, the Fed’s balance sheet is still huge. Second, the market has taken a great deal of comfort from the fact that wages are moderating—as it should. Having said that, the Fed Bank of Atlanta’s latest Wage Growth Tracker showed overall wage growth of 6.1% in December, with wages up 7.7% for job switchers, and up 5.5% for people who remained in their jobs.4 And unit labor cost growth was 5.2%5.3%.5 Historically, the Personal Consumption Expenditures Index (PCE) has mapped into unit labor costs, and the December reading was far above the Fed’s 2% inflation target. So, we’re talking about US unemployment at close to 3.5%, a US fiscal deficit of around 5%, and wages still growing. Meanwhile, markets are anticipating a Fed “pivot” in the near term, but I think some people are suffering from what I would consider a recency bias. They regard the current Fed tightening cycle as being transitory, but I would note that after the global financial crisis (GFC), the Fed spent more than 10 years fighting deflation—the dog that never barked. It threw the kitchen sink at the problem in terms of easing, because the GFC was such a terribly large and meaningful event. I think these last few years of substantially above-target inflation will probably lead us to a multiyear period where the Fed keeps rates higher than the market is currently anticipating. To summarize, you think the federal funds rate will rise to 5% or 5.5% and that the so-called pivot toward easing won’t happen quickly. If the equity market is wrong in its current view and then sees a correction as a result, are you saying it’s unlikely the Fed will come to the rescue? Sonal: Correct. The market believes the “Fed put” is there, but it doesn’t exist. That’s my biggest concern. Mark, let’s turn to you and Western Asset’s view. What is your outlook both for inflation and rates? Any concerns? Mark: The forecasters on the team are talking about the possibility of US inflation at around 2% year-over-year by the end of this year. If you look at the fixing—here I am talking the near-term inflation swap6 market—if you look at the pricing on the headline Consumer Price Index (CPI), it’s somewhat surprising to many, in the fourth quarter of 2023 on a yearover-year basis, we’re 2% or below. It’s the first time in a long time the pricing or fixing on CPI is below our forecast. Obviously, oil and energy are very important components of inflation, and oil is currently around US$75–$80 per barrel. Things could change radically. But if we do end up with year-over-year inflation declining from over 6% in 2022 down to 2% toward the end of 2023, as the market seems to be anticipating, that’s consistent with our view. Read next: EUR/USD Pair Is Belowe $1.07, USD/JPY Pair Is Back To 131 And GBP/USD Pair Is Slightly Above $1.21| FXMAG.COM How do we get there? Certainly, the commodity side plays a part as it relates to headline inflation. But whether it’s rents, autos, medical or other services, we are seeing overall downward pressure in inflation on the goods side, on the manufacturing side. It is a bit slower on the services side. When we look at the inflation numbers and our expectations for 2023, we are optimistic that we will see a quick retracement. The worry is that the 2% inflation scenario is now priced into the marketplace; there is a disconnect between the market expectations and the Fed’s expectations. That’s where the debate gets extremely interesting. “ When we look at the inflation numbers and our expectations for 2023, we are optimistic that we will see a quick retrace ment. The worry is that the 2% inflation scenario is now priced into the marketplace; there is a disconnect between the market expectations and the Fed’s expectations. That’s where the debate gets extremely interesting.” Mark Lindbloom Can you elaborate a little on that disconnect and your outlook for monetary policy? Mark: The Fed, the European Central Bank (ECB) and most other central banks have been talking very hawkishly. They are concerned that we are in an environment similar to the late 1970s and early 1980s when inflation was more buoyant and sticky than the post-GFC period, for a variety of reasons. Fed Chair Jerome Powell and other Fed officials have talked about how they’re not going to ease up the current tightening cycle quickly—essentially saying they are going to get to restrictive territory then hold rates there nearly all year. The market doesn’t believe them. The market is seeing the fed funds rate rise to 4.75% or perhaps 5%, while the Fed has been signaling 5.25%. So, the market expected—and got— a 25 bps hike at the February policy meeting, but there is anticipation of a pause—wherein the Fed can stop and assess the data. And, then assuming the economy is on a path of weakness and lower inflation, the thinking is there will be aggressive easing as we get into the latter part of 2023. At Western Asset, we are generally in line with the market for the near-term outlook, but there is an internal debate within our team regarding duration and the yield curve. We aren’t quite as sure about what happens in March. Most importantly, we think the Fed’s focus is on employment data. While a lagging indicator, earnings and wages have been very, very slow to turn. For the Fed to really shift and pause, we need to see that fall into place.

The hawkish repricing on the US curve has resulted in a further inversion, as swaps still price 2024 rate cuts. The mood is understandably nervous but some indicators suggest optimism Hawkish repricing into today's CPI but the market still expects 2024 cuts It’s an understatement to say that a more resilient US economy, and in particular its labour market, have caused some nervousness in global bond markets. This is the dominant mood among participants as we head into the first CPI print for the year. As usual, the focus will be on core inflation, and in particular on core services ex-housing as Fed Chair Jerome Powell and colleagues have stressed its importance for monetary policy. The hawkish shift in market mood has resulted in 2Y Treasuries printing a new high for the year at 4.54% yesterday. The 45bp reversal in February (trough to peak) means front-end yields are now up in 2023. The same cannot be said of longer tenors, still standing below their 2023 starting levels. The resulting flattening of the US yield curve is probably the most striking example of the more hawkish mood in rates.. Another is forwards, which are now pricing a peak in the Fed Funds rate at 5.2% in July. The amount of Fed cuts priced for 2024 is nearly unchanged since January – roughly 150bp Sticking with forwards, the amount of Fed cuts priced for 2024 is nearly unchanged since January – roughly 150bp. Therein lies the rub – higher terminal rates this year, and generally speaking the better growth trajectory, have not translated into a material repricing of long-term policy rates. One reason is that other forward-looking indicators, for instance the New York Fed’s survey of consumer inflation and earning expectations, continue to point to a decline. Higher US swap rates but the curve is still pricing cuts for 2024 Source: Refinitiv, ING Treasury yields: A rise before a fall, and Europe also has some reasons for inflation optimism There is undeniably some upside to rates across maturities today on an upside inflation surprise but the front end remains the most volatile point on the curve, so a change in the slope should be the clearer take-away. We suspect complacent longs could still be shaken out by this report, and 4% in 10Y Treasuries cannot be excluded if hard activity data rebounds this week (retail sales and industrial production) also rebound but this would be setting up for lower rates later this year. 4% in 10Y Treasuries cannot be excluded if hard activity data rebounds this week Of course, the hawkish repricing has not spared euro bond markets. Regular readers know that we find an even stronger case for the repricing higher in European rates as the ECB is still behind the Fed in its fight against inflation. Some good news helped stem the hawkish repricing yesterday, however. A couple of ECB speakers stressed that the bank will turn to a more data-dependent setting after it delivers the 50bp it pre-announced for March. The European Commission’s own winter forecast updated yesterday also indicated some downside to the ECB’s own projections, which will also be revised in March. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM European Commission inflation forecast point to downside revisions in the ECB's projections Source: Refinitiv, ING Today's events and market view The main release of note out of Europe today is the second reading to the eurozone’s fourth-quarter GDP growth. The previous estimate was 0.1% quarter-on-quarter. Bond supply consists in Italian (3Y/7Y/15Y) and UK (10Y) auctions. This will add to the European Union reopening two bonds with 6Y and 19Y of residual maturity. Today’s US CPI report is easily the most important release this week, and maybe this month, although the sell-off that followed the January non-farm payrolls means there is fierce competition for this title. The median Bloomberg estimate for core is 0.4% month-on-month. An annual change in components weighting make this number more difficult to call than ususual. Note also that 2022 inflation prints were revised higher last week, adding to the market’s nervousness. Other US-centric events today include small business optimism and a flurry of Fed speakers who will no doubt give their spin on the CPI print. 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

EUR/GBP reverses bounce off key support confluence on strong UK employment data. UK Unemployment Rate stays unchanged but Claimant Count Change drops. Divergence between ECB and BoE policymakers may recall pair buyers if EU Q4 GDP improves. EUR/GBP reverses from intraday high while declining nearly 20 pips to 0.8830 on the upbeat UK jobs report during early Tuesday. In doing so, the cross-currency pair reversed the early-day run-up from the key 0.8830 support confluence. UK’s Unemployment Rate matches market forecasts and reprints the 3.7% figure for three months to December. However, a slump in January’s Claimant Count Change to -12.9K versus -3.2K prior, as well as strong prints of the  Average Earnings Excluding Bonus for the said month seemed to have favored EUR/GBP bears of late. In contrast to the upbeat UK data, a comparatively more hawkish bias at the European Central Bank (ECB) versus the Bank of England (BoE) joins the upbeat European Commission (EC) economics forecasts to underpin the regional currency’s bullish bias. On Monday, the European Commission (EC) released its quarterly economic projections for the Eurozone wherein it revised up the economic growth forecast to 0.9% for 2023 from 0.3% previously expected, projecting 2024 growth unchanged at 1.5%. The EC, however, lowered the Eurozone inflation forecast for 2023 to 5.6% YoY from 6.1% earlier expected. Further, the EC also cut 2024 inflation predictions to 2.5% for 2024, versus 2.6% previously anticipated. That said, European Central Bank (ECB) Vice-President Luis de Guindos said on Monday, “Rate increases beyond March are to depend on data.” On the same line, ECB policymaker Mario Centeno said, “Inflation is going down faster than we expected,” while adding that smaller hikes would need mid-term inflation nearing 2%. On the other hand, Bank of England’s (BoE) policymaker Jonathan Haskel cited a rise in inactivity in the UK labor market and challenged the British Pound (GBP) buyers previously. BoE’s Haskel also mentioned, “I would prefer to make policy with much more attention on the data flow over the next few months.” On a broader front, the cautious mood ahead of the top-tier data/events joins softer US Treasury bond yields to favor the mild optimism in the market, which in turn seems to favor the Euro (EUR). Having witnessed the initial reaction to the British data and EU fundamentals, EUR/GBP pair traders should wait for the preliminary readings of the fourth quarter (Q4) Gross Domestic Product (GDP) data for the Eurozone for clear directions. Given the recently upbeat economic projections from the European Commission and the ECB’s hawkish bias, the EUR/GBP pair is likely to remain firmer unless the EU GDP disappoints. Technical analysis Unless breaking 0.8830 support confluence comprising the 21-DMA and a one-month-old ascending trend line, the EUR/GBP remains on the buyer’s radar.

5M chart of EUR/USD On Monday, EUR/USD rose by several dozens of points, and by the end of the day it was near the critical line, and even managed to overcome it. But overall, the upward movement did not exceed 70-80 pips, so it can hardly be argued that the downtrend was broken. Neither the EU nor the US issued any important reports, and there were no important events. So this movement was definitely not connected with any event and we just witnessed a normal growth. This week there will be many days when the macroeconomic background will be strong, so things can change very quickly. I expect the euro to fall because I don't believe that the bearish correction has completely ended. Several trading signals were formed on the 5-minute chart. The pair rebounded from the 1.0658-1.0669 area twice during the European session, which were two buy signals. In the first case, the price went up about 10 pips, so traders had to stay in the long position during the second signal. Then the pair started to sharply rise and managed to reach the Kijun-Sen line, where the upward movement ended on Monday. Traders should have locked in profits on the longs, it was not less than 40 pips. With the total volatility of the day about 70 pips, it's not a bad result. Read next: Poland’s President Andrzej Duda Said The Decision To Send Fighter Jets To Ukraine Was “Not Easy To Take”| FXMAG.COM COT report The COT reports on EUR/USD have been in line with expectations in recent months. The net non-commercial position has been on the rise since early September. The euro started to rise around the same time. The bullish non-commercial position rises with each new week. Taking into account this fact, we may assume that the uptrend will soon come to an end. The red and green lines of the first indicator are far apart, which is usually a sign of the end of a trend. In the reporting week, non-commercial traders opened 9,500 long positions and 2,000 short ones. The net non-commercial position grew by 7,500. The number of long positions exceeds that of short ones by 134,000. There were no new COT reports in the last two weeks, and it's difficult to explain the cause exactly. So now we have to work with the data we have at our disposal. The correction was formed for a long time anyway, so it's clear even without the reports that the pair should continue falling. H1 chart of EUR/USD On the one-hour chart, EUR/USD remains bearish despite overcoming the critical line. The Senkou Span B line is stronger, so the bulls won't find it easy to overcome it. The euro still has no reason to rise, so I think the euro will eventually fall this week. The US inflation report, which will be released today, might provoke the strengthening of the dollar, if it turns out to be weak. On Tuesday, important levels are seen at: 1.0485, 1.0581, 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0938, as well as the Senkou Span B (1.0850) and Kijun Sen (1.0722). Lines of the Ichimoku indicator may move during the day, which should be taken into account when determining trading signals. There are also support and resistance levels, but signals are not formed near these levels. Bounces and breakouts of the extreme levels and lines could act as signals. Don't forget about stop-loss orders, if the price covers 15 pips in the right direction. This will prevent you from losses in case of a false signal. On February 14, there will also be interesting events in the EU, there's the GDP report for the fourth quarter. It will be the second estimate, so I don't expect a strong reaction. Nonetheless, the report itself signals the state of the economy so its worth looking into. What we see on the trading charts: Price levels of support and resistance are thick red lines, near which the movement may end. They do not provide trading signals. The Kijun-sen and Senkou Span B lines are the lines of the Ichimoku indicator, moved to the one-hour chart from the 4-hour one. They are strong lines. Extreme levels are thin red lines from which the price bounced earlier. They provide trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT charts reflects the net position size of each category of traders. Indicator 2 on the COT charts reflects the net position size for the non-commercial group Relevance up to 08:00 2023-02-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335019

Core bonds are on the back foot as the lower-for-longer narrative takes hold. Today’s US data should reinforce that trend, courtesy of unseasonably warm weather. The hawkish repricing has spared riskier assets, but the Fed and political risks are waiting in the wings Higher-for-longer narrative hurts bond longs Monthly US inflation came in line with expectations in January. After hesitating, rates went resolutely higher. Given the lack of a clear signal in the CPI report, we take this as a sign that there are still complacent longs vulnerable to the higher-for-longer narrative. 10Y Treasuries decisively crossed the 3.75% threshold, and the 2Y is quickly converging to 5%. Today’s stronger industrial production and retail sales should reinforce this trend, although the 2Y reaching 5% would either presuppose a much higher terminal rate than currently priced (5.25%) or hardly any rate cut within that horizon. It’s a tall order, but momentum is on the side of bears. 2s10s have reached the flattest level since the 1980s In comparison, the curve flattening at longer tenors seems like a relatively slow burning trend, but 2s10s have reached the flattest level since the 1980s. A more hawkish path for Fed funds rates is the main culprit but it is easy to forget how long-end rates are anchored, making the current inversion possible. At its core, low long-term rates simply illustrate that markets aren’t easily changing their view on the equilibrium levels of real rates and inflation. In practice, we think the remnants of past Federal Reserve intervention in the bond market continue to suppress term premium, and keep the curve flatter than it would otherwise be. The good news is that our economics team sees core inflation declining to 2% by year-end. Even if we were to miss that forecast by a full percentage point, we think this will be significant relief for financial markets. This is not the way investors think at the moment, however, and today’s data should further delay the move lower in rates that we’re expecting for later this year. Past Fed bond market intervention is preventing longer rates from rising as fast as the short end Source: Refinitiv, ING Risk sentiment stronger than ever, but sovereign risk is unattractive Unlike their high-rated peers, high beta fixed-income markets are still enjoying their moment in the sun. This is in sharp contrast to 2022 when anticipation of tighter monetary policy sent stocks down and credit spreads wider. On paper, the current repricing higher in core rates in response to better growth prospects is the right kind of tightening. But, in the words of Lorie Logan of the Dallas Fed, rates may have to be raised “to respond to changes in the economic outlook or to offset any undesired easing of financing conditions”. Understand, the Fed would hike to cool growth and/or financial markets. This, to us, sounds like a direct shot at Goldilocks carrying market sentiment on her shoulders since January. The Fed would hike to cool growth and/or financial markets European sovereign spreads are one area where better risk appetite is most visible. On paper, all is going well – higher beta bonds benefit both from central bank easing expectations, and from better growth prospects. The first assumption is being questioned, and near-term data shouldn’t distract from weakening economic fundamentals, albeit deteriorating slower than expected. Even if risk sentiment holds up, there are plenty of political catalysts for risk appetite to soften going forward. The Italian government is locking horns with the European Commission over the suspension of the Stability and Growth Pact, and over the pre-agreed national recovery plans. Farther afield, Greece and Spain both have elections due this year. All this should compound greater supply pressure this year. There are plenty of risks for sovereign spreads, not least supply Source: Refinitiv, Debt Management Offices, ING Today's events and market view Eurozone industrial production and trade are the main releases in the European session today. Germany is due to sell bonds in the 30Y sector. Belgium mandated a new 30Y bond via syndication which should also be today's business. Unseasonably warm weather probably skews today’s US industrial production and retail sales higher. This is not necessarily the beginning of a trend but could reinforce the dominant higher-for-longer narrative in financial markets (see above). Other data of note include the NAHB housing market index and the empire manufacturing survey. This should continue to push yields higher and the yield curve flatter, with markets nervously looking to tomorrow's US PPI. 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

Eurozone industry ended the year on a weak note as production data showed a decline of 1.1% from November and a 1.7% drop compared to the year before The pharmaceuticals industry saw a slight decline in production in December   Industrial production in the eurozone fell by 1.1% between November and December 2022, and only fell by 1.7% between the third and fourth quarters of the year, which can be seen as quite an achievement given the energy crisis it is currently facing. Still, there are no miracles happening here. Energy-intensive industries have seen production decline in recent months and December was no exception. The chemical, base metals and paper sectors are seeing annual contractions of more than 10% at the moment. On the other hand, we are seeing some post-pandemic positives. The easing of supply chain problems has helped production in recent months as it has improved output from the car sector, and computer, electronic and optical products have rebounded quickly. December showed continued growth from the car sector, but other recent strongholds like pharmaceuticals saw slight declines in production. From here on, the question is which factors will dominate: is it the energy crisis or the rebound after persistent supply chain problems? The rebound is set to fade somewhat, but the energy crisis has also entered a milder phase. For now, however, we don’t see much evidence of production rebounds in energy-intensive sectors, which makes us sceptical of a rebound in activity. Given continued weak demand and supply side problems, we cannot expect much more than a path of stagnation for industry. A rebound is too much to ask for at the moment. Read this article on THINK 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

Fed, ECB, and BA continue to tighten monetary policy It is even more encouraging to note on the 4-hour TF that bitcoin came very close to the level of $24,350 but was unable to pass it and did not even make a direct attempt to move higher. Although there was no obvious rebound from this point, the cryptocurrency may continue to put its stability to the test. However, we think that it is much more likely that it will fall below $18,500 (at least). This is supported by several global variables at once. First off, as the Fed, ECB, and BA continue to tighten monetary policy, safe assets become more alluring. Second, the QT (quantitative tightening) policy is causing the US money supply to continue to contract, which lowers the amount of potential investments. Remember that throughout the pandemic, Bitcoin was rapidly increasing, not because of the disease itself, but rather because numerous central banks around the world were actively boosting their economies by releasing hundreds of millions or billions of dollars in new money. Since there was constantly more money in the economy, it was obvious that it needed to be used in some way. Some of them chose the market for cryptocurrencies. The situation is entirely different right now. Robert Kiyosaki At the same time, well-known publicist and businessman Robert Kiyosaki keeps calling for the collapse of fiat money, a major global economic catastrophe, and the collapse of the global financial system. The world's central banks are still printing billions of dollars, and their currencies will keep losing value, according to Kiyosaki. Silver will cost $500, gold will rise to $5,000, and bitcoin will reach $500,000. In addition, Kiyosaki predicted that sooner or later, people will stop believing in the dollar and turn to bitcoin as "a currency for people." Remember that the bestselling author of "Rich Dad, Poor Dad" has already predicted the collapse of the world financial system. Both the previous year and this year, he made the same prediction. He does not recall the QT program for some reason, and he is uninterested in the fact that despite bitcoin's existence for 15 years, it has not yet been used as a form of payment by individuals. We think that this is just another attempt to "pump" Bitcoin to make it grow artificially. Remember that many experts who do not personally own bitcoin still think of it as a very dangerous and volatile investing tool. Cryptocurrency owners themselves will undoubtedly always talk about how much it will be worth in the near future. Read next: Airbnb Posted A Profit Of $1.9. Billion, Air India And Largest Commercial Aircraft Deal In Aviation History| FXMAG.COM Bitcoin The bitcoin cryptocurrency has distanced itself from recent highs on a 4-hour time frame by roughly $3,000 and so far does not appear particularly motivated to start growing again. The inflation report released today may have a significant influence on cryptocurrencies. Given that two inflation reports cannot double the value of bitcoin, we believe it will continue to fall. The most recent growth cycle appears to have been an unsuccessful attempt to accelerate growth. The bulls were unable to surpass the crucial $24,350 mark.   Relevance up to 16:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335109

Better data has boosted hawkish Federal Reserve and European Central Bank expectations. But this time, the back end of the curve has been lifted to a greater degree. In Bunds especially, the 10Y yield is now approaching the upper end of its recent range Data steepens the curves from the back end Rates were pressured higher on the back of the much better-than-expected retail sales data. A potential weather-related bounce in the data for January had been flagged though, and there is a decent risk that we will see some reversal again next month. For now, as noted in the chart below, money markets are seeing the SOFR rate above 5% through the end of this year for the first time. The notion of higher rates being maintained for longer is gaining traction. The notion of higher rates being maintained for longer is gaining traction More notably this time round, it's the back end of the curve leading rates higher which also helped the Treasury curve pull back from its record inversion. The 10Y UST yield is now back above 3.8% and thus not far below the local high it had ended 2022 on. That itself is still a decent stretch from the October high at over 4.30%, giving yields some room for further upside. Of course, the size of the surprise in the data helps to explain the larger market reaction, but we think it speaks more to overall positioning in rates going into the past week(s) and also the stretched valuations in terms of the curve, which we have also highlighted over the past days. Note for instance that equity markets ended the day higher, dismissing the hawkish implications that the resilience shown in the data may have for the Fed.  Hawkish repricing pushes Fed and ECB expectations to new highs Source: Refinitiv, ING The ECB's hawkish message has finally sunk in When ECB President Christine Lagarde addressed EU lawmakers yesterday she reiterated the call for another 50bp hike in March with underlying inflation still too high and price pressures remaining strong. But again she has left it to other ECB officials to flesh out any guidance beyond the next meeting. Following the last press conference, the central bank's hawks have been more vocal, and also quite successful at realigning markets more to their views. The terminal rate has risen ... and expectations of subsequent policy easing have become less pronounced The terminal rate has risen to 3.56% from a pre-meeting level of 3.44%, and the market’s expectations of subsequent policy easing have become less pronounced, down to below 90bp from the interest rate peak through the end of 2024. Financial conditions as measured by real rates are at the upper end of their recent range since December. Our economists do see a possible scenario where, after March, the ECB continues to hike meeting-by-meeting by 25bp through June - this would bring the deposit facility rate to 3.5%. The market has moved even beyond that, but of course developments in the US have come to help the hawks and we doubt they would have achieved this feat on their own. Today’s slate of public appearances of ECB officials has a more dovish lean with Fabio Panetta and the ECB’s chief economist Philip Lane scheduled to speak. With the Bundesbank’s Joachim Nagel and Ireland’s Gabriel Makhlouf, there are also hawkish voices again, but we have heard from both already more recently. In any case, we have the feeling that markets are more inclined to listen to data these days. Read next: USD/JPY Is Above 133.30, GBP/USD Droped Form $1.21 to $1.20, The Aussie Pair Is Trading Below $0.69| FXMAG.COM 10Y Bunds are approaching a crucial level Source: Refinitiv, ING Today's events and market view Market sentiment and positioning have favoured yield increases. But data remains crucial to carry the sell-off further, especially as we are approaching the upper end of recent ranges. Note that last night's 20Y UST auction saw good demand with the 20Y yield having briefly topped 4% just before. And in Europe, the 10Y Bund yield is now at 2.47%, not far from the (intra-day) highs of last October (2.53%) and December (2.57%) which stake out the upper end for Bund yields this cycle so far.  Today's data releases remain US-focused. Producer prices are seen decelerating further on an annualised basis, not standing in the way of the disinflation narrative. But in the wake of the strong payrolls data the focus will likely fall on the initial jobless claims to gauge the state of the jobs market. A heightened sensitivity to potentially changing narratives in other sectors of the economy may give more weight to housing data including today's housing starts after the larger bounce in the NAHB homebuilders index yesterday Rounding off the data is a busy slate of central bank speakers. From the Fed, only Loretta Mester speaks during the European session, leaving the main focus on ECB officials, including the prominent doves Fabio Panetta and Philip Lane.   In terms of supply, we will see medium-term bond auctions from France out to the 7Y maturity for up to €11.5bn plus linkers and Spain auctions up to €6.5bn in bonds out to the 10Y. The highlight will be the sale of a new 30Y bond from Italy via syndication.  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

Momentum may wane now that key levels are being approached and supply as a compounding factor is slowing. But fundamentally there is little in the upcoming week standing against further hawkish repricing aside from potentially dovish vibes out of the Federal Open Market Committee minutes     Data remains key, but central bank comments help Markets do appear a tad selective, jumping on data that fits ongoing hawkish repricing in rates markets such as yesterday’s higher-than-expected PPI, largely dismissing initial jobless claims creeping higher and regional surveys disappointing. It does provide fertile ground for hawkish Fed comments such as those by James Bullard, who said that he would not rule out supporting a 50bp hike next month with the aim of eventually bringing the Fed (mid)rate to 5.375% from 4.625% currently. Pricing a peak SOFR rate of 5.24%, markets already see the Fed getting close to there, if not as fast. But it was the back-end getting a lift again with the curve steepening and the 10Y UST yield testing above 3.85%. Markets do appear a tad selective, jumping on data that fits ongoing hawkish repricing Bund yields saw a more uniform shift higher across the curve yesterday alongside US rates. The 10Y Bund yield is testing the air above 2.5% and there was little yesterday’s European Central Bank doves could set against it. If anything, ECB arch-dove Fabio Panetta was, in our view, not as dovish as he could have been. Arguing for a slower pace after the quasi-preannounced 50bp hike in March doesn’t have him standing in the way of 25bp hikes in May and possibly June – the market has these already firmly priced in discounting 104bp of tightening March to June, and rates downside from here seems limited given the dove's nod of acceptance. What we witnessed yesterday to a greater degree again was the market pricing out the subsequent easing. From (now a higher) peak in 2023 through the end of 2024, that has been whittled down towards 80bp from around 100bp prior to the ECB meeting. Real Treasury yields didn't really decline in 2023, and are now back at their cycle highs Source: Refinitiv, ING Market pattern more likely to extend, subject to data It is a market pattern that may well extend for now, but it remains crucially dependent on the data. Looking ahead we have warned that data surprises for January can to a large degree be traced back to seasonal adjustments and weather quirks, leaving them exposed to a reversal in February. Next week already holds the first data points for February, though with the PMIs it's sentiment data rather than hard data. As such, they may still support the bearish undertone in rates markets. The consensus seems to build around a more upbeat release again. To round the bearish picture off we will also get the release of the final inflation data, more closely watched this time around since the German data had not been available in time for the first estimate – revisions are possible, if not likely. The first release was also light on details, and investors will pore over components such as service inflation. The FOMC minutes can produce some relatively more dovish headlines The main test to the hawkish repricing narrative this week may come from the Fed itself, though. The FOMC minutes will be released on Wednesday, giving a broader representation of the views presented in the discussions ahead of the policy decision. We know that Fed Chair Jerome Powell tends to be more hawkish than the broader FOMC, which implies the minutes can produce some relatively more dovish headlines. Of course, the market may dismiss such comments as being overtaken by the recent surprisingly strong data, even if there are some serious question marks behind the sustainability of that strength. The end of hiking cycles should bring a convergence in rates, eg between GBP and EUR forwards Source: Refinitiv, ING Today's events and market view The hawkish repricing maintains its momentum, 10Y UST yields are just a smidgen away from their local year-end high, 10Y Bund yields have tested the air above 2.50%, which they previously only have done briefly in October and around year-end. While we maintain our outlook for lower yields by the end of the year, the current repricing has little standing in its way for now. Supply in Europe taking a break from the duration-heavy syndication we have seen of late may remove a technical factor, but we think the upcoming test will be next week's FOMC minutes.   There is very little of note on the data calendars for today besides perhaps US import prices. From the Fed, we will see appearances from Tom Barkin and Michelle Bowman. The only ECB speaker scheduled for today is France's Francois Villeroy. 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

On Thursday, the EUR/USD currency pair attempted to resume its downward trend, although the volatility was quite low. Many reports were released in the US throughout the day, but as we had previously warned traders, all of them turned out to be secondary. Perhaps there was a 20–30 point response to a single report, but should we have anticipated such a response? So, we won't even concentrate on macroeconomic data from other countries. The technological picture has significantly improved in terms of interest. If a long-term downward trend has developed on the 4-hour TF and is not reversed, then the pullback we are currently seeing on the 24-hour TF is not particularly convincing. Although the Kijun-sen line has officially been passed, the pair is still extremely close to it, so anything can happen at any time. The major events of this week are all over, so we can't anticipate a lot of volatility or a significant trend change in the coming days. The daily TF, however, clearly demonstrates how weak the current downward correction is in comparison to the prior upward movement, therefore we are still waiting for a further collapse from the pair. We think that the dollar has fallen so much in recent months unfairly and that the euro currency is still significantly overbought. The rhetoric used by ECB and Fed officials is still described as "hawkish," and both sides have made pronouncements and dropped signals about a potential tightening of monetary policy that might be more pronounced than anticipated. As a result, the rates between the euro and the dollar are currently roughly identical. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM Another speech by Christine Lagarde was made this week. The ECB chief has been speaking quite a bit lately, but what new information does she have to share with the market given that everyone is already aware of the regulator's plans? The market anticipated two successive rises of 0.5% and a further 0.25% even before the rate hike in February. As a result, the market was unaffected by Ms. Lagarde's comments regarding an almost certain tightening of monetary policy by half a percent in March. As we just mentioned, since these solutions have been there for a while and are well known, the market has been working on them. The central bank must keep taking aggressive action because inflation is still high, according to Ms. Lagarde. There's nothing new here. At the same time, Gabriel Makhlouf, the president of the Central Bank of Ireland, predicted that the deposit rate would rise over 3.5% and stay there for a considerable amount of time. The key rate is currently 2.5 percent, and the deposit rate is considerably lower. Even a 3.25% rate, in our opinion, won't be sufficient to bring inflation back to 2% in the near future. We, therefore, believe that the ECB rate will increase for more than two meetings. The European Central Bank (ECB) has a considerably greater capacity for tightening than the Federal Reserve, although much will depend on the condition of the European economy, which is on the verge of entering a recession. As a result, the European currency may resume its movement toward the north during 2023. Although we are not opposed to this scenario, we must remind you that trends cannot exist without corrections. As a result, at this point, we anticipate that the pair will keep declining. The road map for future rises is unlikely to clear up by March when there will be a new ECB meeting, but after that, new clues from regulator officials will start to flow in. As a result, the pair can continue to adjust until mid-March. All indications point to a downward trend: the lower linear regression channel is pointing downward, the moving channel is likewise pointing downward, and the price updated its local minimum yesterday. We do not have any leading purchase indications because the CCI indicator did not move into the oversold area. The pair may continue to advance toward Senkou Span B on a 24-hour TF. As of February 17, the euro/dollar currency pair's average volatility over the previous five trading days was 82 points, which is considered "normal." As a result, we anticipate that the pair will move on Friday between 1.0603 and 1.0767. A new round of corrections will be signaled by the Heiken Ashi indicator's upward movement. Nearest levels of support S1 – 1.0620 S2 – 1.0498 S3 – 1.0376 Nearest levels of resistance R1 – 1.0742 R2 – 1.0864 R3 – 1.0986 Trade Suggestions: The EUR/USD pair maintains a downward trend. Before the Heiken Ashi indication comes up, we can now consider opening new short positions with targets of 1.0603 and 1.0620. If the price is established above the moving average line with a target of 1.0864, long positions can 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 01:00 2023-02-18 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335378

EUR/GBP gains positive traction for the third straight day and climbs to over a one-week high. The upbeat UK Retail Sales for January fail to impress the GBP bulls or provide any impetus. Bets for additional jumbo rate hikes by the ECB support prospects for further near-term gains. The EUR/GBP cross builds on this week's goodish bounce from the 0.8800 mark and edges higher for the third successive day on Friday. Spot prices hold steady above the 0.8900 round figure through the early European session and react little to the latest UK macro data. The UK Office for National Statistics reported that domestic Retail Sales grew 0.5% in January against consensus estimates for a 0.3% fall. Furthermore, sales excluding fuel also surpassed market expectations and rose by 0.4% during the reported month. The better-than-expected prints, however, were offset by a downward revision of the previous month's already weaker readings. This, in turn, fails to provide any meaningful impetus to the British Pound or move the EUR/GBP cross. That said, the softer UK consumer inflation figures released earlier this week fueled expectations that the Bank of England's (BoE) current rate-hiking cycle might be nearing the end. This continues to weigh on the Sterling and acts as a tailwind for the EUR/GBP cross. That said, broad-based US Dollar strength exerts some follow-through downward pressure on the shared currency. This, in turn, holds back bulls from placing aggressive bets and caps the upside for the cross, at least for now. Meanwhile, bets for additional jumbo rate hikes by the European Central Bank (ECB) might contribute to the Euro's relative outperformance against its British counterpart. This, in turn, supports prospects for a further near-term appreciating move for the EUR/GBP cross. Hence, some follow-through strength back towards the 0.8975-0.8980 region, or the highest level since September 2022 touched earlier this month, looks like a distinct possibility. Technical levels to watch remaining time till the new event being published U.S.: Leading Indicators

The euro is down for a third straight day and fell earlier to 1.0629, its lowest level since Jan. 23. In the European session, EUR/USD is trading at 1.0639, down 0.30%. US dollar flexing muscles The US dollar is showing some strength this week against the majors, as US data continues to shine. Retail sales impressed with a 3% gain earlier this week, and PPI and unemployment claims were both better than expected. Is the disinflation process stalled? The markets didn’t expect such good numbers, but the economy has proved to be surprisingly resilient to rising interest rates. The Fed has been preaching ‘higher for longer’ for some time, but the markets stuck to their dovish stance, expecting that the Fed would have to pivot and even cut rates later in the year. The host of strong US numbers has forced investors to recalibrate, and the markets have revised upwards their peak rate forecast to above 5%. The US dollar has been the big winner of the shift in market thinking, and US Treasury yields are at their highest level this year. Fed member Mester said she saw a strong case for raising rates by 50 basis points at the last Fed meeting, a sign that the Fed could move away from the moderate 25-bp hikes if inflation isn’t falling quickly enough. Mester said that she didn’t see inflation falling to 2% until 2025, which points to a long disinflation process. The ECB raised rates by 50 basis points in February and has signalled that it will do the same at the Mar. 16 meeting. The main financing rate is currently at 3%, well below the Fed (4.5%) and other major central banks. It’s not clear what the Bank has planned after the first quarter, but with inflation running at 8.5%, the risk for further rate hikes is skewed to the upside. The ECB has made it clear that rates will remain high until there is evidence that inflation is falling toward the target, which means that the current rate-tightening cycle isn’t anywhere near its end. Read next: USD/JPY Is Trading Close To 134.00, EUR/USD Is Remaining Above $1.07| FXMAG.COM EUR/USD Technical EUR/USD is testing support at 1.0629. Below, there is support at 1.0581 1.0762 and 1.0847 are the next resistance lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

The dollar rose to a six-week high on Friday as strong US economic data and comments from Federal Reserve officials prompted investors to bet on another rate hike. The Fed's target range is currently between 4.5% and 4.75%. Economists at Goldman Sachs on Thursday raised their expectations for Fed rate hikes this year. After previously expecting two more hikes, they said they now expect three more hikes of 25 bp in March, May and June. That would push interest rates to 5.25% to 5.5%. The US Economic Report will not include any macroeconomic data releases that could significantly affect the behavior of the US dollar. As such, market participants will pay close attention to risk perception. USD/JPY The yen pair hit its highest level in almost two months. USD/JPY has been trending up since the start of the day. USD/JPY started the day trading just above 134.07 and has now crossed the 135.00 mark. EUR/USD EUR/USD extended its decline during the Asian trading hours and hit its lowest level since early January below 1.0650. The technical outlook for the short-term pair shows that the bearish bias remains intact. Meanwhile, comments from Federal Reserve (Fed) and European Central Bank (ECB) officials add to the burden on the EUR/USD pair. The euro could weaken further as the market's interest-rate rise expectations for the European Central Bank may be overdone given comments from ECB members about the risks of excessive policy tightening. ECB board member Fabio Panetta said on Thursday that the ECB should consider the risk of unduly tightening policy and argued that the bank should not commit unconditionally in advance to future policy moves. From a more neutral point of view, the ECB's chief economist Philip Lane said he was open-minded about the exact amount of monetary tightening that would be needed to meet the inflation target. On the other hand, Cleveland Fed President Loretta Mester reiterated that the interest rate will have to rise above 5% and stay there for some time for the Fed to control inflation. Read next: Wyoming Prohibits Forced Disclosure Of Private Cryptographic Keys By US State Courts, JP Morgan Projections Of FX Market| FXMAG.COM GBP/USD GBP/USD extends losses towards 1.1900 in the early European morning. The strength of the US dollar (USD) had a big impact on the GBP/USD exchange rate in the second half of the week. Hawkish comments from Fed policymakers and the latest released macroeconomic data have revived expectations that the Fed may decide to make additional interest rate hikes even after May. Data from the UK showed that retail sales rose by 0.5% in January, as compared to market expectations for a fall of 0.3%. While this reading was better than the market's 0.3% decline, December's -1% reading was revised lower to -1.2%, preventing Sterling from taking advantage of the data. AUD/USD Reserve Bank of Australia (RBA) Chairman Lowe's comments did not stop the AUDUSD rate from falling. Governor Lowe warned that the RBA was keeping an open mind and their view was that further rate hikes were needed. Lowe also stated that interest rates are not on a predetermined path as it takes 18-24 months for rate hikes to make an impact in the economy. The pair of the Australian is in a downtrend on Friday. AUD/USD has fallen well below 0.69 and is trading below the 0.6820 level. Source: finance.yahoo.com, investing.com

With milder weather, we expect further improvements in activity data in the US. Consumer spending will have jumped 2% in real terms, however we remain sceptical as to whether this indicates true strength. The Fed's favoured measure of inflation looks set to rise 0.4% month-on-month, more than twice what's required to produce 2% year-on-year inflation In this article US: Nothing stopping the Fed from hiking rates in March Eurozone: Recoveries in sentiment data   Shutterstock US: Nothing stopping the Fed from hiking rates in March The warm weather in January, which contrasted starkly with the cold, wintery conditions of December, will continue to boost US activity data over the coming week. Home sales are likely going to get a lift with more people out and about early in the year home hunting, while we have got a very strong idea that consumer spending will have jumped by 2% in real terms given the 3% month-on-month increase in retail sales over the same period. However, we remain a little sceptical as to whether this indicates true strength given the big shifts in weather may have simply meant that spending that would have been done in February and March may have been brought forward, leaving open the possibility of a correction over the next couple of months. This won’t stop the Federal Reserve from hiking interest rates in March and in all probability May too. Indeed, the Fed’s favoured measure of inflation, the core personal consumer expenditure deflator, looks set to rise by 0.4%MoM, more than twice the 0.17%MoM required over time to produce year-on-year inflation of 2%. Indeed, there will be several more Fed speakers over the coming week with the minutes of the February Federal Open Market Committee meeting also likely to reveal that they were not terribly far away from hiking rates by 50bp. Having done 25bp in February, we think this will be the standard incremental move from now on. Eurozone: Recoveries in sentiment data Lots of sentiment data out of the eurozone next week, which will shed light on how the economy is performing in February. Both consumer confidence and PMIs have been showing slight recovery in recent months and are expected to continue recovery at low levels. This should be in line with economic activity broadly stalling as it did in the fourth quarter. Key events in developed markets next week Refinitiv, ING TagsUS 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

Fed minutes – 22/02 – if the market reaction to the recent Fed rate hike is any guide, there appears to be a type of cognitive dissonance when it comes to what the market wants to hear from the Federal Reserve and what the US central bank is trying to say. To borrow a line from the film Cool Hand Luke, "what we've got here is a failure to communicate". Long story short, the market thinks the inflation job is done, or at least close to it, even though the recent non-farm payrolls report appears to have muddied the waters in that regard. For all of Fed chair Jay Powell's insistence that more rate hikes were coming at his post meeting press conference, 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, created an even greater divergence between market pricing on rates, and the Fed's expectations of how the economy is likely to evolve. Since that meeting, we've had a succession of Fed officials push back on the dovish narrative insisting that rates are likely to stay higher for longer, however the release of the latest minutes also needs to be set in the context of the fact that they came before the recent jobs, and ISM services data. That said, the recent intervention by non-voting member, Cleveland Fed President Loretta Mester that she saw a compelling case for a 50bps move at the last meeting was an unexpected intervention to the cosy consensus that had developed around the 25bps narrative. This was compounded by another non-voting member, James Bullard of the St. Louis Fed who suggested 50bps in March could be a consideration. This raises two questions, one is to how many other Fed members saw a compelling case for a 50bps move at the last meeting, and two, how much could that have shifted over the last few weeks in light of the recent strength of US data. The minutes should answer the first question, the second question will need to see more data. Another key question will be how long Fed officials see rates staying at current levels, and whether they still see the December dots as an accurate representation of future rate hike expectations. US Core PCE Deflator (Jan) – 24/02 – in the last 2 months the US Core PCE Deflator has fallen back sharply from 5.2% in September, falling to its lowest level since October 2021 in December at 4.4%. The sharp fall from those peaks has certainly helped drive the disinflation narrative that has got the markets speculating that we might start to see some of the recent rate hikes start to get reversed before the end of this year. As the Fed's preferred inflation measure, sharp falls in this indicator could help reinforce the narrative surrounding weaker prices growth. Unfortunately, this week's January numbers may not support this conclusion if the recent payrolls and services data is any indication. We could see a big rebound in prices driven by higher personal spending as a result of the strong jobs data. EU CPI (Jan) – 23/02 – inflation in Europe has been falling sharply in recent months, although the recent Germany CPI numbers would appear to suggest that it is a little stickier than perhaps the ECB would like. The most recent flash numbers for January saw headline CPI fall from 9.2% to 8.5% a bigger fall than expected with the month on month decline of -0.4%. Core prices however increased, rising to 5.2% on an annualised basis from 5.1% in a sign that while headline pressures were easing sharply, there is little sign that core prices are going the same way. This week's January final numbers could see an uptick given that Germany CPI came in higher than expected, in spite of continued weakness in natural gas prices which have slipped to their lowest levels in 18 months. US Q4 GDP – 23/02 – despite the rise in interest rates we've seen over the past few months, the US economy has held up reasonably well, with strong growth in Q3 as well as Q4, after a weak H1. The first iteration of US Q4 GDP saw the economy expand by 2.9%, which was above expectations of 2.5%. Personal consumption was a little disappointing, slipping back to 2.1%, which wasn't that surprising given that November and December retail sales contracted. This trend will probably rebound in the January personal spending and income numbers. HSBC FY 22 – 21/02 – the rebound since the lows in October has seen HSBC shares rally to their best levels since September 2019, on a combination of rising interest rates as well as optimism over a rebound in China's economy in 2023. When HSBC reported in Q3 the shares fell back after reporting Q3 revenue of $11.6bn, while profits after tax came in at $2.56bn. This was significantly lower than the numbers in Q2, with profit attributable to shareholders, dropping to $1.9bn, down from $5.77bn in Q2. Part of the reason for the lower profits was an increase of provisions for non-performing loans of $1.1bn, doubling the amount set aside year to date to $2.2bn. On the plus side the banks NIM rose in Q3 to 1.57% from 1.35%, helping to push net interest income to beat expectations, reflecting the higher interest rate environment. A month later the bank announced it had agreed to sell its Canadian operation to Royal Bank of Canada for $10bn in cash. This appears to be the latest example of Asia's largest bank looking to gravitate away towards its core markets in Asia, and in so doing helping to keep its shareholders onside as it looks to boost the resilience of its core operations, as well as improving pay-outs. This week's full year numbers should point to a better outlook with the Chinese economy reopening even if Q4 disappoints due to the covid disruption which only started to ease in the middle of December. Lloyds Banking Group FY 22 – 22/02 – despite the recovery off its lows in October, the Lloyds share price remains below its highs last year as well as its pre-pandemic peaks set back in December 2019. The shares have underperformed primarily due to concerns over the economic outlook and its heavy reliance on the UK domestic market, particularly mortgages and consumer credit. Despite these concerns the bank has consistently outperformed while increasing profits to the point its more profitable now that it was back in 2019 when the shares were much higher. In Q3 statutory pre-tax profits fell back, coming in at £1.51bn, a 26% decline from the same quarter last year, and down a similar percentage from Q2. A large part of the reason for this was due to a large increase in provisions for non-performing loans, which increased by £668m in a sign that the recent squeeze on customer finances was increasing concern about possible loan losses, pushing impairment provision year to date to over £1bn. In its Q3 numbers the bank also reported that unsecured loan demand remained strong with a 4% increase to £8.8bn, while the open mortgage book saw an increase of 1%. This is expected to see a slowdown in Q4 and into the new fiscal year, even as net interest margins have improved to 2.98% for the quarter, up from 2.55% in Q2, pushing average NIM year to date up to 2.84%. Inevitably this improved profitability has led to calls from certain parts of the political spectrum for a windfall tax on the banks, despite the facts that profits are lower this year than they were last year. Lending to small business also saw a modest decline of 3% to £39.8bn, not altogether surprising given the economic backdrop, and the increases in taxes that are due to come into effect in April. Rolls-Royce FY22 – 23/02 – when new CEO Tufan Erginbilgic took over earlier this year he didn't hold back in the challenges facing the current business. Likening the company to a "burning platform" his words sent the shares off their recent highs, after a rally from the September lows of 70p, which saw the shares hit their highest levels since February last year. There is no question the company has its problems, with its heavy reliance on its civil aerospace division a notable weak spot, although even here there are grounds for optimism as airlines slowly return to their normal pre-Covid flying patterns. In Q3 the company that various problems in its supply chains meant that inventory levels were higher than they should be, due to high demand in its power systems business which was seeing record orders. These problems have caused a higher-than-expected build-up of inventory. Large engine flying hours were also at the lower end of expectations, at 65% of 2019 levels despite the return of long-haul flights last year. The company blamed China's zero-covid policy for impacting the business particularly in Asia, a trend which should improve in the coming months. The ITP Aero proceeds have been used to pay down a £2bn floating rate loan. As we look ahead to the new fiscal year let's hope the new CEO paints a more upbeat and more optimistic outlook than the one, he laid out last month. After all, if he can't paint a positive outlook for the business, why should shareholders. BAE Systems FY 22 – 23/02 – over the last 12 months the UK biggest defence contractor has been one of the best performers with the shares hitting record highs earlier this year. The Russian invasion of Ukraine has pushed BAE to the forefront of investors radars given its position as a manufacturer of artillery shells and howitzer rounds, as well as other defence systems and hardware. In Q3 the company announced it had an order book backlog of £52.7bn, with the company seeing £10bn of orders in Q3 alone, on top of the £17.9bn in H1. The company kept its full year guidance of underlying EPS growth of 4% to 6% unchanged. IAG FY 22 – 24/02 – airlines have got off to flyer this year, amongst the best performing sector over optimism that as we head into 2023 consumers will start splashing what available cash they have on holiday getaways in what looks set to be the first year since covid that won't be subject to widespread disruption. The smaller budget airlines have recently reported a huge surge in bookings numbers, which bodes well for the likes of the big carriers as well. In Q3 IAG reported adjusted operating profits of €1.1bn, while revenues beat expectations coming in at €7.33bn, pushing above 2019 levels, despite operating at lower capacity. The higher revenue level, while welcome, simply reflects higher ticket prices, with business travel back at 75% of 2019 levels. Profits after tax for Q3 rose to €853m. For the year-to-date IAG has managed to edge back into the black to the tune of €170m. For Q4 capacity is expected to be at 87% of 2019 levels, with Q1 expected to rise to 95%, which seems a little on the optimistic side given the economic outlook, and how only Ryanair has managed to return to those sorts of levels of load capacity. Walmart Q4 23 – 21/02 – since falling sharply to 2-year lows in May last year after reducing their sales growth targets and missing on profits due to higher costs, Walmart shares have slowly recovered most of that lost ground. In Q3 the retailer reported Q3 revenues of $152.8bn, and profits of $1.50c a share, which were both well above expectations. The profit number for the quarter was wiped out by a one-off $3.1bn opioid settlement, meaning that the profit turned into a net quarterly loss of $1.8bn. Despite that Walmart upgraded its full year guidance and posted gross margins of 23.8% also slightly ahead of forecasts, as well as announcing a $20bn share buyback. Walmart has also managed to reduce its inventory level down to 13%, haling it from Q2's 26%, helped by sales growth of 8.2%. The big question is whether Walmart will be able to meet this target given the slowdown in US retail sales seen at the end of last year. In previous quarters Walmart warned that rising prices were prompting a shift away from higher margin goods to lower margin everyday staples. Profits are expected to come in at $1.51c a share. Nvidia Q4 23 – 23/02 – having hit two-year lows back in October last year, Nvidia shares have undergone a decent rally since then, retracing 50% of the decline from the record highs from November 2021. The rebound from those lows appears to have run into a bit of trouble in recent days as concerns over the economic outlook increase. In August Nvidia warned on its margins as well as cutting its revenue outlook. Its Q2 numbers confirmed that downgrade to guidance, with profits coming in at $0.52c a share and revenues coming in at $6.7bn, with the company citing a slowdown in gaming revenue to $2bn. In Q3 revenues came in at a lower $5.93bn, although demand for its data centre chips was better, which offset slowing demand for gaming chips. Profits came in at $680m, slightly below expectations, with the company offering Q4 revenue guidance of $6bn, +/- 2%. Since the start of this year Microsoft indicated that demand for gaming had remained lower, which is likely to be reflected in Nvidia's revenue on the gaming side. Demand for higher specification AI chips could well offer some hope here with Nvidia a key supplier in this area. Profits are expected to come in at $0.81c a share. For further comment from Michael Hewson, please call 0203 003 8905 or 07824 660632Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

US The latest round of economic data (retail sales, CPI, PPI, jobless claims) are all signaling more Fed rate hikes are coming.  Wall Street will pay close attention to the flash PMIs, which could show manufacturing and service sector activity is stabilizing, existing home sales, jobless claims, and personal income & spending data.  The second look at Q4 GDP and core PCE are also expected as is the final sentiment reading from the University of Michigan. The debate between quarter-point and 50 basis point rate rises by the Fed has returned.  The FOMC minutes will closely be watched, especially after Fed’s Bullard and Mester noted they were thinking about half-point rises.  Fed speak includes appearances by Bostic and Daly on Thursday, while Jefferson, Collins, and Waller speak on Friday.   Earnings seasons continues with key updates from Alibaba, Baidu, BASF, BHP, Block, Booking, CIBC, Cheniere Energy, Deutsche Telekom, eBay, Engie, Eni, Home Depot, HSBC, Iberdrola, Intuit, Keurig Dr Pepper, Moderna, Munich Re, Nvidia, Rio Tinto, Walmart, and Warner Bros Discovery.  Eurozone It’s unlikely to be a game-changing week but there are some very interesting economic data releases that traders will pay close attention to. The one that stands out is the HICP inflation data, although being a revised number we may not get much from it. The PMI surveys could be of greater consequence, being flash readings that will continue to paint a picture of how well the bloc is holding up.  UK  A quiet week for the UK with the early part bringing PMIs from the services and manufacturing sectors and the latter BoE appearances. The outlook for the UK remains confusing despite all of the optimism and just as we’re seeing setbacks elsewhere, there will likely be plenty here too. Investors appear convinced the end of the tightening cycle is nigh, buoyed by the MPC’s confidence on the path of inflation this year. The PMIs will offer further insight into the state of the economy while the speeches may shed a little more light on what this all means ahead of next month’s meeting. Russia The monetary policy report may be of interest next week, although rates have now been on hold for the last five months. PPI data is expected to show the deflation trend remains intact, something that may trigger a change in thought on rates should it filter through to the CPI numbers.  South Africa Unemployment and PPI data are released next week, the latter of which may catch the eye a little more given the potential implications for CPI inflation and interest rates. We’re still a way off from the next SARB meeting which takes place at the end of March but with inflation now only a little above the 3-6% target range and core well within, the case for further rate hikes is weakening.  On Wednesday, Finance Minister Enoch Godongwana will deliver the National Budget speech to Parliament. The government has numerous priorities that it must address and finding that balance will be no easy feat. Markets, as ever, will be watching. Turkey There’s no doubt what the main event is next week. The CBRT is expected to resume its easing program with another 1% cut, taking the key rate to 8%. The central bank hasn’t been shy about going further than markets expect before, or particularly concerned about the consequences. So we shouldn’t be surprised if it does so again. Switzerland Very little of note on the agenda next week, the most notable possibly being the ZEW survey. A 0.5% rate hike is still expected at the next scheduled meeting on 23 March but with inflation still running uncomfortably above target; the only risk is the SNB won’t wait that long.  China The amount of support that will get pumped into China’s economy might depend on how well their reopening goes.  This week’s main event for China is the decision on loan prime rates.  Given the PBOC kept the key rate steady earlier this month, both the 1-year and 5-year loan prime rates are expected to remain unchanged from a month ago at 3.65% and 4.30% respectively.  China is still widely expected to ease sometime soon and that should keep the outlook strong for Asia.      India No major economic releases or events are expected.  Australia & New Zealand The RBNZ is widely expected to deliver its 10th-straight rate hike, with the majority of analysts expecting a half-point rate rise to 4.75%. The consensus range is anywhere from a quarter-point rate rise to as high as a 75 bp rate increase.  Extreme weather may keep inflation pressures going, so the RBNZ should remain somewhat hawkish.  New Zealand’s second-tier data releases also include PPI, trade balance, and credit card spending.    The main economic release for Australia is Q4 wage data that is expected to show pay growth remained, but struggled to keep up with inflation.  The release of Q4 private capital expenditure should show an improvement from -0.6% to +0.9%.   Japan The focus in Japan will be on two big events.  Kazuo Ueda, the government’s nominee to become the next BOJ  governor, is expected to speak at a confirmation hearing at the lower house of parliament on February 24th. Japan’s inflation report is also expected to show core prices rose to the fastest levels since 1981.  Singapore The January inflation report is expected to be hot as the labor market remains tight and foreign travelers return.  Industrial production is also expected to improve, with the year-over-year reading increasing from -3.1% to -1.9%.  Economic Calendar Saturday, Feb. 18 Economic Events Major leaders attend the 59th Munich Security Conference Hungary PM Orban gives his annual state-of-the-nation speech Sunday, Feb. 19 Economic Event US Secretary of State Blinken’s European trip includes visits to Turkey, Germany, and Greece   Monday, Feb. 20 Economic Data/Events US markets closed for President’s Day China loan prime rates Eurozone consumer confidence Finland CPI Malaysia trade Philippines balance of payments Sweden CPI Taiwan export orders Thailand GDP US President Joe Biden is scheduled to visit Poland   EU foreign ministers meet in Brussels Sweden’s Riksbank releases minutes from its February monetary policy meeting BOE’s Woods speaks at the Association of British Insurers annual dinner Tuesday, Feb. 21 Economic Data/Events US existing home sales, PMI Canada retail sales, CPI Eurozone PMI, new car registrations Finland unemployment France PMI Germany PMI, ZEW survey expectations Japan PMI Mexico retail sales, international reserves UK PMI Russian President Putin to deliver his first state-of-the-nation address RBA releases minutes from its February policy meeting Riksbank’s Floden speaks   Riksbank’s Ohlsson participates in a roundtable about the current economic situation Wednesday, Feb. 22 Economic Data/Events Fed releases minutes from its Jan. 31-Feb. 1 policy meeting Germany CPI, IFO business climate Italy CPI New Zealand trade Russia industrial production US MBA mortgage applications Reserve Bank of New Zealand rate decision: Expected to raise rates by 50bp to 4.75% ECB Governing Council meets in Lapland, for a non-monetary-policy meeting BOJ board member Naoki Tamura speaks in Gunma, Japan Riksbank’s Governor Thedeen speaks about the economy and monetary policy South African Finance Minister Godongwana presents the national budget Hong Kong annual budget presentation Thursday, Feb. 23 Economic Data/Events US 2nd look at Q4 GDP, initial jobless claims Eurozone CPI Singapore CPI Taiwan industrial production G-20 finance ministers and central bank governors meet in India Turkey interest-rate decision: Expected to cut rates by 100bps to 8.00% Mexico’s central bank releases minutes from its February policy meeting Fed’s Bostic speaks at the bank’s 2023 banking outlook conference BOE’s Mann speaks at the Resolution Foundation on “The Results of Rising Rates: Expectations, Lags and the Transmission of Monetary Policy” BOE’s Cunliffe delivers a keynote address at a G-20 financial and central bank deputies meeting on “Leveraging National Payment Systems to Enhance Cross-Border Payment Arrangements” Riksbank’s Floden speaks on the economy and monetary policy Japan Emperor’s Day holiday Friday, Feb. 24 Economic Data/Events US PCE deflator, personal spending, new home sales, University of Michigan consumer sentiment Germany GDP Japan CPI Mexico GDP Singapore industrial production One-year mark of Russia’s invasion of Ukraine German Chancellor Scholz leaves for a three-day trip to India BOE’s  Tenreyro participates in a panel discussion titled, “Back to 2% inflation?” BOJ governor-nominee Kazuo Ueda appears before Japan’s lower house Sovereign Rating Updates Netherlands (Fitch)  Austria (S&P) Austria (Moody’s) Sweden (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.  

Next week there are some very interesting economic data releases that investors will pay close attention to. Data on inflation in the euro zone stand out in the foreground. CPI Forecast Eurozone inflation is expected to increase from 8.5% to 8.6%. Core CPI will remain unchanged at 5.2%. The ECB believes that the easing pressure from energy prices and other costs, together with the ECB's monetary policy measures, should bring inflation back to the 2% inflation target. Source: investing.com Economic situation European officials breathed a sigh of relief on Monday after new data suggested the region would avoid an economic recession. Back in November, the European Commission, the EU's executive arm, warned that the eurozone could enter a recession — defined by two consecutive quarters of falling economic performance. However, on Monday, the institution said thanks to government support and a reduction in energy costs, this is no longer the case. The outlook for this year is also brighter with a projected GDP rate of 0.9%, compared to a growth rate of 0.2% projected just three months ago. EU interest rates Despite the good news, finance ministers have plenty of work to do in the coming months. European governments have adopted loose fiscal policies since the outbreak of the coronavirus pandemic in 2020 — it was argued at the time that nations could not focus on lowering debt levels or correcting deficits because they needed to support their economies in such an extraordinary economic shock. The same argument was used after the Russian invasion of Ukraine, when governments helped with energy bills, among other things. “In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde told lawmakers at the European Parliament. She added it would then evaluate the subsequent path for monetary policy, reiterating the message the bank delivered after hiking rates by a half percentage point on February 2. The ECB will publish updated economic forecasts at its March meeting, which will help it formulate the course for monetary policy. If the central bank goes through with the half-point hike in interest rates, it would be its sixth increase since July for a total increase of 3.5 percentage points. ECB Executive Board member Fabio Panetta said on Thursday that the ECB should consider the risks of over-tightening the policy and argued that the bank should not unconditionally pre-commit to future policy moves. On a more neutral note, ECB Chief Economist Philip Lane said that he is open-minded about the precise scale of the monetary policy tightening that will be needed to achieve the inflation goal. Other reports In the coming week there will also be other reports from the euro zone. PMI surveys may be more meaningful as they will be lightning fast readings that will continue to paint a picture of how well the block is holding up. Source: investing.com

Policy remains a headwind The improved mood of investors can be linked to hopes for a less restrictive path for monetary policy — if not now, then later in the year. However, it seems that central bankers in the developed world remain more concerned about the risks of letting inflation expectations become embedded in the behavior of businesses and consumers than anything else. They have repeated this mantra is recent weeks, even as they recognize that the accumulated tightening across the major developed economies appears to be starting to have some impact. The US Federal Reserve (Fed) slowed the pace of rate hikes to a more normal cadence at its early February meeting and talked optimistically of Exhibit 2: European Natural Gas Front Month Futures Contract As of January 31, 2023 Index 350 300 250 200 150 100 50 0 Jul21 OctSources: Bloomberg, 21 Jan Macrobond22 Apr22 Jul22 Oct22 . Important data provider notices and terms available at www.franklintempletondatasources.com a disinflationary process that is underway. The Fed indicated it was getting closer to the end of its tightening cycle but did not suggest that it viewed the cycle as “job done.” What the Fed did say was that the central bank would be highly data dependent in executing its monetary policy objectives. This contrasts with the Bank of Japan (BoJ), which is still at the start of this process and yet to make a first move toward more normal interest rates. Still, the Fed’s message resonated with comments from the Bank of England (BoE) as that central bank hinted at an imminent pause to rate hikes. And even the European Central Bank (ECB) sounded more circumspect even as it and the BoE continued to hike at a relatively rapid pace. The ECB resisted the temptation to give strong forward guidance beyond stating that it would make decisions on a meeting Jan23 bymeeting basis. This was viewed initially as supporting the idea that a peak in rates was approaching. However, we think the more accurate observation is that the lack of guidance, and increased data dependence, will leave financial markets more vulnerable to changes in the interpretation of the economic outlook. It also reinforces our view that policymakers remain laser focused on inflation. Taken together with the prospects for a continued slimming of central bank balance sheets, expected central bank hikes will moderate negative real rates and sustain restrictive conditions Although fiscal policy has responded to energy costs in some countries, especially in Europe, it will be slow to sway dovish in others, leaving it more differentiated across economies. However, the ongoing tilt in global policy is still quite hawkish. Overall, this sees our final theme complete a set of three still quite negative drivers for markets, even as it evolves to downplay the pace of hikes while emphasizing “Policy to Remain Restrictive” move through 2023. as we Equity valuations had moderated (the multiples of earnings at which stocks trade fell considerably), but the levels of anticipated earnings per share have yet to decline meaningfully. The more recent improvement in sentiment and recovery in stock prices appear to underplay ongoing concerns around economic growth, inflation and likely policy responses. Investor sentiment may have got ahead of itself and supports us remaining moderately cautious in our view of stocks, rather than becoming bolder. We entered 2023 with an allocation preference away from stocks, which we have retained in recent months, but over the next few quarters, we anticipate that a nimble investment management style will continue to be required. We are more attracted to the yields available in highquality government bonds, although they too may have discounted an overly sanguine view about an imminent end to the rateattractive longerhike cycle. Although we still see term return potential for stocks and believe they should earn their equity risk premium over time (see Exhibit 3), this premium is not high enough to reflect the uncertainties markets currently face or support an equity preference at this time, in our assessment. Allocation settings views —February 2023 Source: Allocation views | Franklin Templeton

The planet is boiling. US Dollar Escalating geopolitical tensions combined with the hawkish Federal Reserve (Fed) bets boost demand in the US dollar, while gold sees demand below the $1840 mark. US stock market But the US yields are trending higher on an increasingly hawkish Fed talk, and that could well send the precious metal into the bearish consolidation zone, sooner rather than later. Fed and ECB And the Fed hawkishness is spreading toward Europe. The European Central Bank’s (ECB) Isabel Schnabel warned last week that investors may be underestimating the persistence of inflation, and more importantly the response needed to tame it. Read next: Twitter And Elon Musk Faced A Growing List Of Claims| FXMAG.COM EUR/USD The EURUSD rebounded from the 1.0612 dip on Friday. European stock markets The European stock markets, on the other, continue performing well despite the hawkish ECB expectations. Why? Watch the full episode to find out more! 0:00 Intro 0:27 Rising geopolitical tensions… 2:21 … and Fed hawks support USD bulls 3:10 US stock rally in jeopardy? 4:41 What to watch this week? 5:50 ECB hawks become louder… 6:46 But European stocks push higher! 8:09 Energy under pressure 9:24 Is dovish Chinese monetary policy enough to boost appetite? 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 #China #Russia #North #Korea #Iran #geopolitical #tensions #economic #inflation #data #Fed #ECB #China #rate #expectations #Alibaba #Baidu #earnings #USD #EUR #XAU #Crude #Oil #DAX #CAC #EuroStoxx #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 euro showed some volatility at the start of last week but since then it has been in calm waters and has stayed close to the 1.0.7 line.We’ll get a look at eurozone and German PMIs on Tuesday. ECB signals another 50 bp hike The ECB has been criticized for sending mixed messages to the markets, but Christine Lagarde was crystal clear last week when she told EU lawmakers that “in view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March”. Lagarde said the ECB would then evaluate future moves, but with inflation still high, the risks for further rate hikes are skewed to the upside. The ECB’s primary focus is to tame inflation. Headline inflation fell to 8.5% in January, down from 9.2% in December, but is still unacceptably high. Core CPI has been stickier than expected and wage increases are stemming the drop in inflation. ECB member Isabel Shnabel said last that investors risk underestimating inflation, a warning that the Fed has also made to the markets that have consistently been more dovish about rate policy than the Fed. Schnabel noted that the disinflation process has not started in the eurozone, another signal that the central bank will remain in a hawkish mode for the near future. Fed members continue to pound out the message that inflation remains too high and more rate hikes are needed. Investors are clearly concerned that the Fed will make good on these statements, which has sent risk sentiment lower and the US dollar higher. The markets had high hopes that the March rate increase would be a ‘one and done’, but it looks like the Fed will continue raising rates into the second quarter. According to CME’s FedWatch, the markets have priced in an 83% of a 25-bp hike and a 17% of a 50-bp increase. Read next: USD/JPY Pair Is Above 134.00, EUR/USD Pair Holds Below 1.07, GBP/USD Pair Managed To Rebound| FXMAG.COM EUR/USD Technical EUR/USD is testing resistance at 1.0704. Above, there is resistance at 1.0795 1.0604 and 1.0513 are the next support lines This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.

On Monday, there was almost no movement in the EUR/USD currency pair. Volatility was low, which can be partially attributed to the absence of significant macroeconomic and fundamental events. Moreover, Mondays frequently feature weak movements. After the weekend, the market needs to "swing," which takes some time. However, the pair continued to trade below the moving average line, indicating that there is currently no flat. An attempt to break over the moving average line was made last week, but it was unsuccessful due to the news on US inflation. The US dollar should have increased in price as January witnessed a very minor slowdown in inflation. As the market recognized its mistake, it stopped selling it and started buying it again. We witnessed a false overcoming of the moving at this point, which was shortly leveled. According to the Heiken Ashi indicator's current downward trend, the pair may fall to the levels of 1.0590 and 1.0620 today. We anticipate that the European currency will continue to decline for at least another two to three weeks. The pair can successfully shift downwards during this period. If the market is set for an upward trend in 2023, it will be sufficient to begin developing one later. As we've already mentioned, the market has already figured out one of the main things that have been helping the euro currency in recent months. The market was able to anticipate a 1.25% rate increase because the ECB had previously disclosed its expectations for the upcoming several months. As inflation is still extremely high, the European Central Bank will probably not stop at this level of tightening, but the market is still in the dark regarding the regulator's next moves. In any case, the euro currency cannot continue to appreciate even if the "hawkish" sentiment holds strong through May and June. In any case, corrections are necessary. Olli Rehn: Interest rates will continue to rise until the summer. The statement by Olli Rehn, a member of the ECB monetary committee, may have been the sole event on Monday. He delivered the speech that was, in theory, required of him. He specifically stated that the rate hike should continue since core inflation is still too high and has not slowed down. The rate should increase by 0.5% again in March. It is advised to keep growing the pace until the summer when it should reach its maximum level. So, for a very long period, the rates will need to be kept high enough for inflation to recover to 2%. In general, all of these theses have been known to the market for a long time, except for the statements regarding the potential continuation of tightening into the summer. As we previously stated, the ECB is expected to maintain its "hawkish" stance, which may support the euro in the medium term. But, it is important to keep in mind that the Fed may also continue to raise interest rates until the summer. And in this instance, the Fed rate will almost certainly be higher by that time than the ECB rate. As a result, in our opinion, the euro will no longer enjoy widespread support. Therefore, it should no longer be justified in a sharp decline in the price parity area. We see the level of 1.0600 as the lowest target for the present downward movement because there is around where the Senkou Span B line intersects the 24-hour TF. The critical line was crossed on the same TF. The pair has been slowly declining to this point, and this week's macroeconomic and fundamental conditions are not expected to stop it. Hence, nothing has altered in our prognosis as of yet. While volatility has recently dropped to a relatively low level of 74 points per day, we continue to anticipate a fall in the pair, albeit a slow one. Market participants appear to indicate that there aren't many reasons to engage in aggressive trading right now. As a result, you must choose between waiting for new, significant publications and events or relying on weak movements right away. As of February 21, the euro/dollar currency pair's average volatility over the previous five trading days was 74 points, which is considered to be "normal." Thus, on Tuesday, we anticipate the pair to move between 1.0590 and 1.0738 levels. A new round of correction will be signaled by the Heiken Ashi indicator's upward movement. Nearest levels of support S1 – 1.0620 S2 – 1.0498 S3 – 1.0376 Nearest levels of resistance R1 – 1.0742 R2 – 1.0864 R3 – 1.0986 Trade Advice: The EUR/USD pair is still moving south. Before the Heiken Ashi indication comes up, we can now consider opening new short positions with targets of 1.0590 and 1.0620. After the price is fixed above the moving average line, long positions can be initiated with targets of 1.0742 and 1.0864. 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 2023-02-22 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/335625

Today promises another series of upbeat indicators reinforcing the higher-for-longer narrative. EUR rates appear to have only just reached fair value, helping to explain why investors still look at them with suspicion. Geopolitical tensions are rearing their ugly head Source: Shutterstock EUR rates are far from stretched. In fact, they've just reached fair value After a slow start this week, markets gear up for the release of important sentiment indicators for the month of February. While the PMI surveys contain specific questions on various aspects of economic activity, they remain essentially sentiment indicators. As such, they are subject to the same biases as the people answering them. One such bias is that economic agents, just like market participants, may well feel that current conditions are better just on the basis of really poor expectations late last year. We often talk about the circularity of the Zew survey of investors (also published today) having a market impact on the same investors but this is also true for other surveys. All this is merely to warn our readers that sentiment indicators can lead us astray when it comes to the direction of the economy, and certainly of financial markets. At the margin, an improvement from weak levels in today’s PMIs could go some way towards reinforcing the higher-for-longer narrative but we would caution that this reflects information already contained in financial market prices. 10Y Bund yields hovering around 2.5% and 10Y swap rates around 3% is roughly where we have pitched fair value This being said, we do not see current EUR market rates as being particularly high. Yesterday, Olli Rehn made comments consistent with hikes in June and later being acceptable to ECB doves. In fact, he kept the door firmly open to more hikes in the summer. Last week Panetta, another dove, stressed that hikes are set to continue after March, albeit at a 25bp pace. All these policy signals are indeed conditional on economic data, especially inflation, but they show that the roughly three more hikes priced by the swap curve are far from absurd. Similarly, 10Y Bund yields hovering around 2.5% and 10Y swap rates around 3% is roughly where we pitched fair value at the start of the year, so we’re open to the idea of a further increase in market rates. 10Y EUR rates are at roughly where we see fair value Source: Refinitiv, ING USD bonds find ready buyers despite stronger US data US data should paint a similarly upbeat picture today. Our US economist is fond of repeating that unseasonably warm January temperatures are boosting activity numbers this year, and housing indicators are no exception. The repricing higher in yields has already triggered inflows worth 2%+ in USD and GBP medium and long sovereign bond funds in the past four weeks, according to EPFR. This is in contrast with net selling in EUR (but balanced by inflow at shorter maturities). Past flow data isn’t sufficient to draw conclusions about the future direction of travel but it seems to echo our view that the ECB is behind the Fed and BoE when it comes to its tightening cycle, and so EUR-denominated bonds are looked upon with suspicion by investors. Behind this deluge of upbeat economic news lurks something more concerning. We have highlighted before that risk assets’ interest rates sensitivity this year seems to be much below that of 2022. In other words, despite a loss in momentum in some quarters, more hawkish pricing in rates hasn’t yet derailed the improvement in risk sentiment. More hawkish pricing in rates hasn’t yet derailed the improvement in risk sentiment The risks to this state of play are twofold. First we may well reach the point where investors judge that interest rates exceed feeble developed market economies’ ability to stomach them. Secondly, geopolitical tensions are rearing their ugly head once again - with flashpoints in Europe, the Middle East and East Asia. It is difficult to predict when these will register with the market’s consciousness but the mix of elevated valuations and rising interest rates make for a more fraught environment. The latter may well result in higher energy prices, which have proved detrimental to bonds last year, but with better growth prospect the justification for the latest sell-off, the impact on rates is harder to call. Rising intermediate and long USD and GBP yields have met rising demand Source: Refinitiv, ING Today's events and market view The main event today is the release of February PMIs for the eurozone and the UK. Consensus if for a small improvement to still modest levels straddling the 50 contraction-expansion line. This will be followed by the Zew survey which we suspect will be largely ignored as its main point is to predict PMIs. Germany and the UK are due to auction bonds maturing in 2028 and 2029 respectively. Spain has mandated banks for a 15Y syndicated deal which should materialise today. US markets returning from a three day weekend have to grapple with their own set of PMIs, and existing home sales. Both may well extend the string of good US economic numbers, comforting investors in their view that policy rates will remain higher for longer. 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

EUR/GBP retreats from intraday high to extend Friday’s U-turn from two-week high. Full market’s return, cautious mood probe Euro bulls ahead of Eurozone ZEW Sentiment data, monthly PMI. The British Pound braces for UK PMI amid mixed concerns surrounding Brexit. EUR/GBP holds lower ground around 0.8870, after recently reversing from the daily top, as bears keep the reins for the third consecutive day to early Tuesday in Europe. In doing so, the cross-currency pair portrays the broad retreat in the Euro, as well as the recovery in the British Pound (GBP), ahead of the key data for the bloc and Britain. That said, a fresh run-up in the US Treasury bond yields, and the fears emanating from China, North Korea and Russia seemed to have underpinned the market’s rush for the US Dollar as traders from Washington return after a long weekend. As a result, the Euro witnesses a pullback in the demand due to its contrast with the greenback. It’s worth noting that the recent statistics from the Euro area have been firmer while those from the UK have been mixed, which in turn keeps the pair buyers hopeful ahead of the key numbers. Additionally teasing the EUR/GBP buyers are the hawkish comments from the European Central Bank (ECB) official. That said, ECB governing council member and Finnish central bank Chief Olli Rehn recently said, per Reuters, “ECB should keep raising interest rates beyond March and the rate peak, which should be stuck to for some time, could be reached over the summer.” On the same line, upbeat prints of Eurozone Consumer Confidence matched the market forecasts of -19 versus -20.9 prior. Further, Germany's Bundesbank released its monthly report and noted that the economic outlook was somewhat brighter with the short-term outlook turning more favorable than seen just a few months ago. Alternatively, fears of no imminent Brexit deal should have weighed on the British Pound (GBP) as the UK’s Conservative Members of the Parliament (MPs) dislike the deal with the European Union (EU) on Northern Ireland (NI). Some of them are threatening to resign, per The Times, amid fears of the compromised deal. The news also mentioned that UK Prime Minister Rishi Sunak spent notable time in the House of Commons to convince the MPs that no deal had yet been agreed and talks were continuing. “He was told he ‘hasn’t got a hope’ of succeeding without the support of the Democratic Unionist Party,” per The Times. Amid these plays, stock futures are down and the Treasury bond yields, as well as the US Dollar, are firmer, which in turn weigh on the Euro amid a sluggish start to the key day. Looking forward, Eurozone ZEW sentiment figures for February will precede the preliminary readings of the bloc’s, as well as the UK’s, Purchasing Managers Index (PMI) data for the said month to direct short-term pair moves. Given the cross-currency pair’s latest retreat, backed by the market speculations that the Euro rally is about to end amid the European Central Bank’s (ECB) inability to offer higher rates, the sellers may keep the reins unless the scheduled data mark any surprise. Technical analysis EUR/GBP fades bounce off the 50-day Exponential Moving Average (EMA), around 0.8815 by the press time, which in turn joins bearish MACD signals and failure to cross the 0.8915-10 horizontal hurdle to keep bears hopeful.

The composite PMI increased from 50.3 to 52.3, hinting at accelerating growth over the course of the first quarter. While a lot of underlying weakness is still apparent, the economy is proving very resilient this winter. With service sector selling price expectations still high, expect the European Central Bank to remain vigilant   The eurozone economy continues to surprise on the upside. The PMI paints a picture of an economy that is bouncing back from the sluggish performance in recent months, which is mainly driven by fading supply-side problems. This may be giving a larger push to economic activity than initially expected as backlogs of orders are now going into production. Also helpful is that the energy crisis has moved into an undoubtedly milder phase with market gas prices now about a third of what they were only in mid-December. The survey also suggests that demand is improving, which is surprising given the downturn in domestic demand in the fourth quarter in most large eurozone economies. Demand is positively affected by some returning optimism among consumers over peak inflation being behind us and a recession likely avoided. But while consumer confidence has been increasing for five months in a row now, it does remain at levels usually associated with recession. Read next: Amazon Will Pay Employees A Lower Salary Due To Lower Stock Prices, Declining Demand For 5G Equipment Will Result In The Loss Of 1,400 Jobs At Ericsson| FXMAG.COM Inflationary pressures continue to ease, but mainly on the manufacturing side. Fading supply-side issues are having a positive impact on prices, especially as inventories have been building. This has resulted in a continued drop in selling price expectations among manufacturing businesses, although the level remains elevated historically. For services, rising wage costs are an important driver of continued high input cost increases. That has resulted in still elevated selling price expectations among service sector businesses. The combination of better-than-expected economic activity at the start of the year and service sector inflationary pressures which remain elevated will likely keep the ECB in hawkish mode. Read this article on THINK TagsInflation GDP Eurozone ECB 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 US has seen a 1% rise in the 2yr inflation breakeven, and dis-inversion. Higher market rates makes full sense. Stronger-than-expected sentiment indicators have sent bond yields to new highs, and tonight’s Federal Open Market Committee minutes aren’t likely to change that. Broader market sentiment is souring as the reality of higher rates hits home The rise in US market rates coincides with a remarkable 1% rise in the 2yr breakeven We frequently noted in recent months how remarkably low the US 2yr breakeven inflation was. It got down to the 2% area in September last year, and was there again in mid-January this year. Remember, a 2% breakeven means inflation would have to get below that, well below, in order to average 2% over a two-year period. But that's where we were. Well no more, as we are now at 3%. That's a whole different picture for inflation in the coming quarters. So, there has been a remarkable 1% rise in the 2yr breakeven in a matter of four weeks. And there has been no material fall in the 2yr real yield, which remains in the 1.85% area. It fits with the market moves of the past few weeks, which has seen the 10yr move up from 3.4% to now over 3.9%. We had expected something like this, as the curve was far too inverted, and the back end was prematurely discounting interest rate cuts. The back end is being far more reactive to the front-end fears that the Fed is not done till they are actually done In this respect we had been watching the spread from 6mth Libor to the 10yr Treasury yield. That got down to an extreme of 1.8%. That spread which had the 10yr Treasury yield at 1.8% through the 6mth rate had never been as stretched as that before in modern times. Something had to give, and we called for 10yr yields to rise. They have, and the spread is now into 1.4%. It's still elevated, but now the back end is being far more reactive to the front-end fears that the Fed is not done till they are actually done. We are likely to see some buying into the market on the approach of 4% on the 10yr. Asset managers will look at a 4% handle as a good level. And liability managers will use these elevated 5-10yr fixed rates to do some swapping to floating for long term positive cumualtive carry. That should help to mute any big break above 4%. The market is not in a mood to do so though, and we'd likely need to see some stability before the flows really come in. As we noted some weeks back, a popular theme in this environment has been for be long the ultra front end; in money market funds earnings a rolling 4% to 5% on zero risk, and we noted flows into this space. That's been a good idea so far, but can be balanced up now by morphing some flows into longer duration product, while still holding a chunk of front end risk free exposure. Our recent piece going into all of these factors are to be found here and here. The rise in 2Y nominal yields is matched by higher inflation expectations Source: Refinitiv, ING PMIs are upbeat but market sentiment is souring Markets are dusting off the 2022 ‘sell everything’ playbook as government bonds are printing new highs for the year, and cracks are starting to appear in risk assets. The direction of travel for rates is easier to understand. Better-than-expected PMIs across Europe and the US added to the impression that the loss of economic momentum expected at the end of 2022 is proving much more benign than foreseen at the time. Note that PMIs are still flirting with the 50 level indicating anaemic expansion, but this was enough to provide a further boost to central bank tightening expectations, especially with wage pressure and higher selling prices being highlighted for the service sector. Markets are dusting off the 2022 ‘sell everything’ playbook Nowhere was the surprise as clear as in UK PMIs. After months of doom and gloom, the survey painted an upbeat picture, and cast a long shadow on hopes that the Bank of England’s hiking cycle is coming to an end. Our expectation is that one more 25bp hike will be delivered at the March meeting. The market is now pricing two full hikes in March and May, and a 50% chance of a third one in June. Our economics team has argued that inflation (softer than expected in the last report) and employment (stronger) are more important in dictating the next policy steps but, in any case, there will be one more release of each before the next BoE meeting. Higher core rates are starting to impact higher beta fixed income Source: Refinitiv, ING Markets set to look past less hawkish FOMC minutes Treasuries are going into tonight’s release of the February FOMC minutes at their highest yield level this year… and after touching their lowest level the day after that same meeting. In other words, information processed by the market since the February FOMC meeting triggered over 50bp repricing higher in 10Y yields (for the 2Y it’s closer to 60bp). In this light it is fair to say that the minutes are not just three weeks old, they’re also 50bp old. We struggle to see markets coming around to that disinflationary view We view the risks around this release as balanced. On the one hand, some subsequent Fed comments suggested that a couple of members may have made the case for a 50bp hike, instead of the 25bp it delivered. On the other hand, Powell’s less hawkish tone than in previous meetings may well be a reflection of the broader mood on the committee. The repeated focus on disinflation, in particular, was taken as a cue by the market that the Fed thinks it has made sufficient progress on its fight against inflation to stop hikes soon. We struggle to see markets coming around to that disinflationary view even if it was expressed that clearly in the minutes. The curve is now pricing three more 25bp hike, which implies the hiking cycle ending in June. USD rates are going into the February FOMC minutes with much more hawkish expectations Source: Refinitiv, ING Today's events and market view The delayed January inflation report for Germany published this morning saw no upward revision to the provisional number published earlier this month, but it showed core inflation accelerating from 5.2% annualised in December to 5.6% in January. The better-than-expected PMIs across Europe in February should also be reflected in Germany’s Ifo published today despite a lacklustre reading in Germany’s manufacturing PMI. In any case, we think the bar is high to douse the increasingly hawkish pricing in euro rates. In bond supply, Italy is due to sell inflation-linked as well as 2Y bonds. Germany will also add to this with a 10Y auction. The US data calendar is pretty light but the Fed will release the minutes of the February FOMC meeting. 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 EU's deforestation regulation raises the bar for sustainable sourcing of several commodities and will impact many food companies in some way. Requirements to trace commodities back to their origin can cause practical challenges, push up costs and create a need to find alternate suppliers. Still, any resulting changes in trade flows will be gradual At a glance: the EU's deforestation regulation A new EU regulation which aims to ban agricultural products linked to deforestation and forest degradation will come into force this year. This law is another step in the battle against deforestation and comes on top of an increasing number of international agreements and private sector initiatives. According to the Food and Agriculture Organization (FAO), the world has lost 100 million hectares of forest cover over the last decade, which is twice the size of Spain. Net loss was 50 million hectares on a total forested area of four billion hectares. Growing global demand for agricultural products is a major driver for deforestation as it fuels agricultural expansion into (tropical) forests and other ecosystems. More than 50% of deforested land is destined for cropland and almost 40% for pasture. The regulation obliges companies to ensure that goods that enter or exit the EU market don’t originate from land that has been deforested after 31 December 2020. To comply, they need to be able to trace the commodities and products back to the plot(s) of land where they were produced. Competent authorities in the EU member states will be responsible for the inspection of incoming goods. The level of inspections will be based on a risk classification that determines the obligations of companies and authorities. In the beginning, all exporting countries will be qualified as standard risk. In due time, authorities are supposed to inspect 9% of all shipments from high risk, 3% from standard risk and 1% from low-risk countries. Regulation is likely to come into force in the second half of 2023 Provisional implementation track Source: European Commission, Financial Times, ING Research €85bn in agriculture and food trade is in scope The new EU regulation covers imports of seven commodities including beef and leather, coffee, cocoa, palm oil and soy, plus the trade-in derived products such as chocolate, ground coffee, shoes and tyres. Both imports and exports of these products add up to €85bn in trade. On the import side, it covers about 60% of all of the EU's agricultural imports which total almost €120bn. In the rest of this article, we’ll focus on the five food commodities given that we’re particularly interested in the implications for companies in the food value chain. Five food commodities are in scope, with soy the largest based on import value Value of EU imports, billion euro, 2021 Source: Eurostat, ING Research Only a small part carries a recent deforestation risk One of the major questions is which part of the current trade will be non-compliant under the regulation. To answer that question it’s helpful to distinguish three types of trade flows. A large category consists of flows which are already compliant because companies have systems in place to trace commodities back to their origin. Probably the largest category is flows which are technically compliant but where companies cannot prove yet that they don’t stem from recently deforested land. The smallest group is formed by flows from land that has been deforested after the cut-off date (31 December 2020). Because of the recent cut-off date, the share of agricultural land in exporting countries that qualifies as ‘recently deforested’ will be quite small in the beginning. For example, we estimate that 1.5-2% of all land used for agricultural production in Brazil and Indonesia can be marked as recently deforested in 2023. This percentage will go up slightly over time as long as deforestation continues. The regulation further increases the likelihood that products from recently deforested lands will be used for domestic consumption or for exports to other countries such as China. Risks vary between and within countries Deforestation in large countries such as Brazil and Indonesia often attracts headlines because both countries are major agricultural exporters and have high absolute levels of forest loss. Meanwhile, other countries have much higher relative deforestation rates. As such, the regulation could have a more pronounced impact on European leather imports from Paraguay and coffee imports from Uganda than on soy imports from Brazil or palm oil imports from Indonesia. It’s good to keep in mind that the rate of deforestation will be one of the criteria used to determine the country's risk classification. Other criteria include the effectiveness of national policies and the participation in international agreements against deforestation. However, deforestation is often very concentrated in so-called ‘deforestation fronts’ within countries (see WWF). So national risk classifications only tell part of the story – even in high-risk countries there will be regions where risks are low or negligible. Largest net loss of tree cover in Brazil, but Paraguay lost most in relative terms Countries with highest absolute and relative loss of tree cover between 2000 and 2020 Source: Global Forest Watch, ING Research Another trigger for companies to chart their supply chain Companies across the food and beverage industry will require more information from their suppliers, often large traders, to verify the provenance of products because of the regulation. So traders will need to reach out and identify from which farms they source (in)directly. Meanwhile, European buyers of food commodities will need to draw up specific guidelines in their procurement strategies to be able to exclude deforestation-linked products. Public examples of such frameworks include those companies such as animal feed producer Agrifirm and food manufacturers like Unilever and Upfield. A variety of companies will need to make sure that their inputs are deforestation-free Examples of types of companies Source: ING Research Many companies won't have to start from scratch Many of the traders and food manufacturers involved, particularly the larger ones, won’t have to start from scratch. Often they are already involved in initiatives on sustainable sourcing, like the Roundtable on Responsible Soy and Roundtable on Sustainable Palm Oil. On top of that, there are many public datasets and research articles available, as well as software solutions that help to trace flows (examples include Farm Force and Transparancy One). As a result, large corporates generally have a good overview of their direct suppliers and first-tier risks. For example, commodities trader Bunge claims to be able to trace all of its soy purchases from direct suppliers back to their origin, and chocolate producer Barry Callebaut claims to know the geographic coordinates of 80% of its direct suppliers of cocoa. But information on indirect suppliers will also be required if companies want to sell that part of their merchandise in the EU. Given that large corporates can easily have tens of thousands of indirect suppliers, it is going to be quite a challenge to ‘know’ every supplier and sometimes it will not be possible to obtain the required information. Geographic shifts in trade flows; possible but not obvious We don’t expect major geographical shifts in trade flows towards the EU in the short term. But when retrieving origin information from current suppliers proves too costly, or when deforestation risks are too high, companies will have to adapt their sourcing. Below we have summed up what could happen in that case. Improving traceability is easier to do in supply chains where traders work with large and direct suppliers and get more difficult when there are lots of smaller indirect suppliers. As such, the regulation is an incentive for companies to have more direct suppliers in their EU supply chains, but it can also be detrimental for farmers that are indirect suppliers. Either way, there will still be buyers in the market for commodities that EU buyers steer clear from unless similar regulation becomes the norm in other countries instead of the exception. Shifts in sourcing, what might happen? Possible outcomes of the regulation for trade in the five commodities Source: ING Research Compliance obligations and less suitable supply pushes up costs It is fair to assume that the costs for sourcing deforestation-free commodities will be higher than without the regulation because of the following reasons: There will be both one-off and recurring costs for companies to assess risks and monitor supplies. The European Commission estimates that the one-off costs for companies to set up due diligence would range from between €5,000 and €90,000. Recurring costs will largely depend on the complexity of the supply chain. On top of that, the regulation will have an upward effect on the prices of commodities destined for the EU because less supply is able to meet EU criteria in the new situation. When companies need to switch suppliers, it will take time to develop alternative supply chains and sourcing elsewhere is usually more expensive or less compatible with required quantities and quality standards. Different approaches to sustainable sourcing Keeping deforestation-free products segregated from other products at each step in the supply chain is not a common practice in the food commodities trade as it greatly increases costs. However, it is common practice in organic supply chains. Companies that currently source more sustainable inputs often buy certificates that guarantee that a certain volume in the market has been produced according to a certain standard (similar to when you buy green electricity). But this model (‘Mass balance’) doesn’t enable physical commodities to be linked to the exact location where they have been produced. Other sourcing methods such as ‘Origin matching’ and ‘Area Mass Balance’ offer a compromise. Ultimately it will depend on the implementation of the regulation which model will become the default option. Supportive for some food companies, detrimental for others The regulation changes the operating environment for companies. It is supportive for businesses that have already taken steps to prevent deforestation because their competitors now also have to do more. It is also supportive for EU farmers that produce alternatives for the commodities in scope, such as farmers that grow crops like soy and rapeseed and (grass-fed) cattle farmers. But the regulation is generally detrimental to the competitiveness of pig and poultry farmers as it likely pushes up their feed costs. Meanwhile, European exporters of coffee and cocoa products could face increased competition from processing plants elsewhere, which can put some pressure on their exports to non-EU markets. In general, it can also weaken the position of the EU as a trading hub for food commodities as some flows might go straight from producer countries to end markets without making a stop in the EU. All in all, one of the major aims of this regulation is to make sure that negative external effects of food production such as carbon emissions and biodiversity loss are better reflected in the price of food. Such steps are inevitable in the context of the ongoing climate crisis. In the years ahead, food companies shouldn’t be surprised to see more policies in this field as countries step up their efforts to curb climate change. Read this article on THINK TagsSustainability Supply chains i European Union Commodities 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 European Central Bank's policy stance has become restrictive. To us, the impact on the economy is probably the most underestimated drag on growth for 2023. The good news is that we see no meaningful signs of fragmentation between countries, so monetary policy is not causing shocks in more vulnerable parts of the eurozone European Central Bank President Christine Lagarde   Last summer, when the ECB started hiking interest rates, the immediate question for financial markets was how far the Bank would dare to go. Ending an era of negative interest rates and unconventional monetary policy when inflation is approaching double-digit levels is one thing, actively breaking down the economy is, however, another. This is why the eurozone's nominal neutral interest rate – which was pegged at between 1.5% and 2% by almost everyone – suddenly became the focus of attention. Even ECB President Christine Lagarde referred to this illustrious neutral rate (the rate at which monetary policy neither stimulates nor restricts the economy), suggesting that the central bank use this as a rough anchor for when policy could start to become restrictive. When policy is restrictive, this leads to weakening economic activity and ultimately to lower inflation. The rate, however, is a very theoretical concept, impossible to measure and rather an ex-post instrument to describe a monetary policy stance rather than providing guidance for actually conducting monetary policy. This is why the ECB quickly, at least publicly, debunked the idea that it would follow this neutral interest rate concept. Wherever a neutral interest rate in the eurozone might be, hiking interest rates by 300bp, as the ECB has done so far, and with more hikes to come, the question is not whether the ECB’s hiking cycle will slow the eurozone economy but rather when. Most channels through which higher rates work are showing tightening impact Let’s use the ECB's own handy flowchart to explain how it sees monetary policy ultimately feeding through to prices (for the ECB’s own assessment, we can recommend Chief Economist Philip Lane’s speech from 16 February). The four main transmission channels are: money/credit, asset prices, bank rates and the exchange rate. All four channels have seen sizable adjustments since last summer: ECB's own take on monetary transmission Source: https://www.ecb.europa.eu/mopo/intro/transmission/html/index.en.html Source: ECB, ING Research   The money supply has fallen quickly since the ECB started reducing asset purchases. In fact, growth in real money (M1) has not been so negative since the ECB's record-keeping began. This historically corresponds with a significant correction in economic activity. When looking at asset prices, we see that stocks and bonds saw a significant correction in 2022 (although we have seen a rebound in prices as expectations of a peak in policy rates have grown this year). Real estate prices are somewhat slower to respond but are undoubtedly starting to turn. In countries like Germany and the Netherlands, price declines have already become somewhat sizable as the combination of higher bank rates, low consumer confidence and lower purchasing power is resulting in declining housing demand. This is not where it will stop. We expect this to have an impact on construction activity in the coming year. Bank rates have also considerably increased since the beginning of 2022, following the increase at the longer end of the yield curve. This is starting to curb investment as growth in bank lending has almost stalled for households and is considerably negative for businesses. Traditionally, business borrowing reacts with longer lags to higher rates than consumer borrowing. Last year, for example, borrowing by non-financial corporates held up until mid-2022 because of working capital needs – due to supply chain problems for example. Recently, however, there has been a sharp correction, which has been much quicker than in previous cycles. That correction corresponds to the Bank Lending Survey, which indicates that borrowing needs for investment reasons have fallen significantly in recent months. We expect this to have an important dampening impact on investment in the eurozone in the quarters ahead, although the recovery fund's impact on southern economies could mute the overall investment response seen in 2023. The euro has appreciated since the end of last year as investors are expecting more rate hikes from the ECB and because energy prices have fallen significantly from the peak which has resulted in a smaller trade deficit. This is starting to feed through to import prices, which have started to see lower year-on-year growth. In fairness, the bulk of that move down has resulted from the lower energy prices seen recently, but the impact of a stronger euro will be felt down the line. The early phase of monetary transmission is fast at work Source: ECB, Eurostat, ING Research No need for TPI as monetary transmission is not showing signs of fragmentation When looking at the above-defined categories per country, we see that there is not that much difference in transmission. The rise in percentage points for borrowing rates differs just modestly between countries and the nominal effective exchange rate has made roughly similar movements for most countries – as expected. Liquid assets have seen declines across the board, with a few stock markets in Southern Europe notably outperforming. House prices are still well above levels seen in late 2021, although Germany and the Netherlands are starting to see a correction as a downward trend has started which the table below does not pick up on. The money supply is of course handled centrally, but recent developments in bank lending can say something about credit reaching the real economy. Here, we see the most striking difference so far, as Italy and Spain have seen declines in borrowing from non-financial corporates, whereas Germany and France have not, yet. The important caveat here is that we have seen quite some borrowing for working capital and inventory reasons, which has driven up borrowing or at least made borrowing more volatile. For Germany, the bank lending survey suggests declining demand for investment borrowing, which means that transmission could be at work more than the numbers suggest. Compared to the average, we see that France is the country still experiencing a smaller impact on all counts, while Italy is experiencing a somewhat more significant impact. Overall though, there is no shock happening in the system for any country measured, and monetary transmission is therefore not causing problems. So far, there is no reason to use the ECB’s new Transmission Protection Instrument (TPI) as fragmentation of monetary transmission in the eurozone is not happening at the moment. The much feared fragmentation of monetary transmission has not happened so far Note: red indicates more tightening impact than eurozone average, green indicates less tightening than average Source: Macrobond, ECB, ING Research Most of the impact on inflation and growth still has to feed through While the initial boxes of monetary transmission have clearly been ticked, the timing of the actual impact of monetary policy on the real economy has always been difficult. In theory or in large macro models, it is assumed that it takes 9 to 12 months before monetary policy affects the real economy most. Recently, there have been central bankers (Fed members) suggesting that the lag could currently be shorter than in the past. In any case, the transmission of monetary policy can often be blurred by other factors. At the current juncture, the energy crisis is playing a large role in slowing down the economy and has also helped to ease inflation as recent developments have caused gas and electricity prices to come off their peaks. Supply chain problems have been fading recently and demand for goods has weakened, which has helped supply and demand in goods markets become better balanced again. Read next: Consumers Are Spending More On Food, So Walmart And Home Depot Are Making Cautious Predictions| FXMAG.COM How does this stack up to previous hiking cycles? It is difficult to compare current developments to previous tightening cycles by the ECB. The ECB has only engaged in three previous hiking cycles, of which the 2011 one only lasted for two meetings. The thing that stands out is that the underlying conditions of the economy matter a lot when looking at the pace of transmission. The 2005 hiking cycle happened when the economy was performing quite well, the 2000 cycle started in a strong economy, while 2011 was a famous example of hiking into a recession. That difference shows when looking at the response. In 2005, bank lending growth to businesses continued to accelerate despite rate hikes and only slowed when the 2008 recession started. We now see a much faster response. Asset prices are now also turning down much faster than in 2005 as this only happened years after the start of the tightening cycle in 2008, while we are already seeing the negative effects now. This also holds true for money growth. So while we have little to compare to, it does become evident that the key channels of monetary transmission are seeing faster downturns now than in the previous long tightening cycle of 2005. But it's too early for the ECB to declare victory yet While inflation is falling, core inflation is still trending up and is far above target at 5.2%. It is therefore too early to declare victory on price developments. Wage growth is also still moving up cautiously. While not nearly enough to raise concerns about a wage-price spiral, the labour market remains red hot and negotiated wage growth has moved from the 1.5% to 3% range in 2022. So supply and demand in labour markets have yet to adjust. Wage growth has started to trend up, causing upside risk to the inflation outlook Source: ECB   And expectations have started to feed through the monetary transmission system in the wrong way recently. As investors worry about recession and are optimistic about inflation returning to benign levels, we see that financial conditions are loosening again. This could work against tightening efforts from the ECB and we have seen ECB speakers speak out quite vocally against the premature easing of financial conditions. A lot is now moving in the right direction for the ECB to get inflation back to target, but uncertainty remains. No one really knows how persistent core inflation will be after this series of supply shocks that the eurozone has faced. There is also uncertainty over how long it will take for GDP and inflation to be impacted by the aggressive rate hikes from the ECB so far. Having moved to a restrictive level of policy recently and with more hikes in the pipeline, this uncertainty makes policy-making very difficult right now. Restrictive policy will have a significant downside impact on the economy this year While we are not seeing the full impact of monetary policy on prices yet, we do see transmission in full force, which will eventually have a larger impact on output and prices. With uncertain delays on economic activity and prices at work, the question is how hawkish the ECB will remain over the course of the year, given the tightening of monetary policy so far. At the March meeting, another 50bp hike is all but a done deal. Beyond the March meeting, however, the ECB will likely be entering a new phase in which further rate hikes will not necessarily get the same support from the Governing Council, as hiking deep into restrictive territory increases the risk of adverse effects on the economy. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. In the former case, the ECB could consider a pause in its tightening cycle and hike again at the June meeting. The latter would see continuous meeting-by-meeting hikes, possibly in smaller increments of 25bp. For our economic outlook, we think that restrictive monetary policy in 2023 will be a key factor preventing the economy from bouncing back from its current weak spell. While all eyes are on the energy crisis at the moment, higher rates will also be an important factor in dampening any meaningful recovery. While we don’t see the bulk of the impact yet, expect a eurozone economy that flirts with zero growth for most of the year as higher rates complete the transmission to demand. Read this article on THINK TagsInflation GDP Eurozone ECB 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

EUR/GBP looks vulnerable around 0.8800 as hawkish BoE bets soar after a recovery in UK preliminary PMI data. UK’s Hunt is facing calls from within his Conservative Party to cut taxes and raise pay for public service workers. ECB Lagarde is set to continue its policy tightening spell of 50 bps to March. The EUR/GBP pair is struggling to find any direction in the Tokyo session amid the absence of a potential trigger. The cross is juggling around 0.8800 and is expected to display more weakness as an economic recovery in the United Kingdom and a shortage of labor is demanding the continuation of policy tightening by the Bank of England (BoE). Investors were in a dilemma whether the Bank of England (BoE) should pause policy contraction as the economic outlook was expected extremely bleak or continue pushing rates higher to tame stubborn inflation. Shortage of labor and escalating food inflation is continuously maintaining havoc that the inflation could be underpinned anytime to new highs. No doubt, the UK Consumer Price Index (CPI) has eased in the past few months, however, the headline CPI figure is still in double-digit and sufficient to trouble households. Meanwhile, a recovery in the economic activities shown by the preliminary S&P Global PMI (Feb) data, released this week, indicates that labor demand could be fueled further and BoE Governor Andrew Bailey should consider continuation of policy tightening. A figure below 50.0 for the preliminary Manufacturing activities indicates contraction, however, the pace of decline in activities has squeezed significantly. BoE panel sees the interest rate peak around 4.5% and the continuation of the rate hike in the March monetary policy meeting looks warranted. Meanwhile, UK Finance Minister (FM) Jeremy Hunt is facing calls from within his Conservative Party to cut taxes in his March 15 budget and from trade unions to raise pay for public service workers, as reported by Reuters, which could propel inflationary pressures further. On the Eurozone front, clarity on the extent of the rate hike by the European Central Bank (ECB) President Christine Lagarde has eased some uncertainty. ECB Lagarde has announced a continuation of 50 bps rate hike spree for March to keep the downside momentum in Eurozone inflation intact.

Rates are struggling to break above important levels, noses are being turned up at US auctions that are much cheaper then they were, and markets' central bank hike expectations appear maxed out for now. We think next week's data stands a better chance to provide that final nudge, though we also have technical factors from supply to month-end to contend with US auctions being shunned on 50bp concession to those of a few weeks ago US auctions have been a tough sell this week. Both the 5yr and the 7yr tailed, meaning that the awarded yield was above the when-isssued (market) one. Not by much, but enough to show that the market is in no mood to take down extra interest rate risk. No doubt longer duration supply would have been an even tougher ask. Interestingly this happens in the wake of a significant concession built into the curve in the past number of weeks. Clearly the market is not convinced that the move higher in yields is behind us. The market is in no mood to take down extra interest rate risk It's in stark contrast to the stellar long duration auctions of a number of weeks back when the US 10yr was in the region of 3.4% (and lower). That was a time when the market was looking for any excuse to test the downside in yield. We noted back then that the best option was to cosy up to the ultra-front end, take the 4% handles on offer (on zero risk) and sleep easy at night. That thinking remains, but as noted we'd also be slowly averaging into the higher yields now attainable further out the curve, with the 10yr 50bp higher. So, we were cautious on Treasuries around the auctions that went ultra-well some weeks back, and we'd be more constructive into the more recent ones this week that have not gone well. The 4% area for the 10yr is now offering some duration at better levels, and for corporates that are over-fixed to look to swap some liabilities to floating. The latter is carry negative on impact (that's the tough bit), but cumulative carry positive, provided the Fed does some decent interest rate cutting as we venture closer and through 2024. US yields are back at their highs but not high enough to entice buyers at auctions Source: Refinitiv, ING Of data drivers... Data remains crucial. It is being tracked closely by central banks which have reverted to a meeting-by-meeting approach. It has become a main driver of rates direction as markets try to second-guess central bankers' actions in the months ahead. Ahead lies another data-heavy week. Highlight, certainly for EUR rates, will be the eurozone CPI flash estimate for February. The markets' sensitivity was highlighted by the reaction to the upward revisions in the final inflation rate for January just yesterday, to 8.6% year-on-year in headline and 5.3% YoY in core. Energy price development should bring down the headline rate from that level, but it is core inflation that remains the main concern. We have heard from European Central Bank officials that they see the peak in underlying inflation still ahead, so an unchanged rate is probably the best one can expect next week. It is core inflation that remains the main concern A sticky core rate means no relief for central bankers and thus also little reason for markets to budge from their pricing of 125bp of further rates increases from the ECB. However, we also have the feeling that given how far the EUR front-end pricing has already evolved, the further upside appears limited for now with even the ECB hawks already ‘out-hawked’ by the market. Outside the eurozone it had been the resilience of the US jobs market that gave the starting shot to the current leg higher in rates – and giving the Fed more reason to fret about sticky inflation. That jobs resilience is for now also reflected in the weekly initial jobless claims data seen again yesterday. But other data had also come in better, with one outsized surprise being the ISM services which had surged back from below 50 to 55.2. We will get the February reading next week, and while the consensus is looking for some moderation, certainly not of the sort to change the current narrative. EUR rates are also back at their highs but volatility suggests less impetus than in 2022 Source: Refinitiv, ING ... and temporary technical factors Primary market activity in Eurozone sovereign space should moderate next week, but it will have a notable ultra-long flavour again. The Netherlands and Germany will be in the market with 15Y bond taps, while France will have its auction geared at 10Y and longer tenors as well. Also on the slate are Spanish auctions and another tap from Germany in the 2Y maturity. That said the impact of auctions is usually fleeting. Case in point just yesterday was the reversal of the long end curve steepening on the back of the syndicated 30Y Bund tap. To note, the large order book of that particular deal provided another hint for ongoing demand in the sector. Another factor to take into consideration is the rebalancing around month end. The long end deals over the last month should imply duration buying from index trackers to match the index extension. US Treasury supply will take a break next week after last night’s 7Y note auction. Short-end EUR rates have been driving the long-end, but ECB hikes pricing seems to have peaked Source: Refinitiv, ING Today's events and market view Rates are struggling to break above the highs staked out in previous months. We doubt that today’s data alone can nudge rates higher given that markets should already have a good feel for them. We think next week’s data slate stands a better chance to offer fresh impetus. Today we will get more headlines on US inflation to under pin the Fed hike narrative with the monthly series of the PCE deflator up for release. After yesterday’s quarterly data release, the December month-on-month core rate should see an upward revision to 0.4% and we will likely see another 0.4% print for January. Personal income and spending data should reflect the increase in activity already seen in the bumper retail sales release for January. In today’s primary market Italy launches a new 7Y floating rate note alongside 5Y and 10Y bond taps. We will hear from the Fed’s Jefferson and Mester, as well as Bullard. 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

EUR/GBP retreats from intraday high, snaps two-day rebound from monthly low. One-week-old resistance line, key Fibonacci retracement level challenge immediate upside. 0.8840 appears a tough nut to crack for the EUR/GBP bulls. Multiple levels surrounding 0.8760 can probe bears afterward. EUR/GBP bears return to the table, after a two-day absence, as the quote eases from the intraday high to 0.8815 during the initial hour of Friday’s European session. In doing so, the cross-currency pair fades bounce off the lowest levels since January 31 while retreating from the convergence of the one-week-long descending trend line and 61.8% Fibonacci retracement level of January 19 to February 03 upside, close to 0.8820 at the latest. Adding strength to the pullback moves is the sluggish RSI (14) near the 50 levels, as well as the pair’s previous downside break of the support lines from late January. As a result, the EUR/GBP bears are all set to revisit the latest trough surrounding 0.8780. However, multiple levels marked during late January could challenge the pair sellers near 0.8760 then after. Should the quote remains weak past 0.8760, the odds of witnessing a fresh low of the year 2023, currently around 0.8720 can’t be ruled out. On the contrary, a successful break of the 0.8820 resistance confluence isn’t an open welcome to the EUR/GBP bulls as the previous support line from January 30, around 0.8830 by the press time, could challenge the upside moves. It’s worth noting that the support-turned-resistance from January 19 joins the 200-Simple Moving Average (SMA) to highlight the 0.8840 as the key upside hurdle. EUR/GBP: Four-hour chart Trend: Further downside expected

S stocks had a wobbling trading session yesterday. The S&P500 tipped a toe below its 50-DMA yesterday, near 3980, then rebounded to close the session around 0.50% higher, above the 4000 psychological mark. Nasdaq 100 saw support into the 12000 psychological mark and gained almost 1% into the close. The 14% jump in Nvidia certainly helped improve the overall market mood, whereas the US economic data was mixed and was not supposed to pour water on the equity bears or improve sentiment regarding the Federal Reserve (Fed) hawks. The latest GDP update from the US revealed that the US economy expanded 2.7% in the Q4, instead of 2.9% penciled in by analyst. A softer economic growth could have been encouraging for easing inflation and softening the Fed's hand. BUT NO, because the GDP price index – another gauge of inflation which was released along with the GDP update, showed that inflation in the Q4 eased but eased much less than expected – as a perfect reflection of the CPI and PPI data released last week. The cocktail of slower-than-expected growth and higher-than-expected inflation is the worst possible outcome, and we could see the latter reflected in the corporate earnings. The S&P500 companies now all reported their results and earnings fell 1% in the latest quarter. At first glance, this is not a good number, but these earnings are compared to the blockbuster post-pandemic numbers, and despite a fall, they remain high. The question is, how far they will fall. It will depend on several factors, including how aggressive the Fed will continue tightening policy. How aggressive the Fed will continue tightening policy will depend on how sticky inflation is. We have one more important data point to watch before the week ends... and that's the US PCE index, the Fed's favourite gauge of inflation. Given the previous inflation data, we know that inflation has certainly eased, but not as much as expected. If there is not a big surprise, there should be no bloody market reaction to a slightly higher than expected PCE index. The S&P500 could close the week above the 50-DMA, and Nasdaq above its major 38.2% Fibonacci retracement. There is one more thing that probably helps equities hold their ground, and that's the easing US yields. I believe that the US yields have been easing since a couple of days due to the rising geopolitical tensions between the US and China – after China screamed loud and clear their support to Russia this week. These rising tensions certainly increase the safe haven flows to the US treasuries and interferes with the hawkish Fed pricing. As such, the US 2 and 10-year yields are softer compared to a peak earlier this week. European stocks up, euro down on record inflation!? The European stocks gained and the euro fell on Thursday, even though the latest inflation data from the eurozone revealed that the core inflation advanced to a record high. The rising inflation is normally a boost for the European Central Bank (ECB) hawks, who increase the bets that the ECB will raise the rates more forcefully. The latter should weigh on equity valuations and support the euro. But no. The contrary is happening because the major driving force of the market is the Fed and the dollar. So, the EURUSD fell as low as 1.0577 yesterday, while the European stocks were upbeat. The DAX index for example is now at pre-war levels, whereas the latest data is less than encouraging for the German economy. The European exports are recovering to the pre-pandemic levels, but the German exports are clearly lagging behind the zone's average. Spain and Italy are doing much better than their German peers. Why? Because the energy crisis has taken a toll on German manufacturing, whereas the post-pandemic reopening benefit Spanish and Italian tourism. As a result, the headline data is strong, but the underlying factors warn that the Eurozone growth is perhaps vulnerable. Sticky inflation and hawkish ECB are major risks to the actual European equity rally. 41-year high, Mr. Ueda! Speaking of inflation, the data released this morning showed that inflation in Japan rose to 4.3%, a 41-year high, and gave a rapid boost to the yen, sending the USDJPY down to the 134 mark. But we know that the Bank of Japan (BoJ), under the leadership of its new head Ueda, is not necessarily concerned about the rising inflation. The BoJ prefers keeping rates below zero, for now, and that should continue playing in favour of USDJPY bulls, at a time when the Fed members continue showing the world how serious they are in taming inflation.  

The third estimate of German GDP growth in the final quarter of 2022 shows that celebrating resilience was a bit premature. A technical recession is in the making   We've previously had German GDP estimates of stagnation, of -0.2%, and -0.4%. Now we know the third estimate of German GDP growth in the final quarter of 2022 was the correct one. As just released by the German statistical office, the German economy contracted by 0.4% quarter-on-quarter in the fourth quarter of 2022, from +0.5% in the third quarter. This is the first contraction since the first quarter of 2021. On the year, GDP growth came in at 0.9%. Recession is in the making The economic contraction is no surprise. What is interesting in today’s GDP report are the details. Private consumption without lockdown savings languished under high inflation and energy prices and fell by 1% quarter-on-quarter, from +0.7% in the third quarter. Capital investments plunged by 2.5% QoQ, from 1.3%. Net exports, government consumption and a large inventory build-up prevented the economy from falling into a deeper contraction. The German economy has surprised by showing more resilience than feared, despite facing a long series of crises. However, while this resilience, driven by fiscal support and warm winter weather, has prevented the economy from falling into a deep recession, it is definitely no guarantee for a strong rebound anytime soon. In fact, even though sentiment indicators have increased in recent months, there is overwhelming evidence of a still weak economy. The second consecutive drop in the Ifo’s current assessment component, a falling PMI manufacturing and, as reflected in this morning’s data, weak consumer confidence and a willingness to spend close to historical lows, all confirm our view that the German economy will contract once again in the first quarter. Recession in the short term and subdued recovery afterward Looking beyond the first quarter, the latest improvement in soft data suggests that the German and eurozone economies are in the middle of a typical cyclical recovery, while we fear that we are actually in the middle of a structural transition. If we are right, any rebound this year will be softer and more short-lived than many expect, and subdued growth rather than a strong rebound remains the base case. Or in other words: not falling off the cliff is one thing; staging a strong rebound, however, is a different matter. In Germany, industrial orders have weakened since the start of 2022, consumer confidence, despite some recent improvements, is still close to historic lows, the loss of purchasing power will continue in 2023, and the full impact of monetary policy tightening still has to unfold. Today’s numbers mark the first part of what could become a technical recession in Germany. We think that the risk of yet another contraction in the first quarter and, thus, a technical recession is high and that the German economy is still miles away from staging a strong rebound. Read this article on THINK TagsGermany GDP 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

The euro is down slightly on Friday. EUR/USD has been slowly moving lower and is down 1.1% this week. German GDP misses estimate The German economy, the biggest in the eurozone, underperformed in the fourth quarter of 2022. GDP declined by 0.4% in Q4 2022 q/q, below the 0.5% gain in Q3 and shy of the forecast of -0.2%. On an annualized basis, GDP slowed to 0.9%, down from 1.4% in Q3 and below the forecast of 1.1%. It was a rough end to 2022 for the German economy – the energy crisis, high inflation and the end of fuel subsidies all contributed to negative growth in the fourth quarter. The German consumer spent less in Q4 compared to Q3, but the silver lining is that consumer confidence continues to rise. GfK Consumer Climate is estimated to have improved to -30.5 in March, up from -33.8 in February. Consumer confidence is still deep in negative territory but has now accelerated over five consecutive months. The Federal Reserve remains in hawkish mode, as members continue to remind the markets that inflation is too high and more rate hikes are coming. The recent employment and retail sales reports helped convince the markets that the Fed means business, and investors are no longer talking about a ‘one and done’ rate hike in March with rate cuts before the end of the year. The markets appear to have bought into the ‘higher and longer’ stance that the Fed has been pushing, and expectations of a 0.50% hike in March have risen. According to CME’s FedWatch, the markets have currently priced the odds of a 25-basis point hike at 76% and a 50-bp increase at 24%. Earlier this week, the split was 83% for a 25-bp hike and 17% for a 50-bp rise.   EUR/USD Technical 1.0604 is a weak resistance line. Above, there is resistance at 1.0704 There is support at 1.0513 and 1.0413 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.  

Inflation across Europe has continued its downward movement. Another positive report of this indicator is expected. Previous data The cost of living in the eurozone fell slightly slower than previously thought in early 2023. According to Eurostat, the consumer price index for the common currency bloc fell by 0.2% on a monthly basis. This reduced the annual growth rate from 9.2% in December to 8.6% in January (preliminary: 8.5%). A similar story occurred at the baseline, which excludes food, energy, alcohol and tobacco products, with the core printed CPI year-on-year at 5.3% (preliminary: 5.2%), down from 5.2% a month earlier. Compared to the previous month, processed food, alcohol and tobacco increased the most by 1.5%, while energy prices increased by 0.6%. On the other hand, prices of non-energy industrial goods fell by 1.9% and services by 0.1%. Energy prices the main driver of inflation The record inflation in the euro area was due to a spike in energy prices, which started to increase at the end of 2021. The first spike in energy prices came as countries exited or lifted Covid restrictions and energy demand began to recover. The second jump occurred in 2021 due to the emergence of problems on the supply side. This development was exacerbated in early 2022 by the Russian invasion of Ukraine as the conflict interrupted the supply of Russian oil or natural gas to the rest of Europe. Baltic countries were the worst Most eurozone countries saw a decrease in inflation compared to December, but nine countries saw a rise in the consumer price index. Moreover, 12 countries remained in the double digits territory in January. Hungary is experiencing the highest inflation levels at around 26.2% among these. Latvia, Czechia, Estonia, and Lithuania come next, where inflation remains high at 21.4%, 19.1%, 18.6%, and 18.5%, respectively. The report noted that rising food and energy prices contributed the most to the annual inflation in January. Forecast Inflation in the euro zone is falling and is expected to fall again to 8.2% from 8.6%. Such a reading may mean that the ECB's actions are slowly becoming visible in the economy. Interest rates To tame rising inflation, the European Central Bank (ECB) started to raise interest rates after 11 years of loose monetary policy. In July last year, the central bank raised the three key ECB interest rates by 50 basis points. Last week, European Central Bank chief Christine Lagarde reiterated that the central bank aims to raise its interest rates by a half percentage point in March. “In view of the underlying inflation pressures we intend to raise interest rates by another 50 basis points at our next meeting in March,” Lagarde said. Mood improvement Growth in economic activity in the euro area accelerated to a nine-month high in February, reflecting an improvement in the performance of the services sector and a return to growth in industrial production. Growth was boosted by rising confidence as recession fears subsided and inflation shows signs of peaking, although industry also benefited from a significant improvement in supplier performance. The February recovery was supported by the services sector, where business activity increased for the second month in a row. The seasonally adjusted index rose from 50.8 in January to 53.0, the strongest increase since June last year. In terms of manufacturing, chemicals and plastics and basic resources remained major areas of weakness, while the production of food and beverages, household goods and manufactured goods showed further signs of recovery. Source: investing.com, ec.europa.eu/eurostat

Long-term outlook. Throughout the current week, the EUR/USD currency pair has maintained a moderate downward trend. As we have repeatedly stated in recent weeks, we anticipate the European currency to decline because it has increased excessively over the last six months, as is seen in the above illustration. Everything is normal from the perspective of a correction against the downward trend, given that the trend itself lasted two years and that a correction must be made against it. It is time and an honor to know, but the growth of the euro was not driven by fundamental or macroeconomic issues, thus the correction is a correction. This week, the macroeconomic and fundamental backdrops were mostly absent. You may remember several speeches by Fed officials, a report on the US economy, or a report on inflation in the European Union, but we have mentioned before that the significance of these publications lies solely in their signboard. The second estimate included GDP and inflation. Unsurprisingly, the market did not respond particularly well to this data. Also, it did not adhere to the so-called "moderately hawkish" Fed policy. We think that the market is now dominated by technical factors. Because the pair successfully passed the Kijun-sen line on the 24-hour TF and now has a strong probability of consolidating itself below the Ichimoku cloud, we think the fall may continue up to the levels of 1.0312 or 1.0200. In reality, the euro can achieve price parity and distance itself from its multi-year lows by doing just that. The betting component is still, in our opinion, crucial. The Fed is not going to ease down and occasionally gives hints of a more significant rate hike than anticipated. The euro is overbought at this time. The hikes that were previously known have been determined by the market, and the ECB has not yet indicated that it will tighten monetary policy further. It appears that the euro is falling and has a very good chance of continuing to move south. COT Technical difficulties prevented the delivery of COT reports for over a month, but on Friday, one of the delayed reports for January 31 was made available. Since a month has gone by since then and we still don't have access to the data from the subsequent reports, which are more or less relevant, this report is not meaningful. As a result, we keep looking at the available data. The illustration accurately reflected market conditions for the euro currency during the past few months. The aforementioned illustration makes it very evident that, from the start of September, the net position of significant players (the second indicator) has been improving. At about the same time, the value of the euro started to increase. Although the net position of non-commercial traders is currently "bullish" and growing virtually weekly, it is the relatively high value of the "net position" that now permits the upward trend's impending end. The first indicator, which frequently occurs before the trend's end and shows that the red and green lines are very far apart from one another, signals this. Although the euro has already begun to decline, it is still unclear if this is just a brief pullback or the start of a new downward trend. The number of buy-contracts from the non-commercial group increased by 9.0 thousand during the most recent reporting week, while the number of short positions declined by 7.1 thousand. The net position thus increased by 16.1 thousand contracts. Currently, there are 148 thousand more buy contracts than sell contracts for non-commercial traders. Nonetheless, the correction has been developing for a while, so it is obvious even without news that the pair should keep falling. Analysis of fundamental events In addition to the aforementioned activities, business activity indices in various industries were released in the United States and the European Union, while in Germany, an inflation report revealed an acceleration in consumer price growth. Again, there was essentially no response to these figures; nevertheless, it should be emphasized that business activity in the service sectors improved while output declined. Regarding the German inflation news, Jerome Powell and a few other central bankers specifically discussed it. After this process was finished, the price of oil and gas, which has been declining for the previous six months, either started to rise or stopped falling. Consequently, it is safe to divide into two all pessimistic predictions for the return of inflation to 2% during the next year or two. To combat excessive rates of price growth, central banks will have to continue their efforts rather than simply lowering the rate and waiting. As a result, we anticipate seeing plenty of financial surprises this year that will have an impact on how the pair moves. Trading strategy for the week of February 27 to March 3: 1) The pair started moving lower on the 24-hour period, surpassing the Kijun-sen line and the 38.2% Fibonacci level, or 1.0609. As a result, targets in the range of 1.0200-1.0300 can still be reached if the Senkou Span B line does not halt the descent. Sales, in our opinion, are currently appropriate. 2) The purchases of the euro/dollar pair are no longer significant. You should now wait for the price to return above the critical Ichimoku indicator lines before you start to think about long positions. There are currently no circumstances in which the euro currency can start moving higher again. But, in the present world, anything can happen at any time. Explanations for the illustrations Fibonacci levels, which serve as targets for the beginning of purchases or sales, and price levels of support and resistance (resistance/support). Take Profit levels may be positioned close by. Bollinger Bands, MACD, and Ichimoku indicators (standard settings) 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" category is shown by indicator 2 on the COT charts.   Relevance up to 09:00 2023-02-27 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336091

Purchasing Managers Indexes are due next week in three major economies, which may allow to assess the state of manufacturing in each country and draw some comparable conclusions between them.   Tuesday 28.02. 15:00 GMT, US Conference Board Consumer Confidence (February) Conference Board (CB) Consumer Confidence index measures the consumer confidence level in economic activity. It is a leading indicator that can predict consumer spending, which plays a significant role in overall economic activity. Higher readings indicate greater consumer optimism. A reference point of 100 that is used is the consumer confidence index from 1985.  The consumer confidence index fell from 109.0 in December to 107.1 in January, below the expected 109.0. In particular, consumers were less optimistic about short-term job prospects and expected business conditions to worsen. Nevertheless, consumers expected their incomes to remain stable over the coming months. Purchase intentions for cars, and household appliances remained stable. However, fewer consumers were planning to buy a new or existing home. The consumer confidence index is expected to rise to 109.5 in February.  Higher than expected reading may have a bullish effect on the USD, while a lower-than-expected reading could be bearish for the USD. Impact: USD Wednesday 01.03. 01:30 GMT, China Manufacturing Purchasing Managers Index (PMI) (February) The Purchasing Managers Index (PMI) provides the first indication of economic activity in the Chinese manufacturing sector as purchasing managers are considered to have access to first-hand data on the performance of their companies. A reading above 50 indicates expansion, while a reading below 50 indicates contraction in the manufacturing sector. China's PMI spent most of 2022 in contraction territory, as the economy faced production disruptions due to the Covid-19 pandemic. Last month's PMI was better than expected, showing the first sign of expansion since September 2022 - 50.1 versus the expected 49.8 and December's 47.0. This month's reading could indicate whether China's manufacturing sector is continuing its upward trend or whether January's positive reading was just a one-off boost. February's PMI is expected to come in at 49.8, indicating a slight contraction in the manufacturing sector. Better-than-expected results may be seen as bullish for the CNY, while lower results may be bearish for the CNY. Impact: CNY Wednesday 01.03. 09:30 GMT, UK Manufacturing Purchasing Managers Index (PMI) (preliminary February data) UK Manufacturing PMI has shown signs of an even sharper contraction than China's. The last time the UK PMI was in expansion territory was in August 2022; since then, the figure has slipped closer to 45. Preliminary data for February are expected to show a slight increase from last month (47.5 versus 47). A UK PMI index below 50 may indicate that the UK manufacturing sector is experiencing uncertainty about the economic outlook and has reduced demand due to lower risk appetite and higher borrowing costs.  Higher than expected reading may have a bullish effect on the GBP, while a lower-than-expected reading could be bearish for the GBP.  Impact: GBP Wednesday 01.03. 15:00 GMT, US ISM Manufacturing Purchasing Managers Index (PMI) (February) The US manufacturing PMI is close to the UK manufacturing PMI - last month's PMI was reported at 47.4. One visible difference between the two is that the UK PMI index has been fairly stable, with signs of improvement in recent months, while the US PMI index has been gradually falling since December 2021. February's data are expected to show a slight increase to 47.9, ending the downward trend. However, the actual data have been lower than forecast for the past 3 months.  A higher-than-expected reading could be bullish for the USD, while a lower-than-expected reading could be bearish for the USD.  Impact: USD Thursday 02.03. 10:00 GMT, Eurozone Consumer Price Index (CPI) YoY (preliminary February data) The CPI measures the change in prices consumers pay for a given basket of goods and services compared to a year ago. The CPI is the most widely used measure  of inflation - a higher index means higher inflation. The inflation outlook for the euro area appears to be influenced by two opposing factors. On the one hand, lower-than-forecast energy prices may push down inflation faster than previously thought. On the other hand, the pass-through pressure of energy and commodities inflation to production costs is not yet over, keeping the overall inflation high. In addition, as the geopolitical situation in Europe seems  not improving, the ongoing price negotiations in the agricultural sector could lead to higher-than-expected prices, giving an additional boost to inflation figures. This results in a slightly lower inflation rate compared to the double-digit numbers at the end of 2022, but still a long way from the ECB's 2% target. Higher-than-expected data may have a bullish impact on the EUR and a bearish impact on the stock market, while lower-than-expected data may have a bearish effect on the EUR and a bullish impact on the stock market.  Impact: EUR, DAX, STOXX Stocks to watch Target (TGT) announcing its earnings results for the quarter ending on 01/2023. Forecast: 1.39. Positive earnings surprise in 7 out of the last 10 reports. Time: Tuesday, February 28, before the market opens. Costco (COT) announcing its earnings results for the quarter ending on 02/2023. Forecast: 3.21. Positive earnings surprise in 6 out of the last 10 reports. Time: Thursday, March 2, after the market closes. Santa Zvaigzne-Sproge, CFA, Head of Investment Advice Department at Conotoxia Ltd. (Conotoxia investment service) Materials, analysis, and opinions contained, referenced, or provided herein are intended solely for informational and educational purposes. The personal opinion of the author does not represent and should not be constructed as a statement, or 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. 76,41% 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.

US Disinflation trends are struggling and now Wall Street will look to see if improving manufacturing and service activity will further fuel pricing pressures. On Monday, durable goods data for January is expected to show higher borrowing costs are hurting manufacturers. Wall Street will also get a couple of Fed regional surveys from Dallas and Richmond.  Traders will pay close attention to Wednesday’s ISM manufacturing report and Friday’s Services Index.   Central bank speak will be closely monitored, especially new Fed member Goolsbee’s comments on Tuesday.  Jefferson will speak on inflation and the dual mandate on Monday, while Waller will talk about the outlook on Thursday. On Friday, we will hear from Logan, Bostic, and Bowman.   US President Biden will also host German Chancellor Scholz at the White House. Traders will look to see if they announce any new efforts to support Ukraine or sanctions against Russia.   Earnings season continues with key updates from Bayer, Berkshire Hathaway, Broadcom, Budweiser Brewing Co. Apac, Costco Wholesale, CRH, Dell Technologies, Dollar Tree, HP, Kroger, Kuehne + Nagel International, Lowe’s, Merck, National Bank of Canada, Occidental Petroleum, Salesforce, Toronto-Dominion Bank,  VMware, and Workday. Eurozone Next week offers a number of economic data points, the most notable of which will be the flash HICP readings. While headline inflation has been falling, core remains at the peak and policymakers are unlikely to ease off the brake until they’re seeing progress on this front. Forecasts suggest it’s still a little early for that. Markets are still pricing in a 50 basis point hike at the meeting in March although there’s an almost equal chance of 75, based on current rates. Which brings us nicely to the central bank speak, kicking off with President Lagarde who’s due to appear at the G20 conference over the weekend.  UK  It’s all a bit calm next week, with central bank appearances the most notable thing on the calendar. That includes Governor Bailey on Wednesday and Chief Economist Pill on Thursday. With 25 basis points almost entirely priced in for March and the committee clearly a little divided on the correct path going forward, I’m not sure what they could say that would cause much of a shock at this point. Russia Unemployment is expected to have jumped to 4% in January, from 3.7% the month before. Meanwhile PMIs on manufacturing and services on Wednesday and Friday, respectively, will be eyed. South Africa A quiet week in store with unemployment the only notable release. Turkey The CBRT cut rates last week by an unusually modest 50 basis points, taking the repo rate to 8.5%. Inflation remains extraordinarily high, with the official rate released by the Turkish Statistical Institute, sitting at 57.68%. The February reading will be released on Friday, while GDP data is due on Tuesday.   Switzerland A selection of data points will be eyed this upcoming week which should give an up-to-date view on the state of the economy. The week will start with GDP data on Tuesday for the fourth quarter, alongside the KOF indicator for February. This will be followed by retail sales for January and the manufacturing PMI for February on Wednesday.  China The official manufacturing and non-manufacturing PMIs for January will be released on Wednesday, in what will otherwise be a relatively quiet week. Of course, all eyes are on the transition and how quickly and strongly the economy will bounce back, with stimulus measures over the next couple of months likely to turbo-charge the recovery. India GDP and PMI data eyed next week, with the economy seen performing strongly again in the third quarter and surveys indicating ongoing optimism.  Australia & New Zealand The RBNZ’s first interest rate meeting of the year last week was in line with market expectations of another 50 basis point hike. The central bank minutes mentioned that a potential recession in the second quarter of this year might occur, putting pressure on the New Zealand dollar. Focus this week will be on Australian retail sales data for January and GDP for the fourth quarter, and New Zealand retail sales for the fourth quarter. Japan According to Japanese lawmakers, BOJ Governor nominee Kazuo Ueda is to speak in the upper house on 27 February, and deputy governor nominees are to appear in the upper house on 28 February. Ueda will attend the hearing at the National Diet and give a speech, which may have an impact on Japanese markets.  Retail Sales and the Tokyo core CPI will be in focus next week. Singapore Retail sales and the February PMI survey are the only releases of note. Economic Calendar Saturday, Feb. 25 Economic Events Berkshire Hathaway reports earnings   G-20 finance ministers and central bank governors conclude meetings Sunday, Feb. 26 Economic Events German Chancellor Scholz meets with Indian PM Modi Japan’s ruling LDP holds its annual convention Monday, Feb. 27 Economic Data/Events US durable goods Eurozone economic confidence, consumer confidence Hong Kong trade Israel unemployment Japan BOJ outright bond purchases Mexico trade US Congress returns after a recess US Treasury Secretary Yellen talks with President Zelenskiy ECB chief economist Lane speaks on “Macro-Financial Stability in the EU” ECB’s de Cos speaks at EIB event in Luxembourg BOE’s Broadbent speaks at a digital technologies conference in London Tuesday, Feb. 28 Economic Data/Events US wholesale inventories, Conference Board consumer confidence Australia current account, retail sales Canada GDP Finland GDP France CPI, GDP India GDP Japan industrial production, retail sales Mexico international reserves Singapore unemployment South Africa unemployment, trade balance Sweden GDP Switzerland GDP Thailand trade Turkey GDP Chevron investor day Mayoral election in Chicago New Fed member Goolsbee speaks at Ivy Tech Community College BOE chief economist Huw Pill makes closing remarks at digital technologies conference BOE’s Mann and ECB’s Vujcic speak at the EIB forum in Luxembourg Earnings from Target Wednesday, March 1 Economic Data/Events US construction spending, ISM Manufacturing, light vehicle sales Australia GDP China manufacturing PMI, non-manufacturing PMI, Caixin manufacturing PMI European Manufacturing PMIs: Eurozone, Germany, France, and the UK Germany CPI, unemployment India Manufacturing PMI New Zealand building permits Russia unemployment Start of the annual Conservative Political Action Conference (CPAC) Bundesbank publishes annual report BOJ’s Nakagawa speaks in Fukushima BOE Governor Bailey speaks at a conference focused on the cost of living crisis ECB’s Villeroy speaks at the French National Assembly’s finance committee ECB’s Visco speaks in Frankfurt Earnings reports from Dollar Tree, Kohl’s, Salesforce, and Lowe’s   Thursday, March 2 Economic Data/Events Australia building approvals Brazil GDP Eurozone CPI, unemployment Hong Kong retail sales Hungary GDP Italy CPI, unemployment Japan capital spending Mexico unemployment South Korea industrial production Spain unemployment Sri Lanka rate decision US initial jobless claims Bloomberg Intelligence’s Market Structure event in New York. Speakers include Securities and Exchange Commission Chair Gary Gensler and NYSE COO Michael Blaugrund The due date for the DOJ’s amicus brief with its view on Donald Trump’s claim that he should get absolute immunity against civil lawsuits seeking to hold him liable for the Jan. 6, 2021 attack on the US Capitol ECB publishes accounts of February policy meeting Bank of Japan board member Hajime Takata gives speech in Kanagawa BOE chief economist Huw Pill speaks on the economic outlook Retail earnings continue with Macy’s, Costco, and Nordstrom all reporting Friday, March 3 Economic Data/Events US President Biden and German Chancellor Scholz meet at the White House China Caixin services PMI Czech Republic GDP Eurozone Services PMI, PPI France industrial production Italy GDP Japan unemployment, Tokyo CPI Singapore retail sales ECB’s Vasle and Muller speak on inflation Italian PM Meloni visits Abu Dhabi BOE’s Hauser speaks at a workshop on market dysfunction hosted by the Initiative on Global Markets in Chicago Sovereign Rating Updates Austria (Fitch) Czech Republic (Fitch) Hungary (Moody’s) European Union (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.  

Summary:  The U.S. ISM survey and China’s PMI reports are the key data to watch this week. After the hot employment and inflation data from the U.S., investors are searching for additional data to discern the competing scenarios of recession, soft-landing, and no-landing (i.e. strong growth). Investors are also in need of signs of economic recovery from China or additional positive policy signals from the Chinese authorities to sustain the U-turn in sentiment towards Chinese equities since November last year which has started to fade somewhat. Ueda, the new BOJ chief’s rhetoric on policy continuity will be put to test with this week’s Tokyo CPI due on Friday. US ISM surveys to be the next test for yields and US dollar The recent data out of the US has shown firm inflation and growth dynamics, prompting an upward repricing of the Fed’s path and bringing yields to critical levels. The 2-year yields in the US have touched their highest levels since 2007, and 10-year yields are in close sight of the key 4% zone which can spell further risk aversion. The ISM surveys this week will be key to watch for further direction, with the manufacturing survey out on Wednesday and services out on Friday. The consensus is for the manufacturing ISM to improve to 48.0 in February from 47.4 in January, but still remain in contraction (below 50). The ISM services index saw a surge to 55.2 in January after a drop to 49.2 in December, partially a reflection of winter weather trends. Gains are likely to moderate, and consensus expects 54.5. Also on watch will be the US durable goods orders for January, as mentioned in the Weekly Watch.   China PMIs are expected to show further recovery in the economy Also Wednesday - China’s PMI surveys are expected to show the recovery is progressing in February. We expect good news - with the services sector driving growth and manufacturing picking up slightly. These will be important signals - as monthly activity data won’t next be available until mid-March. The official NBS Manufacturing PMI, according to survey from Bloomberg, is expected to bounce further into expansion at 50.7 in February from 50.1 in January and the Non-manufacturing PMI is forecasted to climb to 55.0 from 54.4. Despite the sluggishness in exports, Caixin China PMI is expected to return to the expansionary territory at 50.8 in in February, from 49.2 in January. The Emerging Industries PMI jumped to 62.5 in February from 50.9 in January added to the favourable forecasts for the NBS and Caixin PMIs. Geopolitics remains in focus with China’s peace proposal talks After threats from US about making public the information on China supplying weapons to Russia, China came up with a 12-point peace proposal on Friday to be a neutral mediator in the Russia-Ukraine conflict. Reports suggested that China’s proposal took a clear anti-West stance, condemning NATO extension and sanctions against Russia, but Ukrainian President Volodymyr Zelensky has signaled he's open to China's new ceasefire plan and meeting President Xi. How these events turn this week will be key to watch, especially US comments and support to Ukraine if it was to accept China as a mediator. Australian Economic news on tap to potentially pressure the ailing Aussie dollar Australian GDP data on Wednesday will likely show fourth-quarter economic growth slowed down to pace of 2.7% YoY - quashed by higher inflation and interest rates. And monthly CPI should show inflation is cooling. In these instances, that would theoretically pressure the Aussie dollar lower, while the US dollar is continuing to move up - so that’s something to watch. Softer Eurozone flash February CPI may not be a big relief, ECB minutes on tap as well Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed. Core measure on focus in Japan’s Tokyo CPI release The new Bank of Japan chief Kazuo Ueda’s testimonies in the parliament hinted at an unchanged monetary policy in the near-term, and a steadfast focus on achieving 2% inflation sustainably. Ueda remains in Kuroda’s camp on inflation, saying that the current inflationary pressures are mostly import-driven and inflation is expected to peak soon. This rhetoric will be put to test with this week’s Tokyo CPI due on Friday. Consensus expects the headline CPI to soften to 3.3% YoY from 4.4% YoY last month, perhaps signalling that nationwide numbers could ease as well. However, the core-core measure (ex-fresh food and energy) is likely to be firmer at 3.1% YoY in February from 3.0% previously. Energy companies will be a focus - after so far delivering the strongest earnings this season and last year Energy companies have again reported the best earnings growth this US and Australian corporate reporting season - with increased profits and dividends. Occidental Petroleum’s outlook will be a focus on Monday as well as Canadian Natural Resources - when they report later this week. Occidental is expected to report its highest-ever fourth-quarter net income – with the US energy giant to benefit from high energy prices amid tight supplies. The oil and gas giant generated about $2.8 billion in free cash flow in the period after years of austerity and debt reduction, according to Bloomberg consensus. Investors will closely monitor its 2023 spending and capital-returns outlook with adjust EPS of $1.79 expected. Occidental's shares are down 6.6% this year. For what Australia’s oil and gas giant - Woodside Energy reported on Monday see our daily team note – Markets Today. Also, keep in mind, we expect the oil price to stay around $80 this quarter and move up to $90 next quarter. Brewers will be interesting to watch amid the reopening trade Budweiser Brewing Co (1876 HK) which is a distributor is Asia - is due to release results on Wednesday with Q4 revenue to get a lifeline from the FIFA World Cup trading- but income is still expected to dive. However, the world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) may gain more attention when it reports on Thursday, as option volume rose 8% last week in BUD, with the market expecting EPS to grow from 1.94 to 3.01. For more on Brewers click here. EVs also in focus – Tesla Investor Day and Li Auto and NIO report earnings China reopening theme also continues to be on test with the Asian reporting season underway, and this week brings earnings reports from two key EV manufacturers. Li Auto (02015:xhkg/LI:xnas) reported on Monday before China open while Nio (09866:xhkg/NIO:xnas) reports on Wednesday. It will be key to watch how Tesla’s steep discounts and the end of government subsidy impacts the outlooks for these two Chinese EV manufacturers which got off to a slow start this year, and whether the decline in lithium prices lifts the outlook higher. Tesla (TSLA:xnas) will hold an Investor Day event on March 1 in what could be one of the key days of the year for the electric vehicle giant. Nio, Li Auto and XPeng (09868:xhkg/XPEV:xnys) also report February deliveries this week, and China’s EV and battery giant BYD (01211:xhkg/BYD:xnys) should release February sales by Friday.   Tech earnings to watch in the tech space: Salesforce, Snowflake, and Coupang In a note last Friday, Peter Garnry,  Saxo’s Head of Equity Strategy draws investors attention to Salesforce (CRM:xnys), Snowflake (SNOW:xnys), and Coupang (CPNG:xnys) announcing this week. Activist investors have entered Salesforce, a cloud-based enterprise software provider, over the past year and the pressure is going up on management to drastically improve profitability which is already being reflected in analyst estimates. Analysts expect revenue growth of 9.2% y/y down from 26% y/y a year and EBITDA of $2.67bn up from $1.02bn a year ago; Salesforce reports FY23 Q4 earnings (ending 31 Jan) on Thursday after the market close. Snowflake was one of the hottest IPOs before the interest rate shock cooled the stock to being more ordinary. The cloud infrastructure company is expected to report FY23 Q4 (ending 31 Jan) earnings on Thursday after the US market close with analysts expecting revenue growth of 50% y/y down 102% y/y a year ago and EBITDA of $25mn up from $-146mn a year ago. The third company to watch is Coupang because of its e-commerce exposure to South Korea which could potentially provide some colour consumer spending patterns in one of Asia’s most cyclical economies. If China’s reopening is progressing well then it should spill over into a more positive outlook for South Korea. Coupang reports earnings on Tuesday after the US market close with analysts expecting revenue growth of 7% y/y down from 34% y/y a year ago and EBITDA of $197mn up from $-248mn a year ago. The CCP’s Central Committee convenes the Second Plenum The 20th Central Committee of the Chinese Communist Party is holding the second plenum from 26 to 28 February to decide on the recommendation list of candidates for top government posts to be sent to the National People’s Congress to finalize during the latter’s meeting commencing from 5 March. Investors will watch closely the personnel arrangement on the state administration side, especially who will be put in the top positions in various financial policy-setting and regulatory authorities amid market chatter of the Party’s plan to pursue a major shake-up of the financial system. Macro data on watch this week Monday 27 FebruaryUS                   Durable goods orders (Jan)Eurozone         Consumer confidence/economic confidence/industrial confidence (Feb) Tuesday 28 FebruaryUS                   Chicago PMI (Feb)Japan              Industrial production (Jan)Japan              Retail sales (Jan)Japan              Housing starts (Jan)India                Real GDP (Q4) Wednesday 1 MarchUS                   ISM manufacturing Index (Feb)Germany          Unemployment (Feb)Germany          CPI (EU harmonized; Feb flash)Australia          Real GDP (Q4)Australia          CPI (Jan)South Korea    Exports (Feb) Thursday 2 MarchUS                   Non-farm productivity (Q4, final)US                   Unit labor costs (Q4, final)Eurozone         CPI (harmonized, Feb flash)Eurozone         Unemployment (Jan)Eurozone         ECB Policy Meeting Minutes (Feb)Japan              Consumer confidence (Feb)South Korea     Industrial production (Jan) Friday 3 MarchUS                   ISM Services (Feb)Eurozone         PPI (Jan)France             Industrial production (Jan)Japan              Tokyo-area CPI (Feb)Japan              Unemployment rate (Jan)Singapore        Retail sales (Jan) Company earnings to watch Monday 27 Feb: Woodside Energy, Alcon, Occidental Petroleum, Workday, Li Auto, Zoom Video Tuesday 28 Feb: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday 1 Mar: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday 2 Mar: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies   For Saxo’s live economic and news calendar click here.  

When we started 2023 most of the narrative had been centred around when we would see start to see a Fed pivot and the timing of the first rate cut. Once it became apparent that this was somewhat wishful thinking, this narrative started to shift towards a Fed pause, even in the face of mounting evidence of a remarkably resilient US economy.     Even when the Fed downshifted the pace of its current rate hiking cycle to 25bps at the start of February, there was some disquiet that they might be sending the wrong signal to the market, about their determination to crack down on inflation.   The resilience of the January payrolls report which came in ahead of expectations at the beginning of this month started to sow the first seeds of doubt into the pause narrative, and while bond markets started to react to these shifting sands, the equity markets still held out the hope that a Fed pause was only a few weeks away. On Friday all notion of a possible pause appears to have gone the way of the dodo, in the face of a series of better-than-expected economic data releases, with markets now pricing in another three 25bps rate increases at the March, May, and June Fed meetings.   There had already been signs that the January core PCE numbers might have been susceptible to an upside surprise after retail sales in January surged by 3%, however, Friday's sharp jump in the Federal Reserve's preferred inflation measure to 4.7%, was as unwelcome as was the upward revision to December's number from 4.4% to 4.6%. Throw in the biggest upswing in personal spending in 12 months, by 1.8%, and you have all the ingredients of a US economy that shows few signs that higher prices are weighing on demand.   US 2-year yields reacted accordingly, jumping by 11bps, above their previous peaks in November last year, to close at their highest level since 2007, at 4.813%. It wasn't just yields in the US that moved sharply higher, with German 2-year yields rising to their highest levels since October 2008, closing above 3% Equity markets reacted as you would expect, falling back sharply, with the DAX posting its biggest weekly fall since mid-December. The FTSE100 also rolled over quite sharply wiping out the previous week's gains in the process, although both indexes remain in their uptrends from their October lows.     The S&P500 fell sharply but managed to hold above and rebound off its 200-day SMA, even as it fell to a one-month low, with the Nasdaq 100 also rebounding off its 200-day SMA as well.   This recovery off key technical supports should offer European markets a modest rebound when they open later this morning, after last week's sharp falls. As we look towards a new week, and the end of the month tomorrow, last week's falls have called into question whether markets in Europe can hold onto their February gains, while US markets have already slipped into negative territory for the month, after last week's sharp falls.   The US dollar appears to have accelerated its upward momentum, rising for the fourth week in a row, and is in sight of its highest levels this year, and on course to post its first positive month since September last year.   On the data front the main focus this week, in the absence of the February jobs report which has been pushed out to the 10th of March, is the latest ISM services report which is due at the end of this week and could be instrumental in reinforcing the hawkish narrative that has started to take hold in the last few weeks. A similarly strong report following on from the January report will further reinforce the case for 3 more 25bps rate hikes at the next few meetings.   In Europe, the narrative around sticky inflation appears to be evolving along similar lines, with rapid declines in headline inflation but core inflation continuing to edge to record highs.   This week we'll get to see the latest flash numbers for February, from Germany, whose economy could already be in recession, France as well as the EU, where core prices hit a record high of 5.3% in January and could well stay there in numbers due to be released towards the end of the week.     EUR/USD – the next support lies at the January lows at 1.0480/85, a break of which opens up the prospect of a test of the 200-day SMA at 1.0320. Currently have resistance at the 1.0620/30 area, and behind that at the 50-day SMA. GBP/USD – currently sitting on support at the 200-day SMA at 1.1930, a break of which retargets the 1.1830 area. Resistance currently at the 50-day SMA at 1.2150. EUR/GBP – continues to edge higher with the next resistance currently 0.8870. Support comes in at the 0.8780 area. USD/JPY – closing in on the 200-day SMA and Kumo cloud resistance area at 136.90/00. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 32 points higher at 7,910. DAX is expected to open 48 points higher at 15,457 CAC40 is expected to open at 35 points higher 7,222   Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

The week starts on a cautious note, as the Federal Reserve (Fed) rate hike expectations intensify the selloff in global stocks and bonds, while pushing the US dollar higher against most majors.   Friday's US PCE data was bad. We knew, from the earlier releases that US inflation wouldn't slow as much as expected, but Friday's PCE data showed that not only inflation didn't slow in January, but headline figure ticked higher to 5.4% from 5.3% printed a month earlier, and core inflation ticked higher to 4.7% from 4.6% printed a month earlier. The latter fueled the Fed hike expectations, because a slower-than-expected easing in inflation is one thing, but rebound in inflation is another thing. And the latter is much less cool for the Fed, and the Fed expectations. A rebound in inflation is the worst nightmare for the Fed.   And if the PCE drama was not enough, personal spending surged 1.8% in January, the strongest burst since March 2021, and the University of Michigan's consumer sentiment index hit a 13-month high this month. It's still much lower than the pre-pandemic levels, yes, but it also means that it has ways to recover.   In summary, the tight US jobs data, strong spending and improved sentiment may sound nice to you, but it sounds horrendous to the Fed.  A new study that was presented at a conference in New York on Friday now suggests that the Fed should maybe hike rates all the way up to 6.5% to win its battle against inflation in the US.  As a result, the US 2-year yield is pushing above the 4.80% mark, the 10-year yield is flirting with the 4% mark. Activity on Fed funds futures now assesses just slightly less than 30% probability for a 50bp hike at the FOMC's March meeting. This probability is up from below 10% at the start of this month.   The S&P500 slipped below the 50-DMA (3980) and tested the 200-DMA (3940) to the downside, and closed what was the worst trading week since the start of the year 2.7% down, and below the 4000 psychological mark. Nasdaq, on the other hand, pulled out the major 38.2% Fibonacci support on the latest rally, tested its own 200-DMA to the downside, and closed the week in the bearish consolidation zone and below the 12'000 psychological mark.   And all indicators point at a deeper selloff as long as the higher Fed discussions remain heated.  Read next: The Effect Of Shifting The Aggregate Demand Curve - Demand Shocks| FXMAG.COM FX and commo  It becomes increasingly  clear that we will see a pause in the USD downside correction. The US dollar index is now clearly headed higher.   In EURUSD, a further fall to and below 1.05 is just a matter of time, and the last support to the September to February rally stands near 1.0470, if cleared will send the pair into the medium term bearish consolidation zone, with prospect of further fall to 1.02-1.03 range.  And a softer euro will then make the energy imports more expensive for the Europeans yet again, and spur the European Central Bank (ECB) rate hike expectations.   Hawkish ECB bets will certainly not do much to tame the strong-USD-led inflation, but a more aggressive policy rate response from the ECB would be bad for European businesses, and weigh on European stocks.   Rising US yields and the stronger US dollar hint at further decline in gold prices, as well. Gold cleared a key Fibonacci support, the 38.2% retracement on the November to February rally, and starts this week in the bearish consolidation zone, with the next natural target for the bears standing at $1775, the 200-DMA.  Crude oil continues struggling. Oil bulls never really bought the Chinese reopening story, nor the sharp decline in Russian output. But they might well play the rising recession odds that come along with the tighter central bank policies around the world. As such, sellers are certainly waiting to sell US crude into the 50-DMA, a touch below the $78 per barrel.   Copper futures, on the other hand, sank below their 50-DMA for the first time since November in COMEX, as the higher rate prospects weigh on copper appetite, which is a good gauge of global growth.  Finally?!  In Europe, Britain's Rishi Sunak and EU's Ursula von der Leyen will meet today to finalize the Northern Ireland drama, which could soften barriers in a country that is willing to remain half seated in Europe and half seated in the United Kingdom, while the UK and Europe part ways.  There is however little chance today's annoucement, if any, solves the problem entirely. DUP is expected to oppose.  Mr. Sunak was expected to make an announcement last week. He didn't. And even if it did, I am not sure it would change the course of sterling. The pound is now below 1.20 against the US dollar as a result of a broadly stronger greenback, and is about to slip below the 200-DMA. Further retreat to 1.1650/1.17 band is on the cards.  

The dollar remains broadly bid after Friday's release of US PCE inflation data argued that the Fed needed to push rates higher and for longer. 25bp Fed hikes are now priced for March, May and June. Expect the dollar to hold gains this week, although China's February PMIs (Wednesday) and the US ISM Services (Friday) may prove a challenge USD: Hard to argue with dollar strength near term Friday's release of US core PCE inflation data for January completed what has been a very bond bearish/dollar bullish set of US data this month. We have learned that US inflation is proving much stickier and US activity firmer than we were led to believe in December and January. Understandably, investors are now taking the Federal Reserve hawks more seriously and have priced three more 25bp rate hikes from the Fed in March, May, and June. This hawkish run of data also questions what the new set of Fed Dot Plots will look like when they are released on 22 March. The Fed's current median expectation sees Fed Funds at 5.00-5.25% by the end of 2023 and 4.00-4.25% by end-24. Both of these projections could be revised higher. This prospect could well dissuade investors from re-entering dollar short positions over the next few weeks. At the same time, the US 2-10 year yield curve is now inverted the most since the Paul Volcker tightening of the mid-1980s - creating a headwind to risk assets. It is hard to see global equity markets pushing much further ahead until there are clearer signs that the Fed - and other central banks - can relent in their tightening cycles. For this week, we think the macro highlights will be the ISM business confidence data in the US. The manufacturing component (released Wednesday) is expected to remain soft at 48. More interesting will be Friday's release of ISM services. Was the bounceback in the January services release merely weather-related or did it reflect much better optimism? This could help set the trend in US data through March. Investors will also be looking at the Chinese February PMIs released on Wednesday. A strong showing here could provide some support to the renminbi and to activity currencies in general - although as we discussed on Friday, geopolitics does seem to be weighing on the renminbi too. What does this all mean for the dollar? DXY broke above 105.00 on Friday and the multi-week bias looks towards resistance at the 106.20/106.50 area - some 1.00/1.20% above current levels. Through March we will better assess whether these prove the best dollar levels of the year. Chris Turner EUR: Dollar strength to keep EUR/USD heavy Like the Fed, the European Central Bank remains very much in hawkish mode. Investors fully subscribe to the ECB's message of a 50bp hike on 16 March and then price a further 80bp of tightening into year-end. This should be the key difference between the Fed and the ECB cycles. We think the Fed could be in a position to cut by year-end, while the ECB looks likely to keep rates at their peak throughout the majority of 2024. There is not too much eurozone data this week but today sees eurozone business and consumer confidence for February - all expected to improve modestly. For EUR/USD, we think the strong dollar view will dominate. Expect 1.0500 to be tested, with a chance that it briefly trades down to the 1.0460 area.  Chris Turner Read next: The Effect Of Shifting The Aggregate Demand Curve - Demand Shocks| FXMAG.COM GBP: Northern Ireland trade deal yet to provide a sterling boost So far, sterling seems to be taking little notice of potentially improved trading and political relations between the UK and the EU. Later today, expectations are building that a deal will get announced between the two to soften the trade barriers on the Irish sea. It will be interesting to see whether this will be sufficient to get the DUP back into government in Northern Ireland.  An improvement in UK-EU relations probably does little for sterling in that it will not improve the broader trading environment between the UK and the EU. Instead, the macro-monetary settings of the two will continue to dominate. The ECB looks like it has much further to hike than the Bank of England and suggests that EUR/GBP continues to find support under 0.88. GBP/USD will be vulnerable to continued dollar strength and risks a move to 1.1850 this week. Chris Turner CEE: NBH to assure market that it is too early for change More action returns to the region this week. We start on Tuesday with the National Bank of Hungary meeting. In line with the market, we expect rates to remain unchanged. There is no discussion on the macro side. Central bankers are waiting for a tangible and sustained improvement in domestic and external risks and it is clear that the developments so far are positive but still insufficient for the NBH to reverse course. From a market perspective, however, the main question is whether the central bank can maintain the hawkish tone it set in January. PMI indicators for February across the region will be released on Wednesday. We expect a slight improvement in sentiment in Poland and the Czech Republic and a deterioration in Hungary. We will also see the final GDP numbers for the fourth quarter of last year across the region during this week. On the ratings side, we have two interesting reviews in the CEE region this week - Moody’s in Hungary and Fitch in the Czech Republic. More interestingly, Hungary received a negative outlook and rating downgrade recently from Fitch and S&P and we expect a negative outlook from Moody’s as well. In the Czech Republic, Fitch downgraded the outlook already last year to negative. In our view, the risk of a rating downgrade has diminished since the last review in October but is still significant. In the FX market, this week the main focus will be on the Hungarian forint to see if it can extend its rally. The main driver will be NBH and its efforts to maintain a hawkish tone. Given market expectations, the central bank may only deliver a small push to the forint, but it's still worth being bullish and testing new levels below 380 EUR/HUF, in our view. However, at the end of the week, Moody’s will remind us that there are still a number of issues on the table in Hungary led by EU money access, which should bring the forint back to or above 380 EUR/HUF. 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  

Economists at Commerzbank see upside potential in EUR/CHF, but only moderately. CHF is likely to be less in demand as a safe haven “With the ECB likely to raise its key rate more strongly by the middle of the year, we see depreciation pressure on the Swiss Franc against the EUR in the coming months.” “Moreover, due to easing concerns about an energy crisis and recession in Europe, the CHF is likely to be less in demand as a safe haven.” “The depreciation potential of the Franc is likely to remain limited in view of the SNB and possible interventions against an excessively weak franc though, especially if the inflation picture should cloud over again contrary to our forecasts.” Source: Commerzbank Research

The dollar fell from a seven-week high on Monday as investors took stock of last week's strong US economic data and outlook for global interest rates. Friday's data showed that US consumer spending rose sharply in January, while inflation accelerated. Traders now expect the Fed to raise interest rates to around 5.4% by the summer. USD/JPY The first day of the new week for the USD/JPY pair was mixed in both the Asian and European sessions. The pair started the week at 136.4430, but fell to 136.00 during the day. At the time of writing, the yen was trading at 136.2970. In late February, the Japanese yen weakened above 136 to the dollar, hitting its lowest level in more than two months as Ueda, nominated governor of the Bank of Japan, doubled down on the bank's very restrictive monetary policy. The new governor of the Bank of Japan, Kazuo Ueda, said on Monday that the benefits of the bank's current monetary policy outweigh the costs, stressing the need to maintain support for the Japanese economy with very low interest rates. The comments reinforced signals that the bank will not turn away from its dovish attitude anytime soon. Previously, Ueda had opposed monetary tightening in response to cost-driven inflation and rejected immediate changes to the bank's yield curve control, warning that such measures would deeply hurt growth. EUR/USD EUR/USD started the week at 1.0556. In the Asian session, it mostly traded near 1.0550 and even 1.0560, then fell below 1.0540. In the European session, the euro was rising towards 1.0570. Currently, the EUR/USD pair is trading around 1.0560. The US currency has benefited widely from the view that its central bank has more power and leeway to counter inflation. Meanwhile, the Eurozone has to meet the varying needs of its twenty national economies, some of which will struggle to cope with even minor further interest rate increases. Interest rate differentials are likely to dominate euro fundamentals this week, although some key domestic data is emerging, most notably official eurozone inflation data. Due for release on Thursday and the annual base rate is expected to remain unchanged at 5.3% Read next: BNP Paribas Sued For Providing Financial Services To Companies That Allegedly Contribute To Deforestation Of The Amazon Rainforest| FXMAG.COM GBP/USD The movement of the cable pair resembles the movement of EUR/USD. GBP/USD started the week at 1.1950, but during the day GBP/USD fell towards 1.1930. In the European session, it gained an upward momentum and exceeded the level of 1.1980. Politically, European Commission President Ursula von der Leyen is due to travel to the UK today to meet Prime Minister Rishi Sunak on a new Brexit deal. This could see a resumption of trade between Northern Ireland and the UK, but it has not really translated into the GBP yet. AUD/USD The AUD/USD pair is the worst performer among the major currency pairs. The Aussie Pair started the day above 0.6730 but fell towards 0.6700 in the next session. In the European session, AUD/USD has slightly increased and at the time of writing it is just above 0.6710. The Australian dollar weakened to around $0.67, trading at its lowest level in nearly 2 months as better-than-expected US economic data boosted expectations that the Federal Reserve would need to raise interest rates further to stem rising inflation. Weak domestic employment data also affected the currency with Australia's unemployment rate unexpectedly rising to 3.7% in Q4 despite expectations to hold steady at 3.5%. Meanwhile, the Reserve Bank of Australia's latest monetary policy statement showed it had revised its inflation forecast for this year higher, saying price pressures were spreading to services and wages. Source: investing.com, finance.yahoo.com

The EUR/USD currency pair traded unusually on Monday. In reality, the pair frequently corrects on Friday following a long fall. This is because some traders set profit targets for positions before the weekend. At the same time, the downward trend continued on Friday, and the pair adjusted to the moving average on Monday. This pair's movement was somewhat supported by macroeconomic data. Yesterday, the United States released one more or less significant report on long-term goods orders. Although we have previously stated that we do not anticipate a significant response to this report, the dollar declined by around 60 points as a result of its release. We believe it is more likely a coincidence. The report itself revealed a considerably more significant decline in order volumes than was anticipated, disappointing buyers of dollars. As a result, the pair is currently trading close to the moving average line but has not yet surpassed it. We still don't know why the European currency can demonstrate observable growth, but if there is a consolidation above the moving average, then the bulls can take the lead for a while. The fundamental (global) background has not changed at all recently, and the euro currency is still highly overbought. On the 24-hour TF, the situation gets a little complicated on Monday. Meanwhile, the price is below the crucial level of 1.0609 (38.2% Fibonacci), but it has not yet been able to penetrate below the Senkou Span B. If not, the pair may quickly return its steps to the critical level, which is now located close to the level of 1.0780. Therefore, the pair must at least overcome the moving average on the 4-hour TF to anticipate growth. The rhetoric remains unchanged under Christine Lagarde. Christine Lagarde's speech, meanwhile, was already delivered this week. More specifically, it was a meeting with the Financial Times. Lagarde asserts that the ECB may require a further tightening of monetary policy and that the question of the level of the rate hike in March has nearly been completely addressed. As the rate hasn't been a secret for very long, traders now anticipate another 0.5% increase. Remember that the ECB effectively declared a 1.25% rate increase at the next three meetings a few months ago, and so far it has followed through on that plan. Consequently, Lagarde's remarks on Monday may have potentially supported the euro, but what would have caused the market to respond if there had been no new information? Ms. Lagarde added that the regulator is ready to increase the key rate once more if required to maintain 2% inflation. And this will certainly be necessary. A report for February will be released this week, and it predicts that the consumer price index may slow to 8.2%. We wouldn't jump to conclusions, however, given that Germany's inflation has already shown signs of growth. Ms. Lagarde may not want to shock the markets with strong pronouncements just yet because doing so will not be beneficial. What will the ECB do if inflation begins to rise again? There are already rumors that rates below 6% may not be sufficient to guarantee price stability by 2%, especially in the United States, where inflation has been declining for 7 consecutive months. It is far from certain that the ECB will be able to tighten monetary policy as sharply and enthusiastically as the Fed, given how much more complicated things are in Europe as a result of a rate hike. In general, as previously stated, 2023 may bring surprises, and all current inflation or rate projections are subject to another 1,000 changes. Remember how many experts forecast an impending recession in the US and the EU last fall and summer? And the Fed rate was at its highest point at 3.5% at the beginning of last year. As a result, this year's predictions will probably need to be updated more than once. As of February 28, the euro/dollar currency pair's average volatility over the previous five trading days was 69 points, which is considered "normal." Thus, on Tuesday, we anticipate the pair to move between the 1.0538 and 1.0676 levels. The downward turn of the Heiken Ashi indicator will signal the beginning of a new downward movement. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0864 Trade Advice: The EUR/USD pair is still moving downward. At this point, we can take into account new short positions with targets of 1.0498 and 1.0488 if the Heiken Ashi indicator reverses its upward trend. After the price is fixed above the moving average line, long positions can be initiated with targets of 1.0676 and 1.0742. Explanations for the illustrations: Channels for linear regression - allow us to identify the present trend. 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 01:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336235

Market rates are fretting about economies that are not lying down, at least not as much as had been feared. But they are also not on the starter blocks. More like they are taking on some welcome fluids. Yes we've been looking for market rates to test higher, now that we're here we think (misplaced) risk-on is the most likely route to even higher rates; else we dip Market rates are loving this test higher momentum... Front ends are hitting new extremes as the rate hike narrative from central banks has become more credible. The German 2yr popped above 3% on Friday for the first time since the Great Financial Crisis caused a crash lower in front-end rates a decade and a half ago. It held above yesterday, and looks quite comfortable with that 3% handle. The market appropriate measure of pan-eurozone rates is 6mth Euribor, which is now in the 3.25% area. And 10yr Euribor is also now at back above 3%. The 10yr was higher last year, up in the 3.3% area, but is being pulled back up again on the realisation that the front end still has some material upside risks. It's a similar story on the US curve. Not only is a June hike of 25bp now fully priced (so we have 25bp priced for March, May and June), but a July 25bp hike is now being contemplated by the market. It's still discounted as being less likely than likely, but still, that's quite some change from where we were only a few weeks back when there was some debate as to whether the Fed would hike in May, and there were even some doubts over March. The talk now is for a potential 50bp move, although we view this as being quite unlikely, and indeed unnecessary. The Fed needs a degree of underlying stability in order to be in a positon to tighten, so upping the size of hikes here would be counter-productive. The Fed needs a degree of underlying stability in order to be in a positon to tighten, so upping the size of hikes here would be counter-productive. The other big change on the US front end has been the downsizing of the probability attached to interest rate cuts in late 2023. This is the other reason for the US 2yr to hit a new cycle high in recent days, as the 2yr is not just impacted by rate hike expectations, but also by what happens after the peak and over the subsequent period (over 2yrs, by definition). It's off the highs hit on Friday, but that 4.75% to 4.85% area is still only a smidgen below 5%, a level that the 2yr yield collaped from in 2007 as the US banks began to have that feeling of impending doom that imploded as correlation to a failing housing market wallopped all in its way. The US 10yr has responded to heaping pressure to move higher in yield in the past few weeks, but still remains a tad anomalous in the sense that in the 3.9% area it's still some 150bp below the market projected peak in the Fed funds rate. This is double that should be expected, and indeed most of the time the 10yr hits that same peak as the front end does, only much sooner. Here the 10yr peaked at 4.25% (or 4.33% for a fleeting moment) back in October. Based off that it's telling us that the market discount for the funds rate won't be realised. We're tempted to agree in fact. A June hike should be the last one, and even that one is a stretch given the stresses we see in the financial economy. ... but risk is liable to be turned off ahead (albeit not likely this week) The big question ahead is whether we can sensibly suggest that the US and eurozone economies are about to completely ignore the cumulative effect of rate hikes delivered. Remember these rate hikes have been quite aggressive, and quick, and they are not yet complete. At a certain point, economies will really creak. They began to last year. They've popped over the turn of the year. But that's far more likely to be a false dawn than the beginning of a trend. Yesterday's US durable order numbers confirmed a 3mth downtrend, and the housing data confirmed an angst environment there. We may well get data that points to pops in both the US and eurozone economies, but the bigger picture is still not great. And again, central banks are still tightening. The day ahead won't be pivotal in terms of key data releases. Rather we'll likely take our cue from the appetite for risk – stay risk-on, market rates are pressured up. Come off, and they can come down. We think market rates should be calming here after their hectic ride higher. But the mood is in fact to go the other way; risk-on and tempting market rates to dare to go higher. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Risk sentiment revived on Monday, paring some of the jitters from a hot PCE report on Friday. Month-end flows saw Treasuries firmer and stocks higher, and the losses in dollar were accentuated by GBP strength after UK-EU deal to smoothen Northern Ireland trade. European indices however outperformed while Asia Pacific indices ASX and HSI remain in downtrends. Metal prices firmed up amid a softer dollar with Copper back above $4 support. Focus today on Eurozone flash CPI before US ISM and China PMIs take away the headlines.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) moved up cautiously, European equities outperform On Monday markets seemed pacified a little in a thin volume session after US headline durable goods orders fell in January while the UK and the EU reached a deal on Northern Ireland’s trading arrangements after years of friction caused by Brexit. The S&P 500 rose as much as 1.2% to 4018 in early trading before paring much of the gains to close 0.3% higher. Gains in the benchmark index were driven by consumer discretionary, industrials, and information technology stocks. The Nasdaq 100 finished Monday rising 0.7%. Union Pacific (UNP:xnys) surged 9.4% after the railroad company announced to search for a new CEO. Solar energy equipment makers Enphase Energy (ENPH:xnas) and SolarEdge Technologies (SEDG:xnas) each advanced 5.9%.Telsa (TSLA:xnas) rallied 5.5% amid its German plant hitting a production level of 4,000 per week, three weeks ahead of schedule. European equities started the week on a stronger footing as well with EuroStoxx 600 and Germany’s DAX each up 1.1%, France’s CAC index up 1.5% and UK’s FTSE 100 up 0.7%. Some of the optimism came from UK PM Sunak striking a deal with the EU on Northern Ireland trade (read below). Retailers bounced higher as consumer spending remains resilient after fears of recession and energy crunch have eased and the prospect of Chinese demand. The short end of the US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) rallied as the long lend dragged by supply Yields on the 2-year through 5-year Treasury dropped 5bps on short covering amid mixed economic data with a decline in headline durable goods orders due to weak Boeing orders, strong pending home sales, and a weak Dallas Fed manufacturing activity index. The long end underperformed, with yields on the 10-year shed 3bps and the 30-year finished the Monday session unchanged. Upcoming corporate supply estimated to be more than USD30 billion this week weighed on the long end. Across the pond, the 10-year German Bund yield rose to as high as 2.59%, the highest level since 2011 following hawkish comments from ECB Governing Council member Vujcic. Yields on the 10-year Gilts jumped 15bps to 3.81% following the UK and the EU reached an agreement on treading arrangements in Northern Ireland. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) slid; Chinese consumer names bucked the decline Hang Seng Index and CSI300 extended their declines, falling around 0.3% and 0.4% respectively. Haidilao (06862:xhkg), surging 13.7%, was the best-performing stock within the Hang Seng Index, following the Chinese hotpot restaurant chain preannounced positive profit alert with an FY22 earnings beat. The Chinese consumption space did well overall. Budweiser Brewing (01876:xhkg) and China Resources Beer (00291:xhkg) each advanced over 2%. Xiabuxiabu (00520:xhkg) climbed 1.2%. The performance of China internet names was mixed. Kuaishou (01024:xhkg) gained 2.6% and was the biggest winner with the Hang Seng TECH Index. Nonetheless, news about China’s National Radio and Television Administration studying measures to tighten regulation over short videos broke out after the Hong Kong market close. Baidu (09888) rose 2% while Alibaba (09988:xhkg) slid 0.7%. In the EV space, BYD (01211:xhkg) lost 3.4% on price cuts while Li Auto (02015:xhkg) advanced 2.1% after reporting a 41% Y/Y jump in Q4 non-GAAP earnings, beating estimates. XPeng (09869:xhkg) edged up 0.3% after being added to the Hang Seng China Enterprises Index with a weight of 0.59%. In A-shares, solar, AI generated content, media, electronic, and construction materials declined. Food and beverage, and Chinese white liquor names, coal mining, chemical, and communication bucked the overall trend of decline. Kweichow Moutai (600519:xssc) climbed 1.3%; Wuliangye (000858:xsec) advanced 1.8%. Australian equities (ASXSP200.I) move up - but remain at the lowest levels since Jan 12 The ASX200’s short term downtrend still appears to be at play, despite the market rising 0.6% today. Pressuring equities now are a trifecta of reasons- not only a more hawkish RBA, plus its ex-dividend season – marking the 2nd worst month of the year, and thirdly, from a technical perspective, quant traders will be on their toes as the ASX200 is testing a rising trend line, that it formed last year. If it breaks below the area tested yesterday - the market could be at risk of falling further. What does it mean when shares are trading ex-dividend? It’s simply where the dividend right is transferred to shareholders, ahead of dividends being paid out. This typically pressures share price performance. For longer term investors and those seeking yield (dividends)– it be worth considering buying a company’s shares before the ex-date if you wanted to be entitled to the upcoming dividend to be paid. But also keep in mind, when a company goes ex-dividend on the day, it usually falls. For example yesterday Fortescue shares fell 4.1% after going ex-dividend, moving FMG under its 50-day moving average. Today, one day after going ex-dividend Fortescue’s shares trade  3% higher. Though it is worth mentioning, the iron ore price rising 0.7% is adding to positive sentiment after the iron ore price fell over 3% on Monday. So - it’s important to consider companies going ex-dividend ahead. Today, Origin Energy, Evolution Mining, WorleyParsons and Domino’s go ex-dividend. Coles and Woolworths go ex-dividend on March 2, along with Pilbara Minerals. Next week on March 9 - BHP and RIO go ex-dividend, along with Mineral Resources, South32, the ASX, and CSL. FX: GBP surged on Brexit trade deal, AUD still a laggard The USD softened on Monday, nearly erasing all of Friday’s gains as yields fell and stocks jumped in a risk-on environment. US durable goods data missed estimates, cooling off some concerns of another uptick in the tightening pace. However, inflation fears continue to spell caution and no reversal in Fed’s tightening expectations was seen. Most of the USD softness came on the back of GBP strength on UK-EU finalizing a deal to smoothen Northern Ireland trade. GBPUSD surged from 1.1923 to 1.2060 and EURGBP slid below 0.88. AUDUSD failed to break below 0.67 handle but remained near recent lows even as metals recovered a notch. Copper back above $4 amid risk-on, Lithium supply concerns return A broad recovery in base metals was seen as the PCE data from Friday didn’t materialize in risk sentiment capitulation. Copper prices rose ~1.5% after dropping to lows of $3.94 yesterday. Focus this week is on China’s PMI releases due on Wednesday to assess the pickup in Chinese activity after Covid restrictions have been eased. Aluminum also gained following four weeks of losses amid ongoing supply concerns. Zinc and aluminium smelters in Yunnan have been asked to reduce output due to power rationing. Concerns about Lithium supply are also likely to rise as China investigates illegal mining. Operations in Yichun have been ordered to halt work indefinitely. The move could impact between 8-13% of global supply.   What to consider? UK-EU Brexit deal on Northern Ireland trade sealed The UK and EU reached a deal on Northern Ireland's trading arrangements aimed at ending years of friction caused by Brexit. The deal, known as “Windsor Framework”, aims to considerably cut customs paperwork and checks on goods moving from Great Britain but destined to stay in Northern Ireland. Existing requirements on trade from Northern Ireland to the UK will be removed. GBPUSD surged on the news to 1.20+. Yellen in Kyiv to show support Janet Yellen made an unannounced trip to Ukraine to highlight US support. She met with Zelensky and PM Shmyhal and also announced a disbursement of $1.25 billion in fresh economic aid, the first out of a total $10 billion pledged by the administration. It was also reported that the dignitaries discussed additional sanctions on Russia, including confiscating frozen Russian assets to benefit Ukraine's recovery, despite legal obstacles. Food price inflation continues to ease – wheat prices tumble to lowest levels since Sept, 2021   As mentioned in Saxo’s Quick Take global wheat prices remain under pressure from a flood of Russian supplies forcing EU and US sellers to lower prices to stay competitive. In Chicago the soon to expire March wheat contract trades near a 17-month low, down 48% from the March 2022 panic peak while Paris Milling wheat has declined by 38%. The focus is turning to the outlook for global wheat crops this year. According to Bloomberg, US farmers are likely to plant more than analysts expect, and nearly all of France’s soft-wheat crop is in good to very good shape. Traders are also watching talks on the Ukraine grain-export deal, which is up for renewal in March. Click for the technical levels to watch in Wheat, Corn and Soybean Energy giant Occidental goes against the grain of the energy sector and disappoints   Occidental reported adjusted EPS of $1.61, missing the $1.79 Bloomberg consensus expected for the fourth quarter. Despite production increasing by about 3% YoY, the miss on earnings was a result of lower than expected realised prices for natural gas, while it received slightly higher realised prices for oil than expected. This was all while OXY increased capital expenditure to $1.5b, vs the $1.3b expected in the quarter and repaid $1.1 billion of debt. Despite delivering record earnings that missed expectations, OXY increased its dividend by 38% and announced a new $3 billion share buy back. Warren Buffett’s Berkshire Hathaway is the largest Occidental shareholder. The company will hold a conference call to discuss these results Tuesday at 1 p.m. ET. For the year ahead, OXY guides for cap ex to be as high as $6.2b (vs $5.66b). Occidental shares fell 1% after hours, moving further away from its 50-day moving average. Occidental is the only major oil company lately to report results that missed market expectations; with Shell, BP, and Woodside all beating. Softer Eurozone flash February CPI may not be a big relief Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Risk sentiment recovers; Month-end flows in play – 28 February 2023 | Saxo Group (home.saxo)

Summary:  In FX, The US equity market tried to rally yesterday after Friday’s pummeling on hot inflation data, but generally failed to maintain altitude and dropped back close to unchanged on the session as key support remains in place. End of month flows could drive volatility today. In FX, sterling modestly firmer in the wake of post-Brexit settlement between the EU And UK on the Northern Ireland border issue. What is our trading focus? US equities (US500.I and USNAS100.I): S&P 500 futures remain in limbo US equities bounced back yesterday at point engulfing the entire selloff from last Friday before S&P 500 futures gave up its gains towards the end of the session. This morning the index futures opened higher but have sold off trading around the 3,984 level in early European trading hours. Equities have moved into a short-term hibernation until the market gets more clearer evidence of where the bond market wants to go and whether growth is picking up in China following the reopening of the economy post its zero-Covid policy. Hang Seng Index (HSI.I) pared early gains as tech names tumbled The Hang Seng Index jumped over 1% in early trading before paring all the gains and headed south, losing about 0.3% in the absence of headline drivers. Chinese developers, technology, and solar names led the charge lower. While A-share solar, energy storage, and chemical stocks retreated, the CSI300 was supported by consumer, textile, and pharmaceutical names and managed to advance 0.5%. FX: GBP rallies on Brexit trade deal, AUD still a laggard The USD softened in early Monday trading in the US yesterday, nearly erasing all of Friday’s gains as yields fell and stocks jumped in a risk-on environment, but the risk rally faded and the USD rebounded slightly. US durable goods data missed estimates, cooling off some of the momentum in short US yields. However, inflation fears continue to spell caution and no reversal in Fed’s tightening expectations was seen. Most of the USD softness came on the back of GBP strength on UK-EU finalizing a deal to smoothen Northern Ireland trade. GBPUSD surged from 1.1923 to 1.2060 and EURGBP slid below 0.88. AUDUSD failed to break below 0.67 handle but remained near recent lows even as metals recovered a notch. Crude oil remains anchored near lower end of range Crude oil futures slipped again on Monday before finding a bid overnight in Asia. Developments that continue to see the price action being confined within a narrowing range. Crude oil may nevertheless be heading for a fourth monthly loss as concerns about tighter monetary policies raises concerns about a hard landing and with that weaker demand for crude and products. While a slower than expected start to the year has triggered price downgrades from banks, the consensus still points to a pickup in demand and prices above $90 later in the year. A view shared by Vitol, the world’s largest independent oil trader who sees oil rise later in the year in response to a 2.2 million barrels a day jump in 2023 demand. In Brent we find ascending trendline support at $80.70 with resistance at $83.60. Copper back above $4 amid risk-on, Lithium supply concerns return A broad recovery in base metals was seen on Monday as the focus turns to this week’s Two Sessions gathering in Beijing where traders will be looking for fresh signals from the government. Copper trades back above $4 after finding support around $3.94, the December high. Also, in focus this week is China’s PMI releases due on Wednesday to assess the pickup in Chinese activity after Covid restrictions have been eased. Aluminum also gained following four weeks of losses amid ongoing supply concerns. Zinc and aluminium smelters in Yunnan have been asked to reduce output due to power rationing. Concerns about Lithium supply are also likely to rise as China investigates illegal mining. Operations in Yichun have been ordered to halt work indefinitely. The move could impact between 8-13% of global supply. Yields on US Treasuries (TLT:Xmas, IEF:xnas, SHY:xnas) flat ahead of end-of-month US Treasury yields rose slightly again yesterday to new 15-year highs after Friday’s jump on hot US PCE inflation but then eased back to approximately unchanged. It’s been a tough month for treasuries, with the 2-year yield benchmark surging some 60 basis points this month and the 10-year benchmark yield up over 30 basis points. Today is the last trading day of February and could see month-end rebalancing as we await incoming US data. Read next: EUR/USD Pair Is Trading Around 1.0560, USD/JPY Is Above 136.20, GBP/USD Gained| FXMAG.COM What is going on? UK-EU Brexit deal on Northern Ireland trade sealed The UK and EU reached a deal on Northern Ireland's trading arrangements aimed at ending years of friction caused by Brexit. The deal, known as “Windsor Framework”, aims to considerably cut customs paperwork and checks on goods moving from Great Britain but destined to stay in Northern Ireland. Existing requirements on trade from Northern Ireland to the UK will be removed. GBPUSD surged on the news to 1.20+. Yellen in Kyiv to show support Janet Yellen made an unannounced trip to Ukraine to highlight US support. She met with Zelensky and PM Shmyhal and also announced a disbursement of $1.25 billion in fresh economic aid, the first out of a total $10 billion pledged by the administration. It was also reported that the dignitaries discussed additional sanctions on Russia, including confiscating frozen Russian assets to benefit Ukraine's recovery, despite legal obstacles. Tesla shares gains 5% on German production ramp up Reuters reported yesterday that Tesla’s German car plant production hits 4,000 cars/wk which is ahead of schedule boosting sentiment. At this point, we do not know how big the cannibilazation is against its Shanghai production plant which has been the main exporter to Europe. On Friday, one of its more prolific investors Ross Gerber pulled his activist board seat bid suggesting shareholders are holding back from their criticism. Overnight one of Tesla’s suppliers, South Korea based L&F, announced that it had won a KRW 3.8trn cathode materials order, again suggesting demand is ramping up for Tesla. Zoom video rallied over 7% in post-market trading on a strong profit outlook The company reported slightly weaker sales than expected, but forecast Q1 profit of 96-98 cents per share versus analyst consensus of 87 cents and full year profits and especially 2024 profits well above analyst estimates. Zoom is reporting growth in enterprise customers while a shrinking revenue from individual consumers and small businesses. Energy giant Occidental reports disappointing results Occidental reported record quarterly earnings, but missed expectations after costs rose more than expected. The company guided for higher spending ahead, including on its direct air carbon reduction project. For the year ahead, it expects capital expenditure to be as high as $6.2b - vs $5.66b expected. OXY increased its dividend by 38% and announced a new $3 billion share buyback. Its adjusted EPS came in at $1.61, missing the $1.79 Bloomberg consensus. The miss also comes as it received lower than expected realised prices for natural gas - while realised prices for oil were slightly higher than expected.  Warren Buffett’s Berkshire Hathaway is the largest shareholder. A conference call to discuss the results for OXY is at 1 pm ET on Tuesday. Occidental shares fell 1% after hours. Occidental is the only major oil company reporting recently that missed market expectations – while Shell, BP and Woodside all beat. What are we watching next? Softer Eurozone flash February CPI may not be a big relief Broader expectations are for the Eurozone flash CPI to ease to 8.2% YoY in February from 8.6% last month amid lower energy prices. However, the core measure is still expected to be firm at 5.3% YoY, underpinned by higher non-energy industrial goods. This continues to suggest that the underlying price pressures remain firm, and another 50bps rate hike from the ECB remains likely in March. The minutes from the last ECB meeting are also out on Thursday, and the path after the next 50bps rate hike remains on watch. Lagarde previously noted that the ECB will not be at peak rates in March and there will most likely be ground left to cover, which suggested that hopes for a pause in May could be disappointed. France and Spain report preliminary Feb. CPI figures today, while Germany reports CPI tomorrow. Earnings to watch Today’s key US earnings to watch is Coupang and First Solar with the former being part of our earnings preview from last Friday and analysts expecting Coupang to announce 7% revenue growth and EBITDA of $197mn up from $-248mn a year ago as the company is under pressure to increase profitability. Coupang reports its Q4 earnings releases after the US market close. First Solar is expected to report its Q4 earnings after the US market close with analysts expecting 10% revenue growth y/y and EBITDA of $48mn down from $262mn a year ago. Tuesday: Bayer, Moncler, ASM International, Target, Monster Beverage, HP, First Solar, Coupang, Rivian Automotive Wednesday: Royal Bank of Canada, Beiersdorf, Reckitt Benckiser, Kuehne + Nagel, Salesforce, Lowe’s, Snowflake, NIO Thursday: Anheuser-Busch InBev, Argenx, Yunnan Energy New Material, Toronto-Dominion Bank, Fortum, Veolia Environment, Merck, Hapag-Lloyd, CRH, London Stock Exchange, Haleon, Flutter Entertainment, Universal Music Group, Broadcom, Costco, VMware, Marvell Technology, Dell Technologies Economic calendar highlights for today (times GMT) 0745 – France Feb. Flash CPI 0800 – Spain Feb. Flash CPI 1215 – UK Bank of England Chief Economist Huw Pill to speak 1330 – Canada Dec. GDP 1400 – US Dec. S&P CoreLogic Home Price Index 1500 – US Feb. Consumer Confidence 1500 – US Feb. Richmond Fed Business Conditions 1530 – US Feb. Dallas Fed Services Activity 1930 – US Fed’s Goolsbee (Voter 2023) to speak 2130 – API's Weekly Crude and Fuel Stock Report 0030 – Australia Q4 GDP 0030 – Australia Jan. CPI 0130 – China Feb. Manufacturing/Non-manufacturing PMI 0145 – China Feb. Caixin Manufacturing PMI     Source: Financial Markets Today: Quick Take – February 28, 2023 | Saxo Group (home.saxo)

Spanish inflation rose for the second consecutive month in February. Core inflation also continues to rise. Although we expect a decline in the coming months, this shows that underlying price pressures in the economy are still very strong Madrid, Spain. We expect Spanish economic growth to fall to 0.8% in 2024 Headline and core inflation continue to rise in February After rising slightly in January, inflation also rose in February to 6.1% from 5.9% last month. Harmonised inflation followed the same move to 6.1% from 5.9% in January. Core inflation reached 7.7% in February from 7.5% last month. Core inflation has now risen continuously for 22 consecutive months. According to the National Institute of Statistics, this recent development can be attributed to the rise in electricity prices this month, as opposed to the decline seen in February last year. Moreover, prices of food and non-alcoholic beverages increased more than in February last year. On the other hand, some factors also put downward pressure on inflation. Prices of fuels and lubricants decreased, in contrast to the increase in February last year. Combined passenger transport prices also remained stable compared to last year. Spanish inflation likely to lag ECB target until second half of 2024 Headline inflation is expected to ease in the coming months due to lower energy prices, but this process will be slow. Inflation is fueled by food prices and persistently high core inflation. Companies selling price expectations remain high. Any rise in production costs is only slowly being passed on in higher sales prices, leaving further price increases in the pipeline. The resilient eurozone economy also makes it easier for companies to implement new price increases, which contributes to the persistence of high core inflation. Although the pace and magnitude of the decline in inflation remain highly uncertain and depend on highly volatile energy prices, we expect Spanish inflation to be around 4.3% for the full year 2023, reaching 2.7% by the end of the year. It will probably take until the second half of 2024 for headline inflation to return to the ECB's 2% target. Extra interest rate hikes will hamper economic recovery As we expect the ECB to raise interest rates further in the coming months, economic growth will be hampered, especially in interest rate-sensitive sectors such as real estate and business investment. The monetary tightening is to some extent compensated by the sharp fall in energy prices, supporting consumption. Therefore, we still expect growth of 1.3% in 2023, but as the full impact of interest rate hikes will not be felt until 2024, Spanish economic growth is expected to fall to 0.8% in 2024. Read this article on THINK TagsSpain Inflation GDP 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

The Europeans and the Brits finally found an agreement on the very complicated Northern Ireland issue yesterday. But for now, investors warned that they don’t necessarily expect the deal to remove only all of the uncertainty weighing on prices. Brexit deal And if the Windsor Framework could help sterling and small British stocks recover, all the FTSE 100 wants is a rebound in energy and commodity prices, rather than a Brexit deal… Occidental Petroleum  Occidental Petroleum missed earnings and revenue expectations when it announced its Q4 results yesterday, and fell 1.2% in afterhours trading, despite announcing a 38% increase in its dividend and a $3 billion share buyback. Shell Shell, on the other hand, bounced almost 2% higher in Amsterdam yesterday despite a 1% decline in crude oil. European and US markets European and US markets traded in the green yesterday, but the news other than the Windsor Framework was not necessarily encouraging for the central bankers. US core durable orders expanded more than expected, and pending home sales surged 8% thanks to softer mortgage rates on a broad-based decline in yields. The latter data remained consistent with the strong and the resilient US economy, calling for more rate hikes from the Federal Reserve (Fed) to slow inflation. Stocks market So despite yesterday’s relief, the US yields will certainly remain under a decent positive pressure. And higher yields will, at some point, weigh on equity valuations. The S&P500 tested the 200-DMA, which stands at 3940, to the downside last Friday. A fall below that level is expected to accelerate the selloff. Watch the full episode to find out more! 0:00 Intro 0:42 EU & UK finally agrees on Northern Ireland! 3:53 Occidental Petroleum falls after earnings 4:13 Shell up on Goldman upgrade 5:47 Crude oil under pressure 6:24 Equity rally at risk 8:13 Hawkish ECB may slow but not reverse euro selloff 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. #Northern #Ireland #Brexit #deal #Windsor #Framework #USD #EUR #inflation #Fed #ECB #expectations #Crude #Oil #nat #gas #Occidental #Petroleum #Shell #EVPass #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

The Australian dollar remains under pressure and has edged lower on Tuesday. AUD/USD dropped below the 0.67 line on Monday for the first time since Jan. 3. Australian retail sales bounce back Australian retail sales jumped 1.9% m/m in January, following an upwardly revised 4% decline in December and beating the consensus of 1.5%. The data indicates that consumer demand remains resilient despite rising interest rates and higher inflation. For the RBA, the upswing in consumer spending is a sign that the economy can continue to bear higher rates. The central bank has hiked some 325 basis points since May 2022 in a bid to curb inflation. The cash rate is currently at 3.35% and the markets have priced in a peak rate of 4.3%, with four rate hikes expected before the end of the year – one more than what is expected for the Fed. The RBA meets on March 7 and is widely expected to raise rates by 25 basis points. Wednesday could be a busy day for the Australian dollar, as Australia releases inflation and GDP reports. Inflation for January is expected to ease to 7.9% y/y, following an 8.4% gain in December. GDP for the fourth quarter is projected to slow to 2.7% y/y, after a robust gain of 5.9% in Q3. A decline in inflation and in GDP would indicate that high interest rates are having their intended effect and slowing economic activity. The question is whether the RBA will be able to guide the slowing economy to a soft landing and avoid a recession. In the US, a recent string of strong numbers has raised speculation that the Fed could raise interest rates as high as 6%. The unseasonably warm weather in January may have played a part in the better-than-expected numbers and we’ll have to see if the positive data repeats itself in February. The markets have shifted their stance from a final rate hike in March with rate cuts late in the year to pricing in three more rate hikes in 2023. If upcoming inflation, employment and consumer spending reports point to a weaker economy, we can expect the markets to revert to pricing in a dovish pivot by the Federal Reserve.   AUD/USD Technical AUD/USD has support at 0.6656 and 0.6586 There is resistance at 0.6788 and 0.6858 This article is for general information purposes only. It is not investment advice or a solution to buy or sell securities. Opinions are the authors; not necessarily that of OANDA Corporation or any of its affiliates, subsidiaries, officers or directors. Leveraged trading is high risk and not suitable for all. You could lose all of your deposited funds.  

Summary:  Hot Spanish and French inflation data, along with a soft US consumer confidence report and month-end flows, made for a bumpy ride in equities and bonds to close the month of February. Dollar strength however prevailed at the close of the month despite a bump higher in EUR and GBP earlier in the day. A big miss in Australia’s Q4 GDP and January inflation saw AUDUSD plunge 30bps. Target beat earnings estimates but missed margins and lowered annual guidance. On watch today will be China PMIs, German inflation and US ISM manufacturing.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slipped on falls in consumer confidence and Chicago PMI The major U.S. equity indices posted their second negative month in three - despite starting the year higher. Treasury yields are denting sentiment amid fears that higher Fed Reserve rates would remain in place for longer after inflation fears have been creeping back into the market - while stronger European inflation data strengthened the case for more hikes. On Tuesday, the S&P 500 dropped 0.3% and Nasdaq 100 slipped 0.1% following an unexpected decline in the Conference Board Consumer Confidence and a weaker Chicago PMI print. Most sectors within the S&P500 were down while materials, communication services, and financials inched up. Target (TGT:xnys) gained 1% after the discount store chain beat earnings estimates but missed margins and lowered annual guidance. With traders again reducing bets that the Fed will cut rates this year, the S&P 500 was down 2.6% last month. In contrast, European indices closed in gains for the month of February, with France’s CAC up 2.7%, Euro Stoxx 600 up 1.8% and German DAX up 1.6% despite a big surge in European yields as well. Yields on the short end of the US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) climbed on hotter-than-expected inflation prints in France and Spain Yields on U.S. Treasuries climbed in early trading following the sell-off in European government bonds in response to hot inflation prints in France and Italy. The long end of the Treasury curve recovered after the Chicago PMI, Richmond Fed Manufacturing Index, and Conference Board Consumer Confidence unexpectedly slipped. The 10-year notes pared most losses and finished Tuesday only 1bp cheaper at 3.92% while the yield on the 2-year was 4bps higher at 4.82%. The 2-10 year curve flattened to -89. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) ended a three-month streak of gains The Hang Seng Index and CSI300 index finished February with the first monthly loss since October 2022, ending a three-month streak of gains. In February, Hang Seng Index fell sharply by 9.4% while A-shares’ broad benchmark CSI300 outperformed, sliding moderately by 2.1%. The weakness in Hang Seng Index was driven by large declines in mega-cap e-Commerce platforms. Weighed on by the prospect of intensifying competition, JD.com (09618:xhkg) tumbled 25%, Meituan (03690:xhkg) down 22.4%, and Alibaba (09988:xhkg) down 19.6% over the month. Baidu (09888:xhkg) bucked the market trend and weakness among peers, climbing 1.8% on traction gained in AI-generated content solutions. In the near term, investors will be having a gauge into the strength of the economic recovery from the official NBS Manufacturing PMI, Non-manufacturing PMI, and Caixin China Manufacturing PMI scheduled to release today. After that, the focus will be on the State Council’s Government Work Report which includes, among other items, the growth target for 2023, delivered to the National People’s Congress on 5 March, and then the reshuffling of top leadership in the State Council and other key offices of the Chinese government during the National People’s Congress. Australian equities (ASXSP200.I) retreat back to January levels, with markets pricing in more Fed and RBA hikes Focus today is on commodities – with oil and copper moving higher, while the broad market is being pressured with markets adjusting to higher for longer CPI. We will be watching the reaction to China PMIs - which are expected to boost sentiment in commodities. Short term pressure continues for the Australia dollar after GDP and CPI slowed Australian GDP data showed fourth-quarter economic growth slowed down to pace of 2.7% YoY as expected- quashed by higher inflation and interest rates. Meanwhile, headline monthly CPI showed inflation is cooling – falling to a pace of 7.4% YoY vs the 8.1% price growth forecast. This theoretically pressures the Aussie dollar lower in the shorter term, while the US dollar is continuing to move up – with the dollar index up 4% from its lows - with the market pricing in more Fed rate hikes and potentially no Fed cuts this year – which is in line with our view. Our view is that the Aussie dollar could see strength return in Q2, and we maintain a longer-term bullish view on the Aussie dollar in line with our positive commodity outlook. In other news, Sydney property prices, the bellwether of the Australia market, rose for the first time in 13 months in February in - this is a positive sign for home values – but goes against the grain of what the RBA expected and supports the notion of the RBA keeping rates higher for longer. FX: AUD and JPY were the laggards last month as dollar regained ground The dollar closed firmer at the end of the month which spelled inflation concerns coming back and sent the short-end yields surging to record highs. AUDUSD was the weakest on the G10 board as a beating of the risk sentiment and weaker metal prices saw pair test 0.67 despite the return of RBA’s hawkish stance. Yen had a double blow from surging yields and Ueda’s dovish read, and USDJPY tested 137 last night before getting back below 136.50. EURUSD touched highs of 1.0650 after the French/Spanish inflation prints last night but is back below 1.0570 now. GBPUSD also got in close sights of 1.2150 but back closer to 1.2000 now. Commodities: Copper and oil nudge up - we think the commodity bull market run will be on pause till Q2   The oil prices rose 1.5% with traders reading between the lines at IEA commentary - which alluded to Chinese demand rising - while there is a bigger worry for the EU - should there be a complete halt to Russian flows - which would be a bullish scenario for oil and perhaps see prices move back up to last year's unsustainable highs. As for other commodities - Copper moved further above the key $4 mark after rising almost 2%. Aluminium rose 0.6%, while other metals were lower. At Saxo - our view is that the Commodity bull market will be on pause - before restarting strongly in Q2 with material demand expected to rise from China. Crude oil showing some early signs of life A rally in crude oil prices to the top of last week’s trading range is suggesting some early signs of a recovery towards the top of the trading range that has been established since late 2022. With the Fed rate hikes now well priced in by the markets, focus is moving back to sanctions on Russia that continue to threaten supplies. Meanwhile, sentiment on China demand recovery may be back with the Two Sessions likely to announce a strong policy commitment to growth rebound this year. This is offsetting global demand concerns emanating from API data showing a 10th straight weekly crude build. WTI prices touched $78 overnight and Brent was at $84.   What to consider? US consumer confidence in a surprise drop, labor market strength intact The Conference Board's US consumer confidence index saw a surprise fall to 102.9 in February (vs. exp 108.5) from January’s 106 which was also revised lower from 107.1. The present situation index looked resilient at 152.8 from 151.1 and reaching its highest levels since April 2022, but the forward expectations index declined to 69.7 from 76.0 previously. While the headline figures may be a small input for the Fed, the labor-supply mismatch has become more evident from the consumer confidence report. The report showed that the labor differential improved to 41.5 in February from 37 in the prior month, rising for a third consecutive month and reaching its highest levels since April 2022. The differential represents the percentage of respondents who say jobs “are plentiful” less those who say jobs “are hard to get”. Its rise could be an early indication of labor market strength heading into next week’s payrolls and JOLTs reports. Focus turns to ISM manufacturing survey today which is expected to accelerate but still remain in contraction. ECB rate hike bets pick up after higher French and Spanish inflation Consumer prices in France jumped by a record 7.2% YoY in February as food and services costs increased, while Spain saw a stronger-than-expected 6.1% YoY advance. The strong inflation now results mostly from companies passing through to consumers higher prices in the service sector and higher food prices. Looking at the French data, food prices (price increase of+14.5% YoY) contribute twice more to inflation than energy prices. The increase of prices in the service sector (which represents about 50% of the CPI basket) is another source of worry. Expect it to get worse in the short-term. We also see a similar trend in most European countries (the situation is even uglier in the CEE region), with the first print of German February inflation due today and the Eurozone print due tomorrow. Euro bonds slid with German yields up 7bps and Spanish yields up 6bps as ECB terminal rate pricing briefly touched 4%. China PMIs are expected to show further recovery in the economy Scheduled to release on Wednesday, the official NBS Manufacturing PMI, according to survey from Bloomberg, is expected to bounce further into expansion at 50.6 in February from 50.1 in January and the Non-manufacturing PMI is forecasted to climb to 54.9 from 54.4. Despite the sluggishness in exports, Caixin China PMI is expected to return to the expansionary territory at 50.7 in February, from 49.2 in January. The Emerging Industries PMI jumped to 62.5 in February from 50.9 in January adding to the favourable forecasts for the NBS and Caixin PMIs. Target’s earnings beat with stronger-than-expected sales growth but margins missed and annual guidance weaker-than-expected Target (TGT:xnys) reported FYQ4 (ending Jan 31, 2023) EPS of USD1.89, nearly 28% above the consensus estimate of USD1.48. The earnings beat was driven by a stronger-than-expected 0.7% Y/Y growth in same-store sales and a 1.3% Y/Y growth in total sales, while both were expected to fall. Notable strength was found in food and beverage, beauty, and household essentials. Discretionary categories remained soft. Weakness, however, showed up in the gross margins which declined to 22.7% in Q4 from 25.7% in the prior-year quarter. EBIT margins fell to 3.7% from 6.8% a year ago. For the current fiscal year’s annual guidance, the management is expecting between a low-single-digit decline and a low-single-digit increase in same-store sales and a below-consensus operating income of about USD 4.9 billion. Brewers results on watch amid the reopening trade   Budweiser Brewing Co (1876 HK), the Asia distributor - is due to release results today. Q4 revenue is expected to get a little boost from the FIFA World Cup trading - but is still expected to dive. Its outlook could be tainted as higher beer taxes are ahead for South Korea - while Budweiser’s APAC brands are on notice with proposed liqueur taxes there looming – which could slow business growth. The world’s largest brewer Anheuser-Busch InBev SA/NV (BUD) reports on Thursday, and could see higher volatility - for more click here. EV makers on watch: Tesla bolsters efforts to boost production, Rivian gives lacklustre outlook Tesla is continuing to march ahead with its lofty EV production goals - and now looks set to build a plant in northern Mexico. The news precedes Wednesday's reveal of Elon Musk's next phase "master plan," which will test the resurgent enthusiasm for the EV maker. Further details of the Mexico plan are expected to also be released this week. Meanwhile, Tesla’s competitor, Rivian forecasts 50,000 EVs will be produced this year – which was weaker than the market expected. Its fourth quarter revenue also missed expectations making $663 million – vs the $717 million consensus expected.     For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast. Source: Markets Today: Crude oil and copper recover – 1 March 2023 | Saxo Group (home.saxo)

The latest French and Spanish inflation numbers chime with recent US inflation numbers that show some stickiness attached to the inflation narrative. It keeps both the European Central Bank and the Federal Reserve in hiking mode. Here we update on the cycle for rates ahead, noting 5% and 3% as key levels on the horizon for both ends of the curve The cycle we expect on the front end; dominated by hikes for now Given what we know, we agree that the Fed will hike by 25bp per meeting for the next three meetings. That takes the funds rate range to a peak of 5.25% - 5.50% by June. Here’s where the Fed stops. It’s also reasonably consistent with the dot plot, which will make the Fed feel good about itself. Moreover, the cumulative delivery of 550bp of rate hikes (all the way from zero) is quite a dramatic rise in the cost of leverage for households and corporates. Even if it just holds there for a number of months it will add stresses and strains to the economy. The increased cost of leverage has an impact effect, a cumulative effect and a persistence strain The increased cost of leverage has an impact effect, a cumulative effect and a persistence strain. Even if players had ridden through the rate hike process to date and have felt some tolerable pain, that pain will continue to cumulate. US corporates will be in no mood to go on investment sprees in such an environment. And even though there has been a reluctance for employers to shed employees (as it was tough to get them in in the first place), in all probability lay-offs are liable to creep in as we progress further through 2023. There is a moment where inflation and higher rate costs really hit home. And this is why we think the Fed stops, and furthermore why we think the Fed will subsequently engineer some sizeable cuts. Our Chief International Economist James Knightley thinks the Fed can be in the rate cutting game by end-2023, and in any case through 2024 watch out for at least 200bp of interest rate cuts. Why? By the third quarter of the year the realisation will grow that the inflation threat has been significantly downsized, and the Fed will then focus on its second mandate, which is to facilitate a strong jobs market. By this time, employment reports will have turned to low to negative, requiring some support from the Fed, to prevent ongoing (by then) rises in the unemployment rate. Then we get pause and then cuts, with 3% and 5% handles key levels for market rates The 5% handle for the funds rate in all probability gets reduced down to a 3% handle. In fact we have the funds rate bottoming out at 3% flat in 2024. And before the funds rate gets to 3%, the 10yr Treasury yield is liable to get down there ahead of that. As higher interest rates really begin to bite and the recessionary tendency takes hold in the second half of 2023 the 10yr yield is liable to overshoot to the downside, getting to that 3% level. However, note that we characterise this as an overshoot. What we are saying here is 10yr yield should not go below 3%. Or course it could. But it really shouldn’t. And if it does, it should only be temporary. We are in a new world here where there is a more inflation prone set of circumstances This reflects our view that we are in a new world here where there is a more inflation prone set of circumstances that does not merit super-low rates like we’ve had in the previous decade and a half. Those super-lows were brought on by the Great Financial Crisis and reaction to the pandemic. Mean reversion to the 2% area seen for the US 10yr yield through these years does not make much sense going forward. We’d view 3% as a more suitable starting point, which can be broken out as 2% - 2.5% inflation and 0.5% to 1% real rate. In consequence that’s our target for the Fed funds rate bottom, and if that’s the bottom for the Fed, then the 10yr should not really be going below it. Which brings us to the pivot narrative. We’ve been a bit frustrated with the market obsession with this term throughout 2022. There is no pivot. There is a hiking phase (ongoing), a pause phase (second and third quarters of this year) and then a cutting phase that we believe starts in the fourth quarter and really takes hold through 2024. This cutting phase helps to cushion an economy that had finally caved to the prior interest rate elevation pressure. It can’t be overdone though as the US economy is more prone to inflation going forward. Bringing jobs back home does not mean cheaper jobs; de-globalization the same.   That’s based on what we know. Throw in another crisis and we go off on another tangent. Geo-politics always has the potential to engineer that too. But until it happens, it cannot be fully discounted. That all being said, one of the logical reasons for the remarkable early and deep inversion of the US curve is that longer maturities are a bit nervous about the future. Putin’s war in Ukraine shows how uncertain the wider world is, and how impacts from such events become global really quickly. And its ongoing. The Fed does what it can to focus on the US economy. The markets watch the Fed, and lots of other stuff that pushes things around; always quite a complex web. 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

After such a positive start to the year, with two successive monthly gains, European markets have performed remarkably well against a backdrop of a sharp rise in interest rates. US markets on the other hand closed lower as well as giving up some of their January gains.   Year to date we've seen the DAX rise 10.3% and the FTSE100 add 5.7%, against a backdrop that has seen German and UK rates surge against a backdrop of stickier than expected inflationary pressure.   These gains have inevitably prompted speculation as to how sustainable they are, and for now the progress we've seen thus far does look steady and sustainable. Much will depend on how high rates eventually settle and in that there are many strands of opinion.   Markets are continuing to price in the prospect that rates will eventually fall back to a lower baseline, with very few investors willing to countenance the idea that rates are likely to remain high for some time to come, and even longer.   Much will depend on high sticky inflation is likely to be, and on current evidence there is little sign that it is slowing, which means we could see at least 2-3 more rate hikes in the coming months, and rates could stay at these levels through 2024 and into 2025.   Today's final manufacturing PMIs from Spain, Italy, France, Germany and the UK are set to point to a mixed outlook when it comes to economic activity, with manufacturing expected to show an improvement to 49 and 51 in Spain and Italy and declines to 47.5 and 46.3 in France and Germany respectively.   Yesterday inflation in France hit a record high of 7.2% in February, driven by increases in food and services prices, while in Spain it edged back up to 6.1%. While we've seen slowdowns in the price of energy which generally tends to help the manufacturing sector, there has been divergent reactions to the milder winter. Italy and Spain appear to be more resilient, however France and Germany appear to be heading in the wrong direction.   One part of that is higher inflation, with today's German CPI for February expected to only decline modestly to 9%, from 9.2%, however there is a risk of an upside surprise given yesterday's readings from Spain and France. The sticky inflation outlook is already shifting rate hike expectations for the ECB, and a possible 4% pause rate.   We also have more economic data from the UK, where consumers are being similarly squeezed by higher prices and some shortages.  UK manufacturing PMI is expected to be confirmed at 49.2, an increase from 47.   Mortgage approvals have also been in decline in the face of the slowing economy and falling house prices. At the end of last year approvals fell to their lowest levels since May 2020 at 35.6k and could see a modest pickup in January to 38.5k, however it is clear that higher rates are weighing on demand for mortgages, as well as property.   Net consumer credit has slowed from the levels we were seeing in the summer, falling to £500m at the end of last year. This could see a modest pickup to £800m in January.   Moving on to the US economy, we have ISM manufacturing which will tee us up nicely for the services report on Friday, which helped reinforce the hawkish tilt that we saw post January payrolls.   Manufacturing ISM is forecast to improve modestly to 48, still in contraction, along with prices paid which is currently disinflationary at 44.5. European markets look set to start the new month higher after Asia markets got a lift from the latest China manufacturing and services PMI numbers for February, which showed that manufacturing activity jumped to its highest level since 2012 at 52.6. Services also improved to 56.3, giving the China reopening story some added legs, after what has been a slow start since restrictions started to get eased back in December.   EUR/USD – looks to have posted a bullish day reversal off support at the 1.0530 area earlier this week. We need to push through the 1.0640 area to open up a move higher, and back towards the 50-day SMA at 1.0730. While below 1.0730, the bias remains for a test of the January lows at 1.0480/85. GBP/USD – retested the 50-day SMA at 1.2150 yesterday, and which needs to break to retarget the 1.2300 area. Support remains at the lows this week at the 200-day SMA at 1.1920/30. A break of 1.1900 retargets the 1.1830 area. EUR/GBP – slipped back from the 0.8830/40 area and has drifted down to the 100-day SMA at 0.8750. While below the 0.8830 we could see further declines towards the 0.8720 level. USD/JPY – ran into resistance at the 200-day SMA at 136.90/00. Interim support at 133.60, and below that at 132.60, and 50-day SMA.   FTSE100 is expected to open 20 points higher at 7,896 DAX is expected to open 37 points higher at 15,402 CAC40 is expected to open 5 points higher at 7,281 Email: marketcomment@cmcmarkets.com Follow CMC Markets on Twitter: @cmcmarkets Follow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

Uh oh! Inflation in Europe took the wrong direction in February. The data released yesterday printed a record inflation of 7.2% in France and ticked higher to 6.1% in Spain. Both were higher than expected, of course, and cranked up the hawkish European Central Bank (ECB) rate expectations.   For the first time, the market pricing pointed out that the ECB's deposit rate would reach 4%, 150bp higher than where it stands right now. That means more 50bp hike will be on the mene after the next ECB meeting's almost certain 50bp hike.   What does that mean for investors?  First, it means higher bond yields, as the hawkish ECB expectations directly impact the bond yields, sending them higher. As such, German, French, Italian and Spanish 10-year yields are now at the highest levels in more than a decade. They are at levels reached during the European debt crisis at the start of 2010s.   Higher yields are good for the euro - even if it won't necessarily reverse the negative trend against the dollar, it should at least slow the selloff.   But hotter-than-expected inflation is not necessarily good for the European stocks, as higher inflation means higher ECB rates, higher ECB rates mean higher bond yields, higher bond yields mean more expensive financing for companies, more expensive financing for companies means less projects, less manufacturing, less services, and that, in return, means lower revenues for companies.   Though a stronger euro helps companies eke out better profits as a stronger currency makes raw material and energy costs more affordable for European businesses, higher yields could weigh more on the balance than a stronger euro. Therefore, what's probably next for the Stoxx 600 is a downside correction, following a 23% rally between last October and this February.  Today, we will get hold of the German inflation figures along with the final manufacturing PMI data for the Eurozone countries, and tomorrow morning, the Italian CPI numbers will fall in before the Eurozone flash CPI estimate for February. The expectation is that inflation in the Eurozone may have slowed to 8.2% from 8.6% printed a month ago. Or it may have not slowed as much.   Higher inflation combined with soft growth is the worst possible scenario for stocks.  Slower Aussie inflation, stronger China PMI  Inflation in Australia eased more than expected in January, from last month's record 8.4% to 7.4% versus 8% expected by analysts. But growth also slowed in Q4.   The Aussie-dollar first dipped then rebounded. The better-than-expected PMI data from China boosted iron ore prices, and helped throw a floor under the Aussie's selloff, at around the 100-DMA, 0.6740. But clearing support at this level would only take another wave of hawkish Federal Reserve (Fed) pricing, which would boost the dollar appetite and send the pair below the 100-DMA. The downside risks prevail.  Speaking of the Fed expectations  Cooling US house prices for a seventh straight month, and ugly Richmond manufacturing index cooled the hawkish Fed pressures yesterday, but the S&P500 couldn't hold on to its gains above the 50-DMA, and closed yesterday's session below this level. As a result, the month of February ended with a 2.7% loss for the S&P500, and with mounting pressure from the bears.   The key support to watch in S&P500 is the 200-DMA, near 3940. There are warnings that a fall below this level could trigger a $50 billion selloff, according to JP Morgan.  Elsewhere, well crude oil jumped yesterday, although the latest API data showed another 6.2 million barrel build last week in the US crude inventories. The strong PMI data from China certainly helped keeping the oil bulls alert, but the 50-DMA offers, a touch below the $78pb, may be hard to clear defying the massive builds in US crude inventories week after week. The more official EIA data is due today, and remember last week, the EIA data was even bigger than the API. 

Inflation in Europe took the wrong direction in February. The data released yesterday printed a record inflation of 7.2% in France and ticked higher to 6.1% in Spain. Both were higher than expected, of course, and cranked up the hawkish European Central Bank (ECB) rate expectations. US market In the US, cooling US house prices for a seventh straight month, and ugly Richmond manufacturing index cooled the hawkish Federal Reserve (Fed pressures yesterday, but the S&P500 couldn’t hold on to its gains above the 50-DMA, and closed yesterday’s session below this level. As a result, the month of February ended with a 2.7% loss for the S&P500, and with mounting pressure from the bears. Crude Oil Elsewhere, crude oil jumped yesterday, although the latest API data showed another 6.2 million barrel build last week in the US crude inventories. The strong PMI data from China certainly helped keeping the oil bulls alert. It also helped Aussie rebound following soft CPI data. Read next: Elon Musk Is Richest Man Again, The State Bank Of India Had Raised $1 Billion From Global Banks| FXMAG.COM Stocks In individual stocks, Target and Zoom gained after results, while Rivian lost 10% in after hours trading on mixed results and soft outlook. Watch the full episode to find out more! 0:00 Intro 0:36 Hot European inflation boosts ECB hawks 5:24 Strong China PMI counter soft AUD inflation, but... 6:30 S&P500 closes the month 2.7% down 7:59 Crude oil gains but solid inventory data could limit rally 8:44 Target, Zoom gain, Rivian tanks post 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. #Eurozone #inflation #ECB #rate #hike #EUR #USD #AUD #Crude #Oil #Target #Zoom #Rivian #earnings #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  China’s PMI data came in stronger than expected and signaled the economic recovery is picking up steam. The data triggered sharp rallies in the Hang Seng Index and commodity prices, particularly industrial metals. U.S. bond yields rose and equities slid, following the ISM price paid index rising to 51.3 and Fed officials’ hawkish comments keeping a 50-bp hike in the March FOMC on the table.   What’s happening in markets? Nasdaq 100 (NAS100.I) and S&P 500 (US500.I) slump to new lows on higher Fed rate bets Stocks were pressured after fresh economic data highlighted persistent inflationary pressures remain – pushing the S&P500 to close at its lowest level in six weeks after shedding 0.5%. It’s the second straight day the S&P closed under its 50-day moving average. While most sectors declined within the S&P500, energy rallied strongly by nearly 2%. The strong China PMI data helped sentiment in the materials and industrial sectors, both rising on Wednesday. Nasdaq 100 slid 0.9%. The extra pressure on equities came as the prices paid component of the ISM in surging above the 50 expansion/contraction threshold and higher for longer comments from Fed officials (see below). Key U.S. company news In regular trading, First Solar (FSLR:xnas) shares surged about 16% to its highest since 2009 after the panel maker’s backlog of orders look like they’ll take the 2nd half of the decade to fill. The surging demand comes as the company is benefiting from the Inflation Reduction Act- signed last year by President Joe Biden. Meanwhile, after close of trade - software giant Salesforce (CRM:xnys) gave a surprisingly upbeat forecast for the year ahead - and plans to step up share buybacks to $20 billion, which is positive vs its $167b market cap. Operating margins will be about 27% in fiscal 2024, exceeding Bloomberg consensus estimates of 22.4% growth. This also potentially eases pressures CRMs faces from a group of activist investors. Salesforce shares rose 14% in post market trade, after closing at $167.35 in normal trade. Next, we will be watching - Campbell Soup (CPB:xnys) which reports after market close Thursday. US Treasury curve (TLT:Xmas, IEF:xnas, SHY:xnas) sold off on Fed comments The 10-year yield breached above 4% briefly during the session before closing a touch below that at 3.99%, following comments from the Fed’s Kashkari saying undecided between a 25bp and 50bp hike at the March FOMC and Bostic’s 5-5.25% “well into next year” remarks. Yields on the 2-year notes rose 6bps to 4.88%, the highest level since 2007. The jump of the ISM Prices Paid (see below) also added fuel to the selloff. Hong Kong’s Hang Seng Index (HSI.I) and China’s CSI300 (000300.I) jumped on strong China PMIs Hang Seng Index surged 4.2% and CSI300 gained 1.4% on Wednesday following the release of strong PMI data in China much above consensus estimates. Hang Seng Tech Index jumped 6.6% as technology hardware, China internet, and EV makers advanced sharply. The percentage increase in the Hang Seng Index was the largest since early November and turnover in the Stock Exchange of Hong Kong reached HKD154 billion, the highest since late January. Chinese developers were among the top winners, with Longfor (00960:xhkg) up 9.6% and Country Garden (02007:xhkg) up 8.3% leading the charge higher. The chairman of Country Garden announced retirement. ASMPT (00522:xhkg) jumped 9% after the semiconductor equipment maker reported Q4 revenues beating estimates. After market close, Techtronic (00669:xhkg) reported H2 EPS of USD0.27 and revenues of USD6.2 billion, both below the consensus estimates due to soft demand for power tools.  In A-shares, telco, digital economy, software, gaming, media, and AI-generated content stocks were the top winners. Australian equities (ASXSP200.I) rise to four-day highs on commodities rebounding  - beware of companies going ex-dividend ahead After China PMIs beat expectations, with new orders surging back to 2017 level - focus is on commodities strongly rebounding - with the iron ore (SCOA) price rising to a five-day high $126.70, the spot Copper (HG1) price trading at a five-day high, while aluminium is also higher. Coles (COL), Woolworths (WOW) go ex-dividend today, along with Pilbara Minerals (PLS).  As a reminder – dividend paying giants, BHP and Rio go ex-dividend this time next week, which could pressure equities. FX: Dollar unable to bask in yields glory The US dollar was weaker on Wednesday mostly pressured by the gains in Chinese yuan in the Asian session after the upbeat China activity data sent the China reopening theme roaring once again. USDCNH dropped from 6.96 to sub-6.88. Some reversal in the dollar was seen in the US session but it was not enough to reverse earlier losses. Some other currencies also got a bid from the China theme, particularly EURUSD that surged to highs of 1.0691 also underpinned by rising hawkish ECB expectations after hot regional inflation prints. NZDUSD was the outperformer in G10 FX, rising to 0.6276 with Q4 terms of trade returning to positive territory at 1.8% from last month’s -3.9% QoQ. GBPUSD stayed below 1.2100 despite Bailey signaling more BOE hikes may be needed, and saying that the experience in the 1970s showed that doing "too little with interest rates now" may mean more increases later on.   AUD reverses course, rising above its 100-day moving average The Australian dollar against the US (AUDUSD) advanced for the first time following four days of losses, after China's manufacturing activity boosted sentiment – hitting a decade high – with new orders improving in February, surging to 54.1 - the highest level since September 2017. This enthusiasm is buoying commodity prices on the notion that demand will rise – the iron ore (SCOA) has risen to a five-day high of $126.70, spot Copper (HG1) hit a five-day high, while aluminium is also higher. This optimism is offsetting the slowing Australian prints released yesterday- with GDP grinding down to pace of 2.7% YoY in the 4Q as expected- while monthly CPI cooled to 7.4% YoY vs the 8.1% price growth forecast. It’s also important to note, short covering has also added to the Aussie dollar rising. Our view is that the Aussie dollar could see strength return in Q2, in line with our view that the commodity bull market will strongly restart in Q2. Crude oil struggling to lean on Asia/Europe vs. US demand Crude oil prices remained near recent highs despite the strong signal on Chinese demand recovery from upbeat PMI data. In addition, the inventory data was also bullish signalling a recovery of demand in Asia and Europe. US commercial crude oil inventories gained less than expected last week, rising only 1.2 million barrels as US exports of crude hit a record daily high of 5.6 million barrels last week (+22.4% w/w). However, on the other hand, US ISM data and hawkish Fed speakers continued to highlight inflation fears are here to stay and sparking some US demand concerns. WTI futures traded just below $78/barrel while Brent touched $84.50. Metals complex excited about China Copper, aluminum, zinc and iron all traded higher following the outperformance of Chinese PMI data on Wednesday, driving a return of focus to the China reopening theme. Copper, which earlier found support at $4 surged to $4.17 in the Asian morning today, and may take another look at $4.20. However, our head of Commodity Strategy Ole Hansen wrote that the next sustained move higher is unlikely to be triggered until the second quarter or later, the timing to a certain extend depending on the economic outlook for the rest of the world and whether recession, as we believe, will be avoided.   What to consider? Mixed US ISM survey details – but steady message on inflation The US ISM manufacturing marginally rose to 47.7 from 47.4, coming in below expectations of 48.0. New orders lifted to 47.0 (prev. 42.5), while employment fell to 49.1 (prev. 50.6), entering contractionary territory. But the message on price pressures continued to roil markets. ISM priced paid rose back into expansionary territory to 51.3, well above the prior 44.5 and the expected 45.1, re-affirming that it may be too soon to call goods inflation disinflationary. Hawkish Fed talk brings 10-year yields to top 4% Fed member Kashkari (voter) signaled an openness for a 50bps hike at the March meeting, saying he is open to both 25bps and 50bps. Still, he emphasized that the terminal rate is more important than the size of rate hikes, where also he hinted that it could be revised higher from December. Another member Bostic (non-voter) maintained his view that the Fed policy rate needs to rise to 5.00-5.25% range, but said that the rate should be left there “until well into 2024”. 10-year Treasury yields rose above the key 4% mark for the first time since November, sending another warning signal to equities. China’s PMIs signaled recovery picking up steam The headline official NBS PMI surged to 52.6 in February, the highest print since 2012, from 50.1 in January. The strength was across the board with production and new orders improving markedly and the new export orders unexpectedly surging to 52.4, the first time into the expansion territory in 23 months. The NBS non-manufacturing PMI and the Caixin Manufacturing PMI, also released today, both bounced strongly and signaled economic expansion. Readers can find more on China’s PMI here. Hot German inflation print creates further pressure for the ECB Coming on the heels of hotter than expected inflation prints in France and Spain for February, German CPI print was also hotter than expected at 9.3% YoY (vs. +9.0% exp and +9.2% prior). The message on disinflation has therefore continued to weaken, and both Fed and ECB are likewise pressured to do more on policy tightening to ensure the inflation comes back to target. Th aggregate Eurozone print is out today and expectations of a softening to 8.3% from 8.6% last month may be tested. Tesla plots a path to renewable energy at Tesla Investor Day As part of Tesla’s “Master Plan” for the company, Musk said Tesla’s next phase of growth will be built around building clean energy sources – that can serve a much larger world population - without great economic sacrifice. Moving into sustainable energy might mean moving into heat pumps- as they can dramatically cut home and office heating costs. Tesla dubs them one of the low hanging fruits in the sustainable energy transition. Tesla’s shares are up 97% from their January low.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For a global look at markets – tune into our Podcast.   Source: Markets Today: Sharp rise in China’s PMI data; inflation concerns in the U.S. - 2 March 2023 | Saxo Group (home.saxo)

The Belgian housing market is cooling due to higher interest rates, with 45% fewer mortgages granted in January 2023 than in the same month last year. Prices are expected to correct by 0.5% this year and rise by only 1% next year, while the real price correction could reach 11% between 2022 and 2024 Real price correction may reach up to 11% between 2022 and 2024 Despite sharply higher interest rates and economic uncertainty, house prices have continued to rise sharply in 2022. Although official figures for the fourth quarter are yet to be released, growth is likely to be between 5% and 6% for all of 2022. However, this is largely due to a strong first half of the year. As we will only feel the full impact of higher interest rates this year, we forecast a slight 0.5% decline in house prices this year. The effect of higher interest rates will still be felt next year as well, making a strong rebound in 2024 unlikely. Therefore, we expect house prices to rise by only 1% in 2024. It will probably take until 2025 for house prices to rise faster than inflation again. This is a rather exceptional situation. Although there have been some years in the past when house prices did not rise as much as inflation, these were exceptions. We have to go back as far as the early 1980s to find a period when house price growth remained below inflation for three years in a row. In recent years, declining interest rates were one of the major drivers of the sharp rise in house prices, but this trend has reversed since early 2022, with interest rates rising. This does increase the real price correction further. So while we do not expect a large (nominal) price fall in the Belgian property market, the real price fall (adjusted for inflation) from 2022 to 2024 could reach around 11%. Evolution of average house prices Source: Eurostat, ING forecasts Mortgage production drops to lowest level in 17 years Due to the sharp rise in mortgage rates, demand for credit has fallen sharply in recent months. The number of mortgages granted, after falling sharply in 2022, declined further in January. In January this year, 45% fewer mortgage loans were granted than in the same month last year. This figure is the weakest month in more than 17 years and demand for credit is currently even lower than during the 2009 financial crisis. Moreover, the European Central Bank's latest Bank Lending Survey, a quarterly survey of banks, shows that they expect a further weakening in demand for home loans in the first quarter of this year. The only bright spot in the survey is that the number of rejected home loans rose sharply in other eurozone countries, but not in Belgium. The automatic indexation of wages ensured that the purchasing power of Belgian households held up much better than in other countries. Year-on-year change in number of mortgage loans granted Source: NBB Affordability at lowest level in 10 years The sharp rise in mortgage interest rates last year, combined with the steep rise in house prices, has put strong pressure on property affordability. In January, our affordability index, which is based on both the repayment burden relative to income and the loan-to-value ratio, reached its lowest level in more than a decade. Affordability may deteriorate further in the coming months as interest rates rise (slightly) again, but we expect affordability to improve later in the year as interest rates stabilise. ING's affordability index for Belgian real estate Source: ING's own calculations Mortgage rates possibly a little higher by summer Mortgage rates have stabilised since the beginning of this year after rising sharply last year. In the first weeks of 2023, the 20-year fixed mortgage rate hovered between 3.2% and 3.4%. It could still go slightly higher in the coming months. A key reason for this is persistently high inflation, which means the European Central Bank is likely to raise interest rates further. Although lower gas prices help slow inflation, core inflation, excluding food and energy, is still rising. With the eurozone economy also proving very resilient, inflation will also cool off less quickly as companies can more easily implement new price increases. Several ECB board members have recently stressed their determination to keep raising interest rates and keep them high. Isabel Schnabel, an ECB executive board member, recently warned that financial markets underestimate the risk of persistently high inflation, indicating that the ECB plans to raise interest rates further in the coming months. If the expected (though limited) rise in interest rates continues, affordability will deteriorate further this year. Although wages, which track inflation thanks to automatic wage indexation, are likely to rise more than house prices this year, this effect is expected to be offset by rising interest rates. Indeed, a jump in interest rates has a much greater effect on affordability than a rise in wages. Supporting factors for the Belgian housing market A sharp (nominal) price correction is quite unlikely in Belgium. Our real estate market is historically more stable than other European countries, partly due to the large proportion of private homeowners and the more cautious lending policy of Belgian banks. Moreover, purchasing power held up much better in Belgium last year than in neighbouring countries, thanks in part to the automatic indexation of wages.  Moreover, there are other factors that will support the Belgian real estate market this year. The supply of new homes on the market will slow down in the coming years, which, combined with a growing number of households, will lead to increasing scarcity and higher prices. According to the Planning Bureau's latest projections, the number of Belgian households will increase by nearly 200,000 between now and 2030, meaning that demand for additional housing will remain high. At the same time, growth in the supply of new housing is slowing down. In the first ten months of 2022, the number of licensed housing units fell 8.3% compared to the same period in 2021. During the pandemic, many projects were delayed because building materials could not be delivered on time. Last year, the sharp increase in mortgage interest rates and the higher cost of building materials caused the price of new construction projects to rise sharply, causing many projects to be postponed or cancelled. This increasing scarcity in the real estate market will put upward pressure on home prices in the coming years. Another factor is the slightly improved economic outlook. The expected winter recession did not materialise, thanks in part to lower gas prices. As a result, consumer confidence has risen slightly from its recent low. Also, the ECB's latest February consumer expectations survey showed that Belgians still expect house prices to rise further next year. Compared to neighbouring countries, Belgians are a lot more optimistic, which will help the dynamics of the real estate market. Read this article on THINK TagsReal estate Belgium 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

Hotter-than-expected inflation data pushes the European yields higher. The higher yields support recovery in the euro, but not the European stock valuations. A slowing economic growth Across the Atlantic Ocean, the news is not great, either. The ISM manufacturing index revealed a slower contraction in February, but the improvement compared to the last month was less than expected.A slowing economic growth is not bad news for the Federal Reserve (Fed), but the mounting price pressure is. This is what the ISM report revealed yesterday, and further fueled Fed hawks. Fed Activity on Fed funds futures now gives more than 30% chance for a 50bp hike at the next meeting, and Fed swaps price in a peak Fed rate of around 5.5%. This number was around 4.9% at the start of the year. Yields Consequently, the US 2-year yield continues its steady climb toward to 5% mark, and the 10-year spiked above the 4% psychological level yesterday.The S&P500 tested the critical 200-DMA to the downside. There is major speculation about an aggressive selloff below this 200-DMA level. And given the persistent positive pressure on the yields, clearing the 200-DMA support is not a matter of if, but a matter of when. Read next: Twitter Employees Are Overburdened As Elon Musk Tries To Run Twitter With Fewer Staff| FXMAG.COM Watch the full episode to find out more! 0:00 Intro 0:37 European inflation pressures yields and euro higher, equities lower 4:03 Just a matter of time before S&P500 slips below 200-DMA 8:41 Crude oil gains, but China-led rally may never materialize 10:02 Why Elon Musk’s Master Plan III was a flop? 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. #Eurozone #inflation #ECB #rate #hike #EUR #USD #Crude #Oil #Tesla #Master #Plan #EV #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Summary:  Today we look at the market closing on a weak note on a fresh rise in Treasury yields and then spilling lower in later trading after Tesla's investor event was a damp squib. Elsewhere, inflation remains very much on the brain in Europe, with today's Eurozone-wide inflation print for February rounding out the set of February CPI reports across the bloc. In FX, sterling feels the heat on dithering BoE governor Bailey. In commodities, the latest on copper and crude oil and in equities, thoughts on where we are in the current historic drawdown. Today's pod features Garnry on equities, Ole Hansen on commodities and John J. Hardy hosting and on FX. Listen to today’s podcast - slides are available via the link. Follow Saxo Market Call on your favorite podcast app: Apple  Spotify PodBean Sticher If you are not able to find the podcast on your favourite podcast app when searching for Saxo Market Call, please drop us an email at marketcall@saxobank.com and we'll look into it.   Read next: Twitter Employees Are Overburdened As Elon Musk Tries To Run Twitter With Fewer Staff| FXMAG.COM   Questions and comments, please! We invite you to send any questions and comments you might have for the podcast team. Whether feedback on the show's content, questions about specific topics, or requests for more focus on a given market area in an upcoming podcast, please get in touch at marketcall@saxobank.com.   Source: Podcast: Tesla nothingburger and 4.0% 10-yr yield sets market on tilt | Saxo Group (home.saxo)

Inflation decreased from 8.6 to 8.5% in February with core inflation rising to 5.6%. While some forward-looking indicators for inflation are improving, the faster pace of underlying inflation means the European Central Bank has no reason to stop hiking anytime soon   The small decline in headline inflation mixed with a jump in core inflation is far from what the ECB had been hoping for. The increase in food inflation stands out, jumping from 14.1 to 15% in February. Services inflation is also a clear worry, which increased from 4.4 to 4.8%. With wage growth on the rise, concerns are that services inflation could prove sticky at high levels. But also energy inflation did not drop in line with the market price developments, thanks in part to French changes in the tariff shield. The silver lining is that core inflation increases were mainly due to base effects. Using our own seasonal adjustment, we find that the monthly increase in core prices was in fact slightly down from January. So perhaps not as alarming as it looks at first sight, but then again, at 0.5% month-on-month, core inflation is still growing at an annualised pace above 6%. So still nowhere near the ECB target for the moment. How bad is this exactly? The February reading is a clear setback, but forward-looking indicators show that the declining trend in inflation is set to continue. March will show a much faster drop in headline inflation as the huge jump from last March will fall out of the year-on-year comparison. Energy inflation is set to turn negative soon, possibly already in March. But the question is how fast other price categories will see declines and if inflation proves to be stickier than expected. We do see producer prices for food showing smaller increases and outright declines in food commodity prices, which should lead to slower consumer food inflation over the course of the year. Goods inflation is also set to fade in the months ahead as input costs have improved markedly and selling price expectations from manufacturers are falling quickly. The big worry to us is around services inflation as faster wage growth could make services inflation sticky. Still, the smaller-than-expected decline in inflation in February is important as the ECB takes current underlying inflation seriously as a factor for determining policy. That was not lost on markets this week as yields surged on the back of the higher inflation readings from Spain, France and Germany already released earlier. At the same time, it is also important not to put too much emphasis on this one figure. A rate hike at the March ECB meeting is more or less a given at 50 basis points and May is still quite some time away. There is a clear risk of the ECB having to do more, but ECB Chief Economist Philip Lane also indicated earlier this week that a lot is pointing in the right direction for inflation to come under control. The difference between disappointing current inflation and optimism about forward-looking indicators will likely bring about more debate between hawks and doves ahead of the post-March meetings. Before May, we will have quite some data to judge as to whether February was a blip or inflation does indeed remain stickier than expected. Read this article on THINK TagsInflation Eurozone ECB 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

An improvement in risk sentiment after the publication of upbeat macroeconomic data from China made it difficult for the US dollar to find demand on Wednesday. USD/JPY The USD/JPY pair in the Asian session recouped losses and rose towards 136.80. At the beginning of the European session, the yen dropped significantly to 136.2540, but quickly began to recover. At the time of writing, USD/JPY is trading at 136.7450 So far, the Japanese yen has been stable this week in a period where the US dollar has weakened significantly against most of its G-10 peers. The yen's lack of strength may reflect the belief that the new Governor of the Bank of Japan (BoJ) Kazuo Ueda will maintain the very loose monetary policy of his predecessor. EUR/USD The euro pair is in a downtrend. It started the day high above 1.0670 but dropped to trade around 1.0620. The euro fell against the dollar on Thursday after data showed inflation in the euro zone was not as high as investors had feared based on national readings in recent days. Eurozone inflation eased to 8.5% in February from 8.6% a month earlier on lower energy prices. The core inflation rate in the Euro Area rose for a third successive month hitting a fresh record high of 5.6% in February. The core CPI which excludes prices of energy, food, alcohol and tobacco went up 0.8%. The core number reinforces the idea that without decreases in energy prices inflation remains sticky and adding credence to the recent hawkish rhetoric from ECB policymakers. Investors now see the ECB's 2.5% deposit rate rising by a combined 100 basis points in March and May, then to around 4.1% at the turn of the year. Read next: Tesla Intends To Cut Assembly Costs, The White House Released The National Cyber Strategy | FXMAG.COM GBP/USD The pound pair against the euro is down today. GBP/USD traded below 1.20 again. GBP/USD extended its decline and dropped below 1.2000 on Thursday after failing to capitalize on Wednesday's US dollar (USD) weakness. The couple looks delicate. The British pound loses against the US dollar this Thursday as the dollar finds some support. Last night, Fed officials (Kashkari and Bostic) maintained their hawkish stance. From the UK's perspective, the Brexit deal between the Prime Minister and the EU. Trade disputes with Northern Ireland have now been resolved, but the most surprising aspect of the deal was the favorable reception from some senior Brexiteers who praised the new concessions. While this is positive for the overall UK economy, the currency remains driven by central bank policy. The Brexit deal could bring short-term relief to the pound against the USD. AUD/USD The Australian movement is similar to its European counterparts. The AUD/USD pair remains above 0.67 despite a significant drop from 0.6767 to 0.6730. Source: finance.yahoo.com, investing.com

On Thursday, the EUR/USD currency pair decreased. If you recall, we stated in the article from yesterday that simply fixing above the moving average is not a strong signal to reverse the trend. This is merely a caution that the trend might change and that traders might gradually start to think about making reverse trades. Well, it happened this time. The euro/dollar pair lasted less than a day above the moving average line before rapidly falling below it. But it should be observed right away that yesterday's macroeconomic and fundamental backgrounds did not lend themselves particularly well to the decline of the euro. For instance, the February inflation report revealed a further reduction in the rate of price growth. Indeed, it was minimal, which is depressing in and of itself. Yet, this aspect was intended to help the euro because there is now a greater likelihood that the ECB will tighten monetary policy for a longer period. We've already mentioned that compared to the Fed, not everything is as apparent when it comes to the ECB or the Bank of England. The economy, labor market, and unemployment rates are all favorable for the Fed. The unemployment rate in the European Union, which is nearly twice as high as that in the US, stayed at 6.7% in January. The economy has already reached zero growth rates, at a pace of only 3%. The European economy will undoubtedly enter a recession, making it vulnerable to further tightening of monetary policy if we assume that the rate needs to be hiked to at least 5%, if not more. Also, it should be kept in mind that the European Union is a commonwealth of almost thirty nations; therefore, the regulator cannot carelessly raise the rate while concentrating solely on Germany or France. The situation is significantly worse in the UK because there has been no decrease in inflation there and the rate has already increased to 4%. There is no doubt that a recession will occur; the only question is when it will begin. As a result, unlike the Fed, the Bank of England cannot continuously raise the rate at any level of inflation. It turns out that the time has arrived when the European Union or Britain should no longer maintain a combative "hawkish" attitude due to excessive inflation. The ECB or the BA will most definitely not continue tightening monetary policy, prolong the cycle of rate hikes, or quicken the pace of tightening if inflation starts to grow tomorrow. As a result, the euro and the pound are losing one of their main sources of support and could continue to decline. Christine Lagarde on EU inflation. Every speech by Christine Lagarde is interesting. She claimed yesterday that there has been no consistent drop in European Union inflation, which is still at a high level. She added that she is certain that the consumer price index will fall further and that the rate will rise by another 50 points in March. A longer cycle of rate increases may be necessary, Ms. Lagarde added. Although there are numerous ways to read her statements, market participants undoubtedly anticipated hawkish rhetoric in response to the February inflation report. In our opinion, the euro currency was quite able to show growth yesterday, but this didn't happen, and in our opinion, this is a very important development. If the market stops buying when there are valid reasons to do so, this could indicate that the sentiment has shifted to one of bearishness. As a result, we continue to support the decline of the European currency. The pair is still inside the Ichimoku cloud on the 24-hour TF, but this won't last forever. The price is already getting close to the Senkou Span B line. As a result, one way or another, the pair will leave in the near future. The downward mood is still below the critical level. The pair's decline to the level of $1.02 is now completely supported by the technical picture as well. In theory, it will be extremely difficult for the European currency to count on observable growth if nothing changes in the foreseeable future. And not much can change now. The Fed will continue to increase interest rates "until the bitter end," and the ECB will respond to the situation while keeping an eye on the economy. The euro currency can quickly regain price parity if the market is fully aware of this fact. Then, new fundamental factors will determine every aspect of life. We do not anticipate a continuation of the upward trend that has been developing over the last five to six months. It is unlikely that anything will change at the Fed and ECB meetings in March. As of March 3, the euro/dollar currency pair has experienced 92 points of "average" volatility over the previous five trading days. Thus, on Friday, we anticipate the pair to move between 1.0496 and 1.0680. A new round of upward movement will be signaled by the Heiken Ashi indicator turning back to the top. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0864 Trade Suggestions: The EUR/USD pair has reconsolidated below the moving average line. Unless the Heiken Ashi indication turns up, you can maintain short positions with a target price of 1.0498. If the price is stabilized back above the moving average line, long positions can be initiated with targets of 1.0680 and 1.0742. 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 current trading direction 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) zones.   Relevance up to 01:00 2023-03-04 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336622

The Eurozone’s flash CPI estimate looked as ugly as it smelled beforehand. Inflation in the Eurozone is estimated to have barely eased to 8.5% from 8.6% printed a month earlier, while core inflation advanced to a record of 5.6%, from 5.3% printed previously. CPI The latest CPI update confirmed the European Central Bank (ECB) hawks’ aggressive positioning for further rate hikes and pushed the European yields further up yesterday, but despite higher yields across the board, the Stoxx 600 closed Thursday’s session 0.50% higher. Jobs data Across the Atlantic Ocean, fresh jobs data came to fan the inflation worries yesterday in the US. US Yields US yields advanced but the S&P500 could avoid a further selloff, though it briefly stepped below the most-watched 200-DMA. EU and  US stock markets But for both the European and US stock markets, the rising yields call for downside correction. Watch the full episode to find out more! 0:00 Intro 0:32 Higher Eurozone inflation boosts EZ yields 2:24 … but Stoxx resist 5:01 Latest US jobs data points at heated inflation, as well 6:38 … S&P500 also resists to rising yields 8:36 USD upbeat, dollar-yen clears key resistance 8:58 Strong China data boosts energy, but… 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. #Eurozone #inflation #US #jobs #data #Fed #ECB #rate #hike #EUR #USD #JPY #Crude #Oil #Stoxx #SPX #Dow #Nasdaq #investing #trading #equities #stocks #cryptocurrencies #FX #bonds #markets #news #Swissquote #MarketTalk #marketanalysis #marketcommentary _____ Learn the fundamentals of trading at your own pace with Swissquote's Education Center. Discover our online courses, webinars and eBooks: https://swq.ch/wr _____ Discover our brand and philosophy: https://swq.ch/wq Learn more about our employees: https://swq.ch/d5 _____ Let's stay connected: LinkedIn: https://swq.ch/cH

Optimism about an imminent strong economic recovery and a change of tack by the central banks was short-lived. We expect a longer period of subdued growth in the eurozone, while we also anticipate a significant slowdown of the US economy. It's no surprise markets and analysts are having a hard time seeing clearly at the moment The search for renewed balance in the global economy   Recent weeks have shown that optimism about an imminent strong economic recovery and a pivot by the major central banks was premature. Markets, economies and central banks are still searching for a new balance, a new equilibrium, of structural transition and cyclical developments, higher inflation and interest rates, stricter monetary policy and loose fiscal policy. The path to this new balance, wherever it may be, was always expected to be rough and volatile and not linear. In fact, major central banks are witnessing stubbornly high inflation and still very few signs that recent monetary tightening will destroy demand and hence bring down inflation. We have argued before that both markets and central banks are currently too impatient. It simply takes months before tighter monetary policy finds its way into the real economy. And it will. Or put differently, if the greatest monetary policy turnaround in years does not leave any marks on the real economy, we could also close all central banks. However, since last summer, central bankers seem to have become increasingly afraid that they may lose their grip on inflation. This is why there is currently so little patience and rather a trend of "high or higher for longer". No single central bank wants to be on the wrong side of inflation. Longer-term inflation projections are no longer the main anchor. It is rather a combination of current headline and core inflation, longer-term inflation projections and a large portion of gut feeling. In any case, probably the biggest concern for most central bankers at the moment is relaxing too early. This is why a scenario in which central banks overshoot with their rate hikes is more likely than a scenario in which central banks start cutting rates prematurely. All of this means that the US Federal Reserve and European Central Bank (ECB) will continue to hike interest rates in the coming months. While the global economy will still experience the full impact of the monetary policy tightening of the last year, major economies are clearly out of sync. The reopening of the Chinese economy is only gradually gaining traction and we expect it to last until the second half of the year before the recovery really takes off. The relief that the reopening of the Chinese economy should at least provide for the European economy will not be enough to stage a strong recovery. The eurozone economy seemed to have avoided a recession before we received downward revisions in German growth data. Now, a technical recession is still possible. Even though lower energy prices and the Chinese reopening could give a short-term boost to industry, the large inventory build-up as well as the ECB’s monetary tightening will weigh on the recovery. We expect a longer period of subdued growth in the eurozone. The resilience of the US economy has been remarkable. However, we do see the first cracks in the labour and housing markets and expect a significant slowdown of the economy. Still, with the Inflation Reduction Act and rich energy supply, the US economy should experience a rather textbook-style slowdown, followed by looser monetary policy and consequently a recovery in 2024. With economies struggling between cyclical and structural developments, governments moving from short-term stimulus to longer-term investments, stubbornly high inflation and a new era of "high for longer" at central banks, it shouldn’t be a surprise that markets and analysts are having a hard time seeing clearly at the moment. Remember Jimmy Cliff, who only saw all the obstacles in his way when the rain was gone? In the global economy, it will still take some time before the rain disappears. ING's base case scenario ING Alternative scenarios #2 ING Alternative scenarios #3 ING TagsMonthly Economic Update   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

We now expect the Fed funds rate to peak at a higher level, but still think rate cuts are likely by year-end. The European Central Bank is likely to slow the pace of hikes beyond March, while the Bank of England looks very close to the end of its tightening cycle In this article Federal Reserve European Central Bank Bank of England   Shutterstock Governor of the Bank of England Andrew Bailey, ECB President Christine Lagarde, US Federal Reserve Board Chairman Jerome Powell Our major central bank forecasts Macrobond, ING forecasts Federal Reserve Having implemented four consecutive 75bp rate hikes, the Federal Reserve switched to 50bp in December and then 25bp in February. The data since then has been strong with the economy adding 517,000 jobs in January, retail sales jumping 3% month-on-month and inflation re-accelerating at the core level. Several Fed officials have since commented that they would have considered a 50bp move in February had they known. But those giving this message are all non-voters this year and with borrowing costs rising broadly throughout the economy and banks tightening lending standards, we think the Fed will stick with 25bp increments. Nonetheless, given the current situation, we think the Fed will now hike in March, May and June. Inflation is still slowing and this process will likely accelerate over the summer months, and with job loss announcements on the rise we still anticipate rate cuts before year end – we look for a 50bp cut in December.  European Central Bank As long as core inflation remains stubbornly high in the eurozone, the ECB will continue hiking rates and will not consider future rate cuts. A 50bp rate hike at the March meeting has been pre-announced and looks like a done deal. Beyond the March meeting, the ECB seems to be entering a new game in which further rate hikes will not necessarily get the same support within the governing council, as hiking deep into restrictive territory increases the risk of adverse effects on the economy. The main question beyond the March meeting will be whether the ECB will wait to see the impact of its tightening on the economy or whether it will continue hiking until core inflation starts to substantially come down. We currently expect a compromise: two additional rate hikes of 25bp each in May and June, before pausing the hiking cycle and entering a longer wait-and-see period.  Bank of England The Bank of England's February meeting saw a stark change in communication, with policymakers signalling that the end of the tightening cycle is near. It said further hikes were contingent on signs of additional “inflation persistence”, which suggests policymakers are less beholden to month-to-month swings in data and are more focused on longer-term term trends. In truth, the news here is mixed. The Bank’s own survey has hinted both that recruitment difficulties are easing and price/wage expectations might have peaked. That can’t yet be said for the official wage data, though core services inflation did take a surprise nose-dive in the most recent numbers. Officials have hinted strongly that any future hikes will be in 25bp increments, and they have stressed that much of the impact of past hikes is yet to feed through. Barring inflation/wage data becoming more worrisome, we think a 25bp March hike is likely to be the last.  TagsCentral banks 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

Lower energy prices have boosted both business and consumer confidence. However, the better growth outlook will slow the decline in core inflation, pushing the ECB to act more forcefully. A terminal deposit rate of at least 3.50% now seems likely. Consequently, the economy will slow down in 2H and 2024’s growth is likely to be weaker than 2023’s expansion In this article Black or red zero Shaky recovery Stubborn inflation A more hawkish ECB   Shutterstock The President of European Central Bank Christine Lagarde delivers a speech at the European Parliament in Strasbourg, eastern France - 15 February 2023   Black or red zero After the recent downward revision of German GDP growth figures for the fourth quarter of 2022 to -0.4% quarter-on-quarter (which might also lead to a small negative figure for the eurozone) the jury is still out on whether a winter (technical) recession has now been avoided after all. Not that it matters much, because we are basically talking about a black or a red zero. What is more important is whether the underlying momentum is improving or not. The good news is that the PMI composite indicator rose for the fourth consecutive month in February on the back of improving supply chains, rising demand and a reduction of order backlogs. While the European Commission’s economic sentiment indicator took a breather in February after three months of growing confidence, the picture still reflects a healing consumer. The assessment of activity over the past three months in services and in the retail sector points to growing consumption, after a weak fourth quarter. That said, it is not unlikely that some of the demand will be satisfied out of currently bloated inventories. The bottom line is that growth in the first quarter is still likely to hover around 0%, but also that the economy has gradually entered recovery territory. Eurozone confidence is improving Refinitiv Datastream Shaky recovery Even though falling gas prices are providing the economy with some oxygen, it is too early for optimism. Energy prices are unlikely to remain at the current low level for the whole of the year, although we now believe that any increase will remain limited. Fiscal policy, which is still a tailwind, is likely to get less stimulative in the second half of the year. And of course, the ECB’s monetary tightening will eventually act as a brake on growth. According to its own models, the negative impact on real GDP growth of the current monetary tightening is estimated to be around 1.5 percentage points on average over the three years from 2022 to 2024, with the biggest impact in 2023 and 2024. After a stronger growth figure in the second quarter, we see the expansion softening again in the second half of the year. For the whole of the year, this results in a small upward revision in our growth forecast to 0.8%. However, with the biggest impact of fiscal and (additional) monetary tightening felt next year, we have downgraded 2024 GDP growth to only 0.7%. Stubborn inflation Headline inflation is now on a downward path on the back of the year-on-year decline in energy prices. However, core inflation unexpectedly climbed to 5.6% in February, the highest level since the start of the Monetary Union. That said, looking at price expectations in the business surveys, it seems as if we’re also close to the peak in core inflation, though it might still take several months before a clear downturn sets in. The fact that consumption is picking up is certainly not helping to get inflation down rapidly. On the back of falling energy price inflation, we have decreased our headline inflation estimate to 5.5% for 2023, while for 2024 we now anticipate 2.6% headline inflation. Price expectations are not coming down as fast in all sectors Refinitiv Datastream A more hawkish ECB The ECB already signalled another 50 basis point rate hike in March, but it now looks all but certain that the tightening cycle will go further after that. With a strong downturn averted, core inflation rather sticky, and medium-term consumer inflation expectations back up to 3%, the ECB is probably not done yet at a deposit rate of 3.0%. Board member Isabel Schnabel even described an anticipated 3.50% terminal rate by markets as being “priced for perfection”. In that regard, a higher terminal rate could be envisaged. However, for the time being, we stick with two additional 25bp rate hikes in the second quarter and the deposit rate remaining at that level until the fourth quarter of 2024. With short-term rates remaining high for longer, we have also raised our bond yield forecast, with the 10yr Bund hovering around 2.50% in the first half of the year, before a modest rally brings it back to 2.25% by the end of 2023. TagsInflation GDP Eurozone ECB   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

Lower energy prices have boosted both business and consumer confidence. However, the better growth outlook will slow the decline in core inflation, pushing the ECB to act more forcefully. A terminal deposit rate of at least 3.50% now seems likely. Consequently, the economy will slow down in 2H and 2024’s growth is likely to be weaker than 2023’s expansion In this article Black or red zero Shaky recovery Stubborn inflation A more hawkish ECB   Shutterstock The President of European Central Bank Christine Lagarde delivers a speech at the European Parliament in Strasbourg, eastern France - 15 February 2023   Black or red zero After the recent downward revision of German GDP growth figures for the fourth quarter of 2022 to -0.4% quarter-on-quarter (which might also lead to a small negative figure for the eurozone) the jury is still out on whether a winter (technical) recession has now been avoided after all. Not that it matters much, because we are basically talking about a black or a red zero. What is more important is whether the underlying momentum is improving or not. The good news is that the PMI composite indicator rose for the fourth consecutive month in February on the back of improving supply chains, rising demand and a reduction of order backlogs. While the European Commission’s economic sentiment indicator took a breather in February after three months of growing confidence, the picture still reflects a healing consumer. The assessment of activity over the past three months in services and in the retail sector points to growing consumption, after a weak fourth quarter. That said, it is not unlikely that some of the demand will be satisfied out of currently bloated inventories. The bottom line is that growth in the first quarter is still likely to hover around 0%, but also that the economy has gradually entered recovery territory. Eurozone confidence is improving Refinitiv Datastream Shaky recovery Even though falling gas prices are providing the economy with some oxygen, it is too early for optimism. Energy prices are unlikely to remain at the current low level for the whole of the year, although we now believe that any increase will remain limited. Fiscal policy, which is still a tailwind, is likely to get less stimulative in the second half of the year. And of course, the ECB’s monetary tightening will eventually act as a brake on growth. According to its own models, the negative impact on real GDP growth of the current monetary tightening is estimated to be around 1.5 percentage points on average over the three years from 2022 to 2024, with the biggest impact in 2023 and 2024. After a stronger growth figure in the second quarter, we see the expansion softening again in the second half of the year. For the whole of the year, this results in a small upward revision in our growth forecast to 0.8%. However, with the biggest impact of fiscal and (additional) monetary tightening felt next year, we have downgraded 2024 GDP growth to only 0.7%. Stubborn inflation Headline inflation is now on a downward path on the back of the year-on-year decline in energy prices. However, core inflation unexpectedly climbed to 5.6% in February, the highest level since the start of the Monetary Union. That said, looking at price expectations in the business surveys, it seems as if we’re also close to the peak in core inflation, though it might still take several months before a clear downturn sets in. The fact that consumption is picking up is certainly not helping to get inflation down rapidly. On the back of falling energy price inflation, we have decreased our headline inflation estimate to 5.5% for 2023, while for 2024 we now anticipate 2.6% headline inflation. Price expectations are not coming down as fast in all sectors Refinitiv Datastream A more hawkish ECB The ECB already signalled another 50 basis point rate hike in March, but it now looks all but certain that the tightening cycle will go further after that. With a strong downturn averted, core inflation rather sticky, and medium-term consumer inflation expectations back up to 3%, the ECB is probably not done yet at a deposit rate of 3.0%. Board member Isabel Schnabel even described an anticipated 3.50% terminal rate by markets as being “priced for perfection”. In that regard, a higher terminal rate could be envisaged. However, for the time being, we stick with two additional 25bp rate hikes in the second quarter and the deposit rate remaining at that level until the fourth quarter of 2024. With short-term rates remaining high for longer, we have also raised our bond yield forecast, with the 10yr Bund hovering around 2.50% in the first half of the year, before a modest rally brings it back to 2.25% by the end of 2023. TagsInflation GDP Eurozone ECB   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 European Central Bank's policy stance has become restrictive. To us, the impact on the economy is probably the most underestimated drag on growth for 2023. The good news is that we see no meaningful signs of fragmentation between countries, so monetary policy is not causing shocks in more vulnerable parts of the eurozone In this article Most channels through which higher rates work are showing tightening impact No need for TPI as monetary transmission is not showing signs of fragmentation Most of the impact on inflation and growth still has to feed through Restrictive policy will have a significant downside impact on the economy this year   Shutterstock Most channels through which higher rates work are showing tightening impact To get a sense of how the end of the tightening of monetary policy ultimately feeds through to growth and inflation, we look at the main channels through which monetary policy transmits. These are money/credit developments, bank rates, asset prices and exchange rates. All four channels have seen sizable adjustments since last summer: The money supply has fallen quickly since the ECB started reducing asset purchases. In fact, growth in real money (M1) has not been so negative since the ECB's record-keeping began. This historically corresponds to a significant correction in economic activity. When looking at asset prices, we note that stocks and bonds saw substantial corrections in 2022 (although we have seen a bounce-back as investors are expecting a peak in rates to come soon), while real estate prices have been somewhat slower to respond but are undoubtedly starting to turn. Bank rates have also increased considerably since the beginning of 2022, following the increase at the longer end of the yield curve. Growth in bank lending has almost stalled for households and is negative for businesses. We expect this to have an important dampening impact on investment in the eurozone in the quarters ahead, although the recovery fund's impact on southern economies could mute the overall investment response seen in 2023. The euro has appreciated since the end of last year as investors are expecting more rate hikes from the ECB and because energy prices have fallen significantly from their peaks which has resulted in a fading trade deficit. This is starting to feed through to import prices, which have started to see lower year-on-year growth. The early phase of monetary transmission is fast at work ECB, Eurostat, ING Research No need for TPI as monetary transmission is not showing signs of fragmentation When looking at the above-defined categories per country, we see that there is not that much difference in transmission. Compared to the average, we see that France is still experiencing a smaller impact on all counts, while Italy is experiencing a somewhat more significant impact. Overall though, there is no shock happening in the system for any country measured and monetary transmission is therefore not causing problems. So far, there is no reason to use the ECB’s new Transmission Protection Instrument (TPI) as fragmentation of monetary transmission in the eurozone is not happening at the moment. The much-feared fragmentation of monetary transmission has not happened so far Macrobond, ECB, ING ResearchNote: red indicates more tightening impact than eurozone average, green indicates less tightening than average Most of the impact on inflation and growth still has to feed through While the initial boxes of monetary transmission have clearly been ticked, the timing of the actual impact of monetary policy on the real economy has always been difficult. In theory or in large macro models, it is assumed that it takes nine to 12 months before monetary policy affects the real economy most. Recently, there have been (US Federal Reserve) central bankers suggesting that the current lag could be shorter than in the past. Still, it’s too early for the ECB to claim victory. Core inflation is still trending up and is far above the central bank's target, at 5.3%. Wage growth is also still moving up cautiously. It is therefore too early to say there has been a success on price developments. And expectations have started to feed through the monetary transmission system in the wrong way recently. As investors worry about recession and are optimistic about inflation returning to benign levels after the peak was recently reached, we see that financial conditions are loosening again. Restrictive policy will have a significant downside impact on the economy this year While we don’t see the impact of monetary policy on prices fully yet, we do see transmission in full force at the moment, which will eventually have a larger impact on output and prices. With uncertain delays on economic activity and prices at work, the question is how hawkish the ECB will remain over the course of the year, given the tightening of monetary policy so far. We expect the ECB to hike by another 100 basis points this year, making policy very restrictive. For our economic outlook, we think that restrictive monetary policy will be a key factor preventing the economy from bouncing back from its current weak spell. While all eyes are on the energy crisis at the moment, higher rates will also be an important factor in dampening any meaningful recovery. While we don’t see the bulk of the impact yet, expect a eurozone economy that flirts with zero growth for most of the year as higher rates complete the transmission to demand. TagsMonthly Economic Update Inflation GDP Eurozone ECB   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

US The US has a very busy week ahead.  The two main events are Fed Chair Powell’s semi-annual testimony to Congress and the nonfarm payroll report.  Powell’s two days at Capitol Hill will undoubtedly draw scrutiny from lawmakers as more tightening will raise the risk this economy is recession bound.  Traders will look to see how hawkish Powell will remain given the mostly strong data, recently. The nonfarm payroll report is the main economic release of the week.  After a jaw-dropping 517,000 jobs were created in January, traders will look to see if that number gets a serious downward revision and if February’s job growth slows to 200,000.  Wage pressures are also key and if average hourly earnings come in hotter-than-expected that could fuel more Fed rate hiking bets. President Biden is also expected to release his budget for fiscal 2024, which might include higher taxes. Republicans are calling for sharp spending cuts, but that is not expected to be in this version. Raising the US debt limit will start to become a focal point, but this is still the early stages.   Earnings season is coming to an end with key updates from Adidas, Brown-Forman, CrowdStrike, Daimler Truck, Deutsche Post, and JD.com.  Eurozone Christine Lagarde’s appearance in the middle of next week will be highly anticipated following the February inflation data. The ECB President has insisted repeatedly that the central bank has a lot more to do, and the latest figures – especially the core which unexpectedly spiked to a new high – will reinforce that. That aside, there’ll be some interesting data points but nothing tier-one. UK  Not the busiest week coming, with GDP data on Friday probably the only notable event on the calendar. The UK avoided a recession in the second half of last year and everyone will be looking for early signs of the economy performing better again at the start of 2023. That aside, any BoE appearances will naturally get a lot of attention. Russia The February CPI number is the big release next week, with pressures continuing to abate with an expected reading of 10.8%, down from 11% the week before.  That aside, the focus remains on the war in Ukraine and any sanctions that will follow. Oil output has already been hit, with another 500,000 barrel daily drop this month and some are expecting that to double by the end of the year. South Africa Fourth-quarter GDP data is the only highlight this coming week and it’s expected to show a contraction in the fourth quarter of last year, meaning the country is at risk of being in recession if it hasn’t bounced back since January. Turkey Labor market figures are eyed alongside industrial production on Friday. That aside it’s looking fairly quiet.  Switzerland SNB Chair Thomas Jordan’s appearance on Tuesday is probably the most notable event next week, coming a day after the latest inflation release. The CPI figure is expected to show price pressures easing but probably not enough to put the central bank at ease. Markets are still fully pricing in a 50 basis point hike on 23 March. China All eyes will be on the National People’s Congress (NPC), as it kicks off its annual session.  This will set the tone in Asia as China will announce major personnel changes, government policy goals, and growth targets.   It will also be a busy week filled with economic releases.  Some of the data however will be impacted by the Lunar New Year holiday.  The February trade balance is expected to decline, while both CPI and PPI soften.  China’s credit last month was most likely reined in as aggregate financing and new yuan loans declined.   India It is likely to be a relatively quiet week for India, with the exception of January Industrial production, which is expected to improve from 4.3% to 5.6%.   Australia & New Zealand The RBA is expected to deliver another quarter-point rate rise and maintain a hawkish stance as inflation remains elevated.  Analysts are unanimous in expecting rates to rise by 25bps to 3.60%.    In New Zealand, it will be a week filled with a few economic releases.  The ANZ commodity price reading occurs on Monday.  In the middle of the week, we get a look at February card spending.  Friday includes the manufacturing PMI release.    Japan The end of Kuroda’s tenure is here.  In his last meeting, the BOJ is expected to stay the course and have no changes with YCC or with rates. Governor Kuroda is widely expected to stick to his stance of maintaining monetary easing to aim for sustainable, stable 2% inflation. BOJ Governor nominee Kazuo Ueda has already hinted he will stay the course, but currency traders are eagerly awaiting any signs on how the BOJ will exit this ultra-easy policy.   Singapore No major releases are expected.  Economic Calendar Saturday, March 4 Economic Events Fed’s Daly gives a speech on inflation at Princeton University Sunday, March 5 Economic Events China’s National People’s Congress begins in Beijing Monday, March 6 Economic Data/Events US factory orders, durable goods Australia inflation gauge Euro area retail sales Mexico vehicle production/exports New Zealand commodity prices SNB releases 2022 results  CERAWeek energy conference by S&P Global JPMorgan’s Global High Yield & Leveraged Finance Conference   International Atomic Energy Agency board of governors meeting Tuesday, March 7 Economic Data/Events Fed’s Powell presents his semi-annual Monetary Policy Report to the Senate Banking Committee US wholesale inventories, consumer credit Australia trade balance, reserves China trade balance, reserves Germany factory orders Greece GDP Japan cash earnings Mexico consumer confidence, international reserves South Africa GDP Singapore reserves Spain industrial production Thailand CPI RBA decision: Expected to raise cash rate target 25bps to 3.60% ECB consumer expectations survey Poland Monetary Policy Council rate meeting Riksbank Governor Thedeen speaks on the current economic situation House Ways and Means Committee has a field hearing on the state of the US economy Wednesday, March 8 Economic Data/Events Fed’s Powell presents his semiannual Monetary Policy Report to the House Financial Services Committee US MBA mortgage applications, ADP employment change, trade balance, JOLTS job openings Canada merchandise trade Euro area GDP Germany industrial production Indonesia consumer confidence Japan BoP, bank lending, leading index BOC rate decision: Expected to leave rates unchanged at 4.50% Poland rate decision: Expected to leave rates unchanged at 6.75% EIA crude oil inventories RBA Governor Lowe speaks at the AFR Business Summit in Sydney ECB President Lagarde speaks alongside WTO Director-General Ngozi Okonjo-Iweala at an International Women’s Day event Riksbank’s Breman speaks on the economy BOE’s Dhingra speaks at the Resolution Foundation BOE’s Tenreyro speaks at Conference of British Industry event Thursday, March 9 Economic Data/Events US Challenger job cuts, initial jobless claims, household change in net worth China CPI, PPI, aggregate financing, money supply, new yuan loans Japan GDP, money stock, machine tool orders Mexico CPI New Zealand heavy traffic index, card spending South Africa current account balance President Biden to release his US budget proposal for fiscal 2024 Riksbank’s Bunge speaks on the economic and monetary policy outlook Riksbank’s Jansson speaks on central bank digital currencies BOE’s Breeden speaks on macro-prudential and monetary policy interactions   Friday, March 10 Economic Data/Events US Feb change in nonfarm payrolls: 215Ke v 517K prior, unemployment rate, average hourly wages, monthly budget statement Bank of Japan policy rate decision: No changes expected to YCC or balance rate in Kuroda’s last meeting Canada unemployment France trade balance Germany CPI India industrial production Japan household spending, PPI Mexico nominal wages New Zealand PMI, house sales Russia CPI Thailand consumer confidence, foreign reserves, forward contracts Turkey industrial production UK industrial production, services index, trade balance Apple annual meeting of shareholders Sovereign Rating Updates Belgium (Fitch) Norway (S&P) Portugal (S&P) Greece (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.  

OANDA Senior Market Analyst Craig Erlam highlights five things that he believes investors will be closely tracking over the next month.   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 new week began with growth for the EUR/USD currency pair. For the previous week, the price frequently reversed its direction of movement, nearly always surpassing the moving average. We cannot rule out the possibility that this week will see a similar event. There was no justification for the increase in the euro on Monday, at least. Let's discuss the underlying context in greater detail below. We currently have a mild upward trend from a technical perspective. We think the negative trend that started a few weeks ago is still in place because the pair is still trading below the crucial line and inside the Ichimoku cloud on the 24-hour TF. As was already mentioned, Monday essentially had no noteworthy news or events. The head economist of the ECB, Philip Lane, delivered a speech, and a report on retail sales in the European Union was also released. Philip Lane reiterated everything Christine Lagarde and her colleagues in the "transport shop" mentioned last week as retail sales declined significantly more than traders had anticipated. Hence, there was no justification for the current development of the euro. In addition, there wasn't anything for traders to react to during the day. As a result, we think that Monday's increase in the value of the euro was entirely technical. Following the pair's prolonged decline, an upward correction was necessary, which is what we are currently witnessing. The explanation of what is taking place is kept as basic as possible. This week is full of significant events, but none of them take place in the European Union. As there was nothing noteworthy to write about on Monday, we decided to produce a "Preview of the Week" article on Tuesday. It might as well have been released on Wednesday as traders will also have access to some crucial information on Tuesday. The fun will start on Wednesday. The third assessment of the European Union's GDP report for the fourth quarter will be released on this day. The final value is predicted to be between 0 and 1%, and it is doubtful that the third estimate will significantly change from the first or second. Unless this report surprises us in some way, we don't anticipate a response. Christine Lagarde, the head of the ECB, will deliver her subsequent speech on Wednesday as well. We don't expect anything noteworthy from them, though, because members of the monetary committee have already stated their position: the rate will rise by 0.5% in March, and the rate will continue to grow after that. There isn't much else to be said about this. The next event in the European Union this week will be another speech by Christine Lagarde, but this time on Friday evening. We can say the same thing about this event. As it turns out, there won't be any significant events taking place in the EU this week. Ms. Lagarde might be able to inform the market of something significant, but the likelihood of this happening is low. As a result, traders will be able to focus solely on American data and events. Nonetheless, there appear to be numerous significant events, but in reality, everything revolves around Friday Nonfarm and unemployment. But in the article on the pound/dollar, we'll discuss the American calendar. As a result, the situation is as follows: the pair must gently adjust upwards before they may begin falling again. In any case, we do not anticipate a significant increase in the pair's value because we think the downturn should last for several weeks or perhaps months in the future. As of March 7, the euro/dollar currency pair's average volatility over the previous five trading days was 84 points, which is considered "normal." Thus, on Tuesday, we anticipate the pair to move between 1.0599 and 1.0767 levels. A new round of downward movement will be signaled by the Heiken Ashi indicator turning back downward. Nearest levels of support S1 – 1.0620 S2 – 1.0498 S3 – 1.0376 Nearest levels of resistance R1 – 1.0742 R2 – 1.0864 R3 – 1.0986 Trade Suggestions: The EUR/USD pair has resumed consolidation above the moving average line. Until the Heiken Ashi indicator turns down, you can continue holding long positions with targets of 1.0742 and 1.0767. After the price is fixed below the moving average line, short positions can be opened with a target of 1.0498. 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 01:00 2023-03-08 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/336875

Summary:  As the market awaits Powell’s testimony to Congress and jobs figures, the stock market ran out of puff, with the Nasdaq 100 closing slightly in the black and the S&P500 nudging further above its 50-day moving average. The Australia dollar is in danger, of hitting 0.67, but could the RBA’s decision today avert its course? Meanwhile the EUR is higher on a hawkish ECB. Gold’s next move hinges on Powell’s testimony which kicks off today. And why CATL’s results could have ripple effects, along with a TikTok ban.   What’s happening in markets? Mixed start to the week for the Nasdaq 100 (NAS100.I) and S&P 500 (US500.I)  As the market awaits Powell’s testimony to Congress and jobs figures, the stock market ran out of puff, with the Nasdaq 100 closing slightly in the black and the S&P500 nudging further above its 50-day moving average. Six S&P500 sectors rose, while five closed in the red. Apple shares were a standout, rising 1.9% after a US investment bank initiated a “Buy” on the company. Meanwhile, Tesla shares fell about 2% after its Model S and Model X prices were slashed for the second time this year, after lithium price retreated. Meanwhile, Meta shares fell about 0.2% despite the TikTok potential ban gaining momentum in the US - with several countries in Europe considering the same thing. US Treasuries pared early gains in an uneventful session With a light economic calendar and ahead of Fed Chair Powell’s testimony at the Senate Banking Committee, Treasuries took clues across the pond from German Bunds and were pressured in the afternoon after ECB’s Holzmann signalled potentially four or more 50bp rate hikes in the Eurozone. Hedging flows also weighed on Treasuries as corporate supply picked up with around USD 17 billion in new issues. Th e 10-year pared early gains to finish at 3.96%, 1bp higher in yield.  Hang Seng Index and China’s CSI 300 oscillated on a modest Government Work Report The Hong Kong stock market experienced a mixed session as investors digested the economic targets set in China’s Government Work Report, which came in with a modest GDP target set at around 5%. Hang Seng Index (HSI.I) managed to finish 0.2% higher with Chinese SOE names in the telecommunication outperforming as China is accelerating the construction of 5G infrastructure and development of 6G. China Tower (00788) surged 7.9% and China Mobile (00941:xhkg) gained 3.2%. Chinese property developers were laggards during the session following the Government Work Report emphasized again “housing is nor living in, not for speculation” and warned against the “disorderly expansion of capital” of property developers. China Merchant Bank (03698:xhkg) plunged 4.2% on its high exposure to the Chinese housing sector.  In A-shares, CSI300 retreated 0.5%. Property developers, coal mining, and financials were the top losers while telecommunication, solar energy, and tourism advanced. Australian equities are on edge, awaiting the RBA’s decision and commentary The RBA is expected to hike interest rates for the 10th straight time today, with a 25bps hike expected, which will likely impact forward earnings of Australia’s consumer discretionary, tech and real estate sectors. The RBA’s rate hikes mount despite, bellwethers, such as Commonwealth Bank of Australia, flagging that some households are likely remain under duress this year  - amid inflation and rising interest rate pressures – with Australia’s biggest bank putting aside a capital cushion for bad debts provisions and delinquencies. Philip Lowe’s guidance for further tightening will be on watch, especially as the last several economic readings have been weak. Interest rate futures suggest rates will peak at 4.1% in September, with no rate cuts this year. The Aussie dollar could notch fresh YTD lows, but if RBA is more aggressive than expected, the Aussie dollar (AUDUSD) could knee-jerk higher.  FX: AUDUSD is close sight of 0.67 ahead of RBA; EUR higher on hawkish ECB The USD started the week on the backfoot before equity markets got jittery about Powell’s speech later today. A soft GDP target out of China however weighed on AUD, with AUDUSD hitting a low of 0.6717. The AUD is now down 6.5% from its Feb 2 high. The RBA meets today with another 25bps rate hike expected, although focus will be more on Lowe’s comments on the path of interest rates from here. NZDUSD was also pushed lower to 0.6173. EURUSD however pushed above 1.0680 on hawkish ECB chatter (read below). Swiss inflation data came in hotter than expected at 3.4% YoY for February from 3.1% exp and 3.3% previous. USDCHF pushed lower to test the 0.93 handle while EURCHF wobbled.  Crude oil trades flat  The oil price is steady at just over $80 amid CERAWeek - the world's premier energy conference. Commentary made alluded to a pickup in demand, while supply remains somewhat restricted. It was said at the conference that 75% of global oil demand growth will come from China this year, while companies such as Chevon are working on options to export natural gas to Europe this year. Meanwhile, Estonia called for the EU to halve the $60 price cap on Russian oil this month. And US natural gas plunged on forecasts for milder-than-expected weather.  Gold eying Powell’s testimony Gold (XAUUSD) prices inched up to their highest levels since mid-February on Monday before a reversal from the peak at $1858 to 21-DMA at $1844 in the Asian morning today as caution on Fed Chair Powell’s testimony today starts to set in. The surge higher earlier came despite China’s modest growth target and risk of more rate hikes from the Federal Reserve. However, it must be noted that the recent rise in yields has come with higher breakeven inflation as well, suggesting that the market is now looking at inflation to settle higher in the medium-term. This has kept real yields under pressure, supporting the yellow metal. For the recovery to stay intact, however, support at 200DMA of $1840 and the last week’s low of $1805 will be eyed.    What to consider?   Powell’s testimony kicks off today Fed Chair Powell will begin his two-day testimony before the Senate and the House committees today. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Most Fed members have also sounded hawkish, raising the prospect of a shift higher in March dot plot. If a similar message is conveyed by Chair Powell, we could see US Treasury yields getting above critical levels and USD reversing back to an uptrend.  Hawkish ECB chatter supporting EUR ECB’s Holzmann called for interest rates to be raised by 50bps at each of the next four meetings, and suggested a restrictive policy rate would start from ~4%. President Lagarde and Chief Economist Lane were also on the wires suggesting more rate hikes as well. One of the investment banks, as a result, came out with a terminal rate forecast of 4.25% in wake of Holzmann's remarks, and this led to a drop in EU bonds and a surge higher in EUR crosses.  Why CATL’s results could have ripple effects  CATL, the world’s largest battery maker - and Tesla’s battery supplier - reports results on Thursday. It’s expected to report revenue growth of over 80%. However, there is room for a positive surprise - given strong battery and energy storage demand. CATL is also expanding overseas - teaming up with Ford to build a battery manufacturing plant in Michigan, which we will hopefully get details on. As for its outlook - we expect it to be strong, as CATL’s increased its war chest, after selling its $856 million stake in Australia’s biggest lithium company, Pilbara Minerals. We also think guidance could be upgraded - given auto sales in China are expected to rise in 2023, following years of lockdowns. CATL outlook’s will be closely watched by not only EV makers - but also by EV investors – as they could give a gauge on how much car maker’s battery costs could rise.  TikTok ban making progress in the US  Senate Intelligence Committee Chairman Mark Warner is set to unveil a bill Tuesday that would allow the US to ban the popular video-sharing app TikTok and other Chinese technology. He said that the law will give the US the power to ban or prohibit foreign technology where necessary, considering companies like TikTok do not keep American data safely and is also a propaganda tool. US tech stocks Snap (+9%), Alphabet (+1.6%) and Pinterest (+1%) rallied on reports. Iron ore majors face rising volatility    China’s top economic body, the NDRC held a meeting with some industry experts over potential measures to curb iron ore price rises. The iron ore price has risen 62% from its October low - amid rising demand from China, and expectations this will continue - while supply remains tight. It’s not the first-time accusations have come from China. But this time - its allegedly some in the industry are calling on the Chinese government to tighten futures and spot markets oversight and punish those for hoarding and price gouging.  BHP and Rio make over 50% of their annual revenue from iron ore, Fortescue makes about 90%. Shares in Fortescue are trading lower for the third day, while BHP trades 2.3% lower at A$47.27, and Rio Tinto has fallen for the second session, losing 2%. Be mindful, BHP and Rio go ex-dividend on March 9. For potential implications on ex-dividends, click here.   Trip.com beats estimates Trip.com beat revenue and EPS forecasts as it reported Q4 results yesterday, fueling more weight to the case for the upcoming surge in Chinese outbound travel demand. We had launched the APAC tourism basket to get exposure to this trend, and Trip.com is also included in this basket. Trip.com reported revenue of $729mn (vs. $709mn expected) and EPS of 11 cents (vs. loss of 3 cents expected).   Corporate calendar to watch, including results and companies going ex-dividend   On Tuesday March 7, CrowdStrike (CRWD) reports results well as Darktrace (DARK) its peer. Ashtead Group, Sea Ltd, Ferguson also report.  On Wednesday March 8, Adidas (AD) and Campbell Soup (CPB) are due to report results, along with Ping An Bank, Thales, Geberit. Woodside (WDS) goes ex dividend.  On Thursday March 9, CATL (300750) is due to release results, as well as Jd.com (JD) and Deutsche Post. BHP (BHP) and Rio Tinto (RIO) go ex dividend, along with CSL (CSL), Occidental (OXY) and eBay (EBAY).  On Friday March 10, Oracle (ORCL), DocuSign (DOCU), Daimer Truck, AIA Group, and  DiDi Global are due to report.   For what to watch in the markets this week – read or watch our Saxo Spotlight. For our short black style Week Ahead – read or watch The Week Ahead.For a global look at markets – tune into our Podcast.   Source: Global Market Quick Take: Asia – March 7, 2023 | Saxo Group (home.saxo)

Summary:  The snapback rally in equities extended and then faded yesterday, a mirror-image of the action in treasury yields, which failed to hold an extension lower. Oil rebounded and the gold rally faded. In Australia overnight, the Reserve Bank of Australia hiked as most expected, but signaled it would like to pause the tightening regime soon, triggering a sharp slide in the Aussie. Today, Fed Chair Powell will testify on the economy and monetary policy before a Senate panel. What is our trading focus? US equities (US500.I and USNAS100.I): US equity momentum extends US equities gained slightly yesterday with S&P 500 futures closing at 4,052 after trading as high as 4,082 intraday. This morning in early European trading hours S&P 500 futures are extending their gains as the US 10-year yield continues to push lower lifting overall sentiment. During yesterday’s session social media stocks such as Meta, Pinterest, Snap, and Alphabet were rallying as TikTok bans across the US and Europe are gaining traction. The earnings and macro calendars are light today so the only market moving event is Fed Chair Powell’s speech later today at 1500 GMT. Hang Seng Index and CSI 300: rally fades on Sino-American tensions After follow-through rallies in state-owned enterprises in Hong Kong and mainland bourses in the telecommunication and energy space in the morning, the Hang Seng Index and CSI 300 lost steam and turned south, losing 0.7% and 1.2% as of writing. In a press conference on the side-line of the Two Sessions, China’s Foreign Minister Qin Gang reiterated the “China-Russia comprehensive strategic partnership of coordination for a new era” and downplayed Russia’s invasion into Ukraine to that the “Ukraine crisis has complex historical fabrics and practical reasons with the underlying nature being the eruption of the conflicts in the security governance of Europe”. The pro-Russian stance, as opposed to the more conciliatory-leaning stance in recent months toward the West, added to investors’ concern over the Sino-American relationship. FX: AUD in the dumps on dovish RBA, EUR firm The US dollar is not the focus at the moment as the market awaits further signals from Fed Chair Powell today and tomorrow in his two days of testimony before Congressional panels. The euro is firm on hawkish rhetoric from the ECB (more below) that has the market pricing more than 150 basis points of further tightening this year. Elsewhere, the Aussie weakened sharply as the statement overnight suggested the RBA is looking for excuses to pause its tightening regime – more on that below. The JPY trades passively as we await a pivotal Bank of Japan meeting on Friday, Governor Kuroda’s final meeting before he leaves office in early April. Crude oil climbs to a five-week high Cude oil trades higher for a sixth session amid a broader rally in stocks and a softer dollar. The market will keep an eye on comments from oil insiders, currently meeting in Houston at the annual CERAWeek, one of the world's premier energy conferences. Commentary made alluded to a pickup in demand, while supply remains somewhat restricted. It was said at the conference that 75% of global oil demand growth will come from China this year. Meanwhile, Estonia called for the EU to halve the $60 price cap on Russian oil this month. Overall, crude oil remains rangebound with Brent currently stuck between $81 and $87. US natural gas plunged on forecasts for milder-than-expected weather, and in just two trading sessions it gave back almost half the 53% gain achieved during the prior two weeks. Gold eying Powell’s testimony Gold (XAUUSD) hit a five-week high on Monday at $1858 before reversing lower overnight to test support around the 21-DMA at $1844. Together with US real yields reversing higher following last week’s drop when inflation expectations moved higher, the market sentiment is becoming a bit more cautious ahead of testimonies on Capitol Hill from Fed Chair Powell today and tomorrow. However, with the market currently pricing in a terminal Fed fund rate around 5.5%, any weakness in incoming data – the next major being Friday’s job report – may add further support. For the current recovery to become more than just a bounce, the price as a minimum need to break above $1864, the 38.2% of the February drop. US wheat drops below $7/bu as market awaits monthly supply/demand report The Chicago benchmark wheat contract (ZWc1) dropped below $7 a bushel on Monday for the first time in 17 months, pressured by adequate global supplies, especially from Russia, and optimism a deal can be reached to extend the UN-brokered Ukraine grain corridor deal when the current deal expires later this month. Ukraine’s grain exports are down 26.6% at 32.9 million tonnes in the 2022/23 season so far. Meanwhile, the Australian Bureau of Agricultural and Resource Economics raised its estimate of its 2022/23 wheat harvest by 2.6 million tons to a record 39.2 million tons. Traders now look ahead to USDA’s monthly supply and demand report (WASDE) on Wednesday, in which the main change is expected to be another sizable drop in Argentine’s soybean and corn harvests following a troubled crop year hit by droughts and excessive heat. US Treasury yields (TLT:Xmas, IEF:xnas, SHY:xnas) close near unchanged after probe lower The US 10-year yield extended to below 3.90% at one point yesterday before resistance came in and yields rebounded to unchanged near 3.95% ahead of two days of testimony from Fed Chair Powell today, although yields may pay more attention to the February US jobs report this Friday and CPI next Tuesday as Powell may bring little new to the table in his semi-annual testimony today, which is often more about the political theatre of the Congressional politicians. What is going on? Dovish hike from the RBA, which guides for a tightening pause The RBA hiked by 25bps as expected to 3.6%, with the RBA seeing further tightening ahead. But a small change of phrase positioned this as a dovish hike and an RBA that may be seeking to pause its hiking regime at coming meetings. In the guidance on further tightening, February’s “In assessing how much further interest rates need to increase”, was changed in March to “In assessing when and how much further interest rates need to increase”, with the introduction of “when” a tip-off that the RBA is hoping to pause. Australia’s 2-year yield dropped some 14 basis points as the implied Australian cash rate this year peak fell from 4.1% to 4%. The RBA is concerned both that services inflation remains too high, but also that the lag effects of interest rates had not yet been felt in full by mortgage holders. AUDUSD erasing its intraday gain and slid into the red to below 0.6700 at one point. Hawkish ECB chatter supporting EUR ECB’s Holzmann called for interest rates to be raised by 50bps at each of the next four meetings, and suggested a restrictive policy rate would start from ~4%. President Lagarde and Chief Economist Lane were also on the wires suggesting more rate hikes as well. One of the investment banks, as a result, came out with a terminal rate forecast of 4.25% in wake of Holzmann's remarks, and this led to a drop in EU bonds and a surge higher in EUR crosses. HelloFresh slips 9% in pre-market trading The world’s largest meal-kit provider reports Q4 revenue of €1.87bn vs €1.92bn ahead of the European equity session and EBITDA of €160mn vs est. €137mn. HelloFresh is guiding FY23 EBITDA of €460-540mn vs est. €543mn. Investors are not impressed by these figures sending the shares down 9% in pre-market trading. TikTok ban making progress in the US Senate Intelligence Committee Chairman Mark Warner is set to unveil a bill Tuesday that would allow the US to ban the popular video-sharing app TikTok and other Chinese technology. He said that the law will give the US the power to ban or prohibit foreign technology where necessary, considering companies like TikTok do not keep American data safely and is also a propaganda tool. US tech stocks Snap (+9%), Alphabet (+1.6%) and Pinterest (+1%) rallied on reports. Similar TikTok bans are sweeping through the continent of Europe with the EU parliament banning TikTok across three institutions and other EU members are considering national bans. Trip.com beats estimates Trip.com beat revenue and EPS forecasts as it reported Q4 results yesterday, fuelling more weight to the case for the upcoming surge in Chinese outbound travel demand. We had launched the APAC tourism basket to get exposure to this trend, and Trip.com is also included in this basket. Trip.com reported revenue of $729mn (vs. $709mn expected) and EPS of 11 cents (vs. loss of 3 cents expected). What are we watching next? Powell’s testimony kicks off today Fed Chair Powell will begin his two-day testimony today before Congress, beginning with a session before the Senate Banking panel today. Over the last few weeks, data out of the US has been far more resilient than expected, fueling bets that the Fed will have to raise rates beyond what was communicated earlier and rates will stay elevated for longer as well. Most Fed members have also sounded hawkish, raising the prospect of a shift higher in March dot plot. If a similar message is conveyed by Chair Powell, we could see US Treasury yields rising again and the USD reversing back to an uptrend. Earnings to watch Today’s key earnings release is Crowdstrike expected to report FY23 Q4 (ending 31 Jan) results after the US market close. Analysts expect revenue of $625mn up 45% y/y and EBITDA of $113mn up from $7mn a year ago. Crowdstrike is expected to remain optimistic on its outlook as demand overall for cyber security solutions remain strong. It recent partnership with Dell Technologies provides additional exposure to on-premise workloads and should help on the outlook. Tuesday: Ashtead Group, Sea Ltd, Ferguson, Crowdstrike Wednesday: Ping An Bank, Thales, Adidas, Geberit Thursday: CATL, Deutsche Post, JD.com Friday: Daimer Truck, AIA Group, Oracle, DiDi Global Economic calendar highlights for today (times GMT) 1500 – US Fed Chair Powell before Senate Banking Panel 1700 – EIA's Short-term Energy Outlook (STEO) 1730 – Switzerland SNB President Jordan to speak 1800 – US Treasury to sell 3-year Notes 2130 – API's Weekly Crude and Fuel Stock Report 2155 – Australia RBA’s Lowe to speak   Source: Global Market Quick Take: Europe – March 7, 2023 | Saxo Group (home.saxo)

Chair Powell has sent a clear message: the Fed is back in the driving seat. At a very minimum, the Fed has given itself the option to deliver a 50bp hike from the March meeting. It's now discounted that way. Friday's payrolls is key though. So is next week's US CPI report. As that rate hike pendelum still has swing potential back to 25bp. It's all about the data... Powell gives the Fed a free option to up the pace to 50bp, if needed... The market has now re-priced to a 50bp hike from the March meeting. It's not fully discounted, but it's discounted enough to give the Federal Reserve the option to deliver 50bp if required. In the end it will be up to the data releases to come, and especially this Friday's payrolls report. The clearest remark made was that the labour market remains very tight, and ex-housing services sector inflation too high. These are related, as a material loosening in the labour market is likely required in order to mute services sector inflation. Expect volatility in the rate hike expectation for March to remain elevated though. It could just take a sub-150k payrolls outcome on Friday to swing the rate hike pendulum back towards a 25bp hike, especially if accompanied with some calming in wage inflation. Typically the Fed can have a heads up on some data releases ahead of time, and if that's the case here then a subdued payrolls outcome is less likely. But clearly this is a key number, and is followed by the February CPI report due on Tuesday of next week. The back end is continuing to resist the full extent of the Fed's message for the front end Financial conditions have not materially tightened though, partly as longer dated market rates did not rise in any material fashion. The 10yr briefly broke above 4% as a bit of an impact reaction, but then fell back below. Risk assets came under some pressure, putting some interest back into core duration buying. The curve in consequence hit a new cycle extreme for inversion, with the 2/10yr breaking through -100bp. The back end is continuing to resist the full extent of the Fed's message for the front end. We'd argue that this degree of inversion is being driven by longer-dated real yields being too low. If the US economy is as dynamic as is being portrayed, then a real yield in the 10yr at 1.6% is too low. A move up to the 2% area would make sense, offset by further falls in the 10yr inflation breakeven (now 2.4%). That combination would not need to push the 10yr above 4.25%, but it could or should certainly be moving in that direction if a 50bp hike is to be really justified on pure macro grounds. In the background the Fed will no doubt have noted the remarkable rise in the 2yr inflation breakeven, which was at 2% in mid-January and reached 3.4% before Chair Powell spoke. It's now at 3.25% – a step in the right direction. 2023 forwards show the Fed is reacting to strong US data, but 2024 forwards lag behind Source: Refinitiv, ING European rates also show central banks are back in charge On European curves too, there are signs that central banks are back in control. Ever since Holzmann has put successive 50bp hikes until July on the table, markets are behaving more like the European Central Bank will do what is necessary to get inflation under control. The most obvious evidence of this is the further flattening of the yield curve, pricing both an aggressive central bank but also the depressing medium-term impact on growth and inflation. No doubt the moves in the US and Europe are compounding each other but we note that, aroudn 2.70%, 10Y Bund yields are already 130bp below the expected terminal deposit rate in this cycle. 10Y Bund yields are already 130bp below the expected terminal deposit rate in this cycle Exhibit two is the reversal in inflation swaps so far this week. To be sure, a decline in long-term inflation expectations in the ECB’s consumer survey has helped, but we think this is a reflection of a more general view that, here too, central banks are back on their front foot. This means upside to both front and back end yields, but a hawkish ECB should also bring further curve inversion. Whether this view survives next week’s ECB meeting is another question. Its communication has sometimes confused markets and a wide range of opinions has been expressed in the run-up to the quiet period starting tomorrow. We are fond of saying that risk sentiment cannot ride the recovery wave forever, as more aggressive central banks will inevitably take their toll on valuations. There were signs of this message affecting risk assets yesterday but, in a way, a scenario where central banks keep their eyes on the road and only step off the brake when inflation is under control is the better outcome. The even worse alternative is one where inflation expectations continue to rise for a while with an even more drastic intervention down the line. EUR inflation swaps have stopped rising after hawkish ECB comments Source: Refinitiv, ING Today's events and market view Speeches by the ECB’s Lagarde and Panetta feature prominently on today’s calendar. Today is also the last day before the pre-meeting ‘quiet period’ kicks off, and so the last chance to manage market policy expectations before next week. Also on the topic of central bank commentary, Powell will conduct the second of his two-day Congressional testimony. His prepared statement will be the same as yesterday’s but questions and answers might shed more light on the Fed’s thinking. Bond supply will come from Germany (7Y) and Portugal (10Y/13Y) in Europe, and from the US (5Y). Last but not least, two US job market indicators will be released today: ADP employment, and job openings. The former isn’t rated very highly by our economists but can still move the market in case of significant deviation from the 200k consensus. Job openings are more relevant in our view. The rebound in late December is one of the key indicators that helped rates find a floor at the start of February but consensus is now for a decline. Read this article on THINK TagsRates Daily Disclaimer This publication has been prepared by ING solely for information purposes irrespective of a particular user's means, financial situation or investment objectives. The information does not constitute investment recommendation, and nor is it investment, legal or tax advice or an offer or solicitation to purchase or sell any financial instrument. Read more

Summary:  Powell’s testimony to the Congress started with a hawkish message. Market is now tilting in favor of a 50bps Fed rate hike this month and a terminal rate expectation of over 5.6%. Friday’s jobs data and next Tuesday’s CPI print will be key tests for whether a 50bps March rate hike gets cemented, but what is clear is that Powell’s shift to disinflation narrative in February was premature. Risk assets may remain under pressure if data stays hot, while the path of least resistance for the dollar is higher. Powell’s credibility at risk The semi-annual testimony from Fed Chair Powell was indeed hawkish, despite a political stage being set up. Instead of being relieved by incoming growth indicators, Powell still seemed worried about inflation despite his relaxed stance at the February FOMC meeting where he started the chatter on disinflation. Powell increased the prospect of a return to larger rate hikes, saying, “If the totality of the data were to indicate that faster tightening is warranted, we would be prepared to increase the pace of rate hikes”. The resulting increase in the probability of a 50bps rate hike at the March 22 FOMC meeting is shown in the chart below. He also added that with the latest economic data having “come in stronger than expected”, it “suggests that the ultimate level of interest rates is likely to be higher than previously anticipated”. This change in stance, after just one month of strong data, is proof that Powell took comfort in disinflation prematurely. High stakes for the next set of data The reaction to Powell’s testimony remains at risk of reversal, unless upcoming data supports it. Friday’s jobs report or next Tuesday inflation print will be key to watch to make or break the expectations of a 50bps rate hike in March. Hotter-than-expected prints can also bring the terminal rate pricing closer to the 6% mark, making the Fed’s lag to the market ugly. Moreover, shifting to a 50bps rate hike after just one go at the 25bps rate hike pace will be an embarrassment for Fed and its models. Bloomberg consensus expectations point to another strong jobs report after the blowout report of January. Headline jobs are expected to come in again at 200k+, but risk of disappointment remains given the scope of correction from +517k in January. The unemployment rate is expected to remain unchanged at 3.4%, while wage growth is projected to accelerate. Most early indicators such as the business surveys from S&P pointed to an acceleration in hiring, while applications for unemployment benefits remained historically low. Overall message, despite a potentially softer headline print, is likely to be that US labor market is still tight and there are millions of open positions even as layoffs continue to ramp up in some of the sectors. Risky assets to remain under pressure Along with a higher probability of a 50bps rate hike in March, the shift in tone from Powell has also seen the terminal rate pricing for the Fed Funds target rate to rise to 5.65% from 4.9% at the end of 2022 and the 5-5.25% hinted in the December dot plot. A brutal sell off in Treasuries followed the remarks, with the yield on 2-year Treasuries rising over 12bps to over 5% for the first time since July 2007 and rising further to 5.05% in Asian session. The longer end of the curve, however, recovered from their intraday lows with the 10-year yield closing only 1bp cheaper at 3.96% and the 30-year yield 2bps richer at 3.87%. This made the 2-10-year yield curve flatten to -105bps, the deepest inversion since September 1981. But something seems amiss with the higher-for-longer message not moving the 10-year yields. Either the 10-year yield will need to move higher or the 2-year will need to revert back lower to give a consistent message. This means higher interest rate volatility will remain in the cards, also suggesting higher risk premium for equities. This keeps diversification beyond US equities in favor. We expect European and Asian equities to outperform this year. China also appears poised for an upswing in growth as economic momentum picks up, but the recovery can remain bumpy in light of regulatory and geopolitical risks. Dollar’s path of least resistance is higher The US dollar is now back at its YTD high with potential for another leg higher after a minor correction. For the DXY index, key levels to watch are the 200DMA and 76.4% retracement at 106.45. The dollar is benefitting from a host of tailwinds including: elevated short-end rates a restrained rise in long-end yields suggesting a bid for safety China’s lower-than-expected growth target for 2023 dovish turns from some central banks such as RBA, and BOC likely to pause this week excessive pricing in for ECB and BOE rates remaining at risk of a correction Even if the Fed was to go for a 25bps rate hike again at the March meeting, there is enough reason to believe that that the dot plot will shift higher. That will also be sufficient for the USD to stick to its current range. Source: Saxo   Source: Macro Insights: Bumpy inflation or bumpy Powell? | Saxo Group (home.saxo)

The EUR/USD currency pair traded on Tuesday as though it were paying attention to our recommendations and forecasts. In recent days, we have frequently discussed how the price frequently reverses its direction of movement and surpasses the moving average line. The upward movement appeared to have started on Monday and might have continued, but on Tuesday the pair simply collapsed downward. Also, this is exactly what we anticipated given that we have recently been discussing the overbought European currency, its unwarranted increase in the second half of the year 2022, as well as the lack of growth factors. Yet, we think that Jerome Powell's statement was simply a trigger for the current strengthening of the US dollar that eventually occurred. In any event, Powell's "hawkish" statement accidentally caused the US dollar's decline when it was scheduled to start growing again. In the next few sections, we shall discuss the Fed chairman's speech, but for now, allow us to state the following. In the medium term, a new wave of movement to the south may well begin with the current collapse of the European currency. The market has already demonstrated recently that it is not prepared to purchase the euro. The European currency experienced significant pressure even in those years when growth would have been reasonable or at least not at odds with the underlying conditions. Hence, a new fall was coming. Of course, the pair may simply follow the British pound's lead and remain flat, but given that it has already departed its side channel, it may instead continue to decline. So, both pairs, which frequently move in the same manner, have fantastic potential to advance in the direction that we recently anticipated. The two once more rested on the Senkou Span B line on the 24-hour TF. If it is overcome, there is a greater possibility that quotes may decline more. In this instance, it may go all the way to the level of 1.0200. We think that such a move would be entirely appropriate, even from a fundamental perspective. The US rate will remain higher than the rate in the European Union for a considerable amount of time since the Fed continues to maintain a more hawkish stance than the ECB. The Fed's chairman made a hint about a longer rate increase. What specifically did the Fed chairman say to Congress, then? If readers recall or familiarize themselves with our most recent publications, they will be able to verify what we have repeatedly stated: the US rate will need to be raised considerably more than 5.25%, as many are currently anticipating. The basic calculation indicates that it will only take 1-2 more rises to bring inflation back to 2%. Nevertheless, the Fed intends to return to price stability as soon as feasible and will not prolong the pleasure for a long time. Even so, in the European Union or the UK, this scenario would take far longer. The rate should therefore keep rising in any event. In addition, we noted that since energy prices have declined, which has an impact on the costs of practically all goods and services, inflation has slowed down over the past six months in many nations throughout the world. But, the decline in the price of oil and gas could not endure indefinitely, thus this positive inflationary factor eventually had to be leveled. And that's what occurred. The Fed also enjoys a strong economy, a low likelihood of a recession, a strong labor market, and record-low unemployment. As a result, the Central Bank not only has the capability but also the motivation to actively fight rising inflation. Jerome Powell essentially acknowledged that on Tuesday in front of Congress. He predicted that the struggle against inflation would be long and uneven, and that interest rates would have to be raised much more than previously anticipated. There was a chance that inflation would stall in February or March because it barely slowed down in January. The likelihood of a 0.5% rate hike in March has now increased to roughly 50%, although traders were not even seriously considering this possibility a week ago. According to Powell, the regulator is prepared to speed up the tightening of monetary policy once again if necessary. To be honest, we did not expect such a dramatic reaction to Powell's speech, but we must say that the Fed chairman was exceptionally open and truthful this time. His speech could not help but strengthen the dollar, though it could have been lower, as only such a situation could have been foreseen recently. And given the recent figures on the nonfarm sector and inflation, what else might we anticipate? As of March 8, the euro/dollar currency pair's average volatility over the previous five trading days was 95 points, which is considered "high." Therefore, we anticipate that the pair will move on Wednesday between the levels of 1.0470 and 1.0660. A new phase of upward movement will be signaled by the Heiken Ashi indicator turning back to the top. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0964 Trade Suggestions: The moving average line has been reclaimed below by the EUR/USD pair's consolidation. Unless the Heiken Ashi indication turns up, you can continue to hold short positions with targets of 1.0498 and 1.0470. If the price is fixed above the moving average line with a target of 1.0742, long positions can 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. The short-term trend and the direction in which to trade right now 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) zones.   Relevance up to 01:00 2023-03-09 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337000

Brandywine Global: The euro area has defied expectations. What seemed a near-certain descent into an abysmal recession has not occurred. While risks still loom, recent data generally have continued to surprise positively. A step back from the abyss A year ago, Russia invaded Ukraine, threatening economic turmoil. Western allies, led by the United States, banded together and leveled an array of economic sanctions against Russia. An immediate threat to the eurozone was the risk of a cutoff of Russian natural gas, oil, and petroleum products on which the region had become dependent. Dire economic projections for the area followed, especially when natural gas flows from Russia were drastically reduced and European countries had to search out other, more expensive energy supplies. Forecasters warned of a deep, dark recession afflicting the continent. What happened? That economic darkness has not occurred as governments responded. Defying the Cassandras Europe’s dependency on cheap Russian energy would push the economy into a deep recession, or so it was assumed. Thus far, the forecasters, who had not counted on the aggressive European response to the looming economic crisis, have erred. Simply, the data have come in better than expected. That is the message in Chart 1. The eurozone surprise index has continued to move higher, as actual economic data “outperformed” the consensus of forecasters. Look no further than the Purchasing Managers’ Survey for February. February’s report puts the euro area economy in expansion territory, with a 52.3 reading, another data surprise. Various confidence measures also continue to improve. Chart 1: Eurozone Economic Data Surprises Index, As of February 21, 2023.   Citi Economic Surprise Indices for the eurozone and US represent the difference between official economic results and forecasts. With a sum over 0, its economic performance generally beats market expectations. With a sum below 0, its economic conditions are generally worse than expected.Sources: Brandywine Global, Macrobond (©2023). Indexes are unmanaged and one cannot directly invest in them. They do not include fees, expenses or sales charges. Past performance is not an indicator or a guarantee of future results. There is no assurance that any estimate, forecast or projection will be realized.   Most forecasters now concede the deep downturn will not materialize, but many continue to predict that a “mild” recession is not an impossibility. Consumer spending has weakened, and businesses seem unwilling to boost capital spending. The mild recession thesis relies on a developing and continuing inflation risk that forces the European Central Bank (ECB) to tighten its monetary policy further. Financial conditions are already tightening. The early stages of the Ukraine War and the reduced Russian natural gas flow pushed energy prices sharply higher, raising the stakes for higher inflation, which hit double-digit, year-over-year gains in both October and November of 2022, according to Eurostat. The ECB has already moved the policy rate sharply higher, and one of the inflation triggers, energy prices, appears to be ebbing. The policy rate stands at 3%, with another hike expected at the upcoming March meeting. But as Chart 2 seems to indicate, the ECB could be close to the end of its tightening cycle, at least based on market expectations. That peak terminal rate is expected to occur during the middle of 2023, with the ECB pausing before beginning to lower the policy interest rate around year end. This outcome would help support the following outlook: a slower first half of the year, followed by better growth during the second half, with an expanding economy in 2024. Chart 2: ECB Policy Rate Expected to Hit 3.5% As of February 22, 2023. Forecast Through May 31, 2027.   Source: Macrobond (© 2023). Past performance is not an indicator or a guarantee of future results. There is no assurance that any estimate, forecast or projection will be realized.   While the core inflation rate, which excludes volatile items like food and energy, remains stubborn, the euro area headline inflation rate has already rolled over, peaking In October. Over time, the core rate should follow the headline inflation rate lower. Easing energy prices helped push the headline number lower, as well as the fiscal support provided to households and businesses, which muted the full effect on inflation. Natural gas futures peaked in late August 2022 and have plunged over 80% lower.1 Moreover, the government response to increase natural gas storage capacity also has helped drive down energy prices, particularly gas. Warmer-than-expected winter weather has allowed further additions to the natural gas inventories, putting inventories well ahead of recent winters (see Chart 3). The impetus to reduce dependence on Russian natural gas has driven European governments to seek and obtain alternative energy sources. Germany, for example, just completed its first liquefied natural gas (LNG) jetty in an amazing 194 days and is planning more of such facilities.2 Chart 3: Warm Winter Has Helped Refill Europe’s Natural Gas Inventory Weekly Change in Storage Level (Top), Weekly Change in Percentage Points (Bottom). As of February 20, 2023.   Source: Macrobond (© 2023).   Two sides to the inflation story The inflationary forces, however, remain a risk and could keep the ECB on its rate-rising course longer than the markets believe. Meanwhile, the central bank continues to phase out its asset purchase program. Additionally, the labor market remains tight, evidenced by the sharp drop in the unemployment rate across the continent, creating labor shortages in Europe. As a result, negotiated wages have moved higher, remaining a potential inflationary risk. The recent export ban on Russian petroleum products also could potentially stoke inflation, although Russian oil imports ended with barely a price response or a negative economic impact so far. Perhaps the embargo of Russian petroleum products will be a non-event, too. However, a huge source of inflationary pressure appears to be deflating. Supply-side pressures are dissipating (see Chart 4), and the fall in these pressures presages a sharp melting of the area’s inflation rate, reducing the necessity of protracted ECB hawkishness. Inflation expectations remain well anchored. Wage growth, while stronger, does not appear excessive. Lastly, the euro has strengthened, but the disinflationary impact of the currency’s move higher has yet to hit the inflation rate. Chart 4: Germany Producer Price Index (PPI) and Global Supply Forecasts   The Global Supply Chain Pressure Index (GSCPI) tracks the state of global supply chains using data from the transportation and manufacturing sectors. The Index contains 27 variables related to cross-border transportation costs, supplier delivery times, order backlogs and inventories. The Germany Producer Price Index (PPI) measures price changes of merchandise sold in the following sectors: mining and quarrying, manufacturing and energy and water supply.Source: Federal Reserve Bank of New York, Central Bank of Germany (Deutsche Bundesbank), Macrobond (© 2023). There is no assurance that any estimate, forecast or projection will be realized.   Brighter day for the euro? The stars could be aligning for the euro as the euro area adjusts to life without cheap Russian energy and defies the bleak economic originally forecast. The euro has been in a downtrend since the Global Financial Crisis, but blink and you would have missed the currency’s performance over the last six months. By far and away, the euro has been the best-performing G-10 currency in that period, recording just over an 8% total return during that 6-month period. One negative force suppressing the euro has been the disappointing economic growth differential between the US and the euro area. Over extended periods of time, US economic growth has dwarfed that of the eurozone (see Chart 5). Superior growth prospects supported the US and the US dollar. If the euro area is to experience an appreciating currency, it will have to offer a better pace of growth—and that remains to be seen. Improving business investment trends would help as well as the continued investment in alternative sources of energy, which promise a tremendous deployment of capital. Europe is besting its renewable targets already, and Germany plans to generate 100% of its energy needs from renewable sources by 2035, for example. Accelerating its spending of next-generation energy funds could help the eurozone improve its cyclical growth differential and its potential growth path. Chart 5: GDP Growth Differential US Less Euro Area, Percent. As of October 1, 2022.   Sources: Brandywine Global, Macrobond (© 2023).   The improving total return for the euro shows growing investor interest in the region (see Chart 6). While it has not yet reversed its long-term downtrend, the currency, after flirting with sub-parity recently, has rallied. Can its appreciation continue, cyclically if not structurally? Some improvement in its fundamental drivers needs to occur to drive further appreciation. Chart 6 indicates traders have covered their short positions, and their net positioning in the euro has turned positive, a potential sign of further expected currency appreciation. US dollar weakness could help. Chart 6: Euro Performance and Net Speculative Trader Positions EUR/USD (Top), Net Speculative Positions (Percent of Operating Income), As of February 15, 2023.   Sources: Commodity Futures Trading Commission (CFTC), Macrobond, Brandywine Global (© 2023).   The energy story had been a negative for the currency. The euro area’s net trade surplus turned to a deficit, and its current account shifted from years of accumulating surpluses to a deficit as well. That put depreciatory pressure on the euro. This external deterioration, however, resulted from rising energy prices, which raised the cost of these imports. The reversal of those energy increases should put trade and the current account back into surpluses, and Chart 7 shows the earlier stage of the current account deficit reversing. The improving energy price outlook is necessary but not sufficient though. Tourism should be a growth contributor as travelers seek to take advantage of a still-cheap euro. A rebound in global growth is needed to spark European export growth, and this improvement may be in the offing. After ending its restrictive zero-COVID policy, China is now in the initial stages of stimulating its economy. A rebound in Chinese growth and demand will be critical to trade improvement in the euro area, especially in Germany. Chart 7: Euro Area 19: Current Account Balance Percent of GDP, 3-Month Moving Average, Seasonally Adjusted. As of December 1, 2022.   Sources: Brandywine Global, Macrobond, ECB (© 2023). Past performance is not an indicator or a guarantee of future results. There is no assurance that any estimate, forecast or projection will be realized.   Capital flows into the euro area could be another source of demand for the currency. The change in the ECB’s monetary stance has pushed interest rates higher, making the area’s bonds more attractive to both foreign and domestic investors (see Chart 8). Asset attractiveness is not limited to the area’s bonds. Equity markets have started to draw investor interest, too. The EURO STOXX 50, an index composed of 50 stocks from 11 eurozone countries,3 has gained around 30% from its low at the end of September 2022, compared to a pedestrian 10% by the S&P 500. European bank stocks, measured by the EURO STOXX Banks Index, did even better, advancing 47% from that September low compared to 16% for US bank stocks, based on the S&P 500 Banks Industry Group Index,4 for the same time period. Forward-looking indicators, like equities and confidence measures, could be tilting favorably toward the euro. Chart 8: US vs. German Real 10-Year Government Bond Yields Percent. As of February 20, 2023.   Sources: Brandywine Global, Macrobond, US Department of Treasury, Deutsche Bundesbank, Bureau of Labor Statistics (© 2023).   Finally, there is a structural catalyst for the currency, too. Following years of accumulating current account surpluses, the euro area now has established a positive net international investment position (see Chart 9). Like Japan, the euro area has become a net global creditor, a supplier of credit to the world. That capital flow generates income, and that income finds its way back into the euro area, boosting the country’s primary income. That income, converted to euros, creates a demand for the currency and the potential for it to appreciate. It is still early, but forces could be turning in favor of the euro. Exhibit 9: Euro Area 19: Net International Investment Position Percent of GDP. As of July 1, 2022.   Sources: Brandywine Global, Macrobond, ECB (© 2023).   Conclusions Despite the odds, the euro area appears to have avoided a recession. The European economy has demonstrated amazing resiliency following the supply shock of the Russian invasion of Ukraine. The rising cost of energy forced aggressive adjustments to be made, setting the area on a path away from Russian energy dependency. An important source of support came from the governments that created programs to insulate households and businesses and encourage conservation. An unwelcome by-product of the war and rising energy prices has been the acceleration of inflation. The ECB, an inflation-targeting central bank, has a set goal of achieving a 2% inflation rate. The inflation rate, while recently dropping, remains at an uncomfortable 8.6%, as of January 2023, according to Eurostat. Labor market tightness remains an issue. However, supply chain pressures are lessening, which should help ease inflationary pressures along with the drop in energy prices. The ECB should be able to throttle back its hawkish policy. The euro could be setting the stage for additional appreciation. The currency has demonstrated recent firming, as trader short positions have been covered. Investors appear to have become more interested in European equities, especially bank stocks. The euro area’s current account should continue to improve, helped by improving global growth led by China’s return. The area’s net international investment position should grow, providing support to the euro. Do not ignore risks, however. The eurozone still faces a daunting array of risks. The war in Ukraine is likely to continue, and Western resolve could face a severe test. Another energy crisis cannot be ruled out as the eurozone moves further and further away from Russia. The ECB could become much more hawkish and enter a longer period of monetary tightening. Money supply growth has already decelerated sharply. Finally, environmental, sustainability and governance (ESG) risks should be factored into the equation. France faces protests over President Macron’s plan to raise the retirement age and stabilize the pension, with its budgetary implications. Additionally, the outcome of Spain’s upcoming election could drive future economic reforms. These risks should not be ignored. Facing what seemed a near-certain descent into an abysmal recession, the euro area has defied expectations through a combination of luck, grit, and concerted policy efforts. While significant uncertainties and risks still loom, and it is still early days for some nascent trends, recent data generally continue to surprise positively. Endnotes Source: Bloomberg, “European Gas Is Stuck in Storage After Prices Sank From Peak,” February 12, 2023. Source: EnergyWatch, “Germany's first LNG import terminal completed,” November 16, 2022. The EURO STOXX Banks Index is a capitalization-weighted index that includes countries that are participating in the European Monetary Union and are involved in the banking sector. The S&P 500 Banks Industry Group Index is a capitalization-weighted index based on the Global Industry Classification Standard (GICS) Level 2 Industry Group for banks. WHAT ARE THE RISKS? Past performance is no guarantee of future results.  Please note that an investor cannot invest directly in an index. Unmanaged index returns do not reflect any fees, expenses or sales charges. Equity securities are subject to price fluctuation and possible loss of principal. Fixed-income securities involve interest rate, credit, inflation and reinvestment risks; and possible loss of principal. As interest rates rise, the value of fixed income securities falls. International investments are subject to special risks including currency fluctuations, social, economic and political uncertainties, which could increase volatility. These risks are magnified in emerging markets. Commodities and currencies contain heightened risk that include market, political, regulatory, and natural conditions and may not be suitable for all investors. U.S. Treasuries are direct debt obligations issued and backed by the “full faith and credit” of the U.S. government. The U.S. government guarantees the principal and interest payments on U.S. Treasuries when the securities are held to maturity. Unlike U.S. Treasuries, debt securities issued by the federal agencies and instrumentalities and related investments may or may not be backed by the full faith and credit of the U.S. government. Even when the U.S. government guarantees principal and interest payments on securities, this guarantee does not apply to losses resulting from declines in the market value of these securities.

A 50bp rate hike next week looks like a done deal. The more heated debate at the European Central Bank will be about the path for monetary policy beyond the March meeting The President of European Central Bank Christine Lagarde delivers a speech at the European Parliament in Strasbourg, eastern France - 15 February 2023 Source: Shutterstock   ECB president Christine Lagarde’s de facto pre-announcement at the February meeting, the ECB discussion reflected in the minutes of the meeting and official comments since the February meeting all show that a 50bp rate hike next week is a done deal. The discussion will rather focus on steps beyond the March meeting and how to communicate them. Stagnating economy and stubbornly high inflation While there have been some positive developments in confidence indicators since the start of the year, hard data is still anything but rosy. Interestingly, two downward revisions of German GDP data and one downward revision of Irish GDP data brought the eurozone economy at the brink of recession in the fourth quarter of 2022 and another stagnation in the first quarter cannot yet be excluded. As regards sentiment indicators, consumer confidence remains low and actual assessment components are still weak. After the inventory build-up at the end of last year, production could still remain sluggish. It is far from certain that the Chinese reopening will be sufficient to shift the eurozone economy into a higher gear. Since the start of the year, hard data is still anything but rosy Lower energy prices have led to lower headline inflation than expected in December and will continue to push down headline inflation further. As of March, there should be a sharp negative base effect from energy prices. Also, the ECB’s very own consumer expectations survey this week showed a further drop in consumers’ inflation expectations. At the same time, however, core inflation continued to increase and there are no signs of a peak, yet. Selling price expectations in industry have come down significantly but remain close to all-time highs in services, suggesting that the pass-through of higher input prices to consumers is far from being over. Add to this higher nominal wage growth this year and next year and it is easy to understand the ECB’s concern about stubbornly high core inflation. Macro developments since the February meeting have not brought any relief for inflation and the inflation outlook, which is why a 50bp rate hike looks like a done deal. Heated discussion about path and pace of monetary policy beyond next week's meeting Up to now, the ECB has been surprisingly unanimous on rate hikes. Recent comments by ECB officials, however, suggest that the debate at the ECB will become more heated again. While chief economist Philip Lane and others argue for a more cautious approach, which could lead to a slowing of the rate hike pace and a not so far away pause or end, the hawkish camp, currently headed by Isabel Schnabel, argues in favour of further firm tightening. The publication of a new round of macro projections at next week’s meeting will do little to change the actual rate decision but will give clear insights in where the discussion within the ECB about future rate hikes is heading to. New projections to show lower inflation in 2024 and 2025 Compared with the December forecasts, the external environment and the so-called technical assumptions have changed drastically. Remember that back in December, the ECB had still penciled in gas prices to average 120 euro per MWh in 2023 and 98 euro in 2024; based on market futures. These futures would currently result in average prices of around 50 euro per MWh for this year and next year. The other most significant change stems from interest rates, as 3m Euribor rates should now average almost 100bp more and 10-year bond yields around 60bp more than in the December forecasts. Add to this lower oil prices and a stronger euro exchange rate and anything other than a downward revision of the ECB’s inflation projections for 2024 and 2025 would be a strong surprise. Anything other than a downward revision would also indicate that the ECB has actually become more alarmed about underlying inflation. Back in December, the ECB had expected headline inflation to average 3.4% and 2.3% in 2024 and 2025 respectively, and core inflation at 2.8% and 2.4%. Finally, we will have a very close eye on the ECB’s growth projections. Not so much on the actual numbers but on the underlying profile. If the ECB sticks to its previous view that the eurozone economy will return to pre-pandemic growth rates already in the second half of this year, the risk of further rate hike overshooting increases. If the ECB gets closer to our own view of rather subdued growth going into 2024, our call of the terminal rate for the deposit rate at 3.5% looks realistic. Several options for the ECB beyond next week's meeting If the hawks remain in the driver’s seat, the growth outlook becomes more upbeat and inflation remains stubbornly high, there is a high risk that the ECB could actually continue with 50bp rate hikes. In such a scenario, the ECB would bring policy rates to new historical highs, even if the risk of a policy mistake increases. We are still surprised to see that even the hawks at the ECB seem to underestimate the risk aggressive monetary policy tightening can (and will) have on the economy. If the opposition of the doves increases, the ECB will have to take a more moderate approach to further monetary policy tightening. In such a scenario, which is our base-case scenario, the ECB would hike rates by 25bp in May and June and then pause its hiking cycle. In this scenario, the argument prevails that it will simply take some time before the full impact of the ECB’s tightening so far will materialise.   Our base-case scenario is for the ECB to hike rates by 25bp in May and June and then pause its hiking cycle Don’t expect that a final decision on what will come after the March meeting will already be taken next week. Between March and the next meeting in May, important data releases like an update of the Bank Lending Survey and initial first-quarter GDP growth data will be available. These are two important pieces of evidence that could tilt the balance in either direction; continue hiking rates until actual inflation comes down or prepare to pause to better assess the impact of the rate hikes so far. An instrument to bring hawks and doves closer together is obviously Quantitative Tightening. More aggressive policy rate hikes against a very slow reduction of the ECB’s bond portfolio or less aggressive rate hikes but a faster reduction of the bond portfolio could be the trade-off. In any case, with the recent repricing in financial markets of the ECB's next steps, the heat is on. Not only for the ECB but also for ECB president Lagarde at the press conference. In the past, fine-tuning of market expectations at the press conference often failed. Therefore, it could very well be that the ECB chooses a very defensive communication strategy, stressing the meeting-by-meeting approach and (hopefully) suppressing any need to give forward guidance. Read this article on THINK TagsMonetary policy Inflation Eurozone ECB 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

Central bankers' hawkish response to indications of ever-stickier inflation have struck a nerve with markets which continue to ramp up rate expectations. But it is seen as the right medicine, with market-based inflation expectations dropping further while risk assets are holding up fairly well for now Markets are increasingly bracing for the Fed upping the pace again The US jobs data remains the key data point looming large at the end of this week, but that hasn’t kept markets from further raising their expectation for a 50bp Fed hike yesterday. We think markets will need to see material evidence from Friday's report to row back after Fed Chair Powell opened the possibility of increasing the hiking pace again in his testimony. Data in the meantime chimes with the narrative of a still tight labour market Data in the meantime chimes with the narrative of a still tight labour market. The ADP payrolls estimate beat expectations, and job openings were reported in excess of 10.8 million yesterday, meaning that there are still around 1.9 openings for every unemployed worker. Today’s eyes are on the initial jobless claims where a number below 200k would also give little evidence of the labour market cooling. The US market is in the driving seat into the payrolls. While the front end has pushed higher, the back end is resisting to get back above 4%, thus further inverting the curve which is now stretching towards -110bp. That is not to say that investors are eager to pick the close to 4% in 10Y US Treasury yields. Yesterday’s 10Y auction was in stark contrast to the stellar results of prior bonds sales this year, highlighting some unease ahead of the payrolls and also next week’s key CPI data. What the doctor ordered: Hawkish central banks are having the desired effect on inflation expectations Source: Refinitiv, ING Risk sentiment does not stand in the way of higher rates for now If data does not stand in the way of higher rates, the other factor potentially capping the rise in longer dated yields especially remains risk sentiment. Clearly, the deep inversion of curves is already a reflection of concerns that central banks are overdoing it, but risk markets themselves are proving remarkably resilient in light of tightening already delivered and still expected. Italian spreads have withstood rising volatility and hawkish comments In the eurozone markets the key spread of 10Y Italian government bond yields over German Bunds withstood rising volatility and hawkish comments. It has actually tightened and now resides below 180bp. This is even more impressive as just this week the European Central Bank’s Holzmann has broken with the unwritten rule of not discussing the ECB’s forward guidance on the reinvestment of Pandemic Emergency Purchase Programme portfolio, where a full reinvestment is currently still signalled at least until the end of 2024. Holzmann had suggested to include PEPP in quantitative tightening this autumn. Recall that the possibility to flexibly reinvest PEPP maturities still is the ECB’s easiest-to-activate first line of defence against any spread turmoil. Rolling off the portfolio could be seen as diminishing this firepower. While measures of (implied) rates volatility have started to tick up again since late February, spreads that have before shown to be quite sensitive to such dynamics have indeed budged very little. Collateral scarcity fears are no longer holding back Bunds Source: Refinitiv, ING   The Bund spread versus swaps can also be subsumed under market risk measures, though it has become more of a measure of collateral scarcity fears since the ECB’s pandemic interventions. And collateral scarcity really became an increasing concern with rising market volatility at the start of the broader market sell-off in 2022, driving also the directionality of the Bund asset swap spread – Bund yields had struggled to keep pace with the quick rise in swap rates. Since then a lot has changed: The ECB and the debt agency have made more collateral available for lending, and especially last month the ECB has shown its sensitivity to the issue in the handling of government deposits on its balance sheet. Add to that the ECB's quantitative tightening is underway since this month as well. What we now see is that the directionality of the spread has been broken, and it is also budging the latest uptick in implied volatility measures. Today's events and market view Today’s data calendar is fairly light with the highlight being the US initial jobless claims. The market is looking for a small increase in initial claims to 195k, which would still leave it below the pre-pandemic average of around 219k for 2018 to 2019. The key to validating current market pricing remains tomorrow’s US jobs data. After European bond supply from Ireland and the BTP Italia sale to institutional investors today, the focus in primary markets should be tonight’s 30Y UST auction. It follows yesterday’s weaker 10Y sale, although past 30Y sales have already stood out weaker compared to the strong sales metrics in the other maturities this year so far.    Late in the night, attention will turn to Japan for the last Bank of Japan policy meeting under governor Kuroda. Our economists note that he is well known for surprising markets, but believe that he will leave a decsion on the future of the bank's yield curve control policy to his successor Kazuo Ueda.  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

5M chart of EUR/USD EUR/USD continued a very weak, upward, corrective movement on Thursday. Volatility was very low again, but there was a very concrete explanation in the form of a complete absence of fundamental and macroeconomic events. The pair could not crawl even to the nearest Ichimoku indicator line, although it has been correcting for two days. Therefore, there is no new conclusion regarding the pair's movement and outlook over the past two trading days. We have to wait for the reports, which may determine the dollar's future, until the next FOMC meeting, which will be held on March 21-22. I still expect the pair to fall, i.e. the rise of the USD. However, today it might take a different scenario, as there is no guarantee that the Nonfarm Payrolls report will be much higher than the forecasted value again. Speaking of trading signals, the situation wasn't good on Thursday, but why is it so surprising if the pair managed to go "even" 50 pips in a day? Of course, you should not expect that the pair would provide a lot of strong and profitable signals. At first the pair rebounded from 1.0581, and then was down 15 points, which at least let you place the Stop Loss to Breakeven. Further, the pair traded along 1.0581, but by that time it was clear that trading was not active on Thursday. Therefore, traders could quietly close the terminal and leave the market, waiting for a more interesting Friday. COT report: On Friday, traders had to learn once again the COT report from February 7. This report was published a month ago. It seems that the Commodity Futures Trading Commission will now publish reports with a month's delay instead of a three-day delay as it was before. In the event of this, the reports will hardly be of great importance. However, we will continue to analyze them. Maybe in the future, the situation will change for the better. So far, we can say that in the last few months, the overall picture has been corresponding to the market situation. On the chart above, we see that the net non-commercial position of large traders (second indicator) has risen since September 2022. The net non-commercial position is bullish and continues to increase with each new week, allowing us to expect the uptrend to stop shortly. Such a signal comes from the first indicator, with the green line and the red line being far apart, which is usually a sign of the end of a trend. The euro has already begun its bearish move against the greenback. So far, it remains unclear whether it is just a downward correction or a new downward trend. According to the latest report, non-commercial traders closed 8,400 long positions and 22,900 short ones. Consequently, the net position rose by 14,500. The number of long positions exceeds that of short ones by 165,000. In any case, a correction has been looming for a long time. Therefore, even without reports, it is clear that the downtrend will continue. 1H chart of EUR/USD On the one-hour chart, the pair sharply fell, but after that ended it started a correction for two days. Unfortunately, the chart shows that the downtrend can't be considered as completely revived yet. Now the euro's technical picture looks more like a "swing" than a trend. If the data turns out to be disappointing today, the pair might go back to 1.0692, which will make us believe in the "swing". On Friday, important levels are seen at 1.0340-1.0366, 1.0485, 1.0537, 1.0581, 1.0658, 1.0692, 1.0762, 1.0806, 1.0868, and also Senkou Span B (1.0615) and Kijun Sen (1.0610). Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels. They could be made when the price either breaks or rebounds from these extreme levels. Do not forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses. On March 10, the market will pay attention to the U.S. NonFarm Payrolls and the Unemployment report. However, European Central Bank President Christine Lagarde is also going to give a speech in the EU. All in all, it will be a rather volatile and active day. Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.   Relevance up to 01:00 2023-03-11 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337199

On Wednesday and Thursday, the EUR/USD currency pair was trading much more calmly. The initial impact of Powell's speech quickly subsided, and it is now uncertain what will happen next. On the one hand, the pair has formed a consolidation below the moving average line, which offers great prospects for further decline. Yet, the pair has only surpassed the moving average five times in the past week, so further consolidation below the moving average line is meaningless. Hence, all we can say at this point is that the market may go downward, but in reality, a lot depends on the American statistics that will be announced today. More on it is covered below. Powell's second address to the US Congress contained no new information, as was to be expected. We are taken aback by how the market reacted to the Fed chairman's statement on Tuesday because every argument made was foreseeable. We've stated time and time again that the Fed rate needs to be increased to at least 6% and that any discussion of "the regulator's reaction to reports" or anything similar is nothing more than "a good mine with a poor game." Hence, we were not surprised by Powell's statement regarding the need to speed up the pace of monetary policy tightening once more. The Fed made it clear from the start that it wanted to raise the rate to 2%. And not in the next 5–10 years, but as soon as possible. The topic would be very different if the American economy was on the verge of recession. Nevertheless, very reliable macroeconomic data are being released every month, giving the Federal Reserve every opportunity to tighten monetary policy as required. Following Powell's remarks, the dollar increased as expected, and we think that it will do so going forward. On the 24-hour TF, the pair continued to gain ground beneath both the Ichimoku cloud and the 38.2% Fibonacci line. As a result, the likelihood of a future decline in the quotes has grown, and we have another sell signal. If today's US reports are successful, the pair might decline another 100 points. Non-farm and unemployment in the US won't change market sentiment. We think the debate over raising the rate by 0.5% in March is nearly settled. Jerome Powell rarely makes unsupported claims or assertions that lack substance. If he indicated that there is a chance that the rate of growth will accelerate, the regulator would be preparing for this. Powell's attempt to "step back" in his address on Wednesday was futile, and nobody believed him. The likelihood of a 0.5% rate increase at this point is already more than 50%. Furthermore, this market belief won't be altered by today's reports (in our opinion). Let's analyze it. Will the Fed still go forward with its intentions to raise the rate by 0.5% even if today's non-farm data is weak and unemployment increases? No, we believe. Thus, it's important to consider the entire dynamics and trend rather than just one particular report. Nonfarms consistently perform at a high level. Unlike other experts, we have consistently asserted that adding 200–300 new jobs each month represents an excellent value. Hence, even if there are 150,000 non-farms today, for example, the overall situation will not change. It's the same with unemployment. It is already down 3.4% and is still going down. It is now even preferable for the Federal Reserve to somewhat cool the economy so that inflation does not re-accelerate. The question already exists: should rates be raised to slow the economy and boost unemployment rather than to cut inflation? When there is a labor shortage, salaries start to rise, which in turn causes inflation to accelerate. Meanwhile, the UK is reporting a similar issue. We, therefore, think that the rate will rise by 0.5% with any nonfarm and unemployment. This aspect can significantly assist the dollar over the coming few months in the conflict between the euro and the dollar. The ECB will likewise increase the rate, but it won't be until much later than the Fed rate, and it's unlikely that it will increase to 6% as it did in the US. As a result, the pair has adjusted by 50% from the previous decline, but it simply lacks new growth factors. As of March 10, the euro/dollar currency pair has experienced 75 points of "average" volatility over the previous five trading days. As a result, we anticipate that the pair will move on Friday between 1.0505 and 1.0655. The Heiken Ashi indicator's downward turn will signal a potential continuation of the downward movement. Nearest levels of support S1 – 1.0498 S2 – 1.0376 S3 – 1.0254 Nearest levels of resistance R1 – 1.0620 R2 – 1.0742 R3 – 1.0964 Trade Suggestions: The EUR/USD pair has consolidated below the moving average line once more. Currently, short positions with targets of 1.0505 and 1.0498 can be taken into account if the Heiken Ashi indicator reverses direction upward. After the price is established above the moving average line, long positions can be initiated with targets of 1.0655 and 1.0742. Explanations for the illustrations: Channels for linear regression - allow us to identify the present trend. 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 01:00 2023-03-11 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337203

EUR/GBP takes offers to refresh intraday low, prints three-day downtrend. UK GDP improved in January, Industrial Production, Manufacturing Production deteriorated. Hopes of Britain’s economic rebound due to the latest reshuffle in governing policies, Brexit allow GBP to remain firmer. BoE versus ECB drama could check pair sellers as the key data begins in London. EUR/GBP slides 10 pips to refresh intraday low near 0.8860 as the UK’s Office for National Statistics releases the monthly Gross Domestic Product (GDP) on early Friday. It should be noted that the optimism surrounding the British economic transition and mixed sentiment, as well as likely challenges for the Euro, seem to exert additional downside pressure on the cross-currency pair. UK GDP grew 0.3% MoM in January versus 0.1% expected and -0.5% previous, which in turn pushes back the recession woes and propels the British Pound (GBP) despite mixed readings on the other fronts. That said, UK Industrial Production figures reversed the 0.3% previous expansion with -0.3% MoM marks whereas the Manufacturing Production growth dropped to -0.4% compared to -0.1% market forecasts and 0.0% prior. Also read: UK Manufacturing Production declines 0.4% MoM in January vs. -0.1% expected Elsewhere, hopes of economic recovery and more stock market listings seem to help the Cable pair amid a light calendar during the week. “The country's economy is on track to shrink less than expected this year and avoid the two-quarters of negative growth which mark a technical recession,” the British Chambers of Commerce (BCC) forecast on Wednesday per Reuters. Further, Britain’s finance ministry said on Wednesday it will launch a review into how investor research on companies could be improved to attract more listings, a step that follows a decision by UK chip designer Arm Ltd to only list in New York, reported Reuters. On the same line, Britain's revamped financial market rules will largely be aligned with U.S. and European Union regulations to minimize disruption to global companies, its financial services minister Andrew Griffith said on Thursday per Reuters. It should be noted that Bank of England (BoE) policy maker Swati Dhingra warned against interest rate hikes on Wednesday while saying that overtightening poses a more material risk at this point. On the other hand, fears of more economic pain for the bloc amid geopolitical tensions with Russia and sticky inflation, as well as higher rates, seem to drag the Euro. It should be noted that the risk-off mood underpins the US Dollar’s haven demand and reduces the demand of its major rival, namely the EUR. Having witnessed the initial market reaction to the UK’s data dump, EUR/GBP pair traders may concentrate on European Central Bank (ECB) President Christine Lagarde for clear directions. Also important to watch will be a slew of top-tier data from the US and Canada that can entertain the momentum traders across the board. Technical analysis Failure to overcome the 0.8930 horizontal hurdle joins the EUR/GBP pair’s clear downside break of a one-week-old ascending trend line, around 0.8895 by the press time, to direct bears towards the 100-DMA support of 0.8765.

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

Analysis of transactions and tips for trading EUR/USD The pair tested 1.0561 at a time when the MACD line was just starting to move above zero, which was a good reason to buy. It resulted in a price increase of about 20 pips. No other market signal appeared for the rest of the day. Contrary to expectations, the lack of statistics yesterday led to a further correction in EUR/USD. But today, there is a chance for growth as Germany's CPI data could prompt a rise in demand. The increase, however, will not be large because later in the day, ECB President Christine Lagarde and Board member Fabio Panetta will give a speech, which are unlikely to be good. Upcoming reports on the US labor market are also expected to strengthen dollar as a fall in unemployment rate, jump in non-farm payrolls and increase in average hourly earnings are reasons to buy the currency. Of course, if the data actually disappoints, euro will get a chance to see gains. For long positions: Buy euro when the quote reaches 1.0600 (green line on the chart) and take profit at the price of 1.0640. Growth is possible, but it will only be as an upward correction and nothing more. Nevertheless, make sure that when buying, the MACD line is above zero or is starting to rise from it. Euro can also be bought at 1.0574, but the MACD line should be in the oversold area as only by that will the market reverse to 1.0600 and 1.0640. For short positions: Sell euro when the quote reaches 1.0574 (red line on the chart) and take profit at the price of 1.0538. Pressure will return if the US releases a strong labor market data. However, make sure that when selling, the MACD line is under zero or is starting to move down from it. Euro can also be sold at 1.0600, but the MACD line should be in the overbought area as only by that will the market reverse to 1.0574 and 1.0538. What's on the chart: The thin green line is the key level at which you can place long positions in the EUR/USD pair. The thick green line is the target price, since the quote is unlikely to move above this level. The thin red line is the level at which you can place short positions in the EUR/USD pair. The thick red line is the target price, since the quote is unlikely to move below this level. MACD line - when entering the market, it is important to be guided by the overbought and oversold zones. Important: Novice traders need to be very careful when making decisions about entering the market. Before the release of important reports, it is best to stay out of the market to avoid being caught in sharp fluctuations in the rate. If you decide to trade during the release of news, then always place stop orders to minimize losses. Without placing stop orders, you can very quickly lose your entire deposit, especially if you do not use money management and trade large volumes. And remember that for successful trading, you need to have a clear trading plan. Spontaneous trading decision based on the current market situation is an inherently losing strategy for an intraday trader.   Relevance up to 07:00 2023-03-11 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337241

The dollar index was steady on Friday, a rare spot of calm in volatile global markets ahead of key U.S. payrolls data later in the day, while the yen weakened after the Bank of Japan kept stimulus settings steady. The focus for today is the publication of the non-farm payroll (NFP) in the US with forecasts of 205,000. USD/JPY With the beginning of the trade, USD/JPY traded later at 136.00, but quickly bounced back to 136.75. In the following hours of the Asian session, the prices of the yen pair were above 136.50. At the beginning of the European session, the pair's exchange rate fell to the level of 136.25, but this time it managed to recover. At the time of writing, USD/JPY is trading above 136.95 but still below 137.00. In his last meeting as the BOJ Governor Haruhiko Kuroda left policy settings steady, in line with expectations, given the Japanese central bank adjusted the yield band as recently as December. Incoming BOJ Governor Kazuo Ueda has said the central bank must maintain its current ultra-easy policy for now until there are signs that inflation has sustained above BOJ’s 2% target EUR/USD The euro pair trading on Friday is quite mixed. In the Asian session, the EUR/USD pair was held just after 1.06 and above 1.0585. In the European session, the euro was both above 1.0605 and below 1.0580. At the time of writing, the EUR/USD pair is below 1.0590. The euro rises against the dollar after heavy losses at tech-focused U.S. lender SVB Financial and could extend its gains on potentially softer U.S. jobs data later. The euro gained some support this Friday morning thanks to slightly weaker dollar and better than expected German CPI data. Although the actual numbers were printed as forecast, the figure of 8.7% underscores heightened and persistent inflationary pressures in Germany. As Germany is the largest economy in the Eurozone, the inflation release acts as a proxy for the wider region, reinforcing hawkish sentiment on the part of the European Central Bank (ECB). To close the trading session from a EURUSD perspective, ECB's Christine Lagarde is due to speak and may reiterate the need to suppress inflation after today's German data. GBP/USD The pair of the pound, contrary to the euro, trades calmly. In the zajastj session, the cable pair held around 1.1930, but was mostly below this level. With the European session, the GBP/USD pair began to grow. The GBP/USD pair managed to get close to the 1.20 level, but did not maintain momentum and at the moment of writing the text is trading after 1.1977. Sterling rose on Friday after Britain's economy was shown to have grown by more than expected in January, further allaying fears of a recession. The Office for National Statistics (ONS) said Britain's economy expanded 0.3% month-on-month, after a drop of 0.5% in December. AUD/USD The movement of the pair Aussie equals and z is mixed. At the beginning of the Asian session, the AUD/USD pair fell towards 0.6570 and then increased towards 0.66. In the following hours, the Australian pair remained in the range of 0.6585-0.6595. After a surge, AUD/USD has fallen again and is now trading below 0.6590 Source: investing.com, finance.yahoo.com

In this podcast, ING's James Knightley, Carsten Brzeski and James Smith discuss where interest rates may be heading in the US, Europe and UK while Chris Turner explains what this could mean for global markets   Federal Reserve Chair Jerome Powell cautioned this week that the central bank may need to raise interest rates higher and faster than expected to tame inflation. European Central Bank member Robert Holzmann has called for another four rate hikes of 50bp a piece while in the UK, Bank of England policymaker Catherine Mann has also signalled further tightening ahead. In this podcast, ING's Chris Turner, Carsten Brzeski, James Knightley and James Smith reflect on this hawkish commentary and discuss what it means for monetary policy, economic growth and global markets. 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

Thursday's European Central Bank interest-rate decision and U.S. inflation data on Tuesday will be the main focus next week. Interest rates The ECB, Fed, Bank of England (BoE) and other central banks have aggressively raised interest rates in an attempt to bring inflation back to the 2% target. The UK and US raised their benchmark interest rates from near zero a year ago to 4% and 4.5% respectively, while the corresponding ECB rate is up to 2.5% Interest rate expectations in the Eurozone and the US have been rising recently, putting these two developments in the spotlight. The ECB is widely expected to raise interest rates by 50 basis points, taking the deposit rate to 3.00%. Inflation still too high The world's major economies have been battling rapid inflation for almost two years. After many years of very slow price growth, in 2022 annual inflation in many economies reached double-digit values. This was due to supply chain disruptions in response to COVID-19 and the war in Ukraine, which has pushed up energy and food prices. In the euro zone core inflation increased from 5.3% in January to 5.6% in February. In addition to the main factors influencing inflation, other equally important reasons can be indicated. The reason why core inflation remains elevated may be the fact that unemployment is so low . For example, in the service sector in the Eurozone, we see wages rising as companies compete to pay for workers. Another factor was companies raising prices faster than usual to maintain their profit margins. As most consumers already know all too well, increased inflation lowers the standard of living. This means people can buy fewer items for the same amount of money, making weekly shopping more and more stressful. As signaled by Powell (the head of the Fed) and Lagarde (ECB), the latest inflation data indicate the need for further aggressive interest rate increases. Now 50bp and May too? March's move was well signaled by the central bank, focusing on any signals as to how far and how quickly interest rates will rise in the future, in particular whether the ECB will go ahead with another 50 basis point hike in May. Some analysts raised their ECB interest rate forecasts due to recent strong inflation data, which pushed eurozone bond yields higher. Comments from ECB President Christine Lagarde at the press conference following Thursday's decision will be crucial for the eurozone, especially after ECB policymaker Robert Holzmann called for three more moves of 50bps after this month's meeting. Expect the worst? While there have been some positive developments in confidence metrics since the start of the year, the hard data is still far from rosy. Interestingly, two downward revisions of German GDP data and one downward revision of Irish GDP data brought the Eurozone economy to the brink of recession in Q4 2022 and another stagnation in Q1 cannot yet be ruled out. The ECB's own consumer expectations survey this week showed a further decline in consumer inflation expectations. At the same time, however, core inflation continued to rise and so far there are no signs of a peak. Industry selling price expectations have dropped significantly but remain close to all-time highs for services. Source: investing.com

UK Spring Budget – 15/03 – the last few months have been challenging ones for the UK economy, in the aftermath of the emergency Autumn budget, with the main narrative from those times being peak pessimism. At the time we had the OBR, IMF, and the Bank of England all doubling down with deeply depressing outlooks for the UK economy. All of them were uniformly pessimistic about the prospects for the UK economy arguing that the economy was already in recession and likely to be so for at least 2 years. Since those dark days in October as well as the political upheaval and market turbulence that followed, inflation has started to come down albeit slowly, while industrial unrest has grown. Consumer spending has been weak with retail sales showing sharp falls at the end of last year. On the plus side tax revenues proved to be extremely resilient, helped by higher-than-expected inflows from self-assessment of £21.9bn, as well as strong inflows from Capital Gains tax, which contributed £13.2bn in January. This is good news for the Chancellor of the Exchequer as it means that the UK government has borrowed £30.6bn less than OBR forecasts. It also potentially gives him more wriggle room in this week's budget to rethink some of the recent tax hikes, specifically the increase in corporation tax, which has been widely criticised. At a time when the UK economy needs all the help it can get it beggars belief that a UK Chancellor seems to think raising taxes on highly stretched businesses is a good idea. We've already seen and heard from several companies taking the decision to postpone or cancel investment programs in the wake of the prospect of higher tax and regulatory burdens, while other companies are looking at moving away from the UK completely. It's an absolute fallacy that higher tax rates mean higher tax revenue, despite the UK Treasury pushing back on keeping the rate unchanged. Looking at it another way 19% of something is better than 25% of nothing, and that's the outcome that HMRC and the Treasury might be facing. It's strange that so many people fail to understand that concept, large companies are mobile, but people are not. There has also been speculation that the Chancellor may well extend the energy support scheme for businesses, as well as freezing the energy price cap for consumers at its current level of £2,500 given the recent sharp decline in energy prices. A further freeze on fuel duty also seems likely. The super deduction which expires in April could well be replaced with measures that allow offsetting against profits. In short, this week's budget is the ideal opportunity for the government to stop running scared, push back on the Treasury, and start to take measures to stimulate investment and innovation, champion business, push back on the siren calls for more taxes which are self-defeating, and don't raise the sums claimed. US CPI (Feb) – 14/03 – with the Federal Reserve in a blackout period ahead of next week's FOMC meeting there has been much discussion over whether the Fed got it right when they downshifted their rate hiking cycle in February when they raised rates by 25bps, following on from a similar slowdown in December of 50bps. Since the 25bps rate move, US economic data has shifted up a gear, with retail sales in January surging 3%, and US payrolls growth also showing a strong start to the year. Inflation measures have also ticked higher in contrast to the disinflation narrative that Powell encouraged at his last press conference. While headline inflation slowed in January from 6.5% to 6.4%, markets had been expecting a larger fall, with core prices also proving to be sticker at 5.6%. Since those numbers were released subsequent inflation measures were revised higher, with PPI measures in December revised up, meaning that core PPI instead of coming in at 4.9% in January, came in at 5.4%. This week's February CPI numbers are forecast to show another slowdown, from 6.4% to 6%, and for core prices to come in at 5.4%. With the Fed due to hike by another 25bps next week, this week's numbers, along with the PPI numbers due on the 15th could well dictate whether we're set for another 2 or 3 rate hikes in the next few months. UK Unemployment/wages (Jan) – 14/03 – UK labour market has been one of the bright spots of the UK economy, even accounting for the fact that wages are lagging inflation. The most recent wage numbers showed wage growth jumped sharply in the three months to December, rising from 6.5% to 6.7%. What was also notable was that payrolled employees rose by 102k in January which in turn reinforces the tight nature of the UK labour market with headline inflation still in double-digit territory. Private sector pay continues to lead with an average of 7.3%, compared to 4.2% in the public sector. Unemployment remained steady at 3.7%, however given the gains seen in payrolled employees in January, this could see a fall to 3.6% in this week's January numbers. Furthermore, resilience in wages data will make it much harder for the Bank of England to procrastinate over its rate-hiking policies. Bank of England governor Andrew Bailey may like markets to think that the MPC is almost done when it comes to rate hikes, however with headline CPI still above 10% and core prices and wages growth well above 6% he may be able to kid some of the people some of the time, but he is unlikely to be able to push back against at least another 50bps of hikes between now and the summer. US Retail Sales (Feb) - 15/03 – having seen the US consumer retrench at the end of last year, with two successive monthly declines of over -1%, there had been an expectation that January would see a rebound in spending, especially given the strength of the jobs report a few days earlier. What no one was quite prepared for was a 3% gain as the US consumer came roaring back with a vengeance. Even the control group measure which is used to calculate the GDP contribution, rose by 1.7%, meaning that the consumer rebound was broad-based. The big question is whether this was maintained into February and if it has then it will have significant ramifications for Fed policy with respect to guidance next week when the Fed meets to decide on its forward guidance as well as the trajectory of its dot plot guidance for further rate hikes. ECB Rate Meeting – 16/03 – we already know that the ECB is set to hike by another 50bps this week, with the wider question being how many more hikes the governing council has in its locker. The hawks on the ECB have been becoming ever more vocal led by Bundesbank head Joachim Nagel who, despite the real prospect that the German economy is in a recession is calling for more aggressive action on sticky inflation. The most recent ECB minutes showed that a number of governing council members wanted to go harder than a 50bps move at the last meeting and wanted to go by 75bps. They only relented because of the pledge to do another 50bps this month, as central bankers weigh up the risks of overtightening, as opposed to doing too little and allowing inflation to become entrenched. These calls for tighter policy have been echoed by other ECB members, like Austria's Robert Holzmann who has called for 50bps in March, May, June, and July. Markets have already started to price in an ECB terminal rate of over 4% meaning that any further rises in long-term yields in countries like Italy could cause real-term problems in the long run if sustained. With core CPI already at a fresh record high this month of 5.6% and headline inflation back on the increase in Spain, France, and Germany the ECB is continuing to play catchup, while also needing to remain mindful of financial stability. China Retail Sales (Feb) – 15/03 – having seen retail sales collapse at the end of last year this week's Chinese retail sales numbers have the potential to provide a significant upside surprise after lockdown restrictions started to get eased in December. The recent China trade numbers pointed to a modest improvement in domestic demand, and with the period also including Chinese New Year, there would appear to be a decent probability of a bit of so-called revenge spending, as consumers celebrate coming out of lockdown with a bit of a spending spree. A rather modest rebound of 3.5% is expected, following on from two months of declines, while industrial production is expected to also see a rebound to 3.2% from a 1.3% rise in the previous month. Deliveroo FY22 – 16/03 – the Deliveroo share price appears to have found a bit of a base around the 80p area. At its last trading update, there was a positive response to its Q3 trading update, despite the company downgrading its full-year guidance on sales growth. The uplift was hugely welcome given that the shares are well below their 390p IPO price, which suggests that a lot of pessimism may be already in the price. Gross Transaction Value (GTV) saw an increase of 8% year on year, with the UK operation outperforming international markets, rising by 11%. Consequently, Deliveroo downgraded its full-year guidance on GTV growth to between 4% to 8%, due to concerns about consumer disposable income. There was some good news as EBITDA margins were revised higher to between -1.2% and -1.5%, which suggests the company is making progress on reducing its costs by way of lower marketing spend. In its Q4 update in January, the shares popped to a 2-month high before sliding back again, after announcing that it generated over £1bn of UK GTV for the first time ever, a rise of 9%, pushing total GTV up to £1.8bn. For the full year Deliveroo said it expects to deliver just over £7bn of GTV across all operations, a rise of 7%, and that its adjusted earnings almost achieved breakeven during the second half of the year. This number is expected to continue to improve into the next fiscal year with EBITDA margins revised up from the previous -1.2% and -1.5%, to -1%. In an attempt to streamline its operations further, Deliveroo also took the decision to exit its Australia operation back in January. Balfour Beatty FY 22 – 15/03 – after upgrading its profit expectations for the year back in December the shares have moved up to their highest levels since 2008. It's been a long road back for a business that was on the brink back in 2013, and also got caught up in the Carillion fallout 5 years ago when it had to take millions of pounds of write-downs. Under the stewardship of CEO Leo Quinn refocussed its efforts on higher margin work in all of its markets, primarily in the US and UK, while disposing of underperforming or non-performing assets. This focus on higher margin work has realised £65m in profits in respect of the disposal of five assets. Its order book is expected to be around 5% ahead of last year, as is full-year revenue. In January Balfour Beatty announced another contract win of £1.2bn in respect of the Lower Thames Crossing which involves the design and delivery of 10 miles of new roads connecting the M25 at junction 19 and the A13 with a river crossing at Tilbury Essex. The company also set out a plan in January to buy back up to a further £50m of shares to be completed by May. Adobe Q1 23 – 15/03 – Adobe shares took a swan dive to their lowest levels since March 2020 last September after the company downgraded its Q4 revenue numbers. These came in as expected at $4.53bn in December, while profits beat expectations, coming in at $3.60c a share. On guidance, Adobe said they expected revenues of $4.6bn to $4.64bn for Q1 while keeping its full-year estimates unchanged. The company was on the receiving end of some unwelcome news last month after its $20bn deal to acquire Figma, a mobile web interface design company, was reported to be the subject of an antitrust investigation by the DOJ with a view to blocking the deal. Profits are expected to come in at $3.67c a share. Williams-Sonoma Q4 23 – 16/03 – this high-end retailer has seen its share price tread water over the last few months but it remains a popular brand amongst US consumers at the upper end of the income scale. In Q3 the owner of Pottery Barn reported record revenues for the quarter of $2.19bn, beating forecasts. Profits fell slightly short of forecasts, although they were still up from a year ago at $3.72c a share. Due to concerns over the outlook the retailer declined to reiterate its previous full-year guidance of mid to high single digital annual net revenue growth, due to high levels of "macro uncertainty" and elevated inventories, sending the shares lower, although we've seen a modest recovery since then. Inventory levels are expected to come down in Q4, however, they are still 33% above the levels they were a year ago. Profits for Q4 are expected to come in at $5.46c a share. FedEx Q3 23 – 16/03 – after falling sharply back in September last year to two-year lows, after issuing a surprise profit warning, the shares have slowly clawed back their lost ground, and are up over 40% from that trough. In December FedEx beat those lowered Q2 expectations on profits, returning $3.18c a share, although they missed on revenues, which came in at $22.8bn. The outperformance came about due to the company increasing its prices, as well as announcing widescale cost reductions back in September. FedEx also said it would be cutting another $1bn in costs on top of the $2.7bn it announced previously. FedEx also reinstated earnings guidance for the full year, announcing a new target of between $13 and $14 a share. The big jump in retail sales seen in the US economy at the start of this year augurs well for a decent number for Q3 for FedEx with profits expected to come in at $2.74c a share. For further comment from Michael Hewson, please call 0203 003 8905 or 07824 660632Email: marketcomment@cmcmarkets.comFollow CMC Markets on Twitter: @cmcmarketsFollow Michael Hewson (Chief Market Analyst) on Twitter: @mhewson_CMC

US The labor market is still strong but is showing signs it is ready to soften as wages cool.  Wall Street will pay close attention to the February inflation report.  Disinflation trends are struggling here and a hot report could not only lock the Fed into boosting their hiking pace but possibly lead markets into expecting a higher peak rate.  Headline inflation is expected to slow from 6.4% to 6.0%.  The monthly inflation rate is expected to edge lower from 0.5% to 0.4%, while the core reading is expected to hold steady at the 0.4% pace.  While the inflation report will get the majority of the attention, traders should also pay close attention to the February retail sales data which should show consumer spending is weakening.  Housing data is expected to remain weak, while a couple of Fed regional surveys (Empire/Philly) should show manufacturing data remains deeply in contraction territory. Friday’s release of consumer sentiment is expected to hold steady, while many traders will pay close attention to see if inflation expectations continue to retreat.  With the Fed’s blackout period quickly approaching, only Bowman will make an appearance on Tuesday at the Community Bankers Event in Hawaii.  Eurozone The ECB is widely expected to raise interest rates by 50 basis points on Thursday but it’s what comes next that investors will be most interested in. This makes the new economic projections that are released alongside the decision, and the press conference, arguably the most important things to watch out for. UK Labor market figures on Tuesday are the standout release next week but it’s the spring budget a day later that people may be most interested in. The fact that the UK is not already in recession will come as a big surprise to many and one of the benefits of that may be a little extra fiscal headroom for the Chancellor. Unfortunately, giveaways may be few and far between for a number of reasons that may make holding off more appealing to the government.  Russia The CBR is expected to leave interest rates unchanged at 7.5% on Friday. Inflation has been declining but remains far above target which may encourage the central bank to stay on hold for now.  South Africa It’s a little light on economic data next week with manufacturing production and retail sales the only notable indicators on Tuesday and Wednesday, respectively.  Turkey No major data or events next week.  Switzerland It’s a little quiet next week but the focus will remain on what the SNB will do on 23 March, especially after the inflation overshoot in February. Markets are still pricing in 50 basis points with a small chance of 75. China The National People’s Congress (NPC) has made a more conservative forecast of 5.0% GDP growth in 2023. Recent economic data has shown a strong recovery in the economy, confirming expectations for an early recovery but softening expectations for fiscal and monetary stimulus. The lifting of the zero-Covid policy has led to a surge in business activity, reduced operational interruptions, and robust data on commercial activities.  Powell’s testimony this past week lifted the US dollar against the Chinese yuan pushing the pair close to the psychological level of 7.0000 which may attract attention once more.  Focus next week will remain on the data including retail sales, industrial production, fixed asset investment, and unemployment. India Markets are pricing in one more rate hike in the tightening cycle at the next meeting on 6 April but next week’s inflation data could change that. Recent trends around the world have seen more rate hikes being priced in and India is no exception after the inflation jump in January. If it doesn’t prove to be an anomaly, further hikes could be priced in. Australia & New Zealand Next week offers the Australian unemployment rate, employment change, and change in full-time employment on Thursday. From New Zealand, we’ll get fourth-quarter GDP data on Wednesday and we’ll also hear from Assistant Governor, Karen Silk on Sunday Japan There isn’t much on the agenda next week, with the minutes of the Bank of Japan’s January monetary policy meeting on Wednesday arguably the highlight. Minutes are often viewed as being outdated but nowhere is this more true than in Japan, where those of the January meeting are released after the March meeting has taken place. For that reason, it would take something extraordinary for them to have a big impact on the markets.  Kazuo Ueda, the new governor of the BoJ who will take office in April, recently stated that it is not a good time to abandon the current policy considering the current economic environment. He supports its continued commitment to massive quantitative easing and is not expected to significantly adjust the yield curve control, which has limited the attractiveness of the yen. Singapore Unemployment data on Monday is the only economic release this upcoming week. Economic Calendar Sunday, March 12 Economic Events New Zealand Food Prices Japan BSI Manufacturing Index Monday, March 13 Economic Data/Events India CPI  Mexico Industrial Production New Zealand REINZ House Sales Australia Westpac Consumer Conf, NAB Business Confidence BOE’s Dhingra speaks Tuesday, March 14 Economic Data/Events Fed’s Bowman Speaks at Community Bankers Event in Hawaii UK Claimant Count Rate, Jobless Claim Change, ILO Unemployment Rate Swiss Producer and Import Prices Italy Industrial Production India Wholesale Prices South Africa Mining Data BoJ Minutes of January Meeting BoJ Outright Bond Purchases Riksbank in hearing on the annual report, monetary policy Wednesday, March 15 Economic Data/Events US Empire Manufacturing, Retail Sales, PPI, NAHB Housing Market Index, MBA Mortgage Applications, Business Inventories, Net Long-term TIC flows China PBOC 1-year MLF Rate, Industrial Production, Retail Sales, Fixed assets, Nw Home Prices  UK Chancellor Hunt delivers annual budget EIA Crude Oil Inventories Sweden CPI  France CPI Poland CPI Italy Unemployment Rate, General Government Debt South Africa Retail Sales  India Trade Data New Zealand GDP  Australia Employment Change Thursday, March 16 Economic Data/Events US Initial Jobless Claims, Philly Fed Business Outlook, Import and Export Prices, Housing Starts, Building Permits Canada Wholesale Trade Sales ECB Rate Decision: Expected to raise Main Refinancing Rate by 50bps to 3.50%  ECB President Lagarde holds a post-rate decision press conference BOE releases Ipsos inflation survey  Japan Industrial Production Sweden Prospera’s Inflation Expectations Survey Czech Current Account Poland Current Account Swiss SECO March Forecasts New Zealand Q4 GDP  Riksbank Business Survey, Floden speaks UK OBR briefs on budget Japan Trade Balance Australia Employment Change Singapore Non-Oil Domestic Exports Friday, March 17 Economic Data/Events US Industrial Production, Leading Index, University of Michigan Sentiment, Canada Industrial Product Price Eurozone CPI, OECD Publishes Interim Economic Outlook Sweden Unemployment Rate Baker Hughes Rig Count Russia central bank (CBR) rate decision: Expected to keep rates steady at 7.50% Sovereign Rating Updates Turkey(Fitch) Belgium (S&P) Spain (S&P) 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 outlook. Over this week, the EUR/USD currency pair was able to trade both ways. The start of the week was very dull, but by Tuesday, the market was aggressively working through Jerome Powell's speech to the US Congress. We think the head of the Fed did not report anything spectacular or unexpected because all of the ideas he expressed could have been predicted. The only unexpected thing was that nobody knew when they would be announced. The US dollar rose after this speech, as it turned out that Mr. Powell plans to express them in front of senators. But as it increased, it also decreased. If we assumed the euro's decline would continue on Wednesday, it became evident on Friday that we should not jump to conclusions. After all, Friday's statistics proved to be unclear while yet being extremely significant. Going ahead a little, it should be noted that Nonfarm once more came in over expectations, and the unemployment rate increased from 3.4% to 3.6%. Yet, given that the unemployment rate is still very close to its lowest level in 50 years, we think that even with these statistics, the dollar should have grown. The indicator's growth of 0.1-0.2% is not particularly significant. For instance, each consecutive increase would be significant if the unemployment rate had been growing for several months in a row. The outcome was that the pair spent the entire week in "swing" mode, as is evident on the 4-hour TF. The pair was fixed below the Ichimoku cloud on the 24-hour chart, not because it was aggressively decreasing but rather because the Ichimoku cloud rose. Moreover, the price was unable to establish a solid base below the 38.2% Fibonacci level. It is therefore impossible to conclude that the decreasing trend is still present now. To put it more precisely, it is conceivable to come to a resolution regarding saving but not to move further. We believe that the US dollar should already be continuing to strengthen based on the Fed's highly likely increase in aggressiveness, but the ECB has just started to convey clear signs of a higher rate hike. COT evaluation. A new COT report for February 21 was made public on Friday. It was about a month ago, around the time that the report for February 14 disappeared. It appears that the Commodities Futures Trading Commission will continue to provide reports from a month ago even if they are no longer very important. Note that the CFTC's efforts were unsuccessful, which is why we are currently receiving irrelevant information. Thus far, we can claim that the picture accurately reflects what has been happening in the market during the past few months. The aforementioned image unequivocally demonstrates that since the start of September 2022, the net position of significant players (the second indicator) has been increasing. At about the same time, the value of the euro started to increase. Although the net position of non-commercial traders is currently "bullish" and growing virtually weekly, it is the relatively high value of the "net position" that now permits the upward trend's impending end. This is indicated by the first indicator, which frequently occurs before the end of a trend and on which the red and green lines are quite far apart. The euro has already started to decline, although it's unclear if this is just a short pullback or the start of a new downward trend. The number of buy contracts from the "Non-commercial" group fell by 0.1 thousand during the most recent reporting week, while the number of shorts increased by 1.3 thousand. Therefore, the net position has grown again by 1.2 thousand contracts. For non-commercial traders, there are 165 thousand more buy contracts than sell contracts or three times more buy contracts than sell contracts. Nonetheless, the correction has been building for a while, so it is evident even without news that the pair should keep falling. Analysis of important events. This week's major event was scheduled to be the US Nonfarm Report, but it ended up being Jerome Powell's speech and the unemployment data. Powell's statement was what ultimately caused the pair to fall, as the news provoked an increase in quotes and prevented the market from correctly and logically calculating non-farm payrolls. We consider the NonFarm Payrolls report to be more significant than the unemployment rate, as it shows a considerable excess over the predicted values for the second consecutive month. Thus, it makes no difference that the value for January was reduced. An adjustment of 20–30 thousand jobs does not matter when 0.5 million new employees are created versus a prediction of 200 thousand. As a result, on Friday, the US dollar should have risen against the euro, but this is not what happened. In the future, this situation will need to be leveled. In other words, the dollar may increase the following week during times when there are no clear-cut grounds or reasons for doing so. We are still anticipating a decline in the euro/dollar pair. Trading strategy for the week of March 13–17: 1) The pair is in a downward trend and is still situated below the Kijun-sen on the 24-hour period. As a result, the fall might continue with targets around 1.0200–1.0300. Although we still think that sales are appropriate, Friday's unemployment report confused the market. 2) The purchases of the euro/dollar pair are no longer significant. You should now wait for the price to return above the critical Ichimoku indicator lines before you start to think about long positions. There are currently no factors that would allow the euro currency to resume growing in the medium term. But, in the present world, anything can happen at any time. Explanations for the illustrations: Fibonacci levels, which serve as targets for the beginning of purchases or sales, and price levels of support and resistance (resistance/support). Take Profit levels may be positioned close by. Bollinger Bands, MACD, and Ichimoku indicators (standard settings) (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" category is shown by indicator 2 on the COT charts   Relevance up to 14:00 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337338

Summary:  A slight recovery in sentiment was seen into the Monday open as US regulators stepped in to prevent further fallout from the SVB crisis and announced an emergency bank term funding program assuring SVB depositors they will be fully protected and have access to their money as the week begins. US jobs data on Friday was mixed, putting focus on the CPI this week, although the banking crisis reduces the case for a 50bps rate hike this month.   What’s happening in markets? US equites pulled back on Friday after the Silicon Valley Bank fuelled fear The futures turned green, indicating Monday could potentially see buying return. Market jitters were calmed after the Fed announced an emergency bank term funding program, with SVB depositors to have access to all money from Monday. On Friday though, markets were hurting, SVB parent, SVB Financial Group’s (SIVB:xnas) demise was felt through markets, triggering a sharp sell-off in US equities with the Nasdaq 100 and S&P500 falling 1.4% on Friday and wiping off 3.8% and 4.6% over the week. The banking sector was hit hard, as investors worried about the risk of contagion after 16th largest bank failed, which lead to selling in other banks, and deposit withdrawals – with American losing faith in the banking system. The KBW Bank Index shed 3.9% on Friday, and 15.7% over the week. PacWest Bancorp (PACW:xnas) tumbled 37.9% on Friday and a massive 53.7% since Thursday. US equity futures rallied on Monday Asian hours after the Fed assured depositors in the Silicon Valley Bank they will be fully protected. Treasury yields plunged on safe-haven bids amid banking woes and Fed speculation Safe-haven demand and reduced likelihood of aggressive rate hikes drove down Treasury yields. Meanwhile, asset markets were jolted by the Silicon Valley Bank incident, leading to a surge in safe-haven buying of Treasuries. Prices of Treasuries climbed, and yields fell sharply, with the front end and belly of the curve seeing the best performance. Traders are now speculating whether the contagion of the crisis to other banks, and the widening of credit spreads will sway the Fed in favor of keeping the next hike at a modest 25bps, or perhaps even pausing earlier than expected. These speculations are supported by the slight 0.2% month-over-month or 4.6% year-over-year increase in average hourly earnings, and an increase in the labor force participation rate to 62.5% in February. Interest rates implied by SOFR contracts fell significantly, with June, September, and December 2023 plunging 28 basis points, 44.5 basis points, and 52.5 basis points, respectively. This brought the terminal down to 5.29% in June 2023, from 5.70% in September 2023 just two days earlier on Wednesday. The 2-year Treasury yield tumbled an astounding 28 basis points to 4.59%, while the 10-year yield dropped by 20 basis points to 3.70%. As a result, the 2-10-year yield curve steepened by almost 7 basis points to 89 basis points on Friday. Given the ongoing banking crisis, Treasuries are likely to remain in high demand. Hang Seng Index and China’s CSI 300 plummeted amid concerns about consumption recovery in China The Hang Seng Index and CSI300 experienced sharp declines on Friday, with losses of 3% and 1.3% respectively, resulting in weekly losses of 6.1% and 4%. This was attributed to investors selling China internet and consumer names after JD.COM's (09618:xhkg) downbeat comments on consumer spending prospects in China, causing JD.Com to plummet by 11.5%. The Hang Seng TECH Index also dropped significantly by 3.8%. Auto stocks, particularly BYD (01211:xhkg) and Great Wall Motor (02333:xhkg) took a major hit, with declines of 8.1% and 6.2% respectively, due to an intensification of price war prompted by Dongfeng (00489:xhkg) and other Chinese automakers' price cuts. Auto names were among the largest losers in A-shares on Friday. The tech war involving semiconductors may extend beyond advanced equipment to materials, leading to concerns about Japan restricting the export of crucial chemicals like photoresists to China. In addition, the turmoil in U.S. banking stocks overnight further weighed on sentiment. Australian equities (ASXSP200.I) somewhat unscathed following global rout. Gold miners charge After the demise of the US’ 16th largest bank, SVB with other US banks in jeopardy, Australia’s market has so far outperformed global equity markets, falling 1.9% last week, while the S&P500  shed 4.6% and Hong Kong’s Heng Seng slumped 6.1%. The prudential regulation over Australia’s banks is keeping ASX listed banks relativity unscathed, however smaller non-financial companies with less financial strength are being penalised. The worst performing ASX200 stocks today are BrainChip, and Lake Resources, both down over 4.6%. While capturing upside and lot of bids are, gold miners, with Capricorn Metals, Ramelius Resources and Regis Resources all up 7-9%. FX: Dollar on the backfoot on chatter of SVB bailout After slumping to fresh lows on Friday to get in close sights of 104, the US dollar reversed higher into Friday’s close but gains were short-lived as the announcement on a potential backstop funding from the Feb for distressed bank SVB brought risk trades back to the table. AUDUSD pushed back above 0.66 to highs of 0.6647 in early trading amid thin liquidity and a recovery in sentiment. NZDUSD also took another look at 200DMA at 0.6166. GBPUSD testing 1.21 handle again with this week’s focus being the Spring budget and the labor market data. ECB’s hike remains in focus, and EURUSD taking another hit at 1.07 as risk sentiment improved this morning in Asia. Crude oil prices jumped higher on Friday but closed with a weekly loss Fears of further monetary tightening, coupled with risks of a financial contagion, raised concerns of a demand weakness and saw crude oil prices slide lower last week. The weak sentiment was compounded by high crude oil inventories in the US. This dominant narrative continues to overshadow signs of stronger demand in China. Some respite was however seen on Friday and into early Asian trading on Monday as US regulators announced measures to protect depositors and let them withdraw money from SVB starting Monday. WTI prices touched $77 from lows of sub-75 on Friday and Brent was above $83 from sub-81 levels earlier. The spread between Brent and Dubai narrowed to USD2.70/bbl, as Dubai crude gained against the global benchmark, suggesting robust Asian demand. Gold making a fresh stride higher despite easing banking sector crisis concerns Gold prices saw a big jump on Friday and gains were extended further on Monday morning in the Asian session as a mixed US jobs report and risks of a contagion in the banking sector spooked investors and prompted safe-haven demand. Expectations of a rapid Fed tightening also eased, and Fed swaps fully priced in a 25bps rate cut by year-end. This, along with rising inflation (breakeven) expectations and a sharp drop in yields, has made gold attractive for investors with precious metal charging higher and breaking above key resistances. Gold prices touched highs of $1890 this morning before easing slightly.   What to consider? SVB fallout spreads; Fed announces plans to fully protect Silicon Value Bank and potentially Signature Bank After the demise of the US’ 16th largest bank, SVB, on Friday and its takeover by the FDIC – which marked the largest bank failure since the 2008 financial crisis, the fallout spread. Regulators took control of another bank, Signature Bank. Unlike SVB which supports venture capital firms, Signature bank specialises in providing banking to law firms. The Fed stepped in and announced an emergency bank term funding program, assuring SVB depositors they will be fully protected and have access to their money from Monday, with agencies said to enact a similar program for Signature Bank. All this follows the Venture Capital community urging startups to withdraw funds, which led to civilians taking their money out of banks. Regulators are seeking buyers for SVB. Meanwhile, the Fed said it’s providing additional funding to banks. US nonfarm payrolls remained elevated in February Nonfarm payrolls in the US rose by 311k last month, less than the January's blowout print of 504k (revised down from an initially stated 517k) but still remaining elevated and above consensus expectations of 215k. While the headline continued to reaffirm a tight labor market, other indicators from the report were rather weak. Average hourly earnings rose +0.2% MoM in February, lower than the expected and last month’s +0.3% MoM. The annual rate of averag hourly earnings rose from +4.4% in January to +4.6% YoY, a touch short of the 4.7% that the market was expecting. The unemployment also picked up by 0.2% pts to 3.6% against market expectations of no change, likely as participation rose 0.1% pt to 62.5%. The data remained short of cementing a 50bps rate hike possibility for March, also given the recent concerns on the US banking sector from the SVB collapse. Focus now turns to CPI release on Tuesday to further shape Fed expectations. China's February aggregate financing surged beyond expectations with 9.9% Y/Y Growth China's aggregate financing growth in February was much better than expected, reaching RMB 3160 billion, far above the RMB2300 consensus estimate. The outstanding aggregate financing growth also accelerated to 9.9% year-on-year (Y/Y) in February, up from 9.4% Y/Y in January. Furthermore, M2 increased at a faster pace in February, growing 12.9% Y/Y, up from January's 12.6%. The surge in outstanding RMB loans played a major role in driving the credit growth, increasing by 11.6% Y/Y in February, compared to January's 11.3% Y/Y. Corporate loans were the primary driver, while household loans remained weak. Bank of Japan’s Kuroda ends term without sparks The Bank of Japan kept its policy unchanged on Friday at Governor Kuroda’s last meeting of his decade-long tenure. The target band for the 10-year JGB yield was kept unchanged at around 0%, with an upper limit of 0.50% after being raised in December. The BOJ held its short-term rate at -0.1%. Despite some expectations of another tweak, the outcome carried his usual dovish tone, ensuring a smooth handover to incoming Governor Kazuo Ueda who has conveyed policy continuity in his first remarks after being nominated. Incoming data will be key to watch for what tweaks the next governor Ueda can bring, but near-term focus shifts to US data on inflation, as well as the extent of fallout in the US banking sector as the market appears to be a panic mode after SVB’s collapse which may bring some safe haven flows to the yen.   For a global look at markets – tune into our Podcast. Source: Global Market Quick Take: Asia – March 13, 2023 | Saxo Group (home.saxo) 

Summary:  U.S. regulators moved to calm markets by backstopping depositors in full. The Fed’s monetary policy has been complicated and market expectations swung from a faster pace back to downshifts and earlier pause as the crisis of Silicon Valley Bank and Signature Bank unfolded. Investors’ number one focus this week will be whether the U.S. regulators succeed in calming down the markets’ concern about the U.S. banking system and avoiding systemic risks. The US CPI, PPI, and retail sales data, while being important, may take a back seat in terms of market focus. China will monitor the retail sales data coming out from China this Wednesday to gauge the strength of the Chinese economic recovery. SVB contagion limited by authorities, but risks could remain As risks of a contagion from the US bank SVB’s collapse rose last week, authorities have stepped in to contain the risks and prevent a broader impact on the financial sector. Equity futures have responded positively to the news of a backstop funding, but Treasury yields continued to slide and the US dollar weakness also extended further. The headlines around this will continue to be key to watch this week as there may be lingering fears for depositors for not just the SVB but also more broadly in the US banking sector. President Biden’s address on Monday morning will be key to watch. The development has also complicated the Fed’s monetary policy outlook further, and March rate hike expectations have reversed back from 50bps to now 25bps again with calls for a pause also gaining traction and financial stability concerns arise. However, the Fed’s response to the situation asserts that financial risks remain under control, while the inflation risks may continue to be an issue, suggesting potential yield curve bull steepening.  Investors should remain on guard after the SVB fallout spread to Signature Bank. Market to search for concentration risk clues We all know the US’ 16th largest bank, SVB, on Friday was taken over by the FDIC. Then regulators took control of another bank, Signature Bank. We know the Fed offered an emergency bank term funding program, to SVB depositors, so they can access money from Monday, while authorities suggest Signature Bank depositors would also be supported. This is not only the biggest bank failure since the 2008 financial crisis, but also, risk still remains. Now investors and option holders may be forced to take risk off the table for those assets that are embroiled in the saga. Secondly - it’s really vital to consider the ripple effects of the banking fallout. With Continuous Disclosure obligations for listed companies, we expect companies involved with SVB or Signature bank to disclose their exposure and or relationship over the coming days. This has already started to occur in Australia- with companies on the ASX such as Xero (XRO) revealing they have a 1% of their cash and cash equivalents with SVB. Thirdly – consider the market will be searching for opportunity to de risk – perhaps selling out of firms that are prone to concentration risk or could potentially be under financial duress. That may include financial institutions that have concentrated (not diversified) client's books and revenue streams. Or those companies that have lent money to high-risk technology companies or starts ups. For the investor, it could be worth considering reviewing your portfolio, to ensure the company’s asset quality and clientele are not at risk. Upside in US CPI is also unlikely to make Fed go for 50bps in March US inflation has been the talk of town for several months now, although the focus has lately turned to financial contagion risks that may stop the Fed from switching back to a higher rate hike path trajectory. Still, February CPI – due to be released on Tuesday – will be a big test after last month’s print reversed the disinflation narrative that the markets had started to accept, and continued to point at sticky services inflation. Headline consumer prices are expected to rise +0.4% MoM in February, cooling slightly vs the +0.5% in January, with the annual rate seen easing to 6.0% YoY from 6.4% previously. Core CPI is expected to rise +0.4% MoM in February, matching the January pace, though the annual rate is likely to fall to 5.5% YoY from 5.6% in January. Overall message is likely to remain that inflation remains stubbornly high, especially after tough weather conditions in California, but the risk of a 50bps rate hike from the Fed in March remains low as the central bank becomes wary of “something breaking”. Other US data of note this week includes PPI and retail sales for February, both of which are expected to show a modest cooling but still remain high. Consensus expectations are for February producer prices to rise by +0.3% MoM (prev. +0.7%) or 5.4% YoY (prev. 6.0%). Retail sales are expected to cool from January jump of 3.0% MoM on warmer weather and expected to come in cooler at +0.2% MoM. If the January outperformance in US data is not repeated, and the contagion fears continue, we could see Fed expectations being pulled back significantly this week as the market is in panic mode. China retail sales are expected to bounce strongly China is scheduled to release retail sales, industrial production and fixed asset investment this Wednesday. Investors will focus on the retail sales data for a gauge of the strength of the recovery of consumption after the economy reopened. Consensus estimates expects retail sales to bounce strongly to a growth of year-on-year growth of 3.5% in the first two months of the year, after declining 0.2% in January. Industrial production is expected to come in at +2.5% Y/Y year-to-date. European Central Bank to go for another 50bps rate hike this week The ECB is still expected to hike the deposit rate by 50bps to 3.0% at the March 16 announcement, given what was said in the February meeting and recent commentaries. Focus will be on the guidance for the path of interest rates from here, as well as on the comments around the risks of a financial contagion spreading from the SVB collapse. Recent data such as an upside surprise in core inflation has prompted ECB pricing to shift to a terminal rate of 4% by July, suggesting a lot of room for give back if financial risks broaden. If the central banks stays away from guiding for another 50bps in May, that could come as a dovish surprise for markets. The latest inflation forecasts will also be key, with core inflation expectations likely to be revised higher for 2023 after strong reads in January and February. UK budget on watch for growth and fiscal picture; jobs data key for BOE The UK Chancellor of the Exchequer Jeremy Hunt will be delivering the spring budget on March 15, which will be a key watch especially after the market turmoil in September when Hunt's predecessor Kwasi Kwarteng and former Prime Minister Liz Truss unveiled lavish tax cuts roiling the markets. Expectations are for the Hunt to prioritize keeping public finances steady, announce less near-term borrowing but only a marginally improved medium-term fiscal outlook. Lower energy prices will also likely boost the short-term growth outlook, helping recession fears recede, although longer-term growth may remain marred with low labor force participation and weak productivity growth. Before the focus turns to UK budget on Wednesday, the UK labor market data will be released on Tuesday and investors will be scrambling to gauge how much room does the BOE have to tighten further. Bloomberg consensus expects the unemployment rate to rise to 3.8% in the three months to January from 3.7% previously, with headline jobs growth likely to ease to 60k from 102k in January. However, even with a slightly softer jobs report, the BOE is expected to continue its hiking cycle in March as activity data has been stronger than expected, but the trend in labor market from here will be key to see where BOE could pause its tightening cycle.  Australian pulse checks: business and consumer confidence and jobs numbers Australia business and consumer confidence, numbers released on Tuesday will give a gauge of how the economy is feeling after the RBA made its 10th rate hike, with businesses and consumers likely to lean into the RBA’s comments that it could pause rate hikes soon. Later in the week on Thursday, the all-important unemployment rate will be released for February – with Bloomberg’s consensus suggesting the jobless rate will fall from 3.7 to 3.6%, with 50,000 jobs expected to be added last month. If the data shows employment is rising, contrary to what the RBA expects, then the Australian dollar would likely gain pace, as the RBA would gain power to keep rising rates by 0.25% for the next few months, with the market expecting hikes can made till September. Macro data on watch this week: Monday 13 March India CPI (Feb) Tuesday 14 March US CPI & Core CPI (Feb) U.K. Employment (Jan) & Payrolls (Feb) Australian consumer and business confidence Wednesday 15 March US Retail sales (Feb) US PPI & Core PPI (Feb) Eurozone Industrial production (Jan) UK Budget Japan BoJ monetary policy meeting minutes (17-18 Jan) China Retail sales, industrial production, & fixed asset investment (Feb) Thursday 16 March US Housing starts & building permits (Feb) US Initial jobless claims Australian employment data – jobless rate (Feb) ECB policy rate decision Japan exports (Feb) Japan Machinery orders (Jan) Friday 17 March US Industrial production (Feb) US university of Michigan Consumer Sentiment Survey (Feb) UK BoE/Ipsos Inflation next 12 months (Feb) Japan Tertiary industry activity (Jan)   Earnings on watch this week: Tuesday: Volkswagen, Lennar, Foxconn Wednesday: Adobe, Constellation Software, BMW, E.ON, Ping An Insurance, Alimentation Couche-Tard Inc Thursday: FedEx, Dollar General, Enel, Li Ning Friday: Vonovia, Longfor, CMOC Group Lt Source: Saxo Spotlight: What’s on the radar for investors & traders this week? | Saxo Group (home.saxo)

5M chart of EUR/USD On Monday, EUR/USD continued to trade in "Friday mode". That is, quite volatile and at the same time, with a clear upward bias. In our fundamental article, we have already analyzed the reasons for the euro's growth (or more exactly, the dollar's fall). On the 5-minute chart, you can see that the pair managed to grow considerably as well as fall during the day. And this happened despite the fact that there were no macro data released during the day. However, U.S. President Joe Biden delivered a speech and the FOMC meeting was held, at which the issue of the stability of the banking system after the collapse of two large banks was decided. This news became the drivers on Monday, though it was rather difficult to say which one of them had an effect on the pair and at what time. Speaking of yesterday's trading signals, everything was as simple as possible. The price fell to the area of 1.0658-1.0669 in the middle of the European session, from which it bounced. After a buy signal appeared, the pair went up about 50 pips, which traders could take advantage of by opening a long position and closing it manually in the evening. So, the day was quite good, in terms of trading. Although the movements, of course, were mixed. COT report: A new COT report came out on Friday... for February 21... That was almost a month ago, while the report of February 14 has disappeared... It seems that the Commodity Futures Trading Commission will now publish reports with a month's delay for some time. In the event of this, the reports will hardly be of great importance. Recall that there was a failure in the CFTC, so the data we receive now is considered irrelevant. So far, we can say that in the last few months, the overall picture has been corresponding to the market situation. On the chart above, we see that the net non-commercial position of large traders (second indicator) has risen since September 2022. At about the same time, the euro started to rise. The net non-commercial position is bullish and continues to increase with each new week, allowing us to expect the uptrend to stop shortly. Such a signal comes from the first indicator, with the green line and the red line being far apart, which is usually a sign of the end of a trend. The euro has already begun its bearish move against the greenback. So far, it remains unclear whether it is just a downward correction or a new downward trend? According to the latest report, non-commercial traders closed 100 long positions, and 1,300 short ones. Consequently, the net position rose by 1,200. The number of long positions exceeds that of short ones by 165,000. In any case, a correction has been looming for a long time. Therefore, even without reports, it is clear that the downtrend will continue. 1H chart of EUR/USD On the one-hour chart, EUR/USD surged, but in general, the entire movement still appears more like a "swing" than a trend. I am quite sure that the pair might start to sharply fall this week, since it did not have such strong reasons to grow. The market is still in an impulsive state, but sooner or later it will calm down. During that time, we should expect a resumption of more or less logical and reasonable movements. On Tuesday, important levels are seen at 1.0537, 1.0581, 1.0658-1.0669, 1.0762, 1.0806, 1.0868, 1.0938, and also Senkou Spahn B lines (1.0610) and Kijun Sen (1.0637). Ichimoku indicator lines can move intraday, which should be taken into account when determining trading signals. There are also support and resistance although no signals are made near these levels. They could be made when the price either breaks or rebounds from these extreme levels. Do not forget to place Stop Loss at the breakeven point when the price goes by 15 pips in the right direction. In case of a false breakout, it could save you from possible losses. On March 14, the market will be focused on the U.S. inflation report. There are no important reports or events planned for the EU. In addition, the market may continue to be under the impression from the bankruptcy of the two U.S. banks. Indicators on charts: Resistance/support - thick red lines, near which the trend may stop. They do not make trading signals. Kijun-sen and Senkou Span B are the Ichimoku indicator lines moved to the hourly timeframe from the 4-hour timeframe. They are also strong lines. Extreme levels are thin red lines, from which the price used to bounce earlier. They can produce trading signals. Yellow lines are trend lines, trend channels, and any other technical patterns. Indicator 1 on the COT chart is the size of the net position of each trader category. Indicator 2 on the COT chart is the size of the net position for the Non-commercial group of traders.   Relevance up to 01:00 2023-03-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337460

The EUR/USD currency pair demonstrated on Monday what to anticipate from it this week. To be more exact, market participants' present sentiments were reflected in the second half of last week. We have already mentioned that the moves on Wednesday, Thursday, and Friday are very difficult to call reasonable and logical. But, although two extremely significant events occurred last week, this is the case. These are the Friday release of labor market data and the Tuesday address by Jerome Powell to Congress. As we can see, these events were sufficient to cause traders' short-term mood to change to "bullish," and both technical pictures were in danger of being canceled. Recall that we have been anticipating a decline in the euro and the pound for a while, but something stands in the way of this possibility every time. In addition to the ECB meeting, other macroeconomic indicators will be released in the upcoming week. Even though we do not anticipate any surprises from the European Regulator, it is important to keep in mind that market reactions can occasionally be abrupt and forceful. And once again, everything will depend on how the market perceives the facts. And it is free to be interpreted (in its present form) as you like. It should be highlighted that the technical picture has not yet been broken and may continue in its current form before moving on to the analysis of forthcoming events. To be more exact, everything now rests on overcoming the key line on the 24-hour TF. The departure of the pair from the Ichimoku cloud increased predictions of a further drop. Yet, as we can see, things are shifting far too quickly. Currently, a new fall of the pair, which objectively should be stronger than the level of 1.0515, can easily be triggered by Kijun-sen's rebound. Yet, growth may continue for a while if it consolidates above the crucial line, and the last local maximum is not too far away. The market is currently in an exciting mood, so we can anticipate any developments, but we see no reason to resume the upward trend. It's going to be a great week. The first European Union data will only start to come in on Wednesday. The release of the January industrial production report will be the catalyst for everything. This report is very difficult to categorize as "important" at the moment, but it has the potential to generate a 20–30 point response. The ECB will then hold a meeting on March 16, during which time the key rate may increase by an additional 0.5% to 3.5%. We continue to believe that the market has already factored in this increase and that a total rate of 3.5% or even 3.75% (if we include the next increase in May) will be insufficient to appreciably slow inflation. So the euro shouldn't increase, on the one hand, and Christine Lagarde's rhetoric might take on new "hawkish" overtones, on the other. She earlier stated that rates will likely need to be raised more than initially anticipated, along with nearly all other members of the ECB monetary committee. Nevertheless, who believed that a 3.5% interest rate would be sufficient to reduce inflation from "over 10%" to "2%"? The need to increase the rate to a minimum of 5–6% was clear from the start. Another question is whether the ECB can afford to tighten monetary policy so drastically. We have our doubts about this, and Ms. Lagarde can respond to them. The February inflation report will be released on Friday. Forecasts predict a "mind-boggling" slowdown from 8.6% to 8.5%, which supports the necessity of tightening monetary policy even more. And, once again, everything will be determined by Lagarde's rhetoric on Thursday, her pronouncements and speeches, and her colleagues in the next few weeks and months. If concurrently similar signals from the Fed are not given, the tightening of rhetoric will help the euro. A slight decrease in the consumer price index at this time is by no means a guarantee that the rate will increase in strength and duration. The capabilities of the ECB and the condition of the European economy will be crucial factors in everything. And the only sources from which we can learn about this are the pertinent reports and the members of the monetary committee. As of March 14, the euro/dollar currency pair's average volatility over the previous five trading days was 96 points, which is considered "high." Hence, on Tuesday, we anticipate the pair to move between 1.0646 and 1.0838. The Heiken Ashi indicator's downward turn will signal a potential continuation of the downward movement. Nearest levels of support S1 – 1.0620 S2 – 1.0498 S3 – 1.0376 Nearest levels of resistance R1 – 1.0742 R2 – 1.0864 R3 – 1.0986 Trade Suggestions: The pair EUR/USD has stabilized once more above the moving average line. Until the Heiken Ashi indicator turns down, you can continue holding long positions with targets of 1.0838 and 1.0864. After the price is fixed below the moving average line, short positions can be opened with a target of 1.0498. 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 01:00 2023-03-15 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337464

Monday was yet another ugly day for bank stocks around the world, as the selling pressure continued following the SVB debacle in the US last week. The money flew into the safe havens. Yields Treasury yields around the world tumbled sharply. The S&P500 was flat, while technology stocks and gold rallied. Fed For now, the pricing on Fed funds futures suggests that there is slightly more than 70% chance of a 25bp hike next month, and slightly less than 30% chance for no rate hike. US CPI But the expectations could easily change after US CPI data due later today. Both headline and core inflation are expected to have eased in February, but investors are cautious given that last month’s disappointment could be repeated this month. Eurozone In the Eurozone, traders now see less than a 50% chance for another 50bp hike from the European Central Bank (ECB) this Thursday, and the expectation of the peak ECB rate fell below 3.5%, from around 4% last week. But despite the softening ECB expectations, the EURUSD flirted with 1.0750 yesterday, as the US dollar sank deeper across the board. Watch the full episode to find out more! 0:00 Intro 0:42 Banks down, treasuries up 3:35 No consensus about what the Fed will do next 4:14 How could US CPI shape Fed expectations? 7:06 Tech, gold rally on tumbling yields 8:42 ECB expectations soften sharply, as well. 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 #inflation #CPI #data #bank #crisis #Fed #rate #expectations #USD #ECB #EUR #XAU #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/GBP drifts lower for the fifth straight day and drops to a nearly two-week low on Tuesday. The GBP’s relative outperformance comes amid rising bets for additional rate hikes by the BoE. The mixed UK jobs data fails to push back against hawkish BoE expectations or lend any support. Speculations for more jumbo rate hikes by the ECB warrant caution for aggressive bearish traders. The EUR/GBP cross remains under some selling pressure for the fifth successive day on Tuesday and drops to a nearly two-week low during the early European session. The selling bias remains unabated following the release of the mixed UK monthly employment details and drags spot prices below the 0.8800 mark, with bears now eyeing to challenge a technically significant 100-day Simple Moving Average (SMA). In fact, the UK Office for National Statistics reported that the number of people claiming unemployment-related benefits fell by 11.2K in February, less than the 12.4 decline anticipated. The slight disappointment, however, was offset by a sharp downward revision of the previous month's reading to show a drop of 30.3K in the Claimant Count Change against the 12.9 fall estimated. Furthermore, the jobless rate held steady at 3.7% during the three months to January as compared to a modest uptick to 3.8%, while the rolling three-month average indicated that the UK wages are cooling. Nevertheless, the data is strong enough to allow the Bank of England (BoE) to hike interest rates again later this month, which continues to underpin the British Pound and exerts downward pressure on the EUR/GBP cross. Apart from this, a goodish pickup in the US Dollar demand is seen weighing on the shared currency, which further contributes to the heavily offered tone surrounding the EUR/GBP cross. That said, the recent hawkish comments by several European Central Bank (ECB) officials, stressing the need for more interest rate hikes beyond March, could lend some support to the Euro. Traders might also refrain from placing aggressive bearish bets ahead of the ECB monetary policy meeting, scheduled on Thursday. The focus will then shift to the BoE meeting next week, which should help determine the next leg of a directional move for the cross. Hence, any subsequent decline is more likely to find decent support near the 100-day SMA, which should act as a pivotal point ahead of the key central bank event risks.

The dollar rose in somewhat calmer trading on Tuesday after collapsing on Monday following the collapse of Silicon Valley Bank (SVB) as investors waited for the release of US consumer inflation data later in the day. Tuesday's data on the Consumer Price Index (CPI) could potentially fuel further volatility in global markets, coming a day after fears of a potential banking crisis caused traders to quickly lower their expectations of a Federal Reserve rate hike. Over the weekend, US authorities took emergency action in response to the collapse of the SVB, promising depositor protection to bolster bank confidence. US President Joe Biden on Monday announced measures to ensure the security of the banking system. USD/JPY The yen pair started the day at 133.0870. The USD/JPY pair rose towards 134.00 in the first hours of trading, but failed to maintain momentum and fell towards 133.25. From then on, USD/JPY traded around 133.50 until the end of the Asian session. In the European session there was an upward impulse and the yen pair breaks through 134.00. At the time of writing, USD/JPY is above 134.10. EUR/USD The Asian session for the euro pair, which started Tuesday's session at 1.0727, was bearish. At the end of the Asian session, EUR/USD fell below 1.07. The European session brought an upward impulse to the EUR/USD pair and the trade rebounds above 1.07 again. The euro is trading cautiously this morning which is to be expected as markets prepare for the upcoming US CPI report. Meanwhile, markets are also trying to figure out whether SVB collapse will influence the European Central Bank's (ECB) rate decision later this week. ECB policymaker Yannis Stournaras said on Tuesday that he does not see any impact from the collapse of Silicon Valley Bank (SVB) on Eurozone banks. Although the ECB is in quiet period, the Euro could stay resilient against its rivals in case other ECB policymakers deliver similar comments. GBP/USD The cable pair started Tuesday's session at the level of 1.2168 and, just like the euro pair, was in a downward move in the Asian session. Towards the end of the Asian session, the GBP/USD pair got a strong upward impulse towards 1.2180. In the European session, the pound pair again started to fall towards 1.2150. At the time of writing, GBP/USD is trading above 1.2160. Early Tuesday, the data published by the UK's Office for National Statistics showed that the Unemployment Rate remained unchanged at 3.7% in three months to January. More importantly, annual wage inflation in the three months to January, as measured by Average Earnings Including Bonus, declined to 5.7% from 6% in December. Similarly, Average Earnings Excluding Bonus retreated to 6.5% in the same period from 6.7%. AUD/USD The Aussie pair started trading at 0.6656 and like the European pairs the first move was down. Still in the Asian session, the AUD/USD pair rebounded and grew towards 0.6672. The upward momentum was not maintained in the European session and the pair of the Australian pair started a downward move towards 0.6645. At the time of writing, AUD/USD is trading at 0.6651. Most Asian currencies weaken against the USD in the morning session amid higher Treasury yields. Source: investing.com, finance.yahoo.com

U.S. authorities took emergency action on Sunday to boost confidence in the banking system after the collapse of Silicon Valley Bank (SVB) threatened to trigger a broader financial crisis. Regulators said that from Monday, customers of the failed bank would have access to all their deposits. And to give banks access to funds, they created a new mechanism. The collapse of the SVB triggered a massive rally in European and global bond markets. On Monday, government bond yields fell in the eurozone as investors flocked to safe-haven assets. The yield on two-year German bonds fell 34 basis points to 2.746%. This is the biggest one-day drop since 1995. Yields move inversely to prices. And last week, the yield on 2-year bonds, which is very sensitive to ECB interest rate expectations, exceeded 3.3%. There will likely be a slight rate hike by the European Central Bank (ECB) on Thursday. Expectations for the ECB's next decision changed sharply on Monday. Market pricing showed that traders see a 25 basis point hike as the more likely outcome, even though a 50 basis point hike seemed almost likely last week. In U.S. markets, the 2-year Treasury yields fell 36 basis points to 4.232%, its biggest daily drop since 2008. According to analysts at Goldman Sachs, the Federal Reserve will not raise interest rates at its meeting on March 22, as there is uncertainty about how to proceed due to the failure of the SVB. Monday's pricing in money markets showed that traders believe there is about a 20% chance the Fed will leave rates unchanged and an 80% chance of a 25 basis point hike. Last week, pricing suggested a 50 basis point rise was the most likely outcome. The rush to safe-haven assets included long-term bonds. The yield on German 10-year bonds fell 23 basis points to 2.228% after falling last February to its lowest level at 2.168%. Italy's 10-year yield fell 16 basis points to 4.156%. European stocks fell sharply, while U.S. stocks rose. The European banks index (.SX7P) fell another 5% after falling 3.8% on Friday. The European Central Bank is not planning an emergency meeting of its banking supervisory board after the collapse of the SVB.     Relevance up to 08:00 2023-03-19 UTC+1 This information is provided to retail and professional clients as part of marketing communication. It does not contain and should not be construed as containing investment advice or investment recommendation or an offer or solicitation to engage in any transaction or strategy in financial instruments. Past performance is not a guarantee or prediction of future performance. Instant Trading EU Ltd. makes no representation and assumes no liability as to the accuracy or completeness of the information provided, or any loss arising from any investment based on analysis, forecast or other information provided by an employee of the Company or otherwise. Full disclaimer is available here. Read more: https://www.instaforex.eu/forex_analysis/337511